Fair Share

The world of business is very intriguing, sometimes confusing, and many times brings up issues that defy what appears to be common logic.

There have been several cases in which a huge company is sold for one US Dollar just so that the shareholders can be rid of the enterprise that is laced with problems of labour and liability.

The media has often reported instances of ‘hostile takeovers’ in which outside parties buy enough shares to take control of a company and finally drive the business in a direction that they see fit.

It is not unusual for banks and other financial institutions to provide venture capital to a company and thereby take a share in the business for a period of time after which the financier pulls out with a profit by selling shares back to the remaining shareholders.

During times of economic crisis, several countries have experienced situations where businesses have borrowed from the banks and because of rapid foreign exchange appreciation or depreciation, the borrower either puts the business into irrecoverable debt, or makes a hefty unexpected profit respectively.

When things go well for any business the shareholders can simply smile and grow their business as opportunities open up for them.

On the other hand, when things go wrong or the expectations are not realized, then many businesses either re-structure and re-focus, or they go belly up.

In recent months we have seen several prominent businesses go through the grueling and agonizing twists of facing the choices of re-engineering the business model or sinking to a grinding halt.

The mining sector has experienced these difficulties, the airline sector has also not been spared, and many manufacturing and trading enterprises have been challenged by the simple ‘swim or sink’ options.

Some businesses have survived by changing the way they operate, others by changing the range of goods and services, and yet others have opted for an injection of venture capital or equity partners.

Many of these choices require the shareholders and owners to bite the bullet, push ego aside, and do what has to be done for the sake of keeping the business afloat.

Privately owned companies have transformed themselves into corporations with new equity partners that own more than half the company because of the cash injection that they have put in. The company becomes stronger, more productive, and even the minority shareholder original owner finds her/himself financially much better off than before. This supports the old saying that ’10 percent of something is better than 100 percent of nothing’.

Developing countries often try to attract foreign joint venture partners to bring large capital into their businesses. The irony is that the small business owner of 20 employees’ demands to head and run the larger joint venture business that now employs 200 employees. The foreign business partner is injecting a huge amount of money into the joint venture, has more experience and skills in international marketing, has more export experience, already employs a large complement of workers in her/his head office overseas, and has obviously managed colossal sums of money in previous investments. The final result in such a situation is that the joint venture partner backs off, or the partnership goes through many difficulties as the management tries to do miracles. In the above case the norm is for the joint venture to fail and each partner goes their separate ways.

The question businesses must address is that of ‘A Fair Share’. All investors needs to ask themselves that question and answer it to themselves in as truthfully a manner as possible. What is my value in this business and how can I quantify and justify it? Where is my business going at present and where can it go with an injection of capital or expertise? How much time do I have to make things work before my enthusiasm runs out or I burn out? What is the impact of new and emerging technologies on my business? These are some pertinent questions for any business person to ask themselves as they develop a strategy for making the business more successful.

Sometimes the basic logic of ‘It’s my business’, ‘I founded the company’, ‘I am Zambian’, ‘It’s my country’, ‘I am younger and stronger’, ‘I am older and wiser’, ‘I have the money’, ‘I have the ideas’, ‘I have the know how’, are not enough to make the business a success.

The business world has become much more sophisticated over the years and some seemingly illogical ideas and strategies can produce the best results.

A case in point is a large and well established household goods shop that has been around since the 1960’s and primarily focused on the logical issues of cutting down on shoplifting theft by employing an army of shop assistants that followed customers along every isle of the shop floor. The business soon became stagnant and business topped quite quickly with an eventual impact of negative growth over the last 15 years. The owners have worked themselves to the bone without ever achieving their dream of success. Not far from this business another newly established company offering similar products focused on customer care and satisfaction, and used technology to monitor theft thereby allowing shoppers to freely and happily wander around the shop without harassment. This new business which is barely 10 years old is flourishing and expanding very rapidly. The shareholders are scattered across the world and what the shop turns over in one day is equivalent to the whole month’s business for the nearly 50 year old counter part.

As more and more Zambians consider going into business or look to expand their existing companies, it important to think about what constitutes a ‘Fair Share’. The Fair Share is what it takes to make the business run profitably and sustainably. The Fair Share is what will grow the business to offer a bigger share to all the shareholders. A Fair Share is sometimes visible as in the case of a monetary investment, but in many cases it is invisible and intangible as it represents several important but non financial inputs that transform a limping company into a vibrant and profitable business.

Published 17 February 2009

Enticing Business

Zambia appears to be in the international spotlight in recent weeks as evidenced by the hourly BBC World Service radio announcements that Lusaka listeners can tune in on 98.0Mhz. In addition, top ranking officers of the World Bank, Japanese industry, and the United States diplomatic corps have put Zambia on their international tour agendas for the first quarter of 2009.

