Zambia – lessons from a state of misfortune

Zambia – lessons from a state of misfortune

Few of us look to Zambia from Namibia or the rest of Africa as a country from which there is terribly much to learn. Sometimes much can be learned from misfortune of others, and that Zambia has had in abundance. Good decisions made at the right time are the stuff of what really makes for good luck and progress for a nation. Copper in Zambia has been mined mainly from the Copperbelt region for nearly a century. It has been the foundation of its economy though much to its credit Zambia has diversified in the last few years towards more agricultural production and has become an increasingly important regional exporter of basic food stuffs.

There are those who believe that it is possible to trace Zambia’s misfortune to copper itself. But copper has not been a misfortune for Chile, the world’s largest producer. The problem is the comparisons that are made in the region are invariably with one’s neighbors. South Africa got gold which has now just about finished. Botswana got diamonds but never had the will to diversify and DRC got every mineral in the periodic table but never had a leader who did not plunder and pillage his people without mercy. Now Tanzania has gold in abundance and has discovered off-shore oil and gas, and Mozambique got gas and coal and hydro-electricity but Mozambique is certainly not blessed with good government. Of Zambia’s neighbors only Malawi is more poorly endowed with minerals and natural resources than Zambia.

But the problems of Zambia are far more man made than the result of acts of God and nature. Its problems began almost immediately after it became an independent nation in 1964. In 1969 President Kenneth Kaunda, the father of the nation announced the intention of the country to nationalize the copper mines which it proceeded to do. In Chile the mines were also nationalized at the same time. The profound difference between Chile and Zambia is that successive governments in Chile allowed the state owned company Codelco to operate largely beyond political interference in an otherwise commercial manner. Even under the dictator Pinochet no-one dared move to privatize the copper mines as there existed a national consensus on the issue.

This was never the case in Zambia.  Copper and the state owned copper companies became political footballs and were certainly not managed in a commercial manner. By 1998, after thirty years of nationalization it was estimated that Zambia through ZCCM, the state owned mining house, was losing US$1-1.5 million per day from the nationalized mine. From the outset of nationalization, Zambian copper production and employment fell dramatically in the mines from the 1970’s to the 1990’s when Zambia was forced to privatize by the World Bank and the IMF.

Between the price peaks that occurred at the time of nationalization and the eventual privatization in the 1990’s the price of copper had fallen by three quarters in real terms i.e. after taking into account inflation. This sealed the fate of Zambia and President Kaunda as incomes collapsed.  Zambia had a real GDP/capita of $1519 at independence in 1964. Income collapsed and the real GDP per capita of Zambia did not recover to that level until 2010 and even now after the copper price boom its real GDP/capita was $1615, a mere 8% higher than at independence. While Zambia had performed badly during nationalization the economy grew rapidly after 2010 as copper prices recovered and remained high. From a long term perspective few non-conflict economies in Africa have had such poor economic results. Zambia remains what the UN calls a least developed country even though it was middle income at independence.

In order to attract investors back to Zambia at the beginning of the century the country had to offer a taxation regime dictated to it by the World Bank. That regime was so beneficial to the mining companies that it gave almost all the benefits of any price increase to the mining companies and not to Zambia. Of course the low copper prices of the 1990’s soon recovered as China began to accelerate its industrialization at the beginning of the current century. But what had been done by the World Bank to Zambia had been done throughout much of Africa. It was precisely the incredibly generous terms that the World Bank imposed on African countries that was the cause of the backlash that is now called ‘resource nationalism’.

The World Bank mining policy along with the China boom caused one government after another in Zambia to try to prove its muscularity by being tough on the mining companies and trying to renegotiate the terms of the agreement with government. Between the onset of privatization and 2019, there have been some 10 attempts by various Zambian governments to renegotiate the taxation terms with the privately owned mining companies. Some like the privatization were badly timed and coincided with economic downturns. At times government would raise royalties only to revise them downwards as the copper price fell. This was the case particularly in 2008 when  the government imposed a windfall tax, only for it to be revoked the following year under President Banda’s regime as prices collapsed.

