Killing Skills

Zambia, like most developing economies has placed great emphasis on developing human skills across the country in an effort to build a productive nation. The last two decades have witnessed the mushrooming of Government and Private training institutions across the country, in a public-private partnership endeavour to equip with life skills, the many thousands of Zambian youth that pour out of our High Schools each year.

Even with this effort, only about 40,000 of the over 250,000 students that graduate from Grade 12 are catered for each year in colleges and universities. The many Grade 7 and Grade 9 children that do not make the cut off point marks to move on to the next grade, are destined for the streets of our towns and cities to become unskilled workers, roadside vendors, and street kids. The future is very bleak for this lot.

It therefore comes as quite a surprise that the Ministry of Science, Technology and Vocational Training (MSTVT) through the Technical Education and Vocational and Entrepreneurship Training Authority (TEVETA) have now embarked on a program, ostensibly aimed to improve the quality of training in the country, but will have the net effect of creating barriers and bottlenecks to the greater goal of skilling and empowering our youth country wide.

This program launched by TEVETA on 28th January, 2009 and documented in their Circular No. 2 of 2009, introduces new Registration fees, Accredition fees, Trainer Accreditation fees, Curricula Approval fees, and the associated Penalties for Non Compliance, does more harm than good for the nation. The move is exactly what the Government has been trying to eliminate in the ongoing reforms on Public Sector services.

The Ministry of Tourism is working on eliminating nuisance licensing, permits and fees in order to encourage more investment into the sector. The Patents and Company Registration Office (PACRO) went through a similar exercise to streamline its operations and make business registration a cost effective and hassle free process. The Customs Department within the Zambia Revenue Authority has done pilot programs at Chirundu Border Post to fast track imports and exports from Zambia in order to support private sector business activities, as a contribution to the wealth creation effort of the country. The key benchmarks in these initiatives have been; removal of barriers, simplification of the processes, reducing the cost of doing business, facilitating economic activity, and the provision of value added services to the public.

The TEVETA initiative does not follow the same blueprint. The Education sector, both academic and skills development, is grossly insufficiently supported and experiences insufficient investment by both the private sector and Government. A rough guesstimate is that the combination of school leavers that will not progress through the Government provided educational system beyond the Grade 7, Grade 9 and Grade 12 levels totals to about 500,000 each year.

The new TEVETA effort demands that every training institution must Register for a three year period at a cost of K5,000,000. Each course offered must be Accredited for each level at a yearly cost of K500,000 for Diploma, K400,000 for Advanced Certificate, K300,000 for Craft Certificate, K200,000 for Trade Test Certificate, and K500,000 for Short Courses. In addition, There are charges for renewable (every 3 years or annually) Accreditation of Foreign Examinations Boards, Local Examination Boards, Foreign Examination Centres, and Local Examination Centres. Each Trainer, Assessor, and Examiner is compelled to pay a yearly Accreditation fee of K100,000 to operate within the new rules. There is a list of charges and fees for Curricula Approval, Examination Registration fees, and Entry fees for every subject. These new TEVETA charges provide for punitive penalties for Non compliance which demands K10,000,000 for illegal unregistered operation, and K500,000 for Non Accredited Trainers and for the use of Non Authorised Curricula.

The first impression one has, when considering the plethora of charges, costs and fees imposed by TEVETA on the private training institutions in the country, is that of adding to the cost of doing business in the technical and vocational skills training sector. Colleges will have to increase fees to the community in order to cater for the new additional costs imposed by TEVETA. This already struggling and inadequate sector is likely to struggle much more, and there is now not much incentive for attracting new investors particularly during this period of global recession. Many colleges will have to close down, and many more youth will find themselves ejected onto the streets without options for further education and skills development. One can only guess what impact this will have on the escalation of crime in the country.