A quick stock take of the region does reveal that Zambia is indeed a safe and hospitable place to visit compared to; Zimbabwe which is in a political and economic crisis; Malawi that is entering into a controversial Presidential race; Kenya a country which is currently crisscrossed with corruption issues; the Democratic Republic of Congo which is in the middle of a civil war of some sort; and Uganda the east African nation dogged with rebel insurgents and issues of democracy.

Zambia in comparison is that oasis of safety in the middle of a desert. It may be the explanation for the centre stage attention that the country currently enjoys.

Now that we have the world’s attention, how can we make it work for our economy and for our people? This should be the preoccupation of every Zambian whether in Government, in the opposition, in the private sector, or in the streets. How can we convert this scenario into cash in our pockets and jobs for our people?

The obvious short answer is tourism. Open our doors to tourists. Give them the red carpet treatment, and take the money out of their pockets by the plane load. Bring down visa fees to USD20 per person irrespective of where they come from except for our traditional Commonwealth and Regional brothers and sisters who should continue to enjoy visa free entry into the country. Make arrangements for visa procurement at the airport or any other port of entry to allow for hassle free tourist travel plans to Zambia. Promote as many tourism focused businesses across Zambia that will offer accommodation, transport, entertainment, uniquely Zambian experiences, and cultural foods, so that any visitor to Zambia not only feels welcome, but enjoys some real Zambian hospitality.

The opportunities are abound in tourism but we must make some concerted efforts to make it all happen. The 2009 budget attempts to articulate the development of tourism but falls short of carrying out the necessary ground work to motivate and stimulate investment in this sector.

It is a night mare for many Zambians to go to Durban or Dar-es-salaam to purchase a used Japanese vehicle and have it shipped to Zambia by car carrier trucks only to find that the wheels have been changed, the music system has been pilfered, some body parts have been removed, and the vehicle is no longer the same as when it was purchased. The Zambian importer is sold short, and has to spend more money at spare parts shops trying to replace the lost items. Why don’t we take the bold step of opening our doors to Dry Ports in Zambia? Kapiri Mposhi would make an excellent site for a used car dry port that would initially site 1,000 vehicles of all descriptions to be marketed in Zambia and our neighbours in the DRC and Malawi. The business options for spare parts shops and repair workshops at Kapiri would soon be taken up by our own people in an attempt to upgrade all those vehicles being cleared from Customs and going into peoples businesses and homes. Kapiri would soon transform into a city with the influx of new businesses that would support the motor vehicle industry. The impact on Tazara would result in more business and more profitability in the rail transport system. The opportunities are too numerous to mention. South Africa did it with Durban, Tanzania has done it with Dar, Mozambique is doing it with Beira albeit in a small way, why can we not do it in Zambia?

The 2009 budget puts much emphasis on agriculture. Again, there are many options in Agriculture that have not yet been tapped. Food processing and packaging is still in the infancy stage. The cotton processing value chain was stopped at ginning and there is a lot to be done to develop the value chain towards fabric production. In the recent past there was the foolish notion that Zambia could not produce world class fabric. We may not be able to currently produce suiting fabric, but our Chitenge, Cotton Fabric, and Calico are special fabrics for special African and household products. That is where our attention may need to be directed. We need to be looking for strategic partners in this regard and promoting Zambian investors in this direction if we are to reap some long term benefits that will contribute towards uplifting the lives of our people.

Zambia must start to market her good side. The days of primarily focusing on our good people, our stable environment, and our 44 years of peace are over. We need to offer more. We need to offer opportunities for good business, options for value addition, special incentives for green field investments of varying sizes, and hassle free processes for entering into the business world.

We have started 2009 on a cautious note. We recognize that the global recession will affect our economy negatively. Now we must adjust our thinking and our planning to be much more proactive in an effort to make business more prominent and absorb the shocks that 2009 will no doubt deliver to Zambia.

This is the year when we should be enticing business and investment into Zambia in a way that will create more jobs and economic activity to counter the job losses and lost production that the mining sector is now preparing to undergo.

Zambia has two years to build some economic fat and sustainable enterprises. In the third year the country will be preoccupied with General and Presidential elections and no appreciable economic activity will take place except for spending vast sums of money in the election campaigns.

The next twenty four months must be managed carefully and diligently so that Zambia attracts as much investment as possible be it local or foreign. And in so doing, we must sharpen our competitive and comparative advantages all the time. Our cheaper hydro energy , our educated people, our better English speaking ability, our abundant water resources, our vast arable land, our mineral resources, our tourism potential, and our central location are but some of the attributes that will entice investment into the country. If Zambia allows these attributes to slip and become hurdles, then we only have ourselves to blame for the hardships that our people will endure in the future.

