THE Bank of Zambia (BoZ) says Zambia’s gross domestic product (GDP) growth is expected to remain strong driven by good performance of the mines and high copper prices on the international market.
BoZ assistant director financial markets Jonathan Chipili cited China and India’s economic expansion as a major factors driving demand for copper and pushing up metal prices.
At an economic review and trade finance seminar hosted by Access Bank in Lusaka last week, Dr Chipili said the projected strong GDP for Zambia will further be strengthened by increased foreign direct investment pledges.
“There is substantial private sector investment taking place in the mines. We are also seeing an increase in residential and commercial investment coupled with public works in roads, schools and hospitals,” he said.
He commended Government’s agriculture policy focusing on Farmer Input Support Programme.
Dr Chipili said the country’s foreign international reserves are also expected to strengthen since the external current account will remain in surplus as the interest rates reduce in line with inflation reflecting the confidence in the economy.
“The strong macroeconomic position that Zambia enjoys helped to withstand the effect of the global financial crisis. Going forward, the outlook for the Kwacha is expected to remain stable given high copper prices and good performance of the mines,” he said.
Dr Chipili said the country’s non- traditional exports (NTEs) that are a source of foreign currency have been growing recording over US$ 1 billion in exports with the mines accounting for 55 percent of the country’s exports and the remaining 45 percent from NTEs reflecting diversification of the economy.
Rubbish,ma tuvi ya imbwa.Robust my foot.
Ya.. Ya.. Ya…. The reports on paper often look interesting, but when you speak to average Zambians back home, they often still say things are bad… so not really sure how to take these reports!:(
True, so true…..! there is so much going on behind those closed doors
@ miss daisy it’s simple now we know the country is getting money so we can now hold the government accountable there less excuses to be made bt. yes we can’t base most of our human development on GdP other wise equatorial guinea would be Switzerland
You have a point…
No 2 You can dispute the paper figure…. the fact of the matter is any country which has these paper figure has moved towards development….
Show me any country with
1. Low GDP growth
2. High inflation
3. Low reserves
4. High unemployment
5. High debt to GDP ratio
etc
which is developed. If you can then we can stop measuring or talking about these numbers
# 4 I have been missing you on the blog . Your reasoning is exceptional. You are really worth an Engineer. Zed is proud of you.
@Miss Daisy. People will complain in any country be it the US or the UK. The reality is that empirical data shows that Zambia is really developing well, it will take time for the average Zambian to take note of this or even benefit from it but its happening. Its taken China 30 hard years to be where it is now and even still a large portion of its population is still impoverished. Zambians need to stop looking for quick fix solution to deep systemic problems that are already being solved. Some level of non-partisan confidence that public workers are doing their jobs is needed. Yes there are issues, but were the numbers say positive things just be happy for your country. Cynicism doesn’t ever fix anything, some positivity could definitely help every one.
“Yes there are issues, but were the numbers say positive things just be happy for your country” – Totally agree with this sentiment!!! I should be more positive! Thanks!
Miss Daisy #2
The reason some Zambians may say things are bad are personal e.g. unemployability which by the way many of our relatives are because of what economists would describe as structural unemployment. Poor schooling and a low HDI in the 80s and 90s being the cause of it.
I am not saying is awash with jobs, but the few new jobs in the mines, for example, that are being created require some literacy and numeracy plus a trade. When you visit Zambia it is clear to see. Also our people complian too much waiting for handouts including from yourself in the diaspora. There are opportunities now and our people just need to be encouraged to join in and work hard.
I like your analysis of the situation, I am optimistic that sooner or later, God willing with the right leaders in place, progress seen on paper will reflect in the lives of Average Zambian Citizens. That’s all I care about! And God forbid not only the minimal selfish high LSM groups!