Finally, in 2018 the Zambian government introduced a fairly comprehensive but high tax reform of the mining regime. It came into effect in 2019. One hopes that a stable regime remains in place that gives the Zambian government a fair share of the earnings of mining companies without dissuading investors.

Zambia’s nationalization in the 20^th century and the endless changes to its mining laws in the current century have cost it dearly.  If there is a lesson for the rest of Africa it is that we need to negotiate fair laws that attract investors and not repel them but at the same time guarantee the state a fair stake of revenues. Constant change in an industry like mining where investments are long terms and stability of tax regime is necessary is simply a man-made misfortune.

But what Zambia has done right has been its progressive shift to agriculture. Over the last 15 years Zambia has become a significant exporter of a wide range of agricultural goods including tobacco, cotton, sugar, maize and fodder. Countries like Namibia which still harbor unrealistic dreams of industrialization should learn from that part of Zambia’s development experience.

These are the views of Professor Roman Grynberg and Mr. Fwasa Singogo, Research Fellow and the not necessarily UNAM.

Invertebrate Ministers

Invertebrate Ministers

Some leaders whether Presidents or Prime Ministers think about the way history will judge them. But that would not even be the majority whether it be in Africa, Europe or Asia. Most political leaders seek power and its maintenance and to hell with history. Power is the most addictive and powerful of drugs and once hooked political leaders cannot or will not give it up. As all such addictions are destructive and biggest victim is invariably the nation which has to suffer these power hungry creatures, often for decades. The idea of giving up their post to a younger generation is simply inconceivable. Having been a leader how do you define yourself the day after its all over?

If leaving a leadership position is tough on the ego fancy the prospect of being a mere cabinet minister who has, almost no place in history and the will only be remembered if he has made a god-awful cock up of his job. In  relatively recent times there was a the infamous Profumo Affair where the British  Minister of war in 1961 was having an affair  with two young ladies Christine Keeler and Mandy Rice-Davies who were very indirectly connected to Soviet intelligence. His name has gone down in infamy as a man driven by his lower rather than upper head- a not uncommon male affliction. The affair ended his ministerial career and his name is remembered even well after his passing.

Generally speaking most ministers in governments are unexceptional creatures who descend from a species of invertebrates who share no love other that their bosses love of power, money and if the circumstances arise a chance to replace their boss. As a minister to stay in power one needs a modicum of intelligence, a great deal of guile but most importantly absolute subservience and loyalty to the boss. Importantly you must not embarrass your boss as was the case men like Profumo nor can you be seen by other cabinet colleagues as a block to their activities- nefarious or otherwise. Failure to demonstrate sufficient cabinet loyalty brings a swift termination of one’s ministerial career. The most challenging of ministerial portfolios is often the most powerful, the Minister of Finance as when it comes to allocating budgets he/she must appease not only the boss, cabinet colleagues but also the bankers and accountants. 

In the 20^th and 21^st century there have been very few exceptional ministers. By and large they have been celebrated for balancing the books and doing precious little beyond making polite speeches about the virtues of the free market and globalization. One of the great exceptions was Manmohan Singh who when he was Minister of Finance of India in the early 1990’s introduced transformative changes to the Indian economy. These men or women are few and far between.

Recently  President  Geingob reshuffled his cabinet and demoted Mr Calle Schlettwein from the position of Minister of Finance to that of Minister of Agriculture. To be moved from a powerful central agency like Finance a line ministry like Agriculture is unquestionably a demotion no matter how it may be painted. Other more polite souls suggest that he was ‘reassigned’ to agriculture as it was more appropriate given his education as an entomologist. Certainly this education would have given him unique insights into the behavior of at least two former cabinet colleagues.

During his time in office Mr Schlettwein saw the decline of GDP/capita from US$6400 in 2015 to around US$6000 in 2019. Unemployment rose from 19% to 23% over the same period and government debt as a percentage of GDP went from 37% to 45% in 2018 and are expected to be around 50% in 2019.  He will not go down in Namibia’s history as a successful Finance Minister not because of the above figures but because he neither reformed the economy to deal with its most fundamental structural problem of its inequitable distribution of income nor did he steer it back on a path of sustainable growth. In all fairness to Mr Schlettwein he inherited many of the problems of economic mismanagement from previous administrations but the incontestable fact is that he did not address the two key elements of Namibia’s macroeconomic unsustainability – massive government wage bills and the  debt ridden state owned enterprises. It is doubtful that his cabinet colleagues would support the painful measures that would be needed to address these issues.    

