Stability

The Presidential By-election date has been set for October 30 and all relevant political parties have put their candidates in the race in an attempt to finish as number one on polling day.

The business world is looking forward to seeing formal stability in the political sphere by Monday November 3which will mark exactly one month after the interment of the late President Levy Patrick Mwanawasa.

On the ground there has been much controversy and debate in respect to the local airline industry. In addition, the farming sector has lamented at the cost and availability of fertiliser for the forthcoming planting season which is around the corner. On the investment front, we note that some large investments are planned for Nchelenge District in the palm oil agriculture sector. Electricity tariffs have once again come on the table for adjustment upwards. A mining investor has juts completed a feasibility study for the treatment of Uranium in North Western Province. The North Western Railway company is seeking Government support to construct a railway line from Chingola to the Angolan Border.

It is quite obvious that business is taking place and plans are being unfolded every day in various efforts to keep the economy going and constantly looking for new opportunities to exploit.

Much of what is going on in the economy hinges on a stable Government being in place to lend support where required, and to give guidance where necessary.

Government is faced with the fertilizer issue in various ways. Donations of fertilizer by friendly countries could undermine the fertilizer manufacturing companies and importers such that although things may work out alright this year, no private sector investment will go into fertilizer next year. The whole distribution program must be carefully thought out taking into account the businesses that survive on fertilizer and a sustainable intervention so that next year we do not face the same problems. It therefore becomes very important for Government to be calm, stable, and focussed on dealing with these business related matters because one mis-understood decision by Government can send a particular sector spiralling into recession.

It is important to remove the politics from any decision that will impact on business development, and even more important to offer solutions that will be viable, sustainable and that makes good business sense. In this regard a level of stability and professionalism is required that will not tilt the business environment and alter the playing field. Some caution must be exercised when allocating vast resources to any investor, since the size of land or loans may compromise and undermine other players in the sector.

Some investments must be considered with a developmental view. For example the current wrangle to build a railway line from Chingola to the Angolan border is not just a business venture. It is a lifeline for many people in the North Western Province and it will impact on the cost of doing business in the Mining industry in Solwezi and Lumwana. A solid and stable Government will play a very crucial role in selecting the best option for development to benefit the vast majority of Zambians.

The energy crisis is hitting at us every day. We have pages upon pages of power outage schedules printed in the local media informing us of our daily power blues. Now the cost of electricity is being discussed once again with a demand for tariff hikes. Businesses can no longer plan as electricity costs continue to soar. Electricity like oil based fuels, impact on the production costs of almost all industries in Zambia. This issue will not be tackled in any meaningful way until we have a focussed Government in place to assess the situation, make the necessary changes to the administration chain and take the necessary decisions to implement a recovery plan. At the moment we are toying with Private Public Partnerships, World Bank proposals and various options as time goes by and the electricity crisis gets worse every day.

We must acknowledge that any local or new investor wanting to do big things in Zambia will be challenged by the shortage of electricity. This will force them to either scale down their plans or put the whole idea on hold until a solution to cover the power deficit is found. The media highlights new mining operations opening up around the country. We have huge and ongoing investments in the cement sector. There are dozens of new Tourist hotels, lodges and camps sprouting up across the country. The adequate supply of stable power is now a deciding factor for investment in Zambia.

There are many challenges that we must address in order to make Zambia the place to do business in. Most of our requirements are not anything special but plain necessities for any developing economy. We must have proper roads, we must have adequate electricity, we must have cost effective energy resources, we must have functional Government systems, we must have efficient regulatory and monitoring Government agencies, and we must have a vibrant financial services sector.

Many of these requirements are developed on a stable and focussed Government in place.

Published 9 September 2008

Kafue Gorge Higher

Zambia is currently groping with the electricity deficit across the country. Every sector of the economy is affected and residences are plagued with power cuts for at least five hours every other day. Industry is forced to cut production hours due to power rationing to factories.

There is a definite pool of losses being experienced in the economy in respect to lower production in industry, the resultant damage to electrically powered equipment due to power surges at cut off and re-connection times, and the escalated costs of production because of labour charges paid for non productive workers.

A quick glimpse at the many hardware and motor accessory shops around the country reveals that many types and sizes of electricity generators are on display for quick sale to mitigate against power cuts in offices, business premises, factories and homes.

The generators are petrol and diesel fuelled depending on the size and work load. This growing option for power in view of the prospects that the Zambia Electricity Supply Corporation (ZESCO) is only expected to generate sizeable power to feed the nation in 2015 is fast developing with the consequences of increasing Zambia’s oil based fuel bill and a big cost to the consumer that has to put between 10litres and 20 litres of petrol or diesel per day. This works out to a cost of between K100,000 per day and K200,000 per day. In one month this figure escalates to a massive K3,000,000 at the low end. That is more than ten times the cost of our monthly ZESCO bill and a huge fuel burden to the nation.

The current power deficit is therefore very damaging to the development of the country and to Zambia’s competitiveness as an investment destination within the region. Zambia’s products become much more expensive to produce and cannot compete with other produces in the region and in the global economy. For the private sector this scenario spells doom and gloom.