Published 10 February 2009

Dream Budget

Friday 30^th January, 2009 was Budget day and the Finance Minister spent much of the afternoon reading his budget speech to a packed house and public gallery in the Parliament building.

The first information given to the public was that the theme of the 2009 budget is 'Enhancing growth through competitiveness and diversification'

The budget speech also alluded to the uncertainty in the world economy and the effects of the lower copper prices on the Zambian economy.

The 2009 budget looks to a Zambia where Zambians are well nourished, have decent housing, and have access to clean water and sanitation. In addition, the budget looks to developing paved roads with adequate drainage, access to reliable and renewable energy sources, and the provision of quality health care and education.

The 2009 budget strategy includes economic diversification programs, lower dependency on the mining sector, and for the Government to play its role in creating a conducive and competitive environment for wealth creation and poverty reduction.

The budget seeks to attain 5 percent economic growth and to maintain inflation at 10 percent within a framework that will limit domestic borrowing to no more than 1.8 percent of GDP.

The budget policy highlights a focus on Agriculture, Tourism and Manufacturing as key economic drivers. The policy aims to provide a steady food and fuel supply during 2009. The budget takes into account an expectation that oil prices will remain low during 2009. Resources will be channeled to infrastructure and social services with a prudent domestic borrowing policy. Government plans to incur foreign debt to develop water sources, sanitation, energy sources and roads. An emphasis is placed on undertaking non concessional borrowing for energy development and entering into Private Public Partnerships through the guidance of a bill to be passed during the year. Several instruments are envisaged that will assist Government deliver development to the country, and these include devolution of service delivery to the Local Authorities, the take off of the Decentralization Implementation Plan, the Local Government Capacity Building Plan, and the expediting of the National Decentralization Policy.

The tangible events that will be undertaken during 2009 in agriculture include the development of a 155,000 Hectare farm block in Serenje, and the promotion and facilitation of processing and packaging in Zambia. To this end the budget raises income tax on exports of cotton from 15 percent to 35 percent, much agriculture machinery and equipment will be zero rated, cotton seed export tax will be increased from 15 percent to 20 percent, and boring and sinking equipment will be zero rated.

Tourism development programs include the development of Kasaba Bay to include roads, air strip and electrification, and a tourism zone in Livingstone. The rehabilitation of airports and roads within the infrastructure allocations for 2009 will impact positively on tourism development. The budget allocation to tourism is K77 billion which is a sizeable upgrade from the K26 billion allocation in 2008.

Key developments to enhance manufacturing include the development of Economic Zones across the country, the promotion and facilitation of value addition for selected primary raw materials produced in Zambia, the zero rating of imports for dehullers, windmills, and refrigeration and cold room equipment. Crude vegetable oils, gray fabric, and packaging materials will be re classified to attract lower customs duties in a bid to support manufacturing.

Major infrastructure programs to be funded in 2009 include rehabilitation of the Zimba Livingstone road, seeking investment to develop the Kafue Gorge Lower Power station, a rural electrification initiative, a PPP package for Tazara, the development of the railway systems in Zambia, airports renovations and extensions, and road drainage works.

The 2009 budget seeks to ease the pressure on the mining industry during the copper recession by the removal of windfall taxes, the provision of capital allowance of 100 percent, the reduction of customs duties on heavy oil fuels by 50 percent, and the zero rating of many copper and cobalt processing inputs.

Some attempts to make ZESCO more commercial have been captured in the budget by promoting a tariff increase that will allow ZESCO to experience cost recovery revenues by 2010. Our competitive advantage as a low cost energy centre will be eroded and our attraction for Foreign Direct Investment will be undermined. Furthermore, rural electrification will put pressure on the already overloaded national grid and if tariffs are too high then charcoal burning and deforestation will continue.

The budget places emphasis on converting two teacher training colleges into University Colleges whilst investing in the rehabilitation and development of trades training institutes in Mongu, Kaoma, Ukwimi, Mwinilunga, Lusaka, Solwezi and Chipata. This is a good initiative to raise the skills levels of many Zambians.

The total budget for 2009 amounts to K15.2 trillion, of which K11.7 trillion is from domestic financing, and K3.5 trillion is from foreign grants and loans. In 2008, 25 percent of the budget was foreign financed and in 2009 we expect 24 percent to be foreign financed even in the face of a global recession. Pledges and delivery are two different issues and our 2008 experience informs us that the pledges do not always transform into delivery.

K2.6 trillion is expected to come from Pay As You Earn, K2.5 trillion from VAT, K1.4 trillion from Import Duties, and K1.6 trillion from Excise Duties. Foreign Grants of K2.7 trillion are expected to cover Direct Budget Support, Sector Budget Support, and Project Support.

