GDP and Low-Income Country
Status …
KCM pays supliers $2m out of $200m it owes, we clap!
Do we have a problem with numeracy and literacy in Zambia? Probably yes, we have a little problem with reading figures, interpreting them and using them as a basis for informed decision making. A day or two ago, Zambian blogs exploded into exaltation over an announcement that KCM would allocate $2 million towards clearing arrears to suppliers of goods and services.
The problem here was that the majority failed to read and interpret the value of $2 million relative to the size of KCM, the typical costs of goods and services required by KCM or the volume of debt that KCM owes to contractors and suppliers.
A person who understands figures should have questioned whether the statement from KCM has a typing error because $2 million in the context of a large mine in debt like KCM is a joke. That amount is insufficient to buy just one large excavator (Bucyrus RH400 or Hitachi EX8000) or just one large dump truck (Komatsu 980 or CAT 797F), not even a second-hand one.
A few days ago, Zambians again awoke to a “rude shock” that World Bank had downgraded the country to a Low-income country. Was it really a shock? I don’t think so. It’s only a shock because we in Zambia don’t like to pay attention to figures and to interpret them. To be frank, Zambia just concluded the 7NDP for 2017-2021 in which we did not meet even a single goal and are far behind schedule on almost every milestone LPM planned when his administration adopted Vision 2030, about 15 years ago.
The criteria used to grade economies uses a multiplicity of parameters, including the Gross Domestic Product (GDP). Put in simplest definition, GDP is the monetary value of goods and services in a certain country in a given period. Put differently, it is the sum of what every company or person produces. When mines, farms, factories, banks … produce more goods or services, and make more money, the GDP of Zambia grows. When the opposite happens, the GDP shrinks.
If we have been paying attention to performance of key industries, and key sectors of the economy, lately, we must not be surprised that our GDP is not growing. Here in Ndola, Indeni, Tazama and Ndola Lime (aka Limestone Resources) have been on care and maintenance, hence producing nothing and consequently adding nothing to GDP.
In Kitwe and Muf, Mopani has been producing at 50% or less of capacity; meaning also that its major contractors and suppliers are operating at diminished capacity.
In Chililabombwe and Chingola, KCM has been operating in the last 3 years at less than a third of capacity. In Kalulushi, Chibuluma Mine and Chambishi Metals have been on care and maintenance for a long time.
As regards the Copperbelt-based cement plants (Dangote, Chilanga Ndola and ZPC), they have been operating at diminished throughputs due to lack of demand because the construction sector is in recession the past 3 years.
Elsewhere, we have heard that Tazara and ZRL are carrying almost nothing and are barely surviving to the next paycheck. In agriculture, the same story is prevailing: maize output is down on last year; sugar production went slightly down at Zambia Sugar in 2021. In construction, we know what is happening that GRZ abandoned most projects due to lack of money while in tourism the pandemic ravaged occupancy rates in many lodges and hotels in the past years as workshops and travel were often cancelled or restricted.
All the above malaise put together and measured resulted in the shrinkage of the economy, as indicated by the negative growth recorded in 2020 to 2021. Since the GDP is expressed in USD, the deteriorating exchange rate also contributed to an arithmetic shrinking of the Zambian GDP or economy. By and large, the collapse of the Zambian economy was a result of poor stewardship by a bad ichipani leadership, which was clueless on how to manage an economy: bad policies inhibited outputs in the mines, catalyzed confusion in construction, caused stagnation in manufacturing, pushed many companies into care and maintenance and ruined agriculture.
We the citizens also carry the blame: unions and cadres influenced GRZ to commit suicide in Mopani, KCM and Chambishi Metals. We were celebrating when ichipani was pouring poison in the river and now we are complaining that piped water is causing diarrhea!
Folks, there is nothing shocking about Zambia being downgraded to a lower-income economy. That’s just the reflection of our economy which is in distress. We can reverse that by kickstarting the economy. The mines, the factories, the railways and the farms need to start working again. We should also begin to pay attention to numbers, especially to trends and correlations between cause and effect; we need to start asking questions about numbers. For example, have our mining policies (mineral royalty tax, import duty on concentrates from DRC imposed by Hon Mwanakatwe, liquidation of KCM, nationalization of Mopani…) improved the mining sector, in terms of outputs, and contributed much to GDP? What volumes of goods are Tazara and ZRL carrying and why? What volumes are our factories (NCZ, Indeni, Ndola Lime) actually producing and why? What are our state farms (ZNS and ZCS) producing in numbers and how does that compare to the costs and investment in them? How are the recipients of CEEC loans fairing relative to money they received? What are the efficiencies on various empowerment schemes (fuel tankers for youths, FISP, musicians, Black Mountain…)?
I also notice a worrying trend in my professional family, the engineers. We are in a hurry to start roofing a house where the foundation and walls are not yet done. When we have analyzed where we are not doing fine, let’s start by correcting those first before we begin new things. Before thinking of new electric bullet trains, let’s first ensure that we have capacity to run Tazara. Before thinking of mechanizing and automating new farms, let’s ensure that ZNS and ZCS farms are running productively and profitably; before focusing on installation of smart meters, let’s ensure that piped water is available to all households; before focusing on production of electric car batteries, let us first ensure that we have explored and found where we will get cobalt and nickel in Zambia. We can’t just be building castles in the air without first understanding the problems at hand, including the financial and feasibility considerations. Yes, all the buzzwords (STEM, environmentally-friendly, smart grids, IoT, big data, electric vehicles…) are nice, but just words if you are a country that can only afford $2 million to run the accounts payable department of a large mine.
They say, if you can’t measure, you can’t control. Let’s start measuring and reading numbers. We should grow and measure GDP using numbers, not feelings and guesswork. Our teachers and our leadership need to play their role to ensure that citizens go beyond just reading numbers; they need to start synthesizing, analyzing and evaluating their meanings in order to effectively apply them to function in the 21st century where lack of numeracy and lack of literacy are a handicap.
Just observing loudly …