ZESCO is currently upgrading its existing power stations that have capacity to generate more power and the Kafue Gorge Power Station will be the first to pump out more electricity albeit not enough o satisfy demand. The Kariba North Bank Power Station is currently undergoing upgrading and will generate an additional 360MW with an investment of USD243 million. Sino Hydro of China is carrying out the works for this upgrade project. This work is expected to be completed in 2011and the additional power will be injected into the national grid at a time when our electricity demand will probably have gone up by another 30 percent if we look at the trends in new mining investments and large industry development as captured by the Zambia Development Agency. We will therefore still experience a power deficit.

In 2007 Government was considering two developers to construct a new Kalungwishi Power Station at our northern border with the Democratic republic of Congo. The developers had majority ownership by Eskom of South Africa and the expected cost of the power station was billed at approximately USD1.2 billion even though no exact figures for production size were released to the general public. This leaves much to speculation on the cost benefit analysis.

In 2006 Zambia completed a Feasibility Study through ZESCO to develop a 750MW Power Station at Kafue Gorge Lower and a 120MW Power Station at Itezhi-Tezhi. At that time the estimated costs for the two projects were USD500 million and USD100 million respectively. The rule of thumb at the time was to calculate the development and building costs of a hydro electric power station at USD1 million per Mega Watt. Zesco’s costings were therefore quite conservative, but not impossible if costs were obtained from manufacturers of the required equipment around the world. In the same year our Minister of Commerce who was well aware of the electricity demands of the emerging mines and industries sounded the warnings that Zambia was facing a looming power shortfall which would be felt in 2008 if no new sources of electricity were developed urgently. He called for immediate gigantic investments in new power station to avert a power deficit and the slowdown of investments that were on the Ministry’s drawing board.

In 2003 Sino Hydro signed a Memorandum of Understanding with ZESCO to build a 660MW Power Station at Kafue Gorge to be called the Kafue Gorge Lower Power Station. These figures authenticated the Feasibility Study carried out by ZESCO earlier and the timeline was pegged at five years. The prospect for the power station to come on line before 2009 was considered to be very high as Sino Hydro had built many power stations in Africa within record time.

Where are we now? What are the prospects for a large new power station by 2010? How have the costs changed with time? Where do we get the financing for any new projects?

At the moment we seem to have gone back to the drawing board to scout for new construction companies, new financiers, new feasibility studies, new business plans, and new cost calculations.

The current favourite financiers are the World Bank as principal lender for Kafue Gorge Lower Power Station, supported by possibility Copperbelt Energy Corporation as a smaller co financier. The World Bank however, insists that a new Feasibility Study for the project must be carried out before any financing can be offered. The European Investment Bank and Tata of India are the favourite financiers for the Itezhi-Tezhi Power Station. This power station will be a ZESCO Tata Public Private Partnership. The fate of the Kalungwishi Power Station is not clearly outlined. It may have stopped at just the idea stage. The bottom line is that not much has happened since 2006 and no ground has been broken at Kafue Gorge but some rumblings are taking place at Itezhi-Tezhi.

We are told that Kafue Gorge Lower Power Station will be completed and functional by 2015 and Itezhi-Tezhi Power Station will only come on line by 2012. The power load shedding and power deficit will be with us up to 2015 if all goes as planned. The possibility of delays is always with us depending on how our political system develops and how the economy performs over the next seven years. Any political or business turbulence in Zambia could push the projects back several more years.

The Itezhi-Tezhi Power Station project has seen some escalation in development costs. The figures however are not very far from the initially projected costs. The Kafue Gorge Lower Power Station development costs have lunged from an estimated USD600 million to a missive USD1.5 billion even before the Feasibility Study that the World Bank insists should be done is completed. This expensive USD6 million Study is financed by the Zambian Government and is being carried out by the International Finance Corporation which is a division of the World Bank. It is not likely to be seen as an independent study that can be used to solicit financing from any other sources, but an in-house document to confirm the World Bank’s gestimate of USD1.5 billion project costing. There are conflict of interest issues with this arrangement as the client is Zambia, and Zambia should be free to choose the best consultants that will do an objective and professional Feasibility Study. The World Bank will then have to be guided by Zambia’s Feasibility Study and not a document developed by their own institution as the lender of finances. The money is not a grant but a loan to Zambia. The Sino Hydro offer was to finance 85 percent of the Kafue Gorge Lower Power Station project with prospects to bring it up to 100 percent.

What is the final analysis? We do expect that due to increased metal prices the costs for building new power stations in 2008 will be higher than the estimates of 2006. But are we satisfied with twice the costs? What is the cost of Money borrowed from the world and the European Investment Bank? What risks do we run with our developing industries in view of the extended completion time lines for new power stations? Why are we shunning the China offer even though we see that Sino Hydro is building power stations all over Africa at much lower prices and in record time? Why have we discarded the Memorandum of Understanding that was signed in 2003? CEC is ZESCO’s largest customer and the ZESCO Chief Executive is also a shareholder of CEC. What impact will the investment of CEC in a new power station in partnership with ZESCO have on ZESCO’s corporate governance and conflict of interest issues?

