For immediate release
8th January, 2025
WHERE WILL ZAMBIA GET THE MONEY
TO SUBSIDISE FUEL AND ELECTRICITY?
Introduction
The decision by the Democratic Progressive Party (DPP) to subsidize fuel and electricity once
elected in Government has stirred debate on social media. While most of the people have
welcomed the move, critics have contained that Zambia has no money to afford subsidies.
From the outset it must be borne in our minds that fuel and electricity are the key drivers of the
economy, the cost of production and the cost of living. High costs of fuel and electricity
automatically translate into high cost of living; high cost of production, high inflation, high
levels of poverty and reduced economic growth. Conversely, cheaper fuel and affordable
electricity tariffs equals low cost of living, low cost of production, low cost of doing business,
accelerated economic growth, reduced poverty levels and increased job creation.
Subsidies for fuel and electricity are a common policy tool used by governments worldwide,
including in the United States, South Africa, Nigeria, Morocco, Egypt, Angola, Kenya and the
European Union to mention a few, to achieve various economic, social, and political objectives.
This press release has been issued to respond to the following issues:
i. Impact of high cost of fuel and electricity on our economy.
ii. Where will Zambia get the money to afford subsidies?
1. Impact of high cost of fuel and electricity on the economy.
High fuel and electricity prices are negatively impacting Zambia’s economy in several
interconnected ways. These effects ripple across households, businesses, and government
finances, reducing economic growth, increasing poverty, and destabilizing the macroeconomic
environment. Here are some specific negative impacts of the current high cost of fuel and
electricity on Zambia’s economy:
a) Increased Cost of Living
Rising energy prices have increased the cost of goods and services, as higher energy
expenses are passed on to consumers through higher prices of transportation, rentals,
groceries, food, and manufactured goods. According to the Jesuit Centre for Theological
Reflection (JCTR), the cost of living for a family of five in Lusaka has risen to K10,
575.93, yet the incomes of most people has remained stagnant.
b) Reduced Business Competitiveness
The prevailing high cost of fuel and electricity are the key contributors to the current high
cost of production and the high cost of doing business in Zambia. Energy-intensive
industries (manufacturing, mining, agriculture, and forestry) are facing increased costs,
reducing profit margins. Many small and medium sized businesses such as salons,
barbershops, boutiques, traders, welders are closing-up or downsizing; this has worsened
the Youth unemployment crisis.
Further, many businesses are cancelling their investments in response to rising
operational costs, slowing economic growth and innovation. Export-oriented industries
are struggling to compete globally due to our domestic energy prices which are
significantly higher than in other countries.
c) Erosion of Disposable Income
Higher energy costs have reduced our people’s disposable income, leaving households
with less to spend on essential goods and services, which are impacting businesses and
the broader economy. A lot of people are stressed with personal debt to cover the rising
cost of living, leading to financial instability, broken homes, divorces and mental health
problems.
d) Inflation and Monetary Policy Challenges
Higher energy prices are driving inflation up, increasing the cost of goods and services
across the board making it hard for our people to survive.
e) Worsened Trade Balance
For a country like Zambia which imports almost everything, higher fuel and electricity
prices have increased the cost of imports, worsening the trade deficit and putting pressure
on foreign exchange reserves resulting into the high depreciation of the kwacha against
major convertible currencies. As of today the Kwacha is trading at K28.00 to a US
Dollar.
f) Impact on Energy-Dependent Sectors
High fuel and electricity prices have increased the cost of irrigation, transportation, and
farm machinery operations, making food production more expensive and driving food
insecurity.
2. Where will Zambia get the money to afford subsidies?
A lot of people have been made to believe that Zambia has no money to subsidize its critical
economic sectors such as the energy sector (fuel and electricity). This assertion is a serious
distortion of facts; Zambia is one of the richest countries in terms of natural resources. We have
abundant natural resources including Gold, Copper, Sugelite, Cobalt, Mukula, Rosewood,
Emeralds, arable Land, Water and a young and educated population. Comrades, this is money!
This is why foreigners, from all over the world including Chinese, Americans, Rwandese,
Indians, Senegalese, Somalians, Europeans, name them, are all running to Zambia because of the
money we have in the form of natural resources and a young skilled population.
The issue of whether Zambia has money for subsidies or not is neither here nor there, it is just a question of a visionary leadership and prudent management of our natural resources.
The Democratic Progressive Party (DPP), in government, will raise money to subsidize fuel and electricity by ensuring that we derive maximum benefits from our minerals, agriculture, tourism,manufacturing, forestry, wildlife and by closing loopholes such as tax evasion, tax avoidance and corruption.
The money we are losing as a country from corruption, tax evasion and tax avoidance alone, is enough to pay subsidies for fuel and electricity and sponsor every child to a decent school. For
example, in the last nine months, Zambia has lost an estimated 3 billion US dollars through illicit financial flows (corruption, tax evasion, tax avoidance). The recent reports from the Financial Intelligence Centre (FIC), Public Accounts Committee (PAC) and Auditor General’s Office have consistently shown that Zambia is losing billions of US dollars every year through illicit financial flows.
Last year alone, the Financial Intelligence Centre (FIC) reported receiving nearly 700 reports related to illicit financial activities, amounting to over $3 billion. In the final quarter of 2023, the FIC received 450 reports involving illicit financial flows totaling over $2.8billion.
Worse still, Zambia is losing billions of US Dollars annually from non-remittance of tax. The
Zambia Revenue Authority (ZRA) recently disclosed that only 6 from the over 6000 licensed mining entities.
With all these billions of dollars that people are stealing and with all the natural resources we
have, how can we surely fail to subsidies our strategic sectors of the economy? Our problem as a country is a leadership problem not a money problem. This country is rich and it is unacceptable for our people to be suffering in the manner they are.
3. Conclusion
High fuel and electricity prices have created significant challenges for our economy by
increasing costs across multiple sectors, reducing disposable income, and dampening economic growth. Addressing these impacts requires a combination of targeted subsidies, investment in renewable energy, and energy efficiency measures to mitigate long-term vulnerabilities.
Subsidies for fuel and electricity are a common policy tool used by governments worldwide,
including in the United States and the European Union, to achieve various economic, social, and
political objectives. As Democratic Progressive Party (DPP), we will subsidies fuel and
electricity in order to reduce the cost of production, cost of doing business, cost of living and to grow the economy.
Issued by;
Antonio Mourinho Mwanza
PRESIDENT- DEMOCRATIC PROGRESSIVE PARTY (DPP)