 He did however demonstrate sufficient loyalty to the President that he was appointed the Minister of Agriculture and with it he is given the poisoned chalice of Namibian land reform.  It would indeed be a great historical irony if a Namibian of German origin were to resolve one of the greatest problems created by German colonialism. Let us hope he does and one can only wish Mr Schlettwein good fortune as he will certainly need it.

Now the job of Minister of Finance has been given to Mr Ipumbu Shiimi who was until this appointment the Governor of the Bank of Namibia. He comes from the world of money and this can only be positive. His first act as minister was the N$8 billion in Corona virus funding to help Namibian over what will be a far more drastic economic decline than anything ever experienced by the country in its history. This was the correct thing to do but it is certain that $N750 Emergency Income Grant will not go far and there is little  tax revenue to pay for this or more later on . This was almost certainly from international loans and given the disastrous state of the global economy following “the Great Lockdown” ( read Great Depression) as the IMF is calling it  there will be much more debt to come. There are misgivings about Mr Shiimi given his approval of the SME Bank permit as well as his approval of the permit for Isabel Dos Santos BIC Bank  when he was governor of the Bank of Namibia. Only time will tell whether he proves to be yet another ministerial invertebrate or a man who has sufficient trust from the cabinet and the president to lead the nation on a more prosperous and equitable path. He should be judged only on results.  One can only wish him well because if the years under Mr Schlettwein were difficult enough what is now to come after the ‘Great Lockdown’ will be far worse.  

Are Namibians the heaviest drinkers on the Continent?....Almost , but not even close to Nigerians

Are Namibians the heaviest drinkers on the Continent?....Almost, but not even close to Nigerians

If you believe the poets people started to intoxicate themselves using alcohol or other drugs from the first moment that they realized that they exist. At that moment humankind began to understand there would inevitably come the unspeakable moment where they would no longer exist and hence there was good reason to try to forget. Intoxication using alcohol has been part of human culture for many thousands of years and while alcohol is perhaps the most common there are many ways that cultures have found to help deal with the more unfortunate aspects of human reality.

For decades African leaders have decried the purported heavy drinking habits of their citizens. Early in his presidency founding president of Zambia, Dr Kenneth  Kaunda famously said that that he did not want to be the president of a country of drunkards. Few took him seriously. Alas Kaunda is not alone, as the former president of Bostwana Khama Ian Khama, the son of one of Africa’s greatest leaders Seretse Khama (who liked his whiskey), started a war on alcohol which had many destructive effects. In Namibia the President Geingob, when announcing the second stage of the Covid-19 lockdown made his feelings about alcohol consumption known and followed South Africa model of closing all liquor outlets during the lockdown. The decision is not without merit given the relatively high rates of domestic violence in Namibia. It is probably safe to say that locking otherwise unemployed men and women in their houses for months on end with nothing to do but drink would not be conducive to law and order and the safety of spouses and children. In Zambia the government has allowed its citizens to buy alcohol and consume it at home.

If the World Health Organization 2018 report on global alcohol consumption per capita (based largely on 2016 data) is to be believed then Namibia, in the African league table of serious drinkers, is way up there coming a close third after Nigeria and Eswatini (Swaziland). Zambians and Zimbabweans are veritable teetotalers in comparison with consumption per capita at half that of Namibians. This is probably more to do with the collapse of both economies first under Kaunda and later under Mugabe in Zimbabwe than any purposeful anti-alcohol policies of either country.  Lower incomes will almost certainly mean less alcohol consumption. Botswana, on the other hand, does have relatively high per capita consumption of alcohol despite former President Ian Khama’s attempt to tax alcohol to death. Batswana still continue to drink though they are paying the treasury dearly for their tipple. The main unintended victims of Khama’s policies was been the night life and live music in Botswana which suffered terribly under his abstemious rule. 

