Category: Opinions

REAPING WHAT WE SOW: A Mediocre and Political Budget

REAPING WHAT WE SOW: A Mediocre and Political Budget

The Socialist Party’s Review of the 2021 National Budget

The 2021 Budget comes at the backdrop of heightened weaknesses in the country’s macroeconomic fundamentals with the economy expected to contract for the first time since 1998. It has come at a time when the Zambian Kwacha has continued to weaken against the hard currencies as a result of country’s weak fiscal position, at a time when the debt situation is seemingly unsolvable, at a time of high inflation that has resulted in the overall increase in prices of goods and services. It has come at a time of the COVID-19 pandemic that hit the country in March 2020 and has exacerbated the already struggling economy. These weaknesses in the macroeconomic parameters have also resulted into the country’s credit rating being downgraded further from CC to C by Fitch Rating Agency, making Zambia an unattractive economy to lend to.

Against this grim background, one would have expected the 2021 budget to be an extraordinary budget that rises to the occasion to address these challenges and weaknesses while ensuring that the most vulnerable in our society are protected.  Shockingly, the Minister of Finance presented what the Socialist Party would call a ‘political Budget’ which is not only very hollow but one that they will not even manage to implement from day one – it arrived dead!

While every Zambian is, by now, aware of the fact that the PF Government has taken the country into debt distress and has even gone to the extent of hiring White & Case LLP, a law firm, and Lazard Freres financial advisory firm, to help them negotiate  the restructuring of the debt and suspension of interest payment, they have proposed in the 2021 Budget to borrow K51.6 billion or 43.2% of the total Budget. What is even more shocking and maybe a joke is that the PF Government believes they will borrow K20.6 billion from external lenders as budget support loans. Which external lender would give the PF Government Budget Support loans when they have already admitted inability to repay existing loan?

Or is this figure a number just put in, to balance the Budget?   

It must be noted that at the time the PF took over the Government in 2011, Zambia’s economy was growing at an average 6.4% per annum since 2005, with the country embarking on the 2030 Vision of becoming a Prosperous Middle-Income Nation. As a result of the sustained economic growth exhibited over those years and the country’s attainment of per capita income of above US$ 1,600 in 2011, the World Bank reclassified Zambia as a Lower Middle-Income Country in 2011.

However, with the PF coming into Government, the country went into high borrowing gear without regard towards ability to pay. This resulted in weakened macroeconomic fundamentals to the extent that when the country experienced economic shocks in 2015, the PF Government failed to contain the shocks. Since then, the economy has been in free fall and now in a recession for the first time since 1998.  

Figure 1: Zambia’s Economic Growth, 2011 – 2020

Source: Compiled by the Socialist Party from the Ministry of Finance Budget Speeches

Note * is Preliminary

        ** is projection

While the economy has not been performing well, the PF Government has continued to borrow recklessly. This has taken the country into debt distress. It must be noted that when the PF came into power in 2011, they inherited an economy with debt at 21% of GDP. In 2021, the PF will be handing over the economy with debt at 119% of GDP. This is not only unacceptable, but unjust, careless and taking Zambians for granted.  

 Figure 2: Zambia’s Debt as a Share of GDP, 2011 – 2021

Source: Compiled by the Socialist Party from the Ministry of Finance Budget Speeches

Note * is Preliminary

        ** is projection

The implication of this reckless borrowing by the PF Government is that debt service has become very costly and crowding out resources. These resources could have otherwise gone towards social sector spending such as education and health which directly benefit the majority of Zambians. Debt service expenditure in 2011 only accounted for 11% of domestic revenues. This has however, risen unjustifiably to 51% in 2020 and expected to further rise to 70% in 2021.  

Figure 3: Debt Service as a Share of Domestic Revenues

Source: Compiled by the Socialist Party from the Ministry of Finance Budget Speeches

Note * is Preliminary

        ** is projection

What does this mean?

It means that for every K1 the Government will collect in domestic revenues (Tax and non-tax revenues), 70 ngwee will go towards debt service and only 30 ngwee will remain for other spending including salaries to civil servants, buying medicines for the hospitals, school requisites, water and sanitation, FISP, Social cash transfer etc.

To put it into context, the Government projects to collect a total of K65.98 billion in domestic revenues in 2021. Of this, K53.27 billion is tax revenues and K12.71 billion is non-tax revenues. Debt service on the other hand is projected at K46 billion. If we add salaries of civil servants which we estimate to be around K27 billion, it means debt service and salaries alone will amount to K73 billion. It means the whole of K65.98 billion domestic revenues will go towards debt service and payment of salaries to civil servants. In addition, the Government will have to borrow another K5 billion to finish off paying for debt service and salaries.

This is clearly not a prudent and sustainable way of running our country.

Simply put, there is no money for social sector spending and poverty reduction, resulting in poor health and education outcomes, no drugs in clinics and hospitals, no school supplies for education, no resources for research and extension services to improve agriculture except for the resources for FISP and FRA which are there purely for political expedience.

