President Hichilema is a Good Man, But His Policies Can’t Fix the Economy

Zambia has been lucky in one sense: all the presidents we’ve had have been people with very big hearts who deeply cared for the people. We tend to insult them while they are in leadership,but many years after they leave office, we are able to clearly see that they were only trying to do what they thought would help the people.

The biggest example of this is our first president, Kenneth Kaunda. He was so desperate to help the Zambian people that he decided to nationalise private companies so that he could give jobs to many more people while also spending the profits of those companies on free services (like education, health, etc). He also controlled the prices of commodities so that the people could afford to buy food and other essential items. He was a very good man indeed. But unfortunately,
the result of this wonderful good-hearted generosity was total economic disaster!

Economic principles don’t care about your heart or its good intentions. It turns out that nationalising companies is a terrible idea because companies do not do so well when their motivation is not maximising profit. Running companies with the intention of giving jobs to people is always guaranteed to produce losses, which makes those jobs useless. Price controls are also generous, but they always lead to shortages so that the people you were trying to help end up with nothing to buy, which makes their money useless.

President HH is also a caring man with a big heart and I believe him when he says he spends some sleepless nights trying to solve the big problems that Zambians are going through, with ever-rising commodity prices, power shortages, currency weakening, and so on. Presidents ECL and Michael Sata from the preceding PF party were similarly men with big hearts.

The biggest problem is that our good presidents continue recycling the same mistakes that the first president made, which makes them fail to achieve any real economic breakthrough. It’s like the mistakes of KK are now in the DNA of Zambia. For example, the generous HH decided to bring back the free education of Kaunda because he sincerely wants to help so many poor Zambians get the opportunity of education; the policy sounds very sensible. He is also sending money to many poor Zambians through his “social cash” transfer program, hiring many thousands of people to government jobs, and many other big spending programs. If you oppose any of these programs you look like a heartless person who doesn’t care for the people.

But once again, the results will continue to be more deadly than the problem they are trying to solve. The same people he is trying to help will suffer the most from these high spending policies, and their poverty will just be prolonged more.
What Zambia needs is a thriving economy where many people can have good jobs and make good money, but this can only come from private companies being given permission to succeed and expand. This can’t happen when their taxes are too high.

For as long as HH keeps his generous social spending high, he needs to also keep the taxes high. Which means the companies will not be able to make profits, which means they won’t be able to hire more people, which means the poverty will keep growing, which will lead to the president spending even more money, and so on. The cycle won’t end. Even the money you will pay to those newly hired teachers and nurses will mean nothing, just as it happened in Kaunda’s time.

Besides increasing taxes, he also has to increase his borrowing in order to meet all these different spending needs. And to pay for that borrowing he has to find even more taxes to squeeze from the struggling sector of private employers.
He might not be nationalising companies right now, but the result is exactly the same as if he nationalised them. At best, they will be forced to lay off workers so that they can make a bit of profit after losing money through the taxes and inflation that come from these spending policies.

It is for this reason that Zambia has no chance of recovering economically at the moment. The main key to bringing economic recovery is to radically reduce taxation for all Zambian businesses and their workers, but this can only be achieved by also radically reducing spending and borrowing.

By Chanda Chisala
The author, Chanda Chisala, is the Founder of Zambia Online and Khama Institute. He is formerly a John S, Knight Fellow at Stanford University and Visiting Scholar to the Hoover Institution, a policy think tank at Stanford. You can follow him on X @chandachisala.