One may conclude that the China offer with easy terms and low interest rates to develop power stations in Zambia does not offer ZESCO management any personal perks and benefits, but puts all the resources into a cost effective power solution for Zambia. On the other hand, the World Bank offer will no doubt come with lots of seminars, conferences, project vehicles, and trips abroad with accompanying per diems that will benefit all those top notch engineers involved in the project for years to come.

A quick look at power stations built in Africa gives us a graphic indication of how our neighbours have been faring. The Guinea Kaleta Dam Power Station producing 238MW cost USD257 million. The Ethiopia Tekeze Dam Power Station producing 250MW cost USD224 million. The Sudan Merowe Dam Power Station producing 1,250MW cost USD1200 million. Some African countries have spent USD2 million or more per Mega Watt on power stations but one can clearly see that these countries are fraught with corruption and will have been recovering from a war situation. Conversely, most of the Asian countries and Eastern European countries have spent less than USD1 million per Mega Watt. There is an indication that these countries put much emphasis on due diligence and accountability in respect to public investments on behalf of the people. This information is available on various web sites for public consumption.

Must the Zambian people pay through their children and grand children for the poor judgment of the officials in the energy sector? Are we going to rename the project Kafue Gorge Higher because of the escalating costs? Is this the legacy that the late President Dr Mwanawasa leaves for his people? The incoming President and his administration will have to tackle these issues as a matter of urgency.

Published 2 September 2008

Business After Mwanawasa

23^rd August marked a very important day for me yet again. This time it was the day when our late President Dr Levy Patrick Mwanawasa’s body arrived at the Lusaka International Airport after a ten hour flight from Paris, France.

The people of France had returned our fallen hero back to Zambia to be put to eternal rest at home. The French Airforce Airbus touched down at 09.00hours witnessed by a solemn crowd of Government officials led by the Vice President, and a large complement of the Diplomatic Corps.

The mood on Saturday was unified. The nation wore dark clothes signifying a dark day in the history of Zambia. Many citizens and friends crowded the Airport to receive the late President and many more people lined the Great East Road route from the Airport to Mulungushi International Conference Centre to catch a glimpse of the Hearse and to pay their last respects to our departed President as his motorcade slowly proceeded towards the Conference Centre. Nearly all the vehicles on the roads drove around with full headlights switched on in the traditional way of signalling a funeral procession. Indeed, the nation was in full mourning and united in one purpose; to lay our late President to rest in the most respectful manner that we know.

At the Mulungushi International Conference Centre, the Armed Forces silently stood at attention while their late Commander In Chief was driven passed. The casket was placed in the Main Conference Hall where he was set to Lie-in-State. It was appropriate that the Mulungushi International Conference Centre was selected as the first stop for the late President, because although the venue provided for many members of the public to pay their last respects, it is also the venue where the late President dialogued and made many national decisions that would affect Zambia’s economy. This venue was his somewhat public office where everybody and anybody would interact with the late President and his Government.

The day’s events were extremely moving, and the rest of the country will no doubt be accorded the same opportunity to pay their last respects as the late President’s body is taken from province to province across the country.

Since the announcement of the death of our President on 19^th August 2008, the media has been asking questions about what legacy did he leave in respect to economic development? What happens to business now? How will his demise affect investment in Zambia? What are the prospects in the post Mwanawasa era?

The truth is nobody can foretell the future. But one thing is for sure, Zambia shall continue in one form or another. The world has not come to an end here.

Much as we mourn and acknowledge our bereavement in respect to the passing on of our late President, we must continue to live and improve our lives.

The late President was a champion of Regional Integration as evidenced in his pronouncements in his role as Chairman of the Southern African Development Community (SADC). Late President Mwanawasa supported the work of the Common Market for East and Southern Africa (COMESA) and was an advocate for the Free Trade Areas. Those of us that remain behind are challenged to continue with this legacy of working with the SADC, COMESA and the African Union to unify the continent and create a One Africa economy. Business in Zambia recognises that opening access for Zambian companies into the region will benefit the country and allow the companies to grow much bigger due to the larger regional markets.

The late President stood to attack and eradicate corruption in Zambia. The Task Force on Corruption and the various Capacity Building programs in public institutions must continue their noble work and serve the nation with the same vision that the late President held. The development of business in Zambia is dependent on clear and meaningful systems in all Government offices so that the private sector can predict what level of service they will receive. Businesses are cognisant that corruption eventually destroys an economy as we have seen in parts of West Africa, South America, and South East Asia. The short term gains of corruption are soon eradicated by the long term and irreversible losses.

It must be granted that the death of any incumbent President will cause some discomfort to the economy as a sense of uncertainty sets in. Private Business is very sensitive to political upheavals and is quite quick to pull out if uncertainty prevails for too long. Zambia must not let the late President down by causing unnecessary political tension that would lead to investor flight out of the country. A stable Government must be maintained. The Vice President must carry out his functions as Acting President diligently throughout the 90 days provided for by the National Constitution. The ensuing Presidential Elections must be managed calmly and professionally to continue to give confidence to business that Zambia is the place where to do business.