A typical example is of a college operating at the Broadway complex in Ndola. The college offers 6 courses at certificate and diploma levels, and another 5 short computer skills courses. Each course accommodates 15 students. The total number of students enrolled is 255 if all courses are fully booked. Each course is priced at K1,500,000 for the year thereby generating an annual revenue of K382,500,000. Lecturers are paid K2,000,000 per month and a complement of 11 is required whereby the same lecturer teaches both the certificate and diploma sessions. The annual payroll for lecturers is K264,000,000. Rental and other running expenses tally to about K100,000,000 and the cost of registration and accreditation with TEVETA will be around K40,000,000. The gross profit before taxation works out at K16,400,000 for the owners of the business. This works out at less than K1,400,000 per month in income! Why would any investor want to invest so much, and work so hard, to earn the salary of a Driver?

A second look at the TEVETA fees and costs, indicates that several of the charges are punitive and are not associated with any service that TEVETA may offer to the colleges. Why should TEVETA be charging colleges for examination fees and registration fees that have nothing to do with their operations? Normally, these fees are charged by the examining bodies and the colleges carrying out the examinations. How does TEVETA come into the picture? Accreditation is usually a voluntary requirement. For example, the Government may offer construction contracts to companies Accredited by the Engineering Institution of Zambia (EIZ), but there may be many companies that are not Accredited that continue doing business elsewhere in the economy. Accreditation is seldom used to forcibly compel private companies to register. The term used to compel companies to register is Regulation. And regulation must be backed up by some rationale that protects the public interest. One fails to see the relevance and significance in the TEVETA logic, unless Zambia has now decided to regulate the basic type of training and skills that we want to give to our people, as was the case in the old Socialist Communist days of the Soviet Union.

A third view of the TEVETA program indicates that the aim is to raise funding for the institution. Since TEVETA is a Public monopoly, the charges and fees prescribed can be decided at a whim and the private sector and public must comply. TEVETA is a Government institution and receives funding from the parent Ministry. In addition, TEVETA has received supplementary funding from ‘Donors’ that have supported the activities of the authority for several years now. Donor fatigue and the advent of the Global Crunch now threatens to remove the supplementary funding, and TEVETA has to look to the private sector and the public to finance its operations, or risk having to reduce its operating budget. This dilemma is not new to Government institutions that have enjoyed ‘Donor’ support but did not invest in developing value added services to its customers in an effort to wean themselves from the ‘Donors’ in later years. There is a scramble for new money and an appetite for the ‘Donor’ life style of new vehicles, foreign travel, workshops, and conferences.

India and South East Asia are rapidly developing partly due to the increasing levels of skills development in the region as a consequence of the many colleges and training institution in every community. Bangalore is India’s call centre hub and hosts dozens of English Language training centres in all shapes and sizes. Productivity and development are not hampered by bureaucracy, foreign best practices, and wishful thinking. The overriding factors are wealth creation, skills development for the job markets.

TEVETA can provide services to the public to Authenticate Government run qualifications, provide historical information on results, carry out national trend and other analysis for business decision making, and provide training statistics to the public, to name a few possible services that can be sold to the public. The idea that TEVETA can become a profit centre that is self sustainable is a myth, because all it will do as many other statutory institutions have done in the past, is to become an additional cost to doing business and a bureaucratic barrier to development in the country.

TEVETA is challenged to go back to the drawing board before it does irreparable damage to Zambia’s Human Resource development. Is TEVETA there to squeeze every drop of Kwacha from those colleges that are trying to educate Zambians? Is TEVETA helping to skill and educate our people so that they can become National Resources in the wealth creation and job creation program driven by the FNDP and Vision 2030? Is TEVETA becoming another bottleneck to economic and personal development for most Zambians? Does Zambia want to develop her citizens into thieves, beggars and killers? Let’s stop killing skills development, but vigorously promote all forms of education that will empower our people at all levels of development.

Published in The Post on 31st March, 2009

Great Expectations

April 6-7, 2009 will witness the North South Corridor Meeting at which
20 Trade Ministers from Africa will engage with senior officials from
the World Bank, African Development Bank, European Investment Bank,
World Trade Organization, and African Union amongst other financiers
and economic development institutions that focus on Africa.

