Thinking beyond Dununa Reverse…


By Mwine Lubemba

“Never give up, never give in, and when the upper hand is ours, may we have the ability to handle the win with the dignity that we absorbed the loss.”…Doug Williams

Congratulations Mr President.

The elections have been won.

So, what-now?

Will we keep dancing Dununa reverse?

No Mr President, for each word uttered, each promise you made, each assurance you gave the voters, you were laying booby traps all along your first five year term. Don’t forget, five years from today is no big deal.

All those things you promised to do after you’re given a fresh mandate will still be fresh on 11 August 2021.  The 18 year olds in Ikelenge, Kaputa, Shangombo, Chama, Petauke etc, who voted for the first time, will be 23 years old—and like all kids, they don’t forget.

In addition, there were wishes and new demands from the elderly voters too. Some of the wishes can be achieved in a short time and others may take a long time while many others will be impossible to achieve in the next five years. Some voters will agree when you tell them Rome was not built in a day, others will insist —that you promised…

It cannot be denied these elections were the most expensive— since 1964. There were many financial sponsors and other well-wishers. Some were poor rural dwellers who sacrificed their last cobs of maize and their last village chicken to feed PF foot soldiers, and there were many corporate sponsors too.  And we’re mindful, “one good turn deserves another.” Mr President, you’ll definitely be forced to return some favours because you’re only human.

But we’re comforted Mr President, you told us to trust you and vote for people with experience in running government. True, unlike under-5s, we’re sure you’ll know how balance the various demands from interest groups without losing sight that this is your second and last term.

You’ll have the difficult task to grow the economy utilizing the massive number of new and old queue of graduates looking for jobs from the many schools, colleges and universities already in place and that you’ve completed as well as putting to good use this wonderful infrastructure you painfully undertook to complete in your first and short 2 year term. All the graduates from these colleges and universities and the entire infrastructure will have to be used to make Zambia wealthy. Those were your own promises when you justified the sacrifice Zambians made during the entire construction of all these new projects. We know your team won’t fail us.

That’s why I agreed with my last born daughter when she heavily criticized by article last Sunday. She said the PF government has already put in place a robust industrialization program. She reminded me of the many industrial clusters that are to be built in every district and of course the economic processing zones in Lusaka and Copperbelt. I agree, these are brilliant industrialization ideas that have been tried and have worked in some countries and but they have also failed badly to yield the desired results in many others for the simple reason that in addition to the many tax rebates that are given to these clusters and economic processing zones they again demand for import restrictions on similar competing imported manufactured goods. In other words, without tariff protections, despite the huge tax rebates, these clusters and economic processing zones are unprofitable.

Take for example; just before you were distracted by the election campaigns, there were demands from one Zambian steel producer to increase tariffs on some imported Chinese and South African steel products coming into Zambia. True, this company is an excellent local industrialization model on items such as construction deformed bars and cold rolled steel, angle lines and other steel sections which end users in the metal work and building construction industry use and to make various appliances, steel tanks, drums, hammer mills etc,. I’m sure by now restrictive tariffs have already been imposed or are in the process of being put in place. I’m sure this has been critically analysed by your industrial and economic advisors, in their daily briefs to you and your Minister of Finance as well as your Minister of Commerce and Industry. I believe they have even told you that this measure will protect jobs in the Zambian steel industry. There is no doubt that steel industry jobs will be saved. But, Mr President, you must be mindful that there is ignorance and incapacity of being able to think beyond stage one when evaluating public policy. Measures to protect Zambian steelworker jobs pay attention to only the seen effects of public policy: they ignore the unseen. In other words they look at only the visible beneficiaries of public policy and ignore the invisible victims.

We’ve borrowed use of the above parable of the broken window that was introduced by Frederic Bastiat in his 1850 essay “That which is seen and That which is not seen,” also known as the broken window fallacy or glaziers fallacy that seeks to show how opportunity costs, as well as the “law of unintended consequences,” affects economic activity in ways that are “unseen” or ignored.

Zambian steel companies want the Zambian government to restrict steel imports so that they can sell more steel to Zambian roads and buildings construction companies and individuals running small and village industries that are making window and door frames, hoes and axes in villages and compound markets and charge them higher prices.

That means more employment and greater profits for those in the local primary Zambian steel manufacturing industry. We can think of those observations as the seen, or stage one, effects of these import restrictions.

Mr President, the fact that imported steel is cheaper has its own advantages and disadvantages.  For example, before Dangote Cement in Ndola rural, the Zambian construction industries were charged K40 above the current cement prices. It was then profitable to import cement from Zimbabwe and South Africa. Today, anyone wanting to import cement from Zimbabwe will be considered mad.  It cannot be denied imposition of tariffs will bring about higher local steel prices.

And recently, Daniel R. Pearson writing in a Forbes opinion article titled “The U.S. and China are both wrong on steel” is so much instructive as to how we also deal with import restrictions in the Zambian steel industry because it gets us beyond stage one.

The real cost of steel import restrictions will be the harm they’ll do to the tens of thousands of small and village scale industry metal workers all over the country’s roadsides and markets making door frames, windows, wheelbarrows, ox-ploughs, hammer mills, axes, hoes used by tens of thousands of more Zambians in constructing and finishing their high cost housing structures, and tens of thousands more using axes, hoes, ox-ploughs, wheelbarrows and hammer mills in their small and village scale agriculture ventures.

Mr President, I would humbly ask you to consult heavily so we can know the exact number of jobs already created by the primary steel manufacturing industry versus the number of jobs generated by the end user steel metal workers and manufacturers of doors, windows, ox-ploughs, axes, hammer mills, including those jobs generated by the end users in roads, housing construction and agriculture industry. We also know the monetary and actual contribution to the overall wealth of the tens of thousands of end users of manufactured steel in doors windows and hoes etc versus the wealth contribution from the primary steel producers.