I’m not saying that every one should ignore the problems on the ground, they are real. But I also believe that Zambians are generally too laid back and can be lazy. My parents live in the farming area of Lusaka. Every rainy season the dusty road to their farm gets un-usable….most people just complain about it and do nothing. But my parents and their neighbor rent a bulldozer and fix the road every year out of their own pockets….only them and this one neighbor join together to do this whilst the rest of the community benefits from it….why do they do it? Because they know the government has limited resources!! If you have a problem that you can fix individually or as a community then go for it, fix it. Unfortunately loads of Zambians always wait for someone else to fix their problems.
@4, spot on. Totally agree with @5.
lol…Apamwamba I agree with you. There is a lot of structural unemployment in Zambia, a lot of Zambia’s problems are deeply systemic and were created by the KK government- somehow Zambian’s forget how badly KK mismanaged Zambia’s economy. The cost of capital in the private sector is still relatively high because of the high interest rates, but even these have been falling over the years. Greater competition in the banking sector and more entrepreneurial spirit and ambition from would be entrepreneurs could definitely help reduce this more and help create more jobs etc. But its going to take entrepreneurs who actually have the insight to solve some of the problems for which great economic opportunity exists.
You know I had started writing something and deleted because I thought it was going nowhwere but seeing positivity here, I will put down what I had started. You see, on these threads, there are always people that are negative. My thought is that some do that as a let off for frustrations in their lives. A boss can be nasty to subordinates if he/she has problems at home. I feel some people happen to be in that category, where everything in their lives has gone awry. So as a way to cool off just shoot off negativity. People who are happy in many spheres of life (marital included) will exude so much positivity that it is infectious. So maybe we need to forgive negative people. There may be more to them than we see on the threads. Zambia needs positivity in a big way.
Being positive never hurt any one. Doesn’t matter who you vote for this year. Be more positive about Zambia’s outlook now and in the future and also help out your community, actively make changes otherwise your frustrations are hypocritical. Waiting for some one to suddenly fix your problems…that sort of attitude just leads to a life time of misery and feelings of frustration because you’re sitting on the proverbial nail and crying about it but not getting up….
# 4 the problem is not the paper figures, the problem is what do the figures translate to the ordinary citizen. We can have all the best figures but if the standard of living remains poor whats there to celebrate about the figures? We have huge exports earnings on paper due to copper sales but where does the money stay? Europe, only a little comes back in form of tax, and salaries and payments to local suppliers. We have alot of work as a nation to do before we can start getting excited with these figures.
(Continued) when you could. The reality is that for a lot of people, this years election is more emotional and normative than it is about the visible progress Zambia has had. Personally I wish the opposition had more inspiring candidates, because at the moment most opposition leaders are power seeking ex-MMD people with no more insight than the current government…so honestly I fail to see what sort of real change they could bring. Economically Zambia is headed the right direction, if any opposition is to bring real change to the country it needs to be from a leader who is a visionary. Someone who can galvanize the country and bring back a sense of optimism and change our culture for the better. Zambia needs a new breed of politicians- not people who publicly insult others.
On tax revenue, my opinion is that this is already being dealt with via the variable tax. Variable tax works like windfall tax but takes into consideration operational efficiency and as such is a tax on super-normal profits. This allows the companies and their shareholders to fully gain from the risks they took but also enable the state to benefit from increased profitability. So its a win-win situation in theory. The challenge is that the government needs to thoroughly audit these companies which obviously try to avoid taxes. This is not a taxing problem, but a collection problem. ZRA simply needs to become more efficient and transparent, this forces it to become efficient. In that sense its progressive. So in the mid-long term more mining tax revenues will be collected.
Mining and tax havens
Thus, however illicit, by outsourcing the commercialised sovereignty of tax havens, transfer mispricing, when realised through tax avoidance, is legal within select jurisdictions. The financial geography of MCM is located almost entirely in tax havens: though a Zambian company, it is 73 per cent owned by Carlisa Investments (a British Virgin Islands company, 82 per cent owned by Bermuda-based Glencore Finance, which is 100 per cent owned by Glencore International AG). MCM’s mining partner, holding 18 per cent of Carlisa, is another mining entity active globally and in Zambia – First Quantum.