The 2009 budget is marginally bigger than that of 2008 but there is currently a global economic recession, our mines are laying off workers, and the disposable income for foreign tourists is declining thus negatively impacting on our tourism expectations for the year. The weaker Kwacha will reduce the expected imports which will in turn reduce the revenues anticipated for Import Duties and VAT.

The projections for 2009 are optimistic and are not backed up by complete facilitation cycle initiatives within the budget provisions.

For example, manufacturing will not really be supported until the Government facilitates manufacturing through lowering or removal of taxes on imported machinery and raw materials, and safe guarding the market for domestic manufactures by introducing tariff increases on manufactured imports. There is need to nurture domestic industry to a level where the industry will compete favorably with imports. Deliberate funding and financing for exports will have to be in place for cotton and cotton seeds to be locally processed.

Piecemeal support to tourism by allocating resources to either Livingstone which is over subscribed, or Kasaba Bay which substantially only needs access through an airport or airstrip, will not help matters much. Investors in tourism want to be able to ensure that tourists will be able to access their lodges, hotels and resorts first. Issues of electricity and roads come as a second step after assessing what the tourists are looking for. Upgrading roads that have no tourism impact will not help the economy much.

Air access to Samfya, Siavonga, Kafue National Park and Kasaba Bay are the basic requirements. The private sector will then determine the next steps for development.

The levels of PAYE and Corporate Taxes may be over estimated as many businesses go through what promises to be a few years of business slump.

Several of the assumptions and expectation in the 2009 budget seem to ignore what is happening in the global economy. Railway systems have not delivered on their concession agreement and yet they are ready to make more pledges of USD30 million. How feasible is this?

There is need for more prudent expenditure within the Government machinery this year if we are to finance and balance our 2009 budget. More than K6 trillion is allocated to General Public Services, Defence, and Public Order and Safety. This figure can be down sized to reflect our developing country status leaving more resources for Economic Affairs, Health, Education and Social Protection.

The 2009 budget appears to be a good wish list. It will take a very determined administration to ensure that the other K9 trillion goes towards truly transforming the economy in a meaningful way such that businesses thrive during the year and the focused sectors of Agriculture, Tourism and Manufacturing deliver as predicted. Anything less than this will mean we have a Dream Budget that will fall short of expectations and not live up to the 2009 budget theme.

Published 3 February 2009

Best Wishes

The festive season comes to an end this week and people go back to work, school, and their businesses to start the New Year with hope and expectations.

Many of the greeting cards hanging in living rooms and offices offer Best Wishes for 2009 to the reader. Best Wishes seems to be the major motivator in many developing countries.

The fiscal budget that is developed in the last quarter of the year is largely based on best wishes and expectations for the following year. Our relationship with outside foreign partners is primarily focussed on best wishes thereby encouraging us to relegate our thinking and reasoning to the level where we expect to be working with ‘Donors’ and ‘Development Partners’ and generally take no responsibility for our own well being. The festive season further enchants the atmosphere of best wishes and benevolence when gifts are exchanged, food and drink are shared, and merry making is the order of the day. Students go into exam rooms to take their year-end finals with best wishes, but the successful ones are the students that studied and prepared for the exams.

We now enter 2009 with best wishes for the economy even in the face of a global economic recession.

It is refreshing to experience a deviation from the slumber of best wishes to the practical realities of assessment, analysis, planning and strategy. This new phenomenon propelled by the possible threat to Zambia’s economy due to the Economic Meltdown out there, may be just the kick start that Zambia needs to be pro active, strategic, and engaging with the events around the world.

The Government in collaboration with various private sector associations is assessing the possible impact on the Zambian economy, caused the recession in the global markets. Zambia’s 2009 resolution seems to be one that asks us to move away from the traditional best wishes scenario, to one that compels us to engage with the world on options, opportunities and counter measures that can be explored and implemented to reduce the negative effects of the impending recession.

The challenges include a detailed analysis of existing efforts to develop the economy. The Fifth National Development Plan (FNDP), the Financial Sector Development Program (FSDP), the Medium Term Expenditure Framework (MTEF), the Private Sector Development Program (PSDP), and the Public Sector Reform Program( PSRP) are but a few of the ongoing efforts to profile Zambia into an investor’s haven. These initiatives have to be analysed for results and relevance in view of the evolving world economy. Zambia will not be spared, but pro active preparation, adjustment and strategy, will minimise the negative effects on the local economy.