Zambian businesses must do their part too. Yes, we expect that Zambians will mourn the death of the late President. As we do so, we should continue to run our businesses and expand and create wealth and jobs as our contribution to the memory of the late President. The success of the Zambian economy will no doubt be the success of the late President’s policies.

Life and Business during Mwanawasa was a challenge. Life and Business after Mwanawasa will be a challenge too. The loss of our President ends one chapter in Zambia’s history but also marks the beginning of a new era for development. Zambia has a development plan (FNDP) and a vision (Vision 2030). The new administration will have to consider the country’s future and continue the work that was started by the late President and possibly improve on these national programs for development. The balance between budgeting for consumption and budgeting for development is always a critical mechanism. The hidden liabilities in incurring national debt must be clearly outlined to avoid getting into the debt trap once again. The challenge of spreading development across the nation and into the rural areas has always been a difficult one. The negotiation of domestic development against the impact of regional integration must be constantly monitored and intervention programs must be put in place to put Zambia in a position to benefit from the integration process rather than become a victim of it.

Businesses after Mwanawasa will be as a result of our own choosing. We can dwell on the demise of our President and fold our arms and withdraw, or we can appreciate the good work he did and set out to do, and opt to continue his legacy with vigour and dedication to his memory. The choice is for those of us that are still living. We are faced with the proverbial glass. Is it half empty? Or is it half full?

Published 26 August 2008

EU And Business

The Zambia Federation of Employers recently ran a workshop to discuss the various opportunities for the European Union (EU) to support Zambian businesses.

The EU has traditionally funded infrastructure development projects in Zambia such as the ongoing program to rehabilitate the Zimba to Livingstone road that currently prevents many Zambians and tourists from visiting the tourist capital for fear of wrecking their vehicles. The impact of a useable road between Lusaka and Livingstone will be to enhance the number of visitors to Livingstone therefore bringing in more business to the tourist economy. Businesses in the Southern Province will definitely improve once this road is repaired. This project has been on the drawing board for several years now and the initial cost of works has now doubled due to delays and procrastination in implementation. The usual reasons for these delays are due to EU complex funding procedures and Government bureaucracy in moving the implementation process. The escalating costs clearly reflects that time wasted, is money wasted.

The EU is also heavily engaged in funding road rehabilitation between Katete and Chipata in the Eastern Province. Again, this road link to Malawi and Mozambique is an important access route to the Indian Ocean and our trading partners in the Eastern part of Southern Africa. The current efforts to open up the Nacala Corridor in Mozambique and other business opportunities between Zambia and Mozambique will not result in much, if the road network to the East is not viably useable.

The EU has supported the Health and Education sectors for many years and several schools are now land marks of EU presence in the local economy. There are some problems coming out of the support to the Education sector as is evidenced by schools infrastructures being used as holding pens for goats, pigs and chickens in some areas. This phenomenon discourages the EU from rendering support to this sector as the goals of the support are not being met by their Zambian partners. The challenge on the Zambian side is to ensure that the infrastructure set up for schools is indeed used to educate our children and not be used a s kraals for livestock development. On the other hand, it can be argued that the form of education that is prescribed for Zambia may not be the most beneficial to the majority of the Zambian people. We may want to re-asses the education curricula to encompass some life skills such as Agriculture Science, Wood Work, Health Science, and other subjects which will empower our youth with useful knowledge to help them through life. This is important when we consider that every year we throw about 200,000 Grade 12 graduates onto our streets to survive with no prospects for further education. Relevant education is therefore an aspect that we must consider as we evolve our education system in Zambia. The EU has opened a window for support to the private sector through the funding of Private Schools and Private Medical institutions in a move to complement the efforts being made by Government to provide social and developmental services across the nation. The EU has invested 7 million Euros in the recently completed Soweto Urban market project in Lusaka, but concerns about the maintenance and economic use of this infrastructure produces some anxiety amongst the stakeholders.

Water and Energy are two key sectors that EU support is now focused on. Currently six to eight water projects run by Non Governmental Organizations (NGO’s) are received funding from the EU and the options are open for the various Water Companies to apply for support. The Itezhi-tezhi Hydroelectric Power project is receiving 100 million Euros of funding from the EU to embark on the power station being built by the state enterprise Zambia Electricity Supply Corporation Limited (ZESCO) in partnership with Tata of India. The EU has put funds into Rural Electrification programs and supported Interconnect projects to distribute electricity across the country where possible. This support has largely resulted in farming communities being connected to the national grid to power their irrigation and processing equipment in the various farm blocks. The opportunities for Zambian businesses in this regard has been to apply for EU funding for Solar Energy development, Bio Fuel production and possibly Wind energy development through Windmill generators. These options have not been explored or exploited widely and aggressively by the private sector.