In the short term, ZRA needs some radical change. I really think that this issue should not be politicized. What the politicians need to focus on creating laws that make it very hard to avoid taxes via shell companies and tax havens and also focus on putting more pressure on ZRA to become more efficient at collecting the taxes. Focusing on the windfall vs. variable tax debate distracts every one from the big problem which is making civil service work harder. It used to take days to register a company now its very fast, the same can be done with the ZRA.
Personally something that I think has been ignored is the possibility of making it mandatory for all mining companies that start operations in Zambia to be set up as Public Limited companies and float on the LuSE. They could float a small minority of their equity on the LuSE with the rest owned by their home country MNEs, but being floated would force them to be more transparent to their Zambian shareholders…it would also be a more efficient means of transferring some of the wealth to Zambians. ZCCM isn’t the best vehicle for this because at the moment it works more like a private equity fund. Putting equity in private hands would enable Zambians to more directly benefit from the mining industry. As more mines open I think this is something that will eventually happen.
Thoughts, I can’t agree with your sentiments more. Zambian Govt and LUSE need to be more innovative in getting these mining companies to have dual listings. It is paramount that Zambians participate in capital accumulation. As for the taxation issue I couldn’t comment. The problem with taxation is that the powerful seem to always win. In the UK for example private equity and hedge funds hardly pay tax on yet unproven fears of capital flight and they conveniently package capital gains as carry-overs. Mr Obama has failed to invoke the break on taxing rich Americans ushered by Bush. However, I agree that ZRA needs further institutional strengthening. Good luck in your new job.
The thing that worries most with ZRA is corruption. How do you manage this in the face of these companies. My guess is that they will poach all ZRA’s brains to design their tax avoidance schemes.
With dual listing at leats you can get some of the income back by way of dividends.
@Apamwamba, I agree with your sentiments regarding ZRA corruption. This has to be dealt with, that said its going to be challenging. The problem with corruption is that it has almost been institutionalized into Zambian culture. Maid steal from their employers, some accountants will actively look to skim their employers too…..its every where. Which goes back to my point about the need for a leader that can inspire people to go above this. For some time Mwanawasa seemed to be this sort of person, but the reality is that even in his government corruption was everywhere; nepotism in his ranks, and the corruption in the MoH which was discovered under RB must have started under Mwanawasa. This isn’t necessarily about the leaders, its about a change of culture….
Not sure exactly how the government can look at ways of reducing ZRA corruption. Off the top of my head I think the dual listing would be the best way to do this because these companies would be pressured to declare real profitability by both local investors and the government, without which it will be possible to accurately value the companies. The more companies IPO the more the LuSE will become closer to being an efficient market via higher turnover/trading…leading to more accurate company valuations and an increased need for accurate information. I think in the past Zambia wasn’t able to enforce this because the market environment wasn’t in its favor, copper prices were low and loads of companies were pulling out…this put Zambia in a poor negotiating situation.
The dual listing of KCM could herald a lot of change. Its probably too late to legally presurise already existing mining companies that are privately held, but….the government can look to persuade them to do this and enforce it on any new companies that seek to startup. I think this will probably happen in time. Generally I’m optimistic about were Zambia is now and were its going. If Zambia’s middle class continues to grow, if FDI continues to flow in and interest rates continue to fall….unemployment will gradually drop too, there will be a lot more money flowing around and the standard of life will gradually increase. Corruption will probably also reduce as the size of the middle class increases. Who ever ends up in the government later this year should continue to drive this growth
Thoughts!.. That is a lot of thoughts you had there… but thank you for sharing!
