The Dollar must be crazy! DORA ON THE DOLLAR

A few days ago, my dear friend Bahati told me about her quest to get a quotation from a certain company in town. She was told it was not possible because of the dollar problem. It was later explained to her how difficult quotations for foreign goods are due to the very volatile exchange rate. I totally understood this considering the hardships, especially the small business person who has to import anything, or even the parent paying for school fees overseas, are facing. Bahati, sitting across me on my kitchen table was so upset about not getting the quotation and anxiously asked “awe Dora my friend, what is going on with the dollar”. Here is how I tried to explain it to her.

In the last four years, there has been a lot of inconsistencies in economic policy. On one hand, we were told that mealie meal subsidies were cut to save costs and support the Farmer. Clearly, the peasant Farmer lost out with a 50kg bag of fertiliser being shared among 5 people in places like Petauke and production reduced significantly. Only big farmers and 30 plus Millers in Zambia benefitted from the high mealie meal prices we began to see from 2012. Coupled with bad rains in the last two seasons, the treasury has been pressured to spend ‘saved’ money on relief food and increase FRA purchase price and quantities as well as on FISP.

Secondly, fuel price was significantly reduced, I think by about 40% in 2013 inspite of the cost price. This means that, even though we have seen lower oil prices in recent times, we had already consumed what we could not afford by halving the pump price, a hidden subsidy, while still buying very expensive fuel through middlemen. We still do not have full details on Trafigura. We also received, with much celebration, unplanned 200% civil service wage increments compared to the 2010/2011 increase of 15% and 10% respectively. The wage and employment freeze gains, in 2014/2015 continued to be eroded, by unplanned 40 plus districts, all needing new offices and housing for new civil servants and other entitlements. I am a supporter of decentralisation but it could have been planned for in a systematic manner. We also witnessed much unplanned road construction especially in times of elections deviating from the master national development plan. I support road construction even if we have to borrow for it and we have been unlucky with the world downturn. I don’t have to convince anyone on the impact of over 30 parliamentary by-elections on the nation. YOU MAY WISH TO NOTE TOO THAT IN THE LAST 10 YEARS WE HAVE HAD 4 PRESIDENTIAL BY-ELECTIONS.
I also told Bahati that there was also the small matter of banding ministries without due consideration of their efficiency in an effort to save resources. Performance in sectors such as energy and mining have been greatly affected even more so with the power deficit and unresolved mining tax issues. It also seems that budget tracking continues to be a challenge. Where are we spending our money? Is it’s in health and education and in facilitating business growth?. Or is it on workshops and overseas trips and allowances for few Government workers in management positions? This is not just a failure of the PF but all past administrations. We need to define work to mean beyond reporting to the office but to solve problems Zambians face such as distances to schools and hospitals, bad service at lands, councils and other Government departments etc.

The dollar has really gone crazy with China’s reduced demand for raw materials such as copper, exacerbating the problem. This has not only affected Zambia but many others as the world economy is on a slow down. But our concern must be Zambia and it’s people. The real question is what can be done to alleviate the situation?. First, let us stop paying lip service to Zambia’s so called potential and diversification. In fact, all past administrations have failed to move Zambia from raw material dependence economy to a value addition kind. However, the times are calling for radicle overhaul of economic infrastructure and mindset for real transformation to occur. It is time to really take a chance on the small entrepreneur in the manufacturing and agro-business sectors.
I have always argued that beyond fundamentals, economics is a discipline pushed by perception. There is so much speculation about how Government will intervene to stabilise the Kwacha. Will it print more money, auction foreign currency or what? This has made many companies to behave cautiously and externalise all earnings, causing capital flight and this has directly impacted currency markets. So far, Chikwandanomics have been clear that they will not go back to UNIP ways of printing more money. The perpetual political tension does not help matters either.
Many businesses including Zambian owned ones externalise money in anticipation of violence and uncertainty expected in the first head to head of the PF and the UPND in a general election. I wish to put on record that whether you call it Mapatizya formula, panga or gun culture, violence in any form is the lowest way of putting across your point of view. Politics, good politics must be based on ideas of how to transform our nation.
I belaboured the point to Bahati, that at no time, has Zambia needed political leaders who had no hate nor anger in their hearts but only ideas and strategies for economic transformation to happen. Shared targets have to be agreed and maintained no matter who is in Government. We need to define our national interest and stop threatening each other with arrest as the only basis for wanting to change Government. The ordinary Zambian benefits NOTHING from those kind of politics.

Confidence building is the first step to stabilise the economy and the President has a critical role to play as ‘Captain of the Ship’. We elect leaders to LEAD especially in tough times and EL as he is fondly called, must hold the bull by the horn. Recent ‘statehouse’ scandals, lack of continued VISIBLE engagement by EL on national matters since he was elected, recent labour and student unrests, perpetual opposition criticism and insulting media headlines, rumours about indiscipline in Cabinet and Government and policy inconsistency must all be reigned in and fast. Politics is about engaging all the time. Suffice to say the problems won’t be resolved over night but people want to be sold hope-smart hope. That is hope that is specific, measurable, accurate, reliable and timely.

I also believe the Central bank can only do so much to intervene as most of the work lies with treasury. How do we balance out the need to attract investment without compromising revenue generation and efficient budget execution. We observed that the rebasing of the kwacha at a great cost resulted in very short-term and masked gains. THE KWACHA HAS NOW FOUND ITS TRUE VALUE REFLECTING THE CONSUMER COUNTRY THAT WE REALLY ARE. Like all Zambians, I look forward to 9 October, day of the budget presentation and a day after my 45 birthday. There is a great saying in my gym “Push harder than yesterday if you want a difference Tomorrow”. I hope that is the spirit, with which the 2016 budget has been prepared.
I assured my friend that this is not the time for the blame game except to understand why we are here and find solutions. The dollar continues to be crazy indeed but I think the worst is now and it can only get better.
Well friends, this is what I shared with Bahati.