Budget allocation to priority sectors such as Education, Health and Agriculture show a consistent reduction over the years despite Zambia being a signatory to international commitments. For example:

  1. Under the  Education 2030 Framework  Zambia committed to allocating at least 20% of its budget to the education sector. However, under the PF government this has consistently declined from 20.2% in 2015 to 12.4% in 2020 and further reduced to 11.5% in 2021.
  • Under the Abuja Declaration of April 2001, Zambia committed to allocating at least 15% of the budget to the Health Sector, PF government has consistently allocated meagre resources from 9.6% in 2015 to a low of 8.1% in 2021. This is despite the evolving COVID-19 pandemic.
  • The story is no different for the agriculture sector where Zambia committed 10% of its budget to the sector under the Maputo declaration of 2003. However, actual allocations to the sector have been declining from 10.2% in 2016 to an unacceptable low of 3.7% in 2020.

It must be emphasized that while allocations have been reducing, the actual budget releases are even worse and we will be providing the detailed and specific information on these sectors and the subsequent implication of this on the poor, the workers and the Socialist Party’s vision to correcting these ills over the next few days where we will provide detailed sectoral analysis .

Figure 4: Education, Health and Agriculture Expenditure, 2015 – 2021

Source: Compiled by the Socialist Party from the Ministry of Finance Budget Speeches

Note * is Preliminary

        ** is projection

In conclusion, while the PF Government inherited a very promising and vibrant economy in 2011, they will be handing over a hemorrhaging economy with  unsustainable debt in 2021. To the Zambian people, we are in this together, and together we can bring forth the change towards a just and equitable society that every Zambian deserves.  In 2021, you the people of Zambia will have a choice to make. You have an opportunity to correct the mistakes that our country has been exposed to. The choice is all yours. This is your opportunity to choose wisely, and our prayer, as the Socialist Party is that for the sake of our children and our grandchildren, and our great grandchildren, we will all commit to give the reign of Government to the right people in 2021, the Socialist Party.  

Delivered by

 Dr Cosmas Musumali, General Secretary and Vice President of the Socialist Party

and

DR Chris Ngenda Mwikisa, General treasurer and second vice president of the Socialist Party

The Plight of mine workers under the Mopani and Government on-going shareholding acquisition negotiations

The Plight of mine workers under the Mopani and Government on-going shareholding acquisition negotiations

Good morning ladies and gentlemen from the press. Welcome to today’s Press Briefing. The focus of this briefing is on the plight of the Zambian workers under Mopani Copper Mines – within the context of an anticipated take over of majority shareholding by the government owned ZCCM-IH.

  1. The Context
    It is by now apparent that Zambia today has one of the most reckless and clueless governments on the African continent in as far as macro-economic policy is concerned. The PF government has, within a short period of time, pushed Zambia’s debt to unsustainable levels, hopelessly seen the Kwacha drastically depreciate and set the economy on an inflationary path. As things stand today, and of course using COVID-19 as a scapegoat, the country is entering the first stages of debt default.
    Ladies and gentlemen, Zambia has three outstanding Eurobonds totalling $3 billion. Yesterday, the PF Government launched a vote with its Eurobond holders, proposing to defer interest payments on these three dollar-denominated bonds until April 14, 2021. This is supposed to be a first step to provide the country the necessary “breathing time” to create space for debt sustainability analysis and restructuring! In plain language, the country is unable to pay!

If you are a mineworker at Mopani, your question will be, where is this government going to find money to buy the shares owned today by Glencore – the majority shareholding in Mopani? Indeed the picture is gloomy:

  • The PF Government is clueless as to where the money for the first repayment of $750m Eurobond in September 2022 is going to come from.
  • In July this year, the IMF completed a virtual mission to Zambia to discuss the country’s request for emergency support. We do not see this support forthcoming given the lukewarm, arrogant and corrupt path followed to date on fiscal policy and consolidation.
  • With the 2021 general elections near, fiscal consolidation will mean losing votes. The experience of 2016 teaches us that the PF government will not sacrifice votes for the sake of macro-economic stability. They would rather default on debt payments and loose access to the international finance markets than surrender their parasitic hold on the taxpayer’s money.
  1. The Mopani saga As you might all be aware, Glencore is the majority owner of Mopani Copper Mines, with a 73.1% stake, the Canadian concern First Quantum Minerals owns 16.9%, and ZCCM-IH owns 10%. The Zambian government, through ZCCM-IH, submitted an expression of interest to acquire additional shares in Mopani Copper Mines and Glencore had given its approval to this move. In other words, Glencore is ready and willing to give up all its assets in Zambia. Depending on how this is negotiated, this could amount to anything between USD800 million to 1.500 billion! Again, where will this money come from?

Recently, the government announced that it had constituted a team to liaise with ZCCM-IH for the negotiations with Glencore and also that ZCCM-IH was in the process of engaging a transaction advisor.