@Miss Daisy, you’re welcome. I’m of the belief that Zambian culture has massively become partisan. I think being moderately objective at the least and having some confidence in some of the progress that has been achieved over the last few years ultimately helps people regardless of what party they belong to. In any country that has achieved real growth a positive sense of purpose has been instrumental; American dream or China’s opening up….etc. Zambians need that.
Rubbish you are are busy bullshiting on the growth bafikala,Zambians wont feed on the stupid figures you have been giving.
Mining and tax havens-Thus, however illicit, by outsourcing the commercialised sovereignty of tax havens, transfer mispricing, when realised through tax avoidance, is legal within select jurisdictions. The financial geography of MCM is located almost entirely in tax havens: though a Zambian company, it is 73 per cent owned by Carlisa Investments (a British Virgin Islands company, 82 per cent owned by Bermuda-based Glencore Finance, which is 100 per cent owned by Glencore International AG). MCM’s mining partner, holding 18 per cent of Carlisa, is another mining entity active globally and in Zambia – First Quantum.
@Zed1….okay so you disagree with the empirical data. You’re proving my point, you’re reacting emotionally not rationally. Regardless of which party wins this years elections, development will not happen within a short period of time. Its taken China 30 years to get to where it is and even still it has a large amount of its population still in poverty. The reality is that rather than be cynical it won’t hurt you to look at the positive things happening to Zambia. No one disputes that it will take time to get to a developed status. But the data is correct, the IMF, World Bank, even the Economist has written an article recently about the massive growth Sub-Saharan countries like Zambia are experiencing! Read this: http://www.economist.com/blogs/dailychart/2011/01/daily_chart
In 1990 there were massive food lines, run-away inflation and the economy was crippled. Copper production was seriously low….but thats not the same; Zambia has a growing and thriving middle-class. If anything Zambia currently has two massive issues to solve; unemployment and increased foreign and indigenous investment; the latter will probably occur as the cost of capital decreases, especially interest rates because Zambia’s capital markets are still very fundamental. But overall things are positively changing, to see otherwise one has to be an extreme cynic.
i concur with thoughts
Thoughts, i wish most zambians were as passionate about the economy as you are or a passionate about the economy as they are about politics.We would have less poverty and probably a populace not just content with being employed but running their own firms to compete with the best and politics would be seen as a distraction.Its true it will take time for benefits of growth to trickle down to the average zambian.China even after overtaking Japan as the 2nd largest economy still has a long long way to go before the average Chinese can be like the average Japanese.
Thanks Enka….I totally agree with your sentiments. Having been to 4 cities in China myself I can say that its an amazing country but does face many challenges, the wealth gap there is extreme, probably amongst the worst in the world. The biggest difference between the Chinese and Zambians is that the Chinese have a sense of pride in the progress they have made…reading these threads hardly any one ever actually looks back and says “guys you know what our country was actually almost completely broken in 1990- but we’ve overcome that and are making progress.” A failure to appreciate the past and the progress that we’ve made is very unfortunate because it stops politicians from having real issues based campaigns, they take the easy route and rant. On another note, what/who are the 3Es?
Hi Enka, I think if MPs of every party actually showed more concern for their constitutients and actively sought to find ways to bring their communities together to seek local solutions to local problems it could lead to some innovative developments. For example I see no reason why a village can pool its resources together to build its own wells and sand filtration systems, or build latrines that tun human waste into bio-gas that can be used for electricity…why doesn’t it happen? I have no idea!
Sorry I meant to say MP’s have shown little real concern to fix local problems with local solutions…..a little tired lol.
Enough thoughts shared ;-)
When the Arab north was bombing the Christian (Black) south in Sudan, China chose to look the other way because they did not want to jeopardize their petroleum deal with the Sudanese govt. It is the U.S. that put pressure on the Sudanese govt. Trees that are more than 500yrs old in Madagascar are being logged at an alarming rate by Chinese businesses. It is the west that is protesting such wastefulness of this national treasure. Today, China is still the hero on the African continent. Even pirates in Somali are wiser to stay away from Chinese ships (you will not receive any mercy from the Chinese as you would from other countries” ships). Do Africans really know who the Chinese are?