Some ten years ago, the EU funded the Agriculture sector by financing the building of a Horticulture and Floriculture export warehouse at the Lusaka International Airport. This facility has been a great asset to the Zambian Agribusiness sector and continues to be the conduit for Zambian exports of fresh vegetables and cut flowers to the EU markets in Europe. Chartered cargo aircraft fly in to ship Zambian produce out to the EU, and the entire operation is managed by the Zambia Export Growers Association (ZEGA) which ensures that a business perspective is always applied to the export facility so that the service can operate sustainably into the future. It must be highlighted however, that the cut flower sector has taken a heavy blow in Zambia with more than 60% of the investors in the sector closing down their operations. Many exporters have complained about the difficult funding package that they were given by the EU, others have complained about the volatile markets in Europe, and yet others have lamented about the impact of the US dollar to Euro relationship which has caused many foreign exchange losses for them. Another analysis shows the impact of other producers and exporters in Africa that are fighting for the same markets as Zambian exporters. Countries such as Kenya and Ethiopia have been able to take larger chunks of the cut flowers markets in Europe than Zambia has. One might reflect and consider that maybe, the cut flowers industry is not the most reliable industry to invest in as it is prone to many external factors in addition to simply, the change in fashion around the world. There may be a lesson in this experience for Zambia.

Some EU programs have just ended and there is an opportunity to assess the value of the programs in Zambia and whether we can improve on such programs in the future, or how we can take the model successes into our own development agenda.

The EU Mining Sector Diversification Program (MSDP) has come to an end and all the guests at the closing out ceremony went home with a CD containing the success story of the nearly 30 million Euro program. Many beneficiaries of the program will tell you that they enjoyed the trade visits to the USA, India, Canada, South Africa, China and several other countries over the years. But they will also tell you that they are no better off now than they were 10 years ago. In fact many people are more miserable now than they were 10 years ago because they were exposed to the opportunities out there, but here was no mechanism in place to take advantage of those opportunities. Countries such as Ethiopia, Botswana, Egypt, and Kenya make sure that once their people are exposed to some opportunities, the programs also invest in mechanisms to exploit those opportunities so that some tangible results can be realized from the programs. The MSDP program did not go all the way but stopped at exposure only. Today, many beneficiaries of the program have small loans totaling to about 9 million Euros which may not be paid back as the program has wound up and follow up will be difficult. Much of the information and knowledge collected during the program life cycle has only become useful public information after the program has closed out. The EU would have been more effective if they had launched some pilot projects in sectors that would have had a big impact on engaging local Small and Medium Enterprises (SME’s) and, become models for other private sector investors to emulate. Zambia has vast Marble deposits and these have not been looked at seriously. Zambia offers opportunities in Mining Tourism in the Amethyst Mines of Mapatizya outside Kalomo. This is where MSDP could have put its resources and left a legacy of profitable and sustainable development rather than this one of unpaid loans and a handful of CD’s. This experience is another opportunity for the EU to learn from the program failure and change the way it supports Zambia in the future.

Under the 9^th European Development Fund (EDF) Zambia was supported by an Export Development Program (EDP) which wound up early this year. The fact that the program concentrated on exports, by definition, excluded many Zambian SME’s from receiving support. It is a well known fact that over 80% of economic activity in Zambia is carried out by SME’s. SME’s are not export driven and therefore the EDP program did not help as much as it could have if it were designed to support the majority of Zambians. Loans were given out to businesses during the run of this program and as in the MSDP case; the chances of loan recovery after project closure are virtually nil. We are told that 4 million Euros left over from the EDP fund in cash and assets have been passed on to the Zambia Development Agency to support private sector development in the country. It must be acknowledged however, that any funding that was budgeted for under EDP, and was not disbursed within the program cycle, is an indication that the program did not deliver as expected

Currently, the EU is running a Capacity Building Program within Government, the Private Sector and the Social Sector NGO’s. There is much good being done through human resource development activities in Government. The Private Sector and other NGO’s are being funded in respect to program delivery, but not necessarily in the areas of sustainable service delivery to the membership. This weakness may be as a result of the ‘Donor’ syndrome which many of us suffer from including our collaborating partners themselves, but possibly also from the fact that the EU has traditionally supported development from a benevolent facilitative perspective which does not inject a spirit of self reliance and sustainability. This may be an area that the EU may want to redress as they continue to roll out their Capacity Building Program.

The 10^th EDF is placing 650 million Euros for Regional Infrastructure development such as bridges, border ports, roads and railways. This is welcome commitment to support the efforts of other financiers which include the African Development Bank, the African Development Foundation, and the World Bank. Under the 10^th EDF support to Zambia will be 50% towards Direct Budget Support, 15% towards RoadSip 2, and 15% to the Health sector. Zambia will have the flexibility to use the Budget Support funds as we see fit. The European Investment Bank will commit 50 million Euros to Private Sector Development in the Tourism and Agribusiness sectors in addition to others that may be put forward by the business community. Options to develop our Sanitary and Phytosanitary processes in respect to the export of agriculture products to the EU are open for funding.

Businesses are encouraged to engage with the EU Centre for the Development of Enterprises (CDE), EU-ProInvest, and indeed the EU Commission Headquarters in Brussels in order to solicit support for funding, capacity building and trade linkages.

Published 19 August 2008

Business Transformation

Last week Livingstone hosted the Joint Annual Business Conference collaboratively organized by the Zambia Institute of Chartered Accountants, the Association of Chartered Certified Accountants, and the Chartered Institute of Management Accountants. The theme of the conference was ‘Innovating for a Sustainable Future’. Under this theme, the spotlight fell on the challenges of ‘Transformation of Businesses for a Sustainable Future’.