The expectations in Africa, are that these funding and financing
institutions will pledge over USD2 billion to finance regional
infrastructure projects.

Sub Saharan Africa sees this meeting as an opportunity to secure
investment into roads, railways, bridges, electricity generation, and
telecommunications both at national levels, and at regional levels, to
support enhanced trade and commerce that will directly improve
economic growth and reduce poverty in the developing economies.

This North South Corridor meeting is dubbed as a pilot Aid for Trade
project which is initiated by COMESA, EAC and SADC.

A key component of this initiative is to engage regional and domestic
private sector representatives, in business dialogue and negotiations
that will evolve into viable and implementable projects.

The idea is welcome by the private sector in Zambia, but could be
expanded to include financiers from Japan, China, and India where
funding and technology is easier to access, and offers wider options
to the Sub Saharan countries in respect to development partners.

As the world navigates through the current economic recession, many
challenges face our economies in Southern Africa, which include
runaway foreign exchange rates, unsecured domestic insurance cover,
shrinking markets, high production costs, low commodity prices, and
widespread job losses.

The expectations that a hand full of traditional development partners
will turn our economies around may be too wishful. We may need to
re-model our economies to engage with the developed world such that we
become more attractive for infrastructure development financing than
we have been in the past.

To this end, strategies for opening up new opportunities in various
economic sectors such as timber processing, marble production,
industrial minerals mining, new tourism options, manufacturing, copper
value addition, and agro processing may have to be considered and
developed to make a good case for Zambia.
Recently the media reported that some new investment in the timer
sector was being carried out on the Copperbelt. This information
enhances Zambia’s profile to attract investment in infrastructure. The
announcements that the timber will be processed and used to produce
finished products within the Copperbelt further exhibits enhanced
local capacity to export and makes a compelling case for the need for
infrastructure development at both domestic and regional levels.

Zambia is undermined when reports are made that Insurance companies
should be cautious when underwriting bank loans to the private sector
due to the high rates of defaulters. There is definitely a case for
businesses in general to be more cautious this year than any other
previous years because of the fragile global economy, but there is
still a strong case for businesses to grow, diversify and create
wealth and jobs. This should be our message to the outside world if we
are to attract investment into our economy. We cannot expect outsiders
to invest in our country if we ourselves show reservations in the
performance of our economy purely because we are not planning the
future.

Some realities must be taken into account in respect to private sector
development and economic activity in Zambia. The indications that
foreign exchange based contracts should be converted into local
currency contracts are easier said than done. A currency conversion
from a stable currency to a floating one such as the Kwacha, generally
attracts pre-emptive devaluation through exchange rate hedging. This
practice is not welcome in an economy where we are trying to keep the
Kwacha stable and not too weak against other foreign currencies, so as
to maintain a working balance between the cost of imports and the
income from exports.

Currently Zambia’s infrastructure needs are fairly plain to see. At
the top of the list is to build several more hydro electric power
stations on our major rivers and waterfalls across the country. This
requirement will not only address the current electricity deficit, but
ensure that we have adequate electricity to service the demands of the
new industries and mining operations already in the development
pipeline for at least the next ten years. Zambia’s railway network
comes a close second with the need to rehabilitate the current line
between Livingstone and Chililabombwe. In addition, links to
Kasungula, Katima Mulilo, Chirundu, Chipata and Solwezi would greatly
enhance the movement of goods and passengers across the country to the
various border posts with our neighbours. Third in line would be the
development of the coal mining opportunities in Maamba and other sites
to substitute imported oil based fuels for our growing industries in
the mining sector and manufacturing sector. Fourth would be to upgrade
landing strips and airports in some places, and build new airports in
other places where the impact on the attraction of new tourism would
be greatest. Such sites are Mansa, Kasaba Bay, Kafue National Park,
and Siavonga. Fifth but not necessarily last, would be to build
strategic bridges across the rivers that are at busy border crossings
and those rivers that annex the country in such a way that development
and resources may be prevented from reaching Zambian communities.

