Jump starting the economy


Dr Denny Kalyalya

By Brian Mulenga

I wish I had 5 minutes with Denny Kalyalya, Emmanuel Mutati and Edgar Lungu. I would like to have that chat because I don’t see these three gentlemen pulling in the same direction when it comes to the economic direction of the country.

I just don’t see how the present economic policies will produce any meaningful jobs and diversify the economy. I think one reason is all three have different economic objectives and they are all pulling in different directions and therefore I don’t think economic policy is co-ordinated.

I do not think they all meet and discuss these issues. And if they did I would not want it to be in some stuffy conference room. A more informal relaxed chat perhaps up in Edgar Lungu’s study with some whisky and some cocktails in a no holds barred atmosphere would be fruitful.

Let’s see what each of them is up to:-
• Emmanuel Mutati wants to stabilise the government finances and introduce some fiscal discipline.
• Denny Kalyalya is pursuing a hard currency policy where keeping the Kwacha around K10 has become an article of faith.
• Edgar Lungu has continued his mentor’s infrastructure development agenda and thinks posterity will judge him on infrastructure.

Lusaka City

The economy needs good jobs. Jobs that pay well. This needs low inflation, low interest rates and a conducive business environment. Money in the pockets and money that feels like real money when spent are in the end what everyone wants. However the three different agendas of the three major economic players simply cannot produce jobs nor a business friendly environment. Not when they are trying to meet mutually exclusive objectives and are not closely coordinating with each other.

Felix Mutati has to slash expenditure, raise taxes and all in all is in austerity mode.

Denny Kalyalya wants no repeats of Black August or was it Black September 2015 when the kwacha plunged through the floor, destroyed economic confidence and sent inflation through the roof. His tight money policies make Uncle Scrooge look like a spendthrift. All the liquidity has been mopped up and interest rates ratcheted to sky high levels. The kwacha has responded. It has stayed under the crucial K10 rate.

Edgar Lungu needs those roads, hospitals and schools finished. He promised his constituency that Zambia will have excellent infrastructure. That Zambians cannot sell their goods and services if they don’t have good roads. He also has obviously been watching Danny Kalyalya closely because the trauma of Black September is something he never wants to go through again.
However the elephant in the room is the real economy. All three are doing what they are doing with aim of helping the real economy. But since their view of what is good for the economy is not focused, the results are different. The economy has been slowing down. With the sky high interest rates, tight liquidity, lower Government spending which is a large force in the economy, the economy simply has dramatically slowed down and is in no state to create jobs. The funds for investment are simply not there. Though inflation has slowed down, every Zambian has seen a chicken increase in price from K30 to K 50 in a single year, meat reach K50 a kilo, kapenta, beans, tomatoes you name it’s all gone up.
The small businessman or woman who is the backbone of the economy simply has no funds for investment. He or she can’t borrow as interest rates are high. He or she can’t increase prices anymore because clients might substitute their products for other cheaper goods or services. The hair salon owner cannot stop her workers making deals with her clients to do the job at clients’ homes instead of in her salon and at lower cost. The electric fence and CCTV installer all of a sudden discovers his clients think maybe a fierce dog and a live in house servant doubling as a guard may be cheaper and so on. The bigger businessmen are cutting back as well. The feeling the economy is slowing down is real.
So if I had five minutes with the three men what would I say to them?

Mr. Mutati – Dismantle those arrears and get government to move to a 30-45 days payment cycle for ALL suppliers. Make active moves to reduce corruption, misapplication and misappropriation of funds. As you consolidate the fiscal position of the government, practical measures to ensure quick payment of suppliers are very welcome. As for collecting more taxes, Mr. Mutati please take a long, harder, look at the informal sector.

Dr. Kalyalya – Please loosen up the liquidity squeeze. The banks despite high interest rates are not really making as much money as before and really cant lend as much. It’s hard for businesses to borrow as well at those eye watering rates.

Mr. Lungu – We need to export more. Remember the glory days of horticultural exports of 15 years ago? We not only exported a lot but thousands of jobs were created. I know Salama Park looks beautiful now with a mall and a nice housing estate but when it was a rose farm it supported 3,000 jobs and did more for the economy. It in my opinion added more value to the economy. It earns foreign exchange and supported 20,000 people. We can export roses, baby corn, coffee, sugar, tobacco, cotton and so on but we need real measures to make Zambia a low cost producer but with stable policies. Zambians speak good English and are in a good time zone and yet we have very few call centres in Zambia!!! In fact some Zambian companies have call centres in Cape Town and Johannesburg are hiring Zambians living abroad to work there!!! The roads, hospitals, schools may have to wait because we really need to earn more dollars!!! By the way sir, we also need to make peace with the mines. ten years ago most experts projected we would produce 1.2 million tonnes of copper in 2016. We are not quite producing 800,000 tonnes and the consensus is we lost 400,000 tonnes of production because our policies were so unstable they scared people away.

I know I will never get the minutes but this economy needs a jumpstart and right now what I see is Mr Lungu has a positive terminal of the jumper cables, Mr. Mutati has a negative terminal of the jumper cables, While Dr. Kalyalya has a battery and they can’t seem to get together and produce that jumpstart.

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