Businesses in Zambia today are faced with many challenges in their quest to grow and remain viable for the foreseeable future.

The rapid pace at which information flows across the globe, and the constantly evolving technology age that we live in, offers no mercy to businesses that stagnate or ignore the demands of the market.

In Zambia, we have seen a proliferation of Fuel Stations along our roads and highways. The consumer demand now, is to be served within a few minutes of arriving at the pumps. If this demand is not met as expected, the motorist will drive off to the next Fuel Station for more efficient service. The Fuel Station proprietors that have responded positively to this challenge have embarked on a training program on customer response in order to meet the rising demands. This phenomenon is prevailing over Internet Service Providers, Mobile Phone Service Providers, Supermarkets, and Restaurants. The banking industry provides a special service that impacts on how the private sector is being serviced and facilitated in its quest for growth. With the advent of five new banks opening their doors to the public the scramble for better services to customers is on, and new innovative products are being marketed every day. The looming competition has already brought products such as personal loans and house loans on the market with very easy to apply guidelines.

Modern day business demands puts pressure on businesses to disclose the company’s business dealings to staff in an effort to empower the staff to make the company more productive. Any company that is looking to borrow money from the banks will need to acknowledge that Management Accounts are a basic requirement by the bank to ensure that the money made available to the business is being used for the intended purpose. Accounting staff are therefore required to have open access to the company accounts to provide the necessary information to the banks. Accountants are expected to keep a tight control on company income and expenditure in relation to fiscal budgets. To achieve this, companies must allow relevant staff access to bank accounts and documentation of all business dealings.

Successful private companies that are proprietor owned can only cross the barrier to corporate business if the systems in the company are predictable and pro growth. The systems must be universally understood, should have clear levels of delegation, and should have open systems for reporting. Staff must be held accountable, clear goals should be set, training systems must be in place, and methods for monitoring and evaluation must be constantly at work. Opportunities for re-engineering of the company and movement of obsolete stocks are constantly being looked at to keep the corporate vibrant and competitive.

Technology impacts greatly on modern businesses. The use of Local Area Networks, Virtual private Networks, Access Controls Systems, and Internet Banking are tools that can lunge a company way ahead of its competitors. In addition, Technology offers the opportunity to create new knowledge and services that keep a business viable and profitable.

Customer care is fast becoming the ‘big’ booster to many businesses. Customer care means quick response on issues, calendaring appointments and meetings, keeping useful knowledge about the service provided, transferring tasks to another colleague when overwhelmed, engaging in team work, being courteous, showing commitment to work, letting an issue go when the cost is too high and, effective communication. Customer care is a cross cutting service in all sectors of the economy and businesses, and in many instances either brings in new customers or pushes existing customers away.

Collaboration in developing economies is essential if businesses are to evolve from small and medium enterprises into large corporates. Strategic partnerships assist companies to share their business risks and burdens. Collaboration allows small companies to tackle big business and focus on regional trade. Consolidated imports from the Far East make the cost of the goods cheaper for each member of the consortium due to the lower bulk purchase pricing and large volume shipment discounts. The Newspaper vendors at the traffic junctions have had to collaborate or perish because the customers want to purchase three different papers from one vendor. The vendors sort out their accounts at the end of the day when all the newspapers have been sold.

There is always room for innovation and new products in the world of business. For instance in Zambia the option of integrating Tourism with Mining has not been explored. The option of turning Zambia into a hub for goods and services to supply the eight neighboring countries is only talked about but not acted upon. There are opportunities for developing Zambia into a regional telecommunications hub with options for building International Call Centers. Business opportunities abound in Cultural and Traditional Tourism beyond the well known Kuomboka Ceremony and a few others. Food security is a major concern for all countries and Zambia is no exception. Opportunities for growing large scale rice and fish challenge our minds every day. The processing of our local fruit has still not been established in any meaningful way.

Businesses are now challenged to get more involved in policy development and planning of the local economy. Zambia is plagued with the burden of European Union Economic partnership Agreements, SADC Trade Protocols, COMESA Free Trade Area rules and, the World Trade Organization global trade regime and rules. The private sector should be the instrumental player in all these negotiations but seldom turns up at the discussions. Decisions are made and documents are signed and the private sector is expected to comply. The business that intends to survive into the next decade will have to be an active participant in these negotiations so that the business interests are taken into account and decisions are made that will support and facilitate the growth of businesses. Currently, we see very little input from the private sector in the formulation of the National Fiscal Budget. The challenge is to develop sincere and strategic partnerships amongst the Government, Private Sector and Civil Society that will address the concerns of all three parties.

There will be much give and take but at the end of it all there will be consensus on the way forward such that private sector will forgo some issues but benefit on others. With time the businesses will flourish and meet the larger expectations of the National Vision.