Zambia has taken a deep breath in the past, and had great expectations
from such initiatives as the COMESA FTA, the SADC FTA, AGOA, and the
EU Cottonou Agreement. Not much success was registered from these
initiatives, mainly due to the fact that we did not strategize how we
were going to take advantage of the initiatives, and what we were
going to invest in the strategies to ensure that Zambia benefited for
the exercise.

Great expectations will only be realized, if and when, we invest our
time and resources in developing a strategy and investment program,
that will ensure the desired results will be achieved.

Published 24 March 2009

Trading in Aid

Zambia has featured in the global spotlight lately when our very own Dambisa Moyo launched her new book 'Dead Aid' and Zambia beat Ivory Coast three nil in the African Nations Cup competition.

Zambia later faded out as the competition progressed but 'Dead Aid' lingers on as book that incites critics and other commentators on economics to put forward their views on the question of development Aid in Africa.

Some years ago one very rich man from Seattle USA who heads the world's most successful IT software company remarked to an audience of eminent scholars, that the chances of transforming those same scholars from academics to cutting edge entrepreneurs was extremely slim, because formal education had biased them and fashioned them into compromised material that may not be able to think out of the box.

In many ways the analysis is as true today as it was back then. Facts and figures, anecdotes and references are sometimes chains that tie our thinking to some ideologies and philosophies that are only hypothesis that hold within a prescribed framework.

The questions on the value of development Aid, what Aid has done to developing economies, and what can be done about Aid, are all hinged on context and the investment of the various players in the Aid Trading regime.

Too often the basic facts are ignored in favour of a romantic expectation of what development Aid is supposed to produce and how the roll out ought to take place. The very fact that a specific development engagement between two countries is referred to as Aid tends to hypnotize the recipient party into sitting back and receiving what is put on the table without so much as a question. It also gives the Aid giver arrogance and authority to dictate the Aid relationship. This phenomenon is much the same as that generated by the over used 'Donor' word that parallels the scenario whereby a strong and healthy person is lying on a bed proudly donating blood to the national blood bank. There is a feeling of benevolence, achievement and authority by the ‘donor’ and a corresponding 'anti-feeling' of gratitude, humility, and servitude by the recipient. This partnership of authority and irresponsibility between two countries is usually a recipe for disaster.

It may be useful to consider some basic established relationships between two countries to appreciate the naivety and realities of life. A foreign Embassy or High Commission established in Zambia serves one main critical purpose – To serve the interests of the nationals of the country represented by the mission. We have noted over the last four decades that if a foreign national who is driving in Zambia and is involved in a fatal motor vehicle accident, the first thing that person will do is run to his/her Embassy or High Commission for protection from the Zambian law. This also applies to any criminal activity that a foreign national may be engaged in and the Zambian law is on his/her trail. We have noted that foreign Ambassadors and High Commissioners will protect and support their nationals in business activities even when the host Government disapproves of some activities perpetrated by the foreign companies. Typical examples are the flouting of labour laws, ignoring safety and health standards, and racist behaviour. In war torn countries, local babies and children are abandoned at airports to die at the hands of gunmen while foreign healthy and wealthy people who can take care of themselves are immediately evacuated by their Embassies and High Commissions by specially chartered helicopters. This is as it should be. Embassies and High Commissions are paid for by their tax payers back home and are expected to look out for their own nationals irrespective of whether the actions are morally right or wrong.

The above scenarios illustrate the foundation of Aid. Aid is not free. Aid is traded in a subtle and manipulative way so that at the end of it all, the ‘donor’ gets a return on the investment just like any other business venture.

Many analysts and economists can write about Aid in very different ways as they analyze the impact of Aid in different countries, unpick the various case studies around the world, and brain storm some innovative thinking on new mechanisms for making development Aid work better than before.