In Zambia the forieger is boss. Zambians remain as 20pin/day work force. Lets face it, Zambia at the moment only has natural resourses to showfor. Untill we have a GRZ that say for example, we will get less in bribes but we want the processing plants in Zambia rather than sent raw materials outside. We will get less in taxes but we want shopright and the rest to show they are exhusting local produce, the immigration department should not act as a money collecting entity by way of issuing work permits, cant this money mad MMD see that $2million collected from issuing work permits affects Zambia more in the long run by taking jobs meant for Zambans ?. RB and his Gang of MMD bussiness pipo only think of money in the short term, they would rather rent, then build and showoff the monies saved.
@Witness, please restate your point. Its a little incoherent and that makes it difficult to understand your point. I’ll give my take on what I think you’re trying to say. Regarding corruption, yes this needs to be tackled. But putting say the PF in the government won’t solve this because they are ex-MMD and probably are just as corrupt; that is if your point is that only the MMD is corrupt. The corruption problem is a cultural one not a political one. If the Zambian culture becomes massively intolerant of corruption, corruption will be reduced coz even those people who would want to be corrupt will be forced to put on an act of integrity. Changing governments won’t change this, only changing ourselves can do that.
Choose a government that can positively steer your economy and maintain the rule of law. These two things are the most important because maintaining economic growth increases general welfare, reduces unemployment and creates wealth. Maintaining the rule of law, gives the government credibility to its own people and to external investors…it also ensures the protection of private property. Basically go and read the Adam Smith’s the Wealth of nations….
@thoughts
what i am saying is that until we have a GRZ that looks at the long term investment for zambia, not collecting as much monee as posible selling anything, just to show off the collected monees and saying we are making monee while all we have to show for it is shopping malls and seasonal roads. I would rather they use all those reserves to build Unis and schools and manufacturing plants, not showing off reserves then borrowing massivley behind closed doors for shoddy works like the internationl airport facelift were nobody has seen the tender advertised. What a bunch of crooks this Rbs gang are. They are very good bussiness pipo, but they are selling off our country.zambia should have ver few unemployed graduates if their boost is right about deveopment.
economic prosperity in zambia is measured based on 1. ability to service foreign debt and how easy it is for donors to recover their monies 2. ability for investors to do business, and maximise and externalise profits 3. local reserves available for politicians to share through salaries and allowances or through deals. now all can see that this excludes the common man. not even professionals (teachers, nurses, doctors) are included. just politicians, investors and loaclly based diplomats appreciate development. malls, hotels, good schools and clinics are beyond the majority. please dont blame citzens for being unemployable, lazy or laid back. rubish economics. we need policies that address the underlying problems. neither Sata, Ruphia, or HH have come up with any.
@Witness….there is nothing wrong with privatization in principle. But the most recent privatization was Zamtel. I don’t think the government is mindlessly selling off assets in order to generate revenues. Thats not sustainable. The one thing that they have emphasising again and again is the need for increased FDI- which is what the Chinese have been doing a lot of. This isn’t selling off anything. As far as the tender process goes, yes some transparency there would have been great. But here is the thing, why didn’t a Zambian firm offer to do it in the past? Somethings just take hard decision making. Why are they keeping the reserves? Well because reserves are needed in order to actually borrow money (which is something that every country does).
I agree that schools and universities are needed. This comes out of direct taxes though, not the reserves. Also the private sector should lead in developing new uni’s and schools; this is already happening. Note that the best uni’s in the US are all privately owned.
@da silk, the ordinary men are included by virtue of the employment created by foreign investors when they set up businesses in Zambia. Also politicians themselves don’t have direct access to the reserves, the SC has direct responsibility for the treasury and the BOZ has direct access/control over the reserves. Check & balances exist already. Another thing is that the honest truth is that in most cases an economic agenda is long term and driven by the civil service; though politicians can verry heavily influence it.