At the top level, companies must be alert to issues of corporate failure that have been highlighted in the big corporate scandals around the world. The value of impartial Annual Audits cannot be over emphasized. The futures of businesses are usually reflected in the quality of the Audits done. The Audit reports are the single documents that are drawn up solely for the good and use of the Board of Directors and Shareholders of a company. Any compromise in this activity undermines the future of the company as we have witnessed in the Enron scandal and many others.

It is quite clear that the Accounting profession at all levels plays a pivotal role in facilitating the transformation of businesses such that they become equipped to grow in the face of global changes and various domestic pressures.

It can be argued that Accountants could be held singularly responsible for the success of businesses or the demise of a company because of the strategic positions that they hold from which all major business decisions are made.

The Zambia Institute of Chartered Accountants, the Association of Chartered Certified Accountants, and the Chartered Institute of Management Accountants are challenged by the nation to continue to collaborate, but more importantly, to promote their members to take up the responsibility of being in the forefront of business decision making.

This challenge is in line with the universal principle that states ‘Information and Knowledge is Power’, and the use of ‘Valid Information and Knowledge leads to powerful and appropriate decisions to ensure a prosperous and sustainable future’.

Published 12 August 2008

Business Dialogue

Last week’s Smart Partnership Dialogue at Mulungushi International Conference Centre effectively ran for one full week if we are to take the pre-Dialogue Rehearsals, Dialogue Resource Group meetings, and Secretariat work into account.

The turn out was quite overwhelming and accounted for between 400 and 500 participants. There was a lot of documentation handed out and many presentations were made to the participants ranging from our own Vice President and his colleague, the President of Uganda, to youth representatives from the region. Former Presidents, Prime Ministers, and Cabinet Ministers from several African countries put their views forward for dialogue and exchange of views on social and economic development.

Each successive day of the Dialogue was more challenging than the previous day and the pace was very fast. Many good ideas were shared and many hopes and aspirations were articulated for the betterment of the continent.

Some leaders were clear about their expectations and roles in achieving those expectations. President Yoweri Museveni was clear that Africa must desist from continuous discussions and move into gear to starting to take deliberate and decisive action. He highlighted that Africa cannot continue to boast of peaceful countries or democratic governance structures whilst her people continued to wallow in poverty. It was time to ‘manage’ the ‘talking’ and ‘engage’ the ‘doing’ with clear vision and purpose.

Several former Presidents echoed President Museveni’s sentiments and challenged the Dialogue Participants to be more pro-active and take ownership of their development programs such that their full commitment and investment would be summoned in order to realize the national social and economic agendas of the various countries.

What do we conclude as the effect of the Smart Partnership Dialogue on Zambia’s development agenda?

Clearly one positive effect is that we had one more large gathering of Government officials, some members of the private sector and some social sector NGO’s sitting in one room and discussing issues of national concern.

A hurdle that is always difficult to overcome, and was not successfully overcome at the Dialogue, was that of each participant wearing a particular ‘hat’ and failing to remove it and speak as an individual and citizen of Africa. This hurdle resulted in many contributions remaining in the same spirit of a conference or seminar with the hierarchies firmly in place although not verbalized.

Another positive effect is that of sharing experiences amongst countries so that lessons learned by one country could benefit another country. On the other hand, very few countries shared their mistakes where the more important and bitter lessons are learned. One or two bold current Heads of State were open to sharing their bad experiences in an effort to warn their brothers and sisters in other countries of the impending dangers and costs of making similar mistakes.

Private sector issues were raised quite effectively and some good documentation was circulated to ensure that the Participants appreciated the issues put on the Dialogue table. The difficulty was that the Dialogue reflected a very small percentage of private sector from the region and an even smaller representation from Zambia, the host country. This was not the intention of the Smart Partnership Dialogue mission therefore we must re-assess the mechanisms for engaging the private sector in preparations for future Smart Partnership Dialogues.

The Dialogue days were long and the Dialogue pace was aggressive. On the last day, a tour of the Zambia Agriculture and Commercial Show was made by Participants during a morning session. This visit to the Show was the first Participant to Business contact in an open free dialogue manner. Unfortunately, this type of contact is often too overwhelming in too short a time, so we cannot expect too much to come out of it.

Opportunities for refocusing the Smart Partnership Dialogue to include much more private sector participation need to be explored. Options for restructuring the format of the Dialogue to include several visits to business, industrial, agriculture, tourism, mining, and service sector investments need to be explored to provide a healthy mix of dialogue and productive action. Some possibilities of establishing new dialogue and engagement programs amongst the various stakeholders in each economy can be developed and concretized through the signing of Memorandums of Collaboration in an effort to ensure the establishment and continuity of new Smart Partnerships at a domestic and regional level.

Uganda is set for the 2009 Smart Partnership Dialogue thanks to the established Smart Partnership between President Museveni and the Dialogue Management Team. Hopefully, Uganda will improve on the Zambia experience and above all, get its Private Sector to participate in the dialogue overwhelmingly and effectively. In addition, we hope that Uganda will clearly map out what the role and goals of the Smart Partnership Dialogue will be in promoting the development of the nation for Ugandans.