Country	Alcohol, total per capita (15+) consumption (in litres of pure alcohol)
Angola	6.4
Botswana	8.4
Eswatini	9.9
Germany	13.4
Ghana	2.7
Ireland	13
Mozambique	2.4
Namibia	9.8
Nigeria	13.4
Russia	11.7
South Africa	9.3
UK	11.5
USA	9.8
United Republic of Tanzania	9.4
Zambia	4.8
Zimbabwe	4.8

Source: WHO

As is well known, the road to hell is paved with good intentions and banning alcohol consumption has been tried and failed just about everywhere.  Namibia’s experience was simply no different. The main beneficiaries of the President Geingob’s policy have been unintended, smugglers and black marketers have profited handsomely from providing Namibians with the alcohol they have craved over the last two months. Another group which has also profited has been the other drug pushers who have, according to the police, seen a spike in demand for illicit drugs in the last two months. No matter what the policies or penalties people generally do find one way or another to intoxicate themselves. In all fairness to President Geingob’s policies the real beneficiaries of the abstention during the lockdown may well have been the spouses and children who were not beaten by drunken, frustrated parents and partners.  How many benefited is much harder to calculate.

So is there a clever, if not a good way to mix Covid-19 with alcohol policy? The Indians, as ever have been very inventive in the way they have managed their lockdown and the question of alcohol consumption. The government, always looking for another way to make a rupee, imposed a 70% excise tax on alcohol to allow Indians to buy alcohol and consume it at home. Good-bye black marketers and smugglers. Unfortunately such an easy option is not available to Namibia or the other smaller countries of the Southern African Customs Union (SACU). SACU is not only a customs union it is also an excise union with all five countries having agreed to pool their excise revenues as well as customs duties. While the customs pool benefits the smaller countries the excise pool goes mainly South Africa because it is distributed based on the share of each country’s GDP and South Africa is by far the largest. So just jacking up Namibian excise taxes would have financially benefited South Africa and not Namibia. However, Namibia does have the right to impose health and environmental taxes which would go to Windhoek rather than Pretoria. But raising taxes on alcohol will also have un-intended consequences making dagga and other illegal intoxicants relatively cheaper.

There is no doubt that government has lost an opportunity to raise taxes on alcohol and keep them there after the lockdown. It is time for government to revisit its policies on alcohol and other drugs so as to develop a comprehensive, rational and humane program over the coming years. Now that the elections are over and President Geingob is not up for reelection he should set up a commission of inquiry of experts into alcohol and drug abuse in Namibia and then heed its recommendations.

Kleptocracts, Dictators and the Angel of Death

Kleptocracts, Dictators and the Angel of Death

 

The age of 95 seems to be very popular for Presidents to die in Africa. Last week the former autocratic and corrupt leader of Kenya Daniel Arap Moi was finally taken by the Angel of Death at the ripe old age of 95. Now in Southern Africa that seems like a common age for leaders to die.  Last year the former autocratic President of Zimbabwe Robert Mugabe passed away at the same ripe old age of 95. Now 95 sounds like a ripe old age for a scoundrel to die but good leaders also die at 95. Nelson Mandela, a true revolutionary icon of the anti-apartheid struggle also died at 95. Of course other thugs and butchers did not make it to 95. The ‘Butcher of Uganda’ Idi Amin only lived to 78 years courtesy of the Kingdom of Saudi Arabia which so kindly took him in after Tanzania ousted him in brief war in 1979. The man who would certainly be crowned as grand master of plunder on the African continent, Mobutu Sese Seko, former dictator of the DRC died of prostate cancer early on in Morocco in 1997 at the young age of 67. He had just been ousted earlier that year by Laurent Kabila in the first Congolese war.

 

So how is it that Mugabe and Arap Moi could live that long and the Angel of Death did not disturb either of them? Possibly it is just a matter of having good genes, but there are other perfectly valid explanations for their longevity. In the case of both there are many people who argue that the only reason for their longevity is that in fact crime really does pay. If you have stolen enough money from your people and gotten away with it, you can go to the best hospitals in Singapore or Dubai or London and have some of the world’s best doctors keep the Grim Reaper at bay, at least for a while. In the end, no matter how many rounds you fight with him successfully, he always wins the last battle when even the richest and the greatest of kleptocrats have to leave this world.

