By: Dr Situmbeko Musokotwane – Economics and Finance Chairman – UPND
28th December 2019
Two days after the 2019 Christmas, President Lungu announced that he is voluntarily cutting his salary. Along side this, he has directed the Secretary to Cabinet to cut salaries of non-unionized civil servants as well as some parastatal heads. The President’s intention is to use the money so saved to assist Zambians who are stressed by the prevailing harsh economic environment.
The response from the United Party for National Development (UPND) follows below.
As a preliminary point, the President cannot unilaterally cut salaries for individuals. The law does not permit him to do so. However, some money for the same purpose may be gathered by compelling those ministers who remained in office illegally after the dissolution of Parliament in 2016 to pay back the benefits that they derived over the period. The legal judgements for these payments to be made have been in place for years and it just requires political will to be implemented.
Getting back to the main issue driving the President’s desire to cut salaries, its good to know that he is aware that people are undergoing unprecedented suffering under his leadership. In looking for solutions to the sufferings however, we must understand the nature of the suffering and what has caused it. Unless you have answers to these two questions you are at risk of prescribing wrong solutions to the wrong problems, as the President has done.
Mr. President people are indeed suffering. The most critical type the suffering is that the cost of living has escalated beyond anyone’s imagination. Let’s give examples from the bare basics. Maize meal, our staple food is above K170 per 25kg bag in many places of the country. PF found the price of the commodity at less than K40 in 2011.
Petroleum fuel which has major influence on the transportation costs of goods was around K5.50 per liter in 2011. Now it is above K16 depending on the exact type. The US dollar Kwacha exchange rate, another key determinant of virtual all imported goods and services was around K5. Last week it escalated to nearly K16 before it gained back; even though the fundamentals still suggest more depreciation.
We can go on and on itemizing goods and services that have escalated in prices but that is not necessary. Just know that the cost of living has escalated. Over this same period, employees have had minimal increases in salaries and wages. For civil servants this ending year they have had less than 10 percent of salary increments. In 2020, they will not have any increments at all because there is no such provision in the tight budget.
Employees in the private sector are also suffering from stagnant salaries and wages amidst the ever-rising cost of living. Most of their employers are struggling to keep afloat. When they try to increase the cost of the goods and services that they sell to reflect increased costs like electricity tariffs, weak Kwacha exchange rates etc. they find themselves failing to sell because their customers don’t have the money to pay higher prices. So, employee salaries remain stagnant because the employers are unable to increase them. In many cases, employees are even losing jobs because employers are forced to lay them off just to survive.
The suffering of the people is country wide. Rural and urban provinces are equally affected. This suffering is in great contrast to what the Zambians expected to live under PF because your party promised them more money in their pockets. In contrast, never before have Zambians experienced so much money escaping from their pockets.
Given this situation, Mr. President, how does your solution improve the lives of the people of Zambia? When you cut your salary and those of your senior managers, how will such an act lower the price of mealie meal country wide? Or, are you convinced that the relatively little money thus saved can be distributed to the millions who are starving so that they are enabled to afford maize meal?
Will it be enough to feed the millions that are near starvation in the Western, Southern, Central, Lusaka and parts of Eastern Provinces where there is unprecedented drought induced famine this past season? Will your solution stabilize the exchange rate or lower the electricity tariffs or make electricity available? The answer is no.
We know the government uses the excuse of drought all the time to explain the current suffering. But this is not the first time Zambia is experiencing drought and it will certainly not be the last. Nor is Zambia the only southern African country that suffered drought. The problems manifesting now stem from poor governance in our country, especially in the economic arena.
The biggest cause of the suffering is the debt crisis that has befallen our country. Nearly all of the government budget is just for paying salaries and debt service. Here are a few illustrative points on debt service and the suffering.
When there was drought and poor harvest in past years the government used to import maize to augment the local stocks. This kept the price of food within affordable range. This time government can’t import maize because there is no money. It has gone to debt service.
In the past government used to import electricity and pay for it through ZESCO. This time round both government and ZESCO have huge debts to pay so they can’t import even if it was available.
Debt service has caused the exchange rate of the Kwacha to depreciate and will continue to do so. This is causing misery and it will continue to do so
Debt service has drained away money from the economy, making it hard for business to survive
Clearly the cuts in salaries of government officials will not address these debt servicing induced problems.
Finally, there are a few things the government can do to moderate the suffering of the people even as the debt servicing problems remain. Once again here are a few examples:
The government should immediately stop enticing councilors from opposition strong holders to resign from their positions thereby causing bye elections. Since 2016, on average there have been bye elections after every two months. A few have been caused by deaths. The majority however have been caused by opposition councilors resigning after being induced to do so by the government. Elections are very expensive. They take away resources from more deserving areas like feeding the hungry, providing money for Constituency Development Fund and many other causes.
Reduce government travel especially the Presidential trips which are very expensive
Re-consider the need of existing facilities such as the Presidential jet which demands expensive debt service arrangements
Put on hold some planned loans for unjustifiably expensive projects such as the Lusaka Ndola dual highway.
In conclusion, UPND takes the position that the salary cuts from senior public employees do not address the real source of the economic misery that Zambians are going through. The real source of the problems are the debt crisis and very bad utilization of the little resources that remain after debt servicing.
UPND will elaborate on these more fundamental solutions very soon. As of now, it is pointless to inflict pain on a few people for no real gain at all. At the individual levels, the senior public employees may have running financial commitments based on what they believed were their income streams for the next few years. They may have loans to service or school fees to pay. Why punish them for no social gains?