The positive impact of Smart Partnerships does not happen by mistake. It is a well calculated and strategized mechanism that must deliver the outcomes that it will have been programmed for. Zambia must be very clear about what we want to get out of the next Dialogue in Uganda. We must spend some long hours planning and acting to ensure that we will achieve our goals. If we do not apply our minds to this basic fact, then going to Uganda will be wasting the tax payer’s money and our own resources for no good reason.

Published 5 August 2008

Smart Partnerships

Yesterday flagged off a week of regional and international dialogue on social and economic development opportunities for Southern Africa. The talks dubbed ‘Global Southern Africa International Smart Partnership Dialogue’ is currently running at the Mulungushi International Conference Centre in Lusaka from July 28 to July 31 and carries the theme ‘Smart Partnerships in Economic Development and Diversity’.

Over 250 delegates have been registered from more than a dozen countries. Delegates range from Non Governmental Organisations and Private Sector Institutions, to senior Government officials and Heads of State.

The expectations from this gathering of not so familiar bedfellows is that at the end of the dialogue some productive agreements and partnerships will be made that will result in improved economic activity in all the countries represented. Part of the expectations will dwell on resource mobilisation and yet other expectations include skills sharing and transfers in addition to experience exchanges.

President Levy Patrick Mwanawasa’s welcoming remarks to the delegates described ‘Smart Partnership dialogues as platforms where participants, who become Smart Partners, discuss various issues related in particular, to development’

The President further stated that ‘The dialogue provides an atmosphere that creates unique friendships, bottom-to-top networks and an opportunity for joint ventures’

The President also highlights that ‘the dialogues focus on finding solutions and measures for achieving sustainable economic development’

The key driving mechanism for the whole dialogue period will be ‘Partnerships’. Partnership demands a level of equity by both parties. Partnership requires investment, commitment, responsibility, and obligations to be fulfilled by both parties. Partnership should produce benefits for both parties. The dialogue also pays special emphasis on ‘Diversity’ as being a recognised fundamental that should be taken into account and influence the discussions and deliberations.

There are some overriding benchmarks steering the dialogues and are contained in the word catch word ‘SMART’. The acronym stands for Specific, Measurable, Achievable, Realistic and Time-limited actions to be taken by participating partners.

The Smart Partnership program has been running for over ten years now and has held annual dialogues in several African countries, Malaysia, and Barbados. The themes for each dialogue are specially chosen to target the major development challenges of the time, and in the selected region, to ensure relevance and ownership by the host country and all participating delegates.

Some sessions in this year’s dialogue will tackle the goal of transforming countries through realising national visions. For Zambia this means realising our Vision 2030 – to become a middle income nation by the year 2030. In addition, the dialogues will look at securing natural resources for diversified growth.

One session will be dedicated to engaging Smart Partners to share experiences and implementing opportunities with other Smart Partners. In this session Smart Partners will play the role of ‘sounding boards’ so that their real life experiences and responses can play a part in developing workable and sustainable solutions for other Smart Partners. This session will also require the Smart Partners to provide an update on their ongoing networking activities.

A special session will focus on enhancing the knowledge and application of current trends, opportunities and challenges related to climate change issues. The session will explore actions that Smart Partners can take and options for participating in the development of new standards. The session challenges the participants to be actively involved the Think Tank Factory of Ideas that the dialogue can produce. Hopefully, many of these ideas will be taken home by the Smart Partners for further development through partner networks, and possible implementation.

Two sessions will offer space for interactions between the Media and Communications partners from different areas and specialities. These sessions will also challenge the media with the question, ‘Can the Media assist with the Realisation of National Visions?’ The media will also be given the opportunity to provide their own reflections on the role of the media in development.

A ‘Hands on Experience’ session will take advantage of the Lusaka Agriculture and Commercial Show that is due to kick off at towards the end of the week. This session will allow of Smart Partners to visit the show and meet and dialogue with exhibitors, Non Governmental Organisations, and the public at large in an effort to establish some real linkages and new Smart Partnerships.

The whole week will be punctuated by various activities that will embrace Art and Culture. Social issues will be especially targeted and led by the First Ladies of Zambia and the Kingdom of Lesotho.

This action packed dialogue event will hopefully present some new business relationships that will upgrade our current business community in Zambia. In addition, some new investments are expected to be attracted through this dialogue process. There is an expectation that the dialogue and interaction does not end with the closing ceremony on Thursday afternoon. There is an open challenge to the business community out there, that even though the official dialogue event may only accommodate a selected group of delegates, many of the Smart Partners will still be available at the Mulungushi International Conference Centre on Thursday afternoon for open dialogue with any interested parties. In addition, the interaction and networks established at the dialogue event should continue behind the scenes long after the delegates have dispersed and gone back to their respective countries.

This event is taken very seriously by the Zambian Government and is therefore characterised by the attendance and active participation of the Minister of Commerce and Industry, the Minister of Finance and National Planning, and the Minister of Science, Technology and Vocational Training.

The Zambian business community should take this opportunity to engage with new partners in a Smart way. The opportunities have come to Zambia and we have only ourselves to blame if we do not take full advantage of what is at our door step. The obvious thing to do is to get involved, to get engaged, and to get SMART this week.

Published 29 July 2008