The fundamental question that we must ask ourselves is ‘Are we being realistic to expect a ‘Donor’ country to consciously assist us to develop our country today so that tomorrow we can compete with the very same ‘Donors’?’ This may be asking too much of the ‘Donors’. This is almost as naïve as expecting an Embassy or High Commission to hand over one of their own nationals to face charges in the Zambian courts of law.

If the design of Aid is not to seriously support and facilitate development in our economies then we can spend sleepless nights planning and redrawing implementation plans for as long as we like without ever reaching the goals that the idea of Aid is supposed to achieve. A case in point is the World Bank’s Doing Business Report that ranks Zambia around 100 out of 178 countries. The nature of the criteria for assessing Zambia’s performance is based on questions that only show our weaknesses and not our strengths. For example, which investor whether local or foreign really worries about how long it takes to register a business in Zambia? If it takes three days or three months is neither here nor there in the scheme of things. A more compelling issue is whether a particular business investment will make a profit, and if so, how much? This is not part of the World Bank’s assessment criteria for determining whether Zambia is a good investment destination. No serious investor ever considered licensing time a higher priority than profit margins, cheap labour, and access to land as opposed to ownership of land.

Zambia and other developing countries must re-create their vocabulary when engaging with countries from the developed world. Words and phrases such as ‘Aid’, ‘Donor’, ‘Grant’, ‘Assist’, ‘Facilitate’, ‘Enhance’, ‘Capacity Building’, ‘Diagnostic’ and many others should be struck out and replaced with more definitive and domestically owned replacements that firmly indicate that Zambia and Zambians are responsible for their own development with ‘Collaboration’ and sometimes ‘Co-operation’ from the developed nations. Zambia and Zambians must always be in the driving seat of any engagement such that the goals and outcomes are realistic and predictable.

Zambia will not benefit from throwing English text back and forth to explain why the economy is not developing as we use references and precedents that emanate from the very countries that appear to undermine our development.

Aid may not be dead, it probably does not work for us because it is owned and employed by our competitors. Our challenge is how to effectively Trade in the Aid business.

Published 10th March, 2009

Trade and Commerce

Zambia is working with a relatively new trade initiative referred to as the Enhanced Integrated Framework (EIF). This program was initiated in 1997 as an Integrated Framework (IF) mechanism to provide better coordinated and more effective Trade Related Technical Assistance to Least Developed Countries (LDC) such as Zambia. In 2005 at the Hong Kong WTO Conference, the idea was further developed to an Enhanced Integrated Framework because of the urgent need to make the framework more effective and timely in an effort to assist to deliver social economic development to the LDC’s. The goal of the EIF is to facilitate and fast track the integration of LDC’s into the global economy.

Several multilateral development organisations have spearheaded the development of the EIF and these include the IMF, ITC, UNCTAD, UNDP, The World Bank, and the WTO.

The mechanism for determining the support and assistance for each participating country is a Diagnostic Trade Integration Study (DTIS) at country level. This was done for Zambia in 2005 and the results are now influencing the implementation of the EIF process.

What are the current bottlenecks that are retarding the effective implementation of the EIF in Zambia?

The fundamental issue is the quality of the DTIS that was carried out in 2005. This study was undertaken by a foreign consultant who had very little hands on experiences of Zambia in both data collection and social-cultural understanding. As a result, the DTIS is a very weak document to be used as a guide for EIF implementation. Subsequent public workshops have been held on the Copperbelt and in Lusaka to review the content of the DTIS and there has been an overwhelming conclusion that the DTIS must be reviewed, enhanced and corrected to reflect the true status on the ground in Zambia.

The outcry by the public was that in the future such studies should be carried out by local consultants who understand the country that they live in and can easily contextualise the various trade and commerce related issues to the various groups on the ground in the domestic economy. Too often, foreign consultants spend too little time in the country, collect data from biased official reports in their own countries, and do not use effective local counterparts to enhance their research work.