A realistic approach must be taken in assessing what areas will be affected in the Zambian economy during the next two to three years. Already we note that copper prices have fallen. South Africa is experiencing a slump in tourism due to the fact that European tourists do not have the disposable income to fund expensive holidays in Africa. Investments in mining are likely to reduce as the cost of investment capital becomes more expensive. Grants and soft loans for the education and health sectors are likely to reduce and a larger burden of financing these sectors will have to fall on Government shoulders. The rains have come too heavy in some places and our food production may be compromised during the year. The chances for foreign food aid are less likely this year than in previous years, so we have to plan a new mitigation strategy for food security during 2009. The power crisis that has gripped Zambia for most of 2008 is still with us. Industry is expecting to demand more electrical power and we do not have the means to generate the much needed resource. There are threats of mass job losses in the mining industry. What are we going to do about the people that may be put out onto the streets of the Copperbelt? The price of oil is not likely to remain at below USD50 per barrel for much longer. How will we manage to procure oil based fuel stocks when the prices start to rise again?

Are we going to leave the energy crises as is, or are we going to continue to open up opportunities within Zambia? What will be the future for Maamba Collieries? How do we get the railway systems to take their rightful place as primary mover of goods and people across the country? What do we need to do to raise the standards of products made in Zambia so that they can sell in regional or international markets? How do we skill our people so that they can be gainfully employed and compensated either within the borders of Zambia, or in the region?

This daunting task can either be swept under the carpet and we can all wish and hope for the best, or we can work at it as best we can so that we can lessen the chances of our economy being completely undermined by events that we have no control over.

The group of associations in collaboration with various Government Ministries and agencies have some hard work ahead of them. We may not be able to influence the amount of money that will be employed in the 2009 budget, but we certainly can make recommendations and adjustments on how we use this money so that the country continues to prosper even in 2009. There is an opportunity that exists for a permanent dialogue between the Government and the private sector as a consequence of the global financial crisis. The ongoing dialogue will form part of a new strategic public private partnership that should become the bedrock of social and economic development planning for the country for decades to come.

2009 is the year to hang up our political boxing gloves, our selfish business demands, and our passing the buck habits. The entire nation and all the various civil society, private sector, and Government organs must rally together and shoulder the responsibility to support the country through the no doubt difficult years to come. Best wishes will simply not do this year.

Published 13th January, 2009

2008 Lessons

This is the last week of 2008 and as we proceed into 2009 it will be useful to take some lessons learned from this year as a basis for planning our future from here on.

Early in the year, as a carry over from the previous year, the Government decided to take affirmative action on the Mining Development Agreements (DA’s) in an effort to get the Mining industry to pay their fair share of taxes in the light of unprecedented high copper prices.

Although the case for Mining companies to pay higher taxes than those stipulated in their Development Agreements with the Government was legitimate, the risk of Zambia paying too much attention to the copper mining industry resulted in some mutation of the only too familiar ‘Dutch Disease’. In other words, we placed too much emphasis on the copper mining industry to be our economic rescue line out of poverty, and as the vehicle to propel our economy into prosperity. The copper price slump to below USD3,000 per ton has now brought some realities into our economic development planning strategies.

The Zambia Development Agency (ZDA) was practically launched in 2008 when the first Chief Executive Officer was put into office by Government. This decisive move allowed for a more focused dialogue with the private sector and Government, such that the agency positions itself as the prime mover for investment into Zambia. The various divisions of the ZDA were not completed operationalized by the end of the year, but 2009 promises to prod ZDA into more proactive work with the advent of the Multi Facility Economic Zones.

2008 saw some positive developments in the businesses sector where the primary activity of trading started to evolve with many large companies beginning to invest in factories, hotels and lodges, shopping malls, office blocks, and other real estate investments. This growing transformation was an indication that businesses have started to develop medium term faith in the stability of the economy and therefore look into other avenues of investment beyond trading.

Electricity availability was a major hurdle impeding the growth of the mining sector and the development of new factories. Several factories had to re-schedule their commencement of operations due to insufficient electrical power supply from the Zambia Electricity Supply Corporation (ZESCO). The year was characterized by continuous power outages, load shedding, and blackouts that forced many businesses to invest in energy hungry diesel generators while the general public had to contend with many nights of no electricity. Towards the end of the year ZESCO announced that it was securing a USD1.5 billion loan from the World Bank’s International Finance Corporation to build a new power station to be known as the Kafue Gorge Lower Power Station. This project is likely to take at least five years to complete after the contracts have been signed and pre construction work is completed. This is all on the assumption that we do not do anything to upset the World Bank, International Monetary Fund and other collaborating partners.

Zambia managed to attract several regional banks to invest in the financial sector in 2008 and by the year of this year at least four new banking licenses will have been issued or approved. The impact of more investors in the banking sector suggests that the private sector will have more options to choose from when looking for investment capital for their businesses. An increase in the number of banks in the financial sector also puts more aggressive competition within the banking sector and should result in improved banking services and products in the market.

