TEN REFORMS THAT ZAMBIA SHOULD IMPLEMENT TO TURNAROUND THE ECONOMY- Sean Tembo

TEN REFORMS THAT ZAMBIA SHOULD IMPLEMENT TO TURNAROUND THE ECONOMY

By Sean Tembo – PeP President

1. Recapitalize Nitrogen Chemicals of Zambia so as to Produce Cheaper Fertilizer: The current price of fertilizer which averages $1,000 per tonne is too high for the nation to attain food security. Additionally, the issue of food security is too important to be left in the hands of private players. Therefore, there is need for Government to operate a state-owned local fertilizer production company. And since we already have Nitrogen Chemicals of Zambia in Kafue, we just need to recapitalize it so that it can operate at its full capacity of approximately 3 million metric tonnes per annum. Our current national requirements are about 400,000 metric tonnes, so we can export the rest. It is worth noting here that local private fertilizer manufacturing companies such as United Capital Fertilizer, Greenbelt Fertilizer etcetera cannot be a substitute for a state-owned local fertilizer manufacturing company because their pricing is exploitative and only marginary different from imported fertilizer. Our true liberation can only come from a state-owned fertilizer company such as a fully recapitalized NCZ.

2. Reopen Indeni as an Oil Refinery and Construct a Crude Oil Pipeline to Angola: About 40 percent of the pump price of fuel is attributed to the cost of transportation. That is because we get our oil very far away in the Middle East. Therefore, in order to cut down the pump price of fuel, we need to source it from much nearer to home, and Angola is the perfect place. We need to reopen Indeni as an Oil Refinery as opposed to just using it as a storage facility for processed fuel which is imported from a Refinery in Tanzania. We also need to build a crude oil pipeline from Angola to Ndola to transport the crude oil cheaply. In future, we also need to consider building pipelines from the national Refinery in Ndola to all provincial centers such as Lusaka, Solwezi, Kasama, Mansa, Chipata, Choma, Mongu etcetera, so that we can cheaply transport processed fuel. The fuel tankers will then only need to distribute by road within the province from the depot at the provincial center. If we do that, then we can significantly cut the pump price of fuel and also insulate our economy from fluctuations in world oil prices which are often brought about by factors that we cannot control.

3. Make all Mineral Exports as VAT Standard Rated Supplies so as to Eliminate VAT Refunds to Mining Companies: The concept of zero-rating exports arises from the need to make locally produced goods attractive in foreign markets and therefore promote the local manufacturing industry. It is not intended to be applied to raw materials like minerals. For as long as mineral exports are zero-rated for Value Added Tax purposes, the mining houses will always be in a VAT receivable position. That means the Zambia Revenue Authority will continue to collect tax from struggling businesses and individuals, and then give it away to mining companies in the form of VAT refunds. It is simply immoral. And for as long as this remains the case, our economy will remain a zero-sum game. We are not going anywhere. Poverty and hardships will remain a perpetual part of the lives of our people. The solution simply lies in amending the VAT Act so as to make all exports of minerals and other raw materials like timber, standard rated for VAT purposes. That means mining companies will need to charge output VAT and they will almost always be in a VAT payable position. Therefore, instead of ZRA paying VAT refunds to mining companies every month, it will be the mining companies who will be paying ZRA every month.

4. Institute a Genuine Fight Against Corruption by Making the Anti-Corruption Commission Independent from State House: The decision by President Hakainde Hichilema to put the Anti-Corruption Commission (ACC) under State House, has gone a long way in undermining the fight against corruption. Additionally, the issuing of politically aligned statements by the Acting Auditor General is a clear indication that we do not have an independent Auditor General but a UPND party cadre who is going to cherry-pick what to include in the Auditor General’s Report and ensure that they only report a fraction of the endemic corruption that currently exists. In other words, the current fight against corruption is laughable. In fact, the fight against corruption has now been weaponized and is used to harass and intimidate political opponents, and disposes them of their hard-earned property without a semblance of the due process of the law. Meanwhile, existing corruption is swept under the carpet, much to the detriment of the economy. Corruption is a cancer and for as long as the corrupt are the ones that are responsible for fighting corruption, then we are not going anywhere as a nation.

