The blame for our economic challenges falls squarely on us as citizens
THE
gowing anxiety about a potential economic depression seems to mount with each day that passes amid concerns around the high levels of local domestic arrears and public debt being heightened by the impact of a weakening Kwacha.
The concerns are not without a background. The slump in economic growth has been the deepest in a decade, droughts have hit us twice in three years with devastating impact, and copper production has slowed down by almost 100, 000 tons from 860, 000 tonnes produced in 2018 to about 750, 000 tonnes projected for this year, amidst concerns by mining industry groups about the accumulation of non-tax measures, cost escalation and the need to maintain asset quality.
The geopolitical battle between the United States and China has also not helped, with the copper prices retreating to a two-year low, resulting in significant reduction in mining related foreign direct investments and forex supply.
There is of course the competing policy demands in the mining sector that are worthy of mention here. Whereas it is easy to see why mining companies decry the supposed overreach in taxes and other non-tax measure that they indicate constrain foreign direct investment in the sector and discourage mineral exploration, there is also a challenge for our policy makers on how to counter the popular single treasury export earnings management policies of the mining companies, that constrain forex availability in the country.
Added to this, the constant demand for hard currency to service debt and meet energy sector imports is a challenge which will continue hampering the supply of the Kwacha on the local market and as such the Kwacha will continue to be under pressure versus the U.S. dollar at least in the medium term.
These are well known elements contributing to some of our economic difficulties, however, the outcome of economic activities have been further hampered by the shortage of energy supply to our productive sectors.
In addition, the reduction in the demand for Government securities arising from reduced liquidity levels and adverse sentiments around the protracted fiscal pressure continues to challenge government financing options.
Further, the reduction in the subscription of Treasury Bills means that the performance of the Kwacha will continue to be adversely impacted at least in the short to medium term.
As if the current challenges are not enough, we are seeing increasing negative sentiments by citizens about our economy amidst a weakening Kwacha that are in turn adversely impacting the attractiveness of our government securities to foreign institutional investors and as such, these institutional investors are slowly redirecting their positions to somewhere else where the perceived risks are much lower.
The damaging effect on our economy of this widespread spreading by citizens of negative sentiments, which are most times unsupported by empirical evidence is an important consideration, because of its effect on the country’s prospects.
What is perhaps less generally understood is that a country is like a bank and as such it must project confidence to outsiders to successfully navigate the various everyday external risk that we face.
When citizens become willing purveyors of un-supported negative sentiments against the country, they engage in wilful economic self-sabotage, which heightens the country risk and goes to actualise some of the external risks that in turn adversely impacts our economy.
The unrelenting negative discourse has in effect being the catalyst to preventing sustained investor interest in this country limiting our capacity to attract FDI and by implications the livelihood of Zambian citizenry have become singularly affected.
These challenges add to the worry that the government in this position will continue to face difficulties in applying any level of fiscal stimulus to boost the economy to counter any recessionary pressure.
An important point to note is that our economic structure as a country with no currency controls is such that we must either increase our export base productivity in the short-term or be in the business of projecting the best possible image of our country, or both to attract foreign currency. Otherwise we consign ourselves to unending economic woes.
Perhaps the most significant factor to note in all this, is the misplaced expectation placed on our government leaders. That they will be providers of food, income, that they will somehow cast a magic wand to reduce prices by design. This is a mistaken view of the role of government.
Government’s primary role is that of fiscal policy in so far as promoting macroeconomic stability, by building supportive structures that can sustain aggregate demand and private sector incomes particularly during an economic depressions and putting in measures that help moderate economic activity during those times of robust growth.
Therefore our country's ability to raise the standard of living over the short to long term depends entirely on our capacity as the private sector to raise the output per worker.
This the role singularly assigned to the private sector in a market-driven economy, such as ours. Put another way, our ability to succeed as a nation is a sum total of our individual efforts at increasing the nation’s productivity.
Our starting point for the review of the performance of our country must therefore be ourselves as citizens. That is, what is each of us doing to promote growth in our nation’s output.
And so our collective focus as a country should be around how we in the private sector, can turn the wheels of productivity, how we can reignite exports and rein in of imports and it will not be done by shouting at the roof tops about our failures.
It should be by each of us forming some sort of ecosystem that is supportive of growth, about each of us being initiators or promoters of innovative ideas in our own ways and about how each of us can enable productivity within our own spheres of influence.
In the last few years for instance, the improvements in road infrastructure has begun to provide small and medium sized companies better access to urban markets at cheaper costs that are in turn spurning entrepreneurial opportunities for a number of Zambians with marginal capital.
That is the rightful role of government. Anything else rests in us as a citizenry to be responsive to policy position or to seek policy prescriptions that advance productivity.
To that end, we as Zambians must begin to seek to be economic ambassadors for our country as other nationals have done in major economies, whenever we have the opportunities to interact with others, otherwise we will forever be contributors to the economic malaise facing our nation. To that end, when there is failure, we must first apportion blame on ourselves rather than our elected representatives.
*Kelvin Chungu is a Partner at Nolands Advisory Services. He is contactable on kelvinc@nolands.co.zm or on +260976-377484.