The Citizens Economic Empowerment Commission (CEEC) was officially launched in 2008 when a Chief Executive Officer was employed and an operational premises and staff complement was inaugurated on Los Angeles Boulevard. The CEEC spent much of the year marketing its programs and activities but one hopes that in 2009 we should see more implementation work being carried out.

Half way through the year we noted that some investors from West Africa had decided to invest in Zambia in a fairly large way. Through this initiative we have seen a large cement investment totaling to USD400 million being developed in Lusaka with the eventual impact of bringing down the price of cement to the construction industry as well as to the region. Zambia could turn out to be the largest producer of cement in the region with a local impact of supporting and facilitating a construction boom in the country.

Zambia had started some work on the Economic Zones in 2007 and spent much of 2008 in various efforts to rationalize the development of the three initial zones namely Chambishi, Lusaka-Chalala, and Lusaka International Airport. Some focus was placed on attracting investors from abroad to build factories in these three zones with very little information being shared with local businesses on how domestic investors could benefit or invest in the Economic Zones. Hopefully, 2009 will see some significant changes to this marketing effort by targeting Zambians more aggressively.

Zambia pondered whether to belong to Southern African Development Community (SADC) or Common Market for East and Southern Africa (COMESA) during 2008 and was further pushed to consider the SADC Free Trade Area (FTA). Both regional grouping are looking to developing a Customs Union (CU) within a few years with COMESA aiming to operationalize its Customs Union by December 2008. The implications and impact to the Zambian economy in respect to FTA’s and CU’s was subject for much debate and dialogue during the year.

The European Union had persuaded Zambia to initial a pre Economic Partnership Agreement (EPA) document at the end of 2007 and the same manner of commitment to ongoing dialogue was agreed in 2008 by Zambia initialing another pre EPA document due to the fact that Zambia is not likely to sign the full EPA by the end of 2008.

In the second quarter of the year some rehabilitation work was started on the Zimba to Livingstone road which had deteriorated to an extent that the 80 kilometre stretch could be covered in no less than four hours by car or bus. These ongoing road works have not yet been completed by the end of the year with the onset of the rainy season. It still remains a road traveler’s nightmare.

Midway through 2008 Zambia suffered a national blow with the demise of the incumbent State President Levy Patrick Mwanawasa. Much uncertainty was introduced into the economy and the immediate effect was for the Kwacha to depreciate against the US Dollar. The subsequent run up to the Presidential By-Elections introduced even more uncertainty such that some investments were put on hold and the kwacha further depreciated.

The inauguration of President Rupiah Banda brought some stability to the country. The Banda Government remained significantly unchanged from the Mwanawasa Government and that sent good messages of confidence to the business community both at the domestic level and the international level.

In the last quarter of 2008 a new bridge over the Luapula River was completed and commissioned as the Levy P Mwanawasa Bridge. This life line crossing between Zambia and the Democratic Republic of Congo via the pedicle access road, cuts travel time to and from the Luapula Province by at least three hours.

The year saw the Global Financial Crises develop and eventually convert into a world recession and economic meltdown in many counties across the world. Major banks, mortgage companies, and insurance companies either ran aground or were speedily rescued by their Governments in an effort to ward of a snowball collapse of the financial systems of ‘strong’ economies.

The last few months of 2008 saw the Zambia State Insurance Company mutate into three separate business entities as a result of a re-engineering process that should see the state enterprise survive and thrive in years to come.

The significant major event of the last quarter of the year was the change of guard at the Ministry of Finance and National Planning. Mr N’gandu Peter Magande was replaced by Dr Musokotwane Situmbeko who is a seasoned civil servant with experiences that span the Bank of Zambia, the National Treasury, State House and the IMF.

What are the major lessons to be learned from 2008? The most important lesson is that Zambia must focus on developing economic activity across the various sectors. 2008 teaches us that we cannot become too complacent when copper prices are good. We must diversify and spread the burden or financing the economy as evenly as possible so that when there is a slump in one sector the other sectors will still hold the country up. Another big lesson is that competition brings down prices and improves quality of services or products. We must encourage competition pro actively for the benefit of our people. A special lesson from 2008 is that proper planning and commitment is essential. We have energy shortages due to poor planning and commitment. We have bad roads due to poor planning and commitment. We have mediocre tourism due to poor planning and commitment. We have a bad railway network due to poor planning and commitment. We have neglected coal resources which could be used for alternate energy, due to poor planning and commitment. We are grappling with the future of the Zambia Telecommunications Company (ZAMTEL) due to poor planning and commitment.