5. Respect People’s Property Rights so as to Attract Foreign as well as Local Direct Investment: The current regime has aggressively used the Forfeiture of Proceeds of Crime Act No. 19 of 2010 to disposes innocent people of their property without the due process of the law. This law was passed by the MMD administration in 2010 and was meant as a tool for fighting drug trafficking. We never used to hear about it because the previous PF administration hardly used it. But the UPND administration have embraced it as their number one weapon in their lawfare against political opponents who are being treated like drug dealers and have their property disposed without any due process of the law. The due process of the law was put there for a reason. If you suspect an individual of wrongdoing, then take them to court. If they are convicted of a crime, then you can apply to the court to forfeit a portion of their property that is deemed to be proceeds of crime. You cannot just wantonly deprive an individual of their property or funds without any semblance of due process and for no good reason. Just because you don’t like the person? For example, why did the State take away Yo Maps Landcruiser? We all know that the State has power since they hold the keys to the national armoury, but that power should not be abused on powerless citizens. The economic consequence of this lack of respect for people’s property rights that we have witnessed under President Hakainde Hichilema’s administration is that people are afraid of investing in Zambia. And when l say people, l mean both Zambians and foreigners. Such a situation can never be good for the economy.

6. Cut Down on Domestic Debt through Government Bonds and Treasury Bills: The wanton accumulation of domestic debt has been a major driver of Zambia’s economic downfall. Within just about two years of the UPND administration being in office, our domestic debt has risen from about K70 billion in August 2021, to about K220 billion at present !!! That is more than a three-fold increase, and yet no one seems to be talking about this. The problem with domestic debt is that instead of banks and other financial institutions such as insurance companies and pension funds, giving loans to private companies and individuals and therefore drive economic growth, they would rather lend to Government by buying GRZ bonds and Treasury Bills. That means the private sector is crowded out. When the private sector is moribund, it means ZRA will not collect enough tax to fund Government expenditure, and the Government is then forced to accumulate more domestic debt to fund it’s deficit, which further crowds out the private sector and leads to less tax revenue collected by ZRA and leads to more deficits and more accumulation of domestic debt. The vicious cycle continues and the economy goes further and further into the doldrums.

7. Revise ZESCO’s Bulk Power Purchase Agreement with Copperbelt Energy Corporation so that Taxpayers can Stop Subsidizing the Profits of a Private Entity: The bulk power purchase agreement that was signed between ZESCO and CEC soon after the UPND administration ascended to office is daylight robbery to the Zambian people. Under the agreement, CEC buys power from ZESCO at less than 50 Ngwee per Kilowatt-Hour and sells it to the mines at about K4.00 per kWh, thereby making a supernormal profit merely for transmission. Even me at a personal level, when my consumption is above 1,000 kWh per month, l pay above K2.50 per kWh, so why should CEC be paying K0.50 per kWh?

8. Adequately Capitalize the Citizen Economic Empowerment Commission and Expand its Mandate: The Citizen Economic Empowerment Commission (CEEC) is the most sure vehicle that can be used to financially empower vulnerable citizens and allow them to become entrepreneurs by giving them small affordable loans. However, in order to achieve that, there is need roll out CEEC presence and access up to the Ward Development Committee level, and also remove political partisanship when awarding loans. People should access CEEC loans because they are Zambians and not because they support UPND. Additionally, CEEC needs to consider introducing mentorship programmes for loan recipients so that they can be guided on the dos and donts of running a business.

9. Embark on a Massive Road Infrastructure Programme Across the Country to Ensure the Country is Adequately Land-Linked: I did not agree with most of President Micheal Sata’s economic policies, but one policy that l agreed with him 100 percent was the idea that road infrastructure development is the key to unlocking the economy. If we are serious about turning around our economy, then we need to engage on a massive road Infrastructure development programme, not only for highways and toll roads as the current regime seems to think, but also for community roads.

10: Reduce Tax Rates so as to Increase the Appetite for Compliance: Whether you talk about corporate tax, Pay As You Earn, Property Transfer Tax or Customs and Excise Duties, Zambia has the highest tax rates in the region. However, we collect the least amount of tax as measured by the Tax Revenue to GDP ratio which has averaged about 18% in the past 20 years, against about 25 percent for South Africa, 26 percent for Namibia, Botswana, Zimbabwe and eSwatini and about 27 percent for Lesotho, Angola and Malawi. So if we have the highest tax rates, then why is it that we collect the least amount of tax revenue as a proportion of GDP? Well, it is because our high tax rates reduce the appetite for compliance among taxpayers. Haven’t you wondered why businesses still engage in smuggling despite the stiff penalties of having their goods and motor vehicles impounded once caught? Well, because it is more lucrative to smuggle and risk being caught than to pay the ridiculously high tax rates at the border. That is the reason we need to reform our tax system so that businesses can find it more lucrative to pay tax at the border than risk smuggling. Once we do that, our tax revenue collection will go up and our cost of compliance enforcement will go down. Tax is a volume game. It is not a mark-up game.

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SET 13.01.2024