I hope my letter finds you well. I last wrote to you on 18th December 2014 with some suggestions for your presidency Since that last letter, things have gotten worse politically and economically in Zambia. I hope you can take into consideration the following further advice from a concerned citizen because desperate times call for bold, decisive action.
1. Take a pay cut. Other leaders have taken a pay cut such as Kenyan President Uhuru Kenyatta (20%), Namibian President Hage Geingob (20%), Nigerian President Muhammadu Buhari (50%) and French president François Hollande (30%). You see sir, things in Zambia economically will not significantly get better in the foreseeable future. Sooner rather than later, you will be forced to face Zambians and tell them the bad news. You will have to borrow some lessons from the late President Frederick JT Chiluba who told us that things would be rough and we would need to go through some pain.
Unlike President Chiluba, I hope you shall avoid helping yourself to the treasury while Zambians are sacrificing and suffering. Voluntarily cutting your own salary will earn you lots of respect from all of us because we shall see that you are sincere and serious about sacrifice since we can see you are also losing something.
You can sign a Statutory Instrument to cut your salary. You can challenge your Vice-President and ministers to also take a pay cut. The money saved can be put into a special account and used for something more useful like giving loans to small-scale entrepreneurs. Besides, you do not really need a big salary because everything is paid for and you get a good pension upon retirement, not to mention all the allowances you get on duty.
2. Stop the freebies. Get rid of costly subsidies on electricity, fuel and fertilizer. You are already spending about half a billion Dollars (10% of the budget) every year subsidizing electricity and fuel and we know that it is the mines who are the greatest beneficiaries since they consume half of all the power and lots of diesel. These subsidies, including on fertilizer, cannot work in the current scenario because there is no money.
Prices will of course shoot through the roof once you scrap subsidies. Maybe you can do it slowly over 2 years. You just have to bite the bullet and have a national address to tell Zambians to bear with you over the next 2 years as the cost of living increases, but with the promise of stability and economic recovery long term. Please avoid the temptation of going back to free things later on even if the economy is doing well. Zambians need to be weaned off too many free things that were introduced under the UNIP socialists.
I know this is a very unpopular thing to do but true leaders are known for making unpopular decisions and being vindicated later on. Here you can borrow a leaf from the late British Prime Minister Margaret Thatcher who took on the trade unions and broke their power because they were hindering economic recovery. She began the privatization process of British parastatals (which even the Labour party under Tony Blair continued) and the British economy recovered. Mr Blair had to re-brand his party and distance it from the labour unions who were weighing it down. This was a very brave tough decision considering that the labour movement gave birth to the party.
3. Diversify the Zambian economy. All your predecessors claimed they wanted to diversify the economy but never did it. It makes no sense that after 52 years of independence, the share of Copper in total exports has basically remained the same at around 70% or more. Economic diversification occurs spontaneously when you improve property rights, make it very easy to do business, enhance access to credit and you reduce the cost of doing business. Leave licensing to independent bodies and make it cheap. For example, when cabinet has powers to decide who gets a telephone license instead of leaving it to ZICTA, it weakens investor confidence and breeds corruption.
When people have to take months to get all sorts of permits and licenses, it is bad for business and increases corruption. Why can’t I register my business with PACRA, ZRA and open a bank account within one morning? This is very easy to do with technology. I should be able to do everything online including paying any fees rather than wasting time driving there. Similarly, I should only take a day to get a title deed, passport, drivers licence or NRC.
4. Cut government expenditure, especially personal emoluments for civil servants. Emoluments already account for 75% of local revenue and seems very bizarre to me. Imagine I came to you as an investment portfolio manager and got a million Kwacha from you, only to spend K750,000 of it to manage the remaining K250,000, of which a further K50,000 was lost in corruption. I think you would instantly fire me.
You can cut the wage bill significantly by using technology and making processes more efficient. As I suggested last time, you might want to consider closing down some irrelevant ministries and outsourcing some things to the private sector using a franchise system. You should also consider swapping Toyota Corollas for all those expensive 8 cylinder fuel guzzling SUVs that your ministers and other GRZ fat cats drive. You can still retain some SUVs as pool vehicles for field trips.