2009 looks encouraging and prosperous, if we work as a team towards developing the economy and opportunities for our people. The partnership starts with the Christmas and New Year’s celebrations where Government officers, business men and women, and the general public laugh, drink and merry make together in sincerity. We must take the season’s spirit into 2009 and into our board rooms and conference rooms so that together we build Zambia. Seasons greetings you all and a prosperous 2009!

Published 30th December, 2008

Basic Existence

Last week I chaperoned my 16 year old son to the Department of National Registration under the Ministry of Home Affairs to get his first ‘carry on person’ identity card namely; a National Registration Card or NRC.

In the process, I was advised at the National Registration Office on Dedan Kimathi Road that my own NRC was no longer useable and needed to be replaced with a new card that would have a more recent photograph as my existing card was one of those issued in the 1970’s and did not have all the new security features that are now standard on NRC’s.

I immediately left for the ‘Old Boma’ building near the Central Police Station where the records of my NRC are kept and was pleased to note that there were very few people standing in the queue. After a few minutes my turn came up and the woman responsible for checking my records in the Registry only took a few minutes to verify that my existing NRC was genuine and referred me to the cash office to pay my K3,100 NRC replacement fee. That exercise took less than 5 minutes and I went back to the Registry where the earlier woman immediately typed up my new replacement NRC. My wait in the Studio was longer due to the requirement that photographs are only taken in groups of four owing to the fact that the old Polaroid ‘Snap and Give’ camera’s in use place 4 photographs on one film card. Eventually when the required 4 applicants were assembled the photographer woman took my photograph, assembled the NRC for lamination, and a few minutes later I was out of the building with my hot new NRC.

There are some interesting perceptions to be made through the experience of replacing my NRC. The first was that the Registry appeared to be very well arranged and the woman working in the section was very familiar with the system and therefore worked very efficiently. The second observation was that none of the staff were distracted by phone calls on their landlines or mobile sets. They systematically worked towards moving the queue forward and dispensing whatever service was required to the public. The third issue worth noting was that the section seemed to be dominated by women with the exception of one man in the cashier’s office. I had made this observation about the prevalence of women in this section twice before, when assisting my brother and father with NRC replacements during the last 10 years.

Now that I was up to date with my credentials as the father of the 16 year old that was looking forward to having his first taste of unique basic existence as a Zambian and as an individual, we proceeded back to the Dedan Kimathi offices to go about the business of securing his NRC.

The staff at this office was more apt to respond to the public with a ‘wait in the corridor’ answer to enquiries, or to redirect a customer to another office without too much explanation. This could be because the staff are too overwhelmed with work and have to multitask in addition to responding to special cases.

I was pleased to note that one officer insisted that we resolve any issues in respect to the issuance of my son’s NRC. Where she needed higher authority, she referred us to that relevant office for action. We shuttled back and forth a couple to times owing to some mistakes in capturing data from the Record of Birth 16 years ago, and eventually found ourselves waiting once again in a Studio and hoping that we would soon make up the 4 customers that are required for the Studio staff to take the photographs. After 20 minutes the numbers added up to 4 and ‘click, click, click, click, ‘snap and give’ again. We soon walked out of the building with my son’s new NRC and he proudly and protectively placed it in his shirt pocket feeling very Zambian and looking forward to registering and voting in the 2011 General and Presidential Elections.

The experiences at the Department of National Registration indicated to me that the systems are in place, that the staff is knowledgeable about the work that they do, that the Department is not very well equipped, and that some basic Computerization would greatly assist in making the Department much more efficient and productive.

The NRC’s are typed on manual typewriters, while on the other hand the Birth Certificates are printed via a computer system. The photographs are taken with a film based camera which must be very expensive to maintain and run, but new Passports are being printed with imbedded digital photographs that require no film at all. The numerous searches and verifications are done manually and are prone to records not being in the right place thereby introducing delays and repeated follow up visits by the public, when a little computerization would make searches only a click away on the computer screen. The current system requires some dedicated and focused staff to deliver services to the public, but a more robust way of re-engineering the Department would be via simple and predictable systems that are process driven rather than discretion or personality influenced.

Since the NRC is the first piece of national identification for every Zambian or resident, it also becomes the most useful tracing mechanism for displaced people, unidentified corpses, various documentation, educational qualifications, tax references, family trees, bank references, and military – civil service and security history.

Many of our other references often refer to the NRC. The issuance of a passport is dependent on a NRC. The registration of a company requires that a NRC number must be quoted in the appropriate forms. The registration for taxation requires the NRC number to identify the tax payer. The submission of pension funds depends on the NRC as part of the account description. Insurance policies require the NRC number to be part of the insured’s identification details. The many licenses and permits issued by state institutions and private bodies demand the NRC number to be quoted on the various documents for proper identification of the holder.