We can discuss these benefits Mr President. But don’t be surprised you find that the primary steel manufacturing employment contribution will be lower or none existent compared to end user metal workers employment generation which visibly translates into millions of jobs created all over the country.

And at our last back- envelope- arithmetic calculations we found that the steel end user wealth transfer benefit to Zambians is 53 times greater.

In addition to the high cost of local steel products Mr President, these tariff restrictions will translate into less end user steel manufacturing companies of fridges, air conditioners, solar panels, wind mills, water pumps, irrigation centre pivots, hot water geezers, truck trailers, and many others wanting to come and set up manufacturing base in Zambia because they’ll also be affected by steel import restrictions and to avoid these Zambian government imposed costs, they’ll simply move production to neighbouring Botswana, Malawi, Namibia or even Zimbabwe where government imposed costs may not be in existence.

Mr President, as Pearson suggests in his Forbes article on the U.S. steel industry, the Zambian government should also merely send a thank you note to China and South Africa for transferring so much of their wealth to Zambia by exporting and selling low priced steel to Zambia. It is attracting subsidiary industries to be set up in Zambia and helping keep our unemployed youths with metal work skills employed all over the country and its helping make the construction of our roads, bridges and housing, office complexes, schools and hospital infrastructure cheap.

Mr President, another example of failing to think beyond stage one is the protections given to the Zambian maize, wheat and soya bean industry and their by-products.

Everyday civil servants tell us how God almighty has blessed Zambia with basically every natural resource on planet earth. For example they tell us that of the 60% SADC shared water flowing through Zambia almost 40% is actually Zambia’s own water in Lakes, Rivers and swamps.

Mr President, the PF government has just given out farm land to retired miners on the copperbelt to grow their own food and for resale so they can prosper than being in a paid mine job.

We’ve been told the PF government has a lot of land for any Zambian who wants land to grow his own food and sell the surplus to FRA.

And during your laborious campaign we heard chiefs and their subjects praise government for early delivery of FISP inputs. We’ve been told we can become the bread basket in SADC and Africa. I’m sure you have an idea what I’m getting to.

If we are to become a bread basket we’ve to remove export restrictions and that will encourage many farmers and business men to invest in agriculture and grow cereal and oil seed crops as a business. After all Mr President, any Zambian who wants land to grow his own food can get the land, but there’ll also be a lot of maize just like many other agricultural produce such as rape, cabbages, Irish potatoes, kandolo, cassava, umumbu, sorghum, millet, impwa, Chinese cabbage etc, that have always been sold at unsubsidized prices at FRA and free markets all over the townships for those who chose not to grow their own food. Mr President, you cannot teach a man to fish (land), give him free hooks (fertilizers), and bait (seeds) but if he decides on his own free will not to go fishing and instead wants to eat the fish you caught and to make it worse he wants it free or at a subsidised price without taking into consideration that to get the fish you had to forgo leisure for labour and walk or pay a fee to get on the back of a truck on a dusty road to the river to catch your fish.

Mr President, I’m not an economist—I’m a process engineer and I could be talking out of context. Another example of visible beneficiaries of your public policy that ignore the invisible victims are the massive subsidies on petroleum products. Recently with an exchange rate of K11 dollar, pump petrol prices were selling below U$0.88 per litre.

I’ve no idea where you buy and what you pay for our petroleum products. But I can tell you right now, Mr President, despite record low oil prices, there’s a 35% of fixed costs that go into processing a barrel of crude oil at any refinery that haven’t gone anywhere down at all.

We then have to add the final profit margin chargeable by the refinery. The product coming to Zambia’s Indeni Refinery has to be comingled (there’s a charge to this), sea freighted to Darussalam (there’s a charge to this), pipelined to Indeni (there’s a charge to this) where its fractionated back into the various original products (there’s a charge to this)-plus there are pipeline losses – so, even if the crude cot at the originating refinery was zero, the 35% refinery fixed costs alone and the various chargeable costs and margins would bring the final price in Zambia to above US$0.88 per litre. This assumes the Zambian government is purchasing directly without middlemen who charge additional survival margins.

Of course this is a simplified figurative example and in reality we have to take into consideration several other input data that’ll make this exercise go out of basic understanding.

Basically, petrol at the pump should cost ±45 cents more or ±US$1.35 which is about K14.85 per litre than 88 cents or K9.87 per litre.

Should this be the case then subsidising petrol at ±K4.98 per litre is bad public policy. For example if there are ±400million litres imported per quarter, the subsidy is K1.992 billion or US$181 million or US$724 million per year. Of course these assumptions could be way out of the whack from the actuals but the point is subsidies exist and are being given at the expense of the invisible Zambian victims.

Simplified, the invisible victims can be new young graduates from our several schools, colleges and universities who can’t drive and benefit from the subsidies because they can’t find a job or the 70% poor urban and rural dwellers.

All of us had jobs by the time we were leaving UNZA in the 70s. The mines took a number.

A few remained as Staff development fellows and GRZ and the ZIMCO group absorbed the rest. I’m not saying we copy and paste the 1970s model, but we can use this assumed US$724 million subsidy from petroleum to assist create jobs.

Imagine how many quality research and development centres and manufacturing industry jobs can be created with such an amount of cash at our disposal in the next 5 years (US$3.62 billion) instead of spending it filling up petrol tanks for people going on beer drinking sprees?

Next week, in Part II of this article, we’ll attempt to provoke discussion on the many industries that can be created and funded from our assumed subsidy savings not forgetting the PF government is committed to ensure the Industrial Development Corporation (IDC) contributes to positive economic development.


Just a thought,

Categorized | features

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