All this will reduce your budget so that you do not need to borrow from commercial banks thereby creating excess liquidity for the private sector to borrow and grow the economy. You can take a leaf from Tanzanian president John Magufuli who has declared war on government waste. It is better you cut expenditures voluntarily rather than be forced to by the IMF as they dangle the carrot of concessionary loans which come with conditions that reduce our sovereignty.
5. Undertake extensive land reforms. Zambia’s property rights regime was severely weakened in 1975 when the land tenure system was changed from freehold to leasehold. This needs to be reversed because freehold land is more stable and secure and makes better collateral. The fact that over 70% of land is traditional land with no title deeds makes things worse. Villagers cannot borrow against traditional untitled land to invest and produce. Rich foreign investors just fly into Zambia and buy land very cheaply after showing chiefs a nice brown envelope. The villagers are then kicked out with very little compensation.
I propose that you enact a law to convert about half of land in Zambia into state land under a freehold system, put it on title after dividing it up into portions of varying sizes from 10,000 hectares down to 1 hectare and then sell it all off. All buyers must develop the land within 5 years or it is repossessed and resold. Also ensure that villagers get title deeds. The chiefs will oppose you since they want to continue getting brown envelopes and they do not want to lose control but you just have to be tough. You also need to sort out shanty compounds by converting them into legal settlements with proper documented plots on title, gazetted roads, postcodes and all other accompanying things like police posts.
6. Get GRZ out of maize marketing, both buying/selling or setting floor prices. The Food Reserve Agency should strictly be for national reserves, not for crop marketing. All this meddling in the maize markets causes price distortions and contradictory incompatible policies. You cannot simultaneously satisfy the need to pay farmers more and lower prices for consumers without a significant government subsidy. Just leave everything to market forces.
When the price of maize goes up, farmers will be smiling and more new farmers will join them since they also want to make a killing. This will reduce prices over time without the need for a costly subsidy. And please allow everyone to export as much maize as possible into the whole region. We could have made close to a billion dollars this year selling 4 million tons of maize to the whole region during the recent El Niño. Such money then creates value addition so that exports increase and diversifies the economy. We need a Kellogg’s factory here instead of selling maize to South Africa and importing corn flakes.
7. Get GRZ out of fuel procurement. GRZ always makes a mess of it because of too many sticky fingers and greedy people. Hence the many fuel shortages and price distortions which is bad for business. Leave it to the private sector.
8. Set up trading centers at border points like mini cities. Kasumbalesa should be built up with warehouses, silos, cold rooms, abattoirs, storage facilities, banks, hotels, lodges, a modern market, a commodity exchange, forex bureaux, rail transportation, hospital, business centers, restaurants, shops and all other necessary facilities. Same with Sikongo, Chirundu, Nakonde and Kazungula. GRZ doesn’t have to spend a penny but can bring in property developers on a 30 or 40 year lease.
9. Scrap visas. Just charge people at the point of entry into Zambia something like $50 and automatically give them 30 days stay which can be extended with another fee. There is no need to make it difficult for foreigners to enter Zambia when you want their money. Criminals are not deterred with current inefficient procedures when they can simply use bush paths to get into Zambia.
10. Let the Kwacha devalue to its true value. Don’t waste previous reserves trying to fight Kwacha depreciation. Nor should the Bank of Zambia keep increasing reserve ratios with the banks. It just reduces liquidity and prevents lending to the private sector. You can also do this slowly over a year. Our exports will become cheaper, more tourists will come and the volatility of the Kwacha will stop, leading to more stability and predictability.
Finally, I wish to warn you that some of these ideas, especially the difficult ones, will only work if you do them within your first year in office while you are still relatively popular after the election. As you well know, scrapping subsidies or cutting the civil service cannot work two or three years before elections.
Contact me: michael [at] zambia [dot] co [dot] zm