Many Zambian contributions to the EIF process focussed on issues of Market Access initially within the domestic economy, and then in the region’s economic groupings such as SADC and COMESA. Issues of trade infrastructure such as warehousing at popular trading border posts were raised. Key examples of where warehousing is desperately needed are at Kasumbalesa, Nakonde, Chirundu and Kasungula.

A request was made for a gender analysis in trade with emphasis on cross border trade. It is expected that women engage in cross border trade more frequently than men, and yet there is very little provision made to facilitate women in trade at border crossings.

The public requested that more useful Monitoring and Evaluation processes need to be introduced in the EIF process to constantly assess the effectiveness of the program, and where necessary, to investment more resources to ensure good results.

Some businesses appreciated the necessity for domestic and regional standards in enhancing trade opportunities. To this end, the role of the Zambia Bureau of Standards, the Zambia Weights and Measures Agency and the Food and Drugs Authorities need to be embraced as integral players in the trading regime.

There was general outcry for public information on trade and trade related activities to be disseminated across the country in an effort to empower all levels of businesses with knowledge that will impact on their businesses.

On the Copperbelt the challenging issues were to open up avenues for diversification of the economy away from mining, in order to strengthen the sustainability of the domestic economy in the province.

Some key working points were brought out which will need to be tackled for the EIF process to receive full support and commitment.

A baseline study needs to be undertaken to identify the opportunities for social and economic development in each district. This study will look at comparative and competitive advantages as well as the markets and viability of the opportunities. The previous DTIS outlined coffee as a focussed crop for production in Zambia and at the moment coffee farms have closed down and others have been forced into liquidation. The DTIS rationale seemed to be, to grow crops that can be exported to the west without alternate markets. This mono market focus has now resulted in difficult times for coffee growers due to the economic slump in the west. Coffee cannot be eaten so it does not add to Zambia’s food security concerns.

It has been identified that middlemen, consolidators and out grower schemes are all value chain elements that must be encouraged in order to enhance productivity and trade in the country. As such, more emphasis must be put towards developing the value chain in trade and commerce so as to reduce the pressure on each individual value addition link in the value chain.

It is important to constitute a liaison committee for integrating new trade initiatives into the EIF process as the economy evolves. One such example is the new advent of Economic Zones that may be left out of the EIF process if not deliberately incorporated through a deliberate integration process.

Zambia is signatory to many trade protocols, agreements, and policies. In addition Zambia has her own development plans that are devised every five or six years. The EIF process requires that all these instruments need to be harmonised so that there are very few clash points.

The overarching concern by Zambians in respect to trade and commerce is that Zambians and their companies need to be accepted as investors in the domestic economy. As such Zambians must be in the forefront of being invited to participate in the new Economic Zones currently being developed in Lusaka and the Copperbelt. Zambians must be in the forefront of investing in the new tourism initiatives in Kasaba Bay and the Livingstone Tourism Zone. Zambians must be the first to be linked to any foreign investment that requires supporting goods and services to roll out any huge investment in the country.

This process has been practiced by the Asian Tigers during the period when they were building their economies. The Japanese economy comprises of over 80 percent SME’s to support the under 20 percent large corporations. The case for supporting and facilitating trade and commerce in the domestic economy is very compelling. Local businesses are here to stay, and they will eventually become the back bone of the economy of tomorrow, if only Zambia makes a deliberate effort to develop them through the EIF process.

Published 3rd March, 2009

Difficult Decisions

The last few weeks have been characterised by rumblings and upheavals in the global economy and some new challenges in the domestic economy.

Banks and Insurance companies have run to their Governments in the developed world to seek financial support to remain solvent while others have chosen to remain mute while their businesses face collapse. Some businesses have been allowed to close their doors because they were poorly managed and became a liability to the economy.

In Zambia, we have had upheavals in respect to the privatisation of Zamtel, our exchange rate is on a free fall manoeuvre, some parastatal companies are unreasonably over exposed, copper mining companies are planning to close some plants and retrench workers, and there is a Mealie Meal shortage experienced in Lusaka and several other towns.