I’ll give the example of Dr. Musokotwane, he’s had a long distinguished professional career as an economist. He’s been Deputy governor at BOZ, worked at the IMF, worked in the Ministry of Finance as ST, worked for the President as Special advisor…so during that whole time many of the economic principles that are at play today were started then with people like him serving the government already. The current BOZ governor has been there since 2001….what does this show? Well it shows that economic progress isn’t up to any one person, its a group of collective people working together over a long period of time. Chembe at Statehouse was at BOZ before, the current ST used to be at Zanaco. If these guys wanted they could have better paying jobs outside of Zambia
Cleary some people in the government are there to serve. Its strange in developing countries politicians and civil servants are criticized mostly for the ideological beliefs. In Zambia its assumed that all people in a government…….we need politics to be issues based as opposed to always be about character assassination or presumption without facts. Whether you support MMD, PF or UPND without this, political debate will always be about who you support as opposed to what you support. This is the key difference that keeps people loyal to parties in other countries irrepective of who the current party leader is, what the party stands for is known and remains unchanged. In Zambia if Sata quit PF tomorrow to start a new party all of PF would follow him.
‘Transparency’ hides Zambia’s lost billions Mining corporations’ tax avoidance schemes cost African nations billions of dollars each year. See 2008 report: It is a logic that appears to bank on political or “demand-side” corruption, chiefly innate to the developing country’s character – with corporations simply “going along” with the system – a kind of “when in Rome” response.
But the EITI theory is vastly different from the reality and has more to do with corporate and “first world” country supply-side corruption. Zambia’s first report, for instance, revealed that mining companies remitted $463 million in payments to the government in 2008. The EITI report claims “significant discrepencies” noting a net total of “unresolved discrepencies” of $66 million.
This is especially interesting when taking into account that Zambia’s entire GDP for 2008 was $14.3bn.
Glencore’s lucrative policies
This type of corporate corruption – known as transfer mispricing, made headlines recently when a leaked report authored by Grant Thornton at the request of the Zambia Revenue Agency (ZRA) unpacked how the Glencore-controlled lucrative Mopani Copper Mines (MCM) – a company which declared no profits, was cheating the country’s tax base of copper revenue.
The auditors disclosed that MCM tried “resisting the pilot audit at every stage”, rendering them unable to access crucial data in many instances. MCM’s chief executive, Emmanuel Mutati, claimed that the audit was not accurate, precisely because data was inaccurate.
Yet Glencore, the world’s largest commodity trader, controlling 50 per cent of the global copper market, is confident that MCM will be “exonerated”. In all probability, Glencore will be saying that transfer pricing is perfectly legal and central to trade. But the nature of “arms-length transfer pricing” within the current deregulated global financial architecture, enables multinationals (conducting as much as 60 per cent of global trade within – rather than between – corporations) to “self-regulate” pricing.So, though pricing, in theory, is determined according to “market values”, in reality, the “corporate veil” facilitates tremendous mispricing when subsidiaries of the same company trade with one another – the means through which Glencore allegedly purchased grade +1 copper
Tax havens such as Switzerland are essential to resource-seeking corporations operating in Africa: more than 85 per cent of asset portfolios for sub-Saharan Africa passes through tax havens. In Zambia, MCM’s structure – like that of Vedanta and others, keenly utilises tax havens as vehicles for shell companies able to access legal and financial opacity tools including banking secrecy, thin capitalisation, little or no taxation, zero disclosure of company accounts, use of nominees, and – best of all – high-level client confidentiality, all of which is entirely legal.Thus, however illicit, by outsourcing the commercialised sovereignty of tax havens, transfer mispricing, when realised through tax avoidance, is legal within select jurisdictions.
‘Transparency’ hides Zambia’s lost billions
Mining corporations’ tax avoidance schemes cost African nations billions of dollars each year.