Mister Michael Sata was not the most educated president Zambia has had, but somehow he became the first politician to realize that the biggest missing key to Zambia’s elusive prosperity is the radical lowering of taxes, including abolishing most of the many taxes that consumers and companies pay. When I first heard him say this, I was surprised that he understood this concept at a quite sophisticated level when most educated politicians never even mention it in their manifestos, interviews or campaigns.
Although he kept saying he was a “socialist,” Sata understood that the only way he could collect enough money to help people was if businesses started growing and thriving first, and they can’t thrive in an environment that has such punitive taxation (besides the crippling regulations – a topic for another day). Furthermore, if workers themselves are paying lower taxes on their salaries, while also being charged less taxes on the goods they buy, they would be left with much more “money in their pockets” since their salaries go higher while their spending costs go lower. This excess money means that there would be more opportunities for other people to sell extra things to them, whether as formal businesses or on the street or at the markets. On top of this, it becomes easier for foreign companies to want to invest in a country where the people have excess money to buy more products. It’s easy to see how this whole process can produce a booming economy. And in such a vibrant economy, the poor can even start affording to pay for their children’s education, healthcare, etc.
I was eagerly waiting to see how quickly Mister Sata would implement this new revolutionary tax policy when I saw something in the news that depressed my hopes: the new PF government had just been invited to borrow huge amounts of money through the “Eurobond” and they became very excited about it. Before they even finished celebrating this mistake, they received opportunities for even more loans from China and many other countries and private lenders. I knew immediately that the promise of radical tax reduction would not happen and the pockets of Sata’s poor voters would remain moneyless. For you to repay such huge loans you need to collect a lot of tax, which means you won’t see that thriving economy that major tax reform would have brought “in 90 days.”
We cannot emphasize this economic lesson enough: to really fix the economy you have to radically cut taxes across the board, not just for a few products like solar panels when there’s an emergency – that can never fix anything. Reduce the taxes on everything and everyone everywhere. But to do that, it means you also have to radically slash your big budgets. Mr. Sata understood the first part of the coin (on tax reduction), but he clearly did not understand the second part (on spending reduction), which is the only reason his promise of transforming Zambia in 90 days did not happen.
When Trump won his second term in the US, his team immediately went into overdrive trying to find ways to cut spending because that’s the only way Trump could fulfill his big Sata-like campaign promise of cutting taxes and making the American economy “great again.” This is how Zambia and other countries have found themselves losing American donor aid, as Trump’s people keep digging deeper and deeper into the woods for more spending cuts. It has nothing to do with “racism,” as some African critics have thought; they are cutting aid to everyone, including “white” countries, and even to their own citizens.
Trump understands this principle very well and it is how he produced a great economy in his first term. There are many Americans who hate Trump’s abrasive personality (which is somewhat similar to Michael Sata’s personality), but they voted for him because they could remember his economic performance in his first term. He had managed to reduce unemployment to the lowest levels in American history for most groups, including African Americans, which is why he got even more votes from blacks and Hispanics for his second election. He did this by simply cutting taxes and regulations in a way that was unprecedented in modern American history. The voters wanted him to return to do whatever he did to fix the economy (before Covid hit the world). But in order to cut taxes in a big way again, he has to find even bigger expenditures to cut.
Besides the Elon-Musk-led Department of Government Efficiency (DOGE) that’s been tasked with finding all these wasteful expenditures and unnecessary government jobs to cut, Trump’s Republican party leaders have also been shutting themselves in emergency meetings to debate what major government programs should be cut from the annual budget [Republicans try to find consensus on massive tax and government spending cuts]. Trump has said that even the money they have been sending to Ukraine is now going to come with a condition: Ukraine should give America some of their precious resources in exchange for continued financial support [Trump Ties Ukraine Aid to $500 billion in Rare Earths”]. This means American tax payers won’t be paying for that expenditure any more: Ukraine will be paying, which means more opportunity for tax cuts for American businesses and workers.
In African countries, this process of finding what costs to cut so that you can reduce the weight of tax almost never happens. Even when president HH was campaigning for the presidency, he promised to kill a lot of these taxes, just like Sata had promised before him. HH understood this side of the coin too. And since HH was opposed to the heavy borrowing of the PF, one would have expected that he understood that radical cutting of government expenditure should be the first priority, just as Trump’s team is doing in the first days of his presidency.
Unfortunately, the annual budgets of the UPND government have looked very similar to the budgets of the PF before them, with just a few numbers moved around here and there. No major spending cuts and therefore no major tax cuts, besides continuing the same habit of heavy borrowing.
Even when they have cut some expensive government programs, they have simply replaced them with other expensive programs, instead of using the savings to reduce the taxes more. For example, when they ended the subsidies on fuel, they simply replaced this with another expensive subsidy: free education. On top of this, they also inflated the government wage bill even more by hiring tens of thousands of teachers, nurses, soldiers, etc so that they can boast about “creating” new jobs while the private sector, which could have created actual real jobs, continues to suffer under heavy taxation and regulations.
One smart economist who was leading the only remaining “free market” political party in Zambia, Mr. Highvie Hamududu, noticed this mistake of replacing one expensive program with another and immediately called it out. According to a report of his Radio Phoenix interview at the time, Hamududu opposed president Hichilema’s free education policy because, according to him, all it does is “remove subsidies on fuel and electricity tariffs, but pushes the money in another hole called free education.” (His exact words).
This does not mean Hamududu was against the education of poor children in villages. We all want the poor children to be educated. It simply means he understood that this free education was only going to contribute to a worsening economy because you are increasing your spending before you increase your economy’s productivity. Instead of fixing the economy quickly so that they can afford to pay for education, you are making them even poorer. Besides this, the quality of the education itself was bound to go down, as has already been confirmed [Zambia made education free, now classrooms are crammed].
By giving people free things when your economy can’t afford them – free education, new government jobs, new government ministries, new social cash transfers etc etc – you are simply making it harder for them to ever get out of that poverty trap because you have to keep punishing the productive side of the economy.
End.
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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.