In the face of these economic rumblings Zambia is preaching about Economic Zones and new investment as the magic bullet to lift our economy out of the doldrums brought about by low copper prices and low market demands.

The 2009 budget is very dependent on tax collection in the areas of import customs duties, VAT, PAYE, company tax, and excise duties. Another huge component in the budget is the 24 percent budget support pledged by the pool of international collaborating partners.

It is quite evident that as the Kwacha depreciates against the US Dollar, and as businesses slow down because of the global recession, there will be less tax to be collected during the year. In addition, as our international collaborating partners find themselves having to support their own economies more than they had anticipated at the time when they made pledges to support the Zambian budget for 2009, some pledges may not materialise into cash on the table for Zambia.

Zambia has to therefore engage in a process of making those difficult decisions that may hurt some sectors in the short term but will ultimately support the development of the economy in the medium to long term. There are some economic sectors that with the right focussed support and facilitation can bring about quick wins in an effort to continue to market Zambia as a good investment destination for both local and foreign investors. Tourism, Manufacturing and the Services sector are on the top of the list for quick wins.

The tone for a tightly managed economy starts from the top. The President must be the first person to lay down the agenda for managing Zambia during the current global recession. His message must be clearly understood by his Finance Minister, his Cabinet, and his Government. With this lead the necessary work must be done on the ground to ensure that Zambia will be well run, will not tolerate rogue behaviour within its ranks, will get the work done to stimulate economic activity, and will move into action in areas of private sector activities that may undermine the development of the country and her people.

All companies are already engaged in this process. Those Directors and Managers that are not working in the best interests of a company are immediately being laid off. Many companies are tightening their expenditure budgets. Staff is being re-trained and re-skilled to become more productive. The level of service is being raised in order to keep existing customers and attract new business. The management teams are constantly re-grouping to make sure that they are focussing on the same goals, and any team member that is not working by the set rules is dismissed. This needs to be emulated in the Government machinery too.

At the national level, we are facing upheavals with the foreign currency situation and the Bank of Zambia must act to bring sanity to the sector. The issues in the Ministry of Transport and Communication and at NAPSA must be decisively dealt with for the purposes of clarity and nation building. The plight of the bulk of Zambian owned businesses which fall into the Small and Medium Enterprises sector must be addressed decisively. Any accusations of impropriety aimed at the family of the Head of State must be responded to in a manner that does not disadvantage any party, but commits to accountability and transparency.

The country is currently given some breathing space as the mining companies reduce their demand for electricity. The occurrences of blackouts and load shedding have reduced, and the upgrading works in the power stations have brought more power on line. What happens when the situation turns around and the demand increases again? Will Zambia go back to load shedding? This is the time for the difficult decisions. Let us decide to get on with it and find new partners to build the Kafue Gorge Lower power station. Let us decide whether we can continue with the almost derelict railway system in Zambia, or do we find some new partners to develop and upgrade this infrastructure? Let us decide to get Maamba Collieries up and running again with an injection of new capital or new partners. Let us decide to move Nitrogen Chemicals and Mulungushi Textiles from sleeping giants to productive industries. Let us decide to open our minds to new options beyond those constantly being drummed into our minds by the World Bank and IMF. Let us consider what is going on in South America with Venezuela and Brazil and learn a few lessons from them on how we can take our country forward. Let us decide to encompass our own people in national development in the role of investors and not just labour resources. Let us decide to empower our people and private sector with a more robust mechanism than that of the CEEC which is subject to budgetary allocation. Let us take the bold step of making the DBZ a special purpose vehicle for citizens economic empowerment so that Zambians can invest in the new Economic Zones that demand a minimum investment of almost K3 billion. Let us decide to amend the ZDA Act, the new Public Procurement Act, and any other legislation, so that Zambian businesses are supported and facilitated to become part of the greater economy.

Zambia will be no exception in addressing the challenges brought about by the global economic recession. Zambia will be left out and left behind if the leadership does not consciously make those difficult decisions.

Published 24 February 2009

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