 

Other, more religious souls repeat the ironic aphorism that the reason for the longevity of these scoundrels is that only the good die young. Certainly in the case of Mandela, this may have been true, much less so with Arap Moi and Mugabe.

 

It is considered rude to speak ill of the dead but when the dead have done so much ill to so many then rudeness must surely take second place to telling the truth. Arap Moi has been given an official state burial by President Uhuru Kenyatta who had wonderful things to say about him even though there were few in Kenya who were sad to see him go in 2002, after 24 years in power.

 

When Mwai Kibaki became Kenya’s president after the departure of Moi, he established a Judicial Commission of Inquiry into the Goldenberg Scandal which was in many ways the crowning glory of corruption under Moi’s presidency. Goldenberg is perhaps the most audacious of the grand frauds ever committed on the African continent, and there are many competitors for that title. Arap Moi oversaw the Goldenberg scandal where a Mr Kamish Pattni and the Head of Kenyan Police security Mr Kanyotu established a trading and mining company that was supposed to export gold and diamonds from Kenya. The judicial inquiry that was established and found in 2005, after three very expensive years of research, that Goldenberg had managed to defraud the Kenyan state of at least $600-1,500 million in  subsidies by the government though Goldenberg was estimated to have made a total of $2.3 billion including the benefits of money laundering. Goldenberg was given a monopoly of exports of gold and diamonds from Kenya and a subsidy of 35% of the value of these exports. The fraud of course was that Kenya had absolutely no gold or diamonds.

 

This raises the question of how such a thing could occur. The Vice President and Minister of Finance, Saitoti was heavily involved in authorizing payments and allowing Goldenberg to continue to rob the people of Kenya. Some of the beneficiaries included Arap Moi’s children. Under the rules to obtain the subsidies Goldenberg had to get signatories from customs that exports occurred, the Central Bank of Kenya that revenue arrived, the Ministry of Minerals that production occurred and the Ministry of Finance for final authorization. A bevy of corrupt and well paid senior government officials all played their part in the plunder of the nation. In the end after three years the Commission of Inquiry finally wound up its work but no-one ever went to jail for this grand fraud. Crime without punishment remains an enduring theme of Kenyan political life.

There is one hero in this sad story. His name is David Sadera Munyakei who, while working as a clerk for the Central Bank of Kenya, provided information to opposition members of the Kenyan parliament in 1993 on the ‘exports’ of gold by Goldenberg. For his trouble, Mr. Munyakei was dismissed from his post at the Central Bank of Kenya, imprisoned, and spent the rest of his life in poverty in Mombasa. This is a reminder if more were ever needed, of the high price that honest men and women pay for telling the truth to power. He died in 2006.

It is common for white people in Africa to be reluctant to criticize African leaders. I have no need to prove my credentials to anyone as I have 50 years of anti-racist struggle behind me. As a free man I rejoice at the end of dictators and thieves who loot and plunder their people without mercy. My only sadness is that Angel of Death has been so tardy.

Who is Responsible for the Corruption in the Fisheries Sector (aka Fishrot) - YOU

Who is responsible for the Fishrot Scandal-YOU!

Two weeks before the election two of Namibia’s best known ministers, the Minister of Justice, Mr Sacky Shangala and Mr Bernard Esau the, Minister of Fisheries  have ‘resigned’ from cabinet because of their alleged involvement in corruption in Namibia’s largest sustainable export sector – the fisheries. The people of Namibia are wringing their hands and asking how such a thing could possibly happen? What has been going on in the fisheries is well known and there has been one exposé after another of corruption and malfeasance in the sector. No-one who is an informed citizen who cares about Namibia and its future should be the slightest bit surprised about what has happened in the Fishrot scandal.

In 2016 I wrote an article in the Namibian about how people who were politically connected were getting Horse mackerel quota and selling them for $3250 per tonne to people who actually do the fishing and so anyone getting a 5000 tonne quote was instantly a multi- millionaire without having to put a line or fish net in the water. After I wrote my article some of my colleagues at UNAM laughed at me saying that this is nothing new at all and the corruption is well known. Long before I had ever written anything on the matter The Namibian newspaper was telling a seemingly disinterested public about the misconduct in the fisheries.