It is my hope that the general public experiences a similar treatment to the one I experienced last Friday, or better. We must acknowledge however, that the population of the country is steadily growing. There will be need for purposeful investment in technology, re-engineering of systems, and continuous human resource development if we are to expect the Department of National Registration, or indeed any other Government institution, to deliver efficient and productive services to the public.

Seasons' greetings to all Zambians out there. The basic existence of an individual impacts on the basic existence of any company. If we can fix the fundamentals, then there will be hope for Credit References, improved Financial Services, Trade Credit Facilities, broader Tax collection, and much better planning at Government level and Local Governemnt level.

Published 23 December 2008

ZAMTEL Re-Loaded

Zambia and more specifically, the Ministry of Communications and Transport has been thinking about how to turn around the state communications company Zamtel, so that it can become efficient and competitive in the ICT sector where innovation, quality of service, efficiency, and cost of service are key survival elements.

Generally, Zambia has often swung from one extreme to the other when considering the future of state enterprises. During the privatization era we hurriedly sold off many state enterprises that if re-structured could have still been around and well today. But because of our haste, probably due to World Bank and International Monetary Fund pressure, we converted state owned companies that had purpose, into assets and properties to be broken down and sold in various auction yards. The other extreme was to hang on to some state enterprises through 'hail and high water' and at the tax payer's cost without making any meaningful efforts to improve the productivity of these bloated giants. Zamtel, ZESCO, ZSIC, NAPSA, are some of the few remaining state companies that require some strategic and researched re-engineering so that they can continue providing the core services for which they were created, in a more productive and efficient manner.

Recently, ZSIC went through an internally motivated and managed re-designing program such that the company is splitting into three clear units that have specific core goals. We hope to see three separate companies that will emerge out of the ZSIC unbundling that will focus on the three main activities currently occupied by ZISC which are namely; Short and Medium Term Business, Long Term Business, and Properties and Investments. This proactive and locally developed evolution process is likely to result in the three arms of ZSIC becoming more efficient, productive, competitive, profitable, and sustainable with time. Hopefully, this formula should steer the ZSIC companies away from the auction yard.

Zamtel has similar characteristics to ZSIC because one can clearly identify five core functions within the company. The basic telephone service offered by Zamtel has always been landlines across the city. Zamtel has installed landlines in all major cities and towns and many telephone exchanges have serviced the communication needs of both the business sector and residential areas. This sector of Zamtel's operations can easily be turned into a standalone company.

All international phone calls in Zambia are routed through the Mwembeshi Earth Station where two satellite dishes continuously pipe information and communications across the globe via the satellite array in orbit around the Earth. This multimillion dollar investment can also be parceled out and formed into a separate company that will primarily buy and sell international communications connectivity and bandwidth for internet use.

Zamtel On-line offers internet services to the public and is one of the four largest Internet Service Providers in the country. Again, Zamtel On-line is clearly a division within Zamtel that can run as a separate company.

Cell-Z has always run as a separate entity under Zamtel. This was done to introduce competitiveness in the Cell-Z operations so that the mobile phone service could compete favorably with the other two privately owned companies in Zambia.

The last distinct development in Zamtel is the Fibre network that is currently being laid to cover the line of rail from Livingstone to Chililabombwe. This 1,500 kilometre fibre backbone can easily be incorporated into a separate company much like the Mwembeshi Earth Station but for national connectivity. The prospect for providing high speed connectivity to businesses and Governemnt departments are quite wide and opens up some new profit centres for Zamtel.

It is quite clear that Zamtel has already split itself into clear service centres and now needs to follow up by physically separating the various entities into separate companies with possible partners from the private sector. Zamtel may need some foreign investment partner for the landline telephone service, but Mwembeshi Earth Station will probably do better to offer some shareholding to local mobile phone service providers and internet service providers who both need fast and reliable connectivity to the outside world. Zamtel On-line can operate quite productively and efficiently with its current profile. As soon as Zamtel On-line is weaned from the parent company Zamtel, it should adopt some new strategies for sustained operations and profitability that will ensure its continued operations for years to come. Cell-Z will have to up its quality of service so that it can compete with the other two players in the industry. Cell-Z will have to introduce a more solid service in respect to international SMS services and international roaming. Many mobile phone users often use two companies to cater for their everyday uses. Cell-Z for local calls and landline calls, and one of the other mobile services provides to give them efficient SMS services to and from outside Zambia. There is a target to install a total of 4,000 kilometres of Fibre cable throughout the country. Opportunities exist for local partners to take a stake in this development through partnerships with the Zamtel Fibre Back Bone entity.

Hopefully, Zamtel will get it right and strategize its commercialization and privatization such that the transformation will be in the best interests of Zambia and will result in more productive and efficient services to the public.

Published 16 December 2008