MILK FROM ROCK – UNDERSTANDING THE ROCK THE PRESIDENT WAS REFERRING TO!
——————————————————————-
By Alexander Nkosi
You cannot get milk from rock, you have to feed and take care of your cows so that they can give you good milk production. You sell the milk, earn money and create more economic opportunities. The is the reality of job creation. You cannot wake up one morning and order the private sector to employ more people. You have to create an enabling environment that allows firms and individuals to make profit and invest in expanding and employing more people as a result.
What rock was the President referring to?
1. Consumers: The cost of living is high. In a few years, inflation increased from 7% to 24% (now 22%), eroding the purchasing power. In the same period taxes remained high. So disposable incomes were not only reduced due to high taxes but the purchasing power also reduced due to sharp increase in prices. This affected savings and if people cannot save much, there is less money available for producers to borrow and invest in growing their businesses.
2 Producers: High cost of production driven by kwacha depreciation, high cost of duel and electricity. With kwacha depreciating from below K10/$ to K22.6/$ (now K17/$), the cost of importing inputs and machinery required for production more than doubled. Even after importing, producers still have to struggle with high cost of transportation and electricity. They also have to borrow at very high rates from banks to fund their investments. At the end of the day, their products have to compete with foreign products that are of better quality, branding and produced at lower costs. Jobs are hidden in developing local value chains across sectors, under such circumstances, it becomes so hard to create jobs. Even if you give youths empowerment funds to run their own entreprises, they too need a good economic environment for their entreprises to survive. They try poultry, the prices of feed are extremely high. They try crops, the prices of inputs are very high. They try welding, the price of electricity is very high. They try restaurants, the prices of food are very high and people would rather save and eat from home. This is the reality of a ‘chocked economy’.
3. Government: Government is faced with tough decisions:
a) How does government invest more in economic sectors when between 80% to 87% of domestic revenue is spent on debt service and public wage bill? How does it even significantly cut down on borrowing under such circumstances?
b) How does government reduce prices of electricity in the short term when ZESCO has huge foreign loans obtainedto fund projects, and now the Auditor General’s report discloses that there is more local debt and the company made a loss of over K4 billion.
c) How does government reduce taxes when it needs more revenue to spend on stimulating economic activities. On the other hand, high taxes are also hurting the same economic activities.
d) How does government immediately significantly reduce the prices of fuel and agricultural inputs to a level that will give consumers and producers meaningful relief when the import bill is high due to unfavourable exchange rate?
e) How does government increase allocations to economic empowerment programs when existing entrepreneurs are owed over K20 billion in domestic arrears? Some of these borrowed from banks to finance their projects and have since lost property? What logic is there in trying to create new entrepreneurs if you are killing existing ones? How does government strike a balance?
CONCLUSION
Whether jobs for youths or direct economic empowerment, it is hard to produce any of these in the prevailing economic environment, there is simply no magic wand, it is as hard as trying to get milk from a stone. The economy should be fixed to support entreprise development and job creation. One of the tools used to achieve this is the national budget, through shifting priorities. The process will be incremental as one fiscal year is not enough to achieve significant results.
My next article will ficus on the solution: Creating jobs and economic opportunities through shifting allocations in the national budget and embarking on an ambitious national production initiative.