 It was not until The Namibian exposed the role of parliamentarians in 2018 when they made their declarations of interest public,  that the issue really became public. It was found that that at least 24 of the 104 members of parliament either own or are directors of fishing companies.  In 2018 Mr Daniel Kali the De Beers resident director wrote an article comparing how much the diamond industry pay in taxes compared to how little the fisheries sector pays. Yet no-one really said anything as though such behavior is almost expected.

In 2017/18 the BBC ran a major high profile story from the infamous ‘Paradise Papers’, a major leak of documents about tax havens and corruption,  about how Namibia was being ripped off in the fisheries sector. It was publicly aired in Namibia and the Minister of Finance was interviewed and he agreed that companies registered in Mauritius were busily ripping off  Namibia and not paying their share of taxes. Certainly Mr Schelettwein knew at least a large part of what was going on in the fisheries sector.

In 2018 former Fisheries Minister Mr Esau confirmed publicly that fishing quotas were allocated to the Namibian Intelligence Service and that this had been the case since 2010. In 2019 this was estimated to be worth some N$17 million.

One scandal after another has engulfed the fisheries sector and quota allocations and those  who they were allocated to were simply kept secret, despite the law. Even though Mr Esau was supposed to reveal the beneficiaries he did not do so. Finally the list of most companies benefiting from fisheries quotas was published by Robin Sherbourne who in his 4^th ed (2017) ‘The Namibian economy’.

Amongst all of this corruption, malfeasance and malpractice no-one really said a word until two ministers were apparently caught on camera and lots of documents were allegedly revealed by a whistleblower. Who is the real culprit, is it the political elite who are up to their necks in the fisheries or a completely passive Namibian civil society that has said nothing until the current Fishrot scandal? If there is a problem in Namibia, it is in the mirror. If anyone wanted to know and really cared enough about their country they would have known that the fisheries sector has been rotten for years.

But we have now crossed the Rubicon - we have gone too far and the public demands that something needs to be done. What then? The Namibian newspaper has suggested that fish quotas should be auctioned and this is an excellent proposal that should be pursued by whoever is the next President. A week, as they say, is a long time in politics, and after this scandal and the anger it has generated it is by no means obvious who the next president will be.

I once served in Papua New Guinea as adviser to the Prime Minister. The situation that Namibia faces in the fisheries was exactly the same as confronted by PNG in its incredibly corrupt logging sector and PNG was much more violent. PNG had Korean, Malaysian and Japanese logging firms that had been felling prime forest of rosewood for 20 years but had never earned a profit and barely paid anything for the right to harvest. I suggested that because most government officials were so corrupt that we simply could not reform the sector and so we had to auction the logging areas to the highest bidder. I suggested that we use an independent company from Switzerland to undertake the auction. The Prime Minister and much to my surprise the forest minister, who was amongst the most corrupt and violent individuals I had ever met, thought this was a wonderful idea. I was sent off on a fool’s errand to organize the auction and then the Minister did precisely that- he auctioned the logging areas to the highest bidder pocketing what was made and distributing it to the relevant cabinet ministers. The PNG cabinet  at the time was in effect ‘Ali Baba and the 40 thieves’.  To this day little has changed in PNG logging sector except there is much less forest to harvest. The man sent to investigate the corruption in the logging industry, a judge and a colleague, Mr Justice Barnet was subsequently set upon by a gang of criminals and stabbed 20 times. He miraculously survived the attack.

The great risk of course in auctioning our fisheries resource is assuring that the company that organizes the auction itself remains honest and that the benefits actually accrue to the people of Namibia and not to scum bag ministers. There are of course many ways to steal. The Swiss company Societé General du Surveillance (SGS) was going to be used because its commercial advantage at the time lay in selling honesty which is something we desperately need in the fisheries sector. There are now many companies that have an excellent track record and sell such services. Namibia’s fisheries must change and it must do so immediately after the election or we will destroy this vital sector of our economy. However so long as civil society quietly accepts this sort of criminal behavior from ministers and officials then no amount of reform will matter.