Ladies and gentlemen, let us remind ourselves as to what has transpired in the recent past:

  • International civil society organisations have for years often accused Mopani of exploiting Zambia and not paying its dues tax obligations.
  • In April 2020 Glencore announced that it planned to halt operations at Mopani, and place the mine on care and maintenance. The Zambian government reacted angrily to this, claiming that they had not been given ample notice. A threat was made to revoke Glencore’s licence in the country.
  • In May 2020 Mopani announced that it would resume operations for 90 days.
  • On 20 May 2020, the Supreme Court ruled in favour of the Zambia Revenue Authority (ZRA) in a long running tax dispute with Mopani. The ruling ordered that Mopani pay a total of K240million in taxes assessed for the 2006/07, 2007/08 and 2009/10 tax years within 30 days, bringing to an end a dispute that has been running since 2010. It was brought to light that Mopani had under-priced copper sold to its shareholder company Glencore International AG (GIAG), thus reducing its tax liability.

Mopani is not to be trusted. Neither can the workers trust their own Zambian government!

  1. The Plight of the workers

Since Mopani was placed under care and maintenance, we have about 9,000 workers that are without employment. Their families are today enduring extreme hardships and poverty. The government has paid lip services to their plight – but nothing much beyond that.

We have another 11,000 employees serving under contractors. Their situation is also becoming acute by the day. Pay cuts are not uncommon.

Then we have about 6, 000 direct employees under Mopani whose future is now uncertain. Glencore is not investing in its Zambia assets anymore. The operations have to sustain themselves. Under this context, the services to employees have been drastically curtailed. This is often done without consultations and warning.

Similarly, the negotiations between Government and Glencore have to date excluded management and workers. The mineworkers are once more, like during the privatisation process, treated as collateral damage not worthy consulting.

This is the real plight of the workers. A crooked multinational corporation and a corrupt, clueless government are deciding upon their future. The workers are not on the negotiating table. They are not appreciated. These negotiations are therefore not about them. Quite to the contrary, they are against them.

  1. Demands for the workers

The Socialist Party, in its understanding, as a workers party, demands the following on behalf of the affected Mopani workers:

  1. All workers should be paid their outstanding dues and benefits upon ZCCM-IH taking over majority shareholding from Glencore.
  2. No workers’ dues and benefits should be held in Trust for the workers.
  3. Former employees of ZCCM under Mukuba Pension Scheme would also need to be paid out what is owned to them. The whole pension scheme for miners is turning out to be a huge drain for the workers and not helping out to sustain their livelihoods after employment.
  4. New contracts will need to be signed for all workers upon a fundamental shift in the shareholding structure.
  5. Mineworkers and management must be represented in the negotiations between Government and Glencore

By: The General Secretary, Dr. Cosmas Musumali

Socialist Party Office, Kawama, Kitwe

Statement of the Socialist Party to mark the International Day of Peace

Statement of the Socialist Party to mark the International Day of Peace

Each year, the International Day of Peace is observed around the world on September 21. The United Nations General Assembly has declared this as a day devoted to strengthening the ideals of peace, through observing 24 hours of non-violence and cease-fire.

This year, it has been clearer than ever that we are not each other’s enemies. Rather, our common enemy is a tireless virus that threatens our health, security and very way of life. COVID-19 has thrown our world into turmoil and forcibly reminded us that what happens in one part of the planet can impact people everywhere.

In March, United Nations Secretary-General António Guterres called on all warring parties to lay down their weapons and focus on the battle against this unprecedented global pandemic. While the message was intended for armed parties, solidarity and cooperation across borders, sectors and generations are also needed to win this new fight against the worst public health crisis of our time.

In these difficult times of physical distancing, even though we may not be able to stand next to each other, we can still dream together about a world full of justice, equity and peace.

The 2020 theme for the International Day of Peace is “Shaping Peace Together”. Let’s celebrate this day by spreading compassion, kindness and hope in the face of the pandemic. Let’s stand together against attempts to use the virus to promote discrimination or hatred.

There’s need to preserve human existence and world peace in the face of complexities, dangers and challenges.

Peace has been the golden dream of humanity, and the peoples’ aspiration, at every moment in history. Thousands of nuclear weapons are hanging over humanity’s head. Preventing the most brutal war that could be unleashed has undoubtedly been the fundamental objective of efforts by religious leaders of churches directed by men such as Pope Francis, Pontiff of the Catholic Church, and His Holiness Kirill, Patriarch of Moscow and All Russia.

To struggle for peace should be the most sacred duty of all human beings, whatever their religion, country of origin, skin colour, advanced or youthful age may be.

Issued by Fred M’membe on behalf of the Politburo of the Socialist Party

Mwika Royal Village, Chinsali

PRESS STATEMENT FOR IMMEDIATE RELEASE

PRESS STATEMENT FOR IMMEDIATE RELEASE

We have over the past weeks received reports from our structures in Eastern Province, namely: Chipangali, Lundazi, Chansefu, Sinda, Nyimba and Chipata Central, that the UPND claims we have signed an agreement to work together in the 2021 general elections.

This is a lie. We are not in any alliance or pact with any political party.

There’s no alliance or pact between the Socialist Party and the UPND.

Rehoboth Kafwabulula
National Spokesperson of the Socialist Party

RE: Call for solidarity with the victims of state repression

RE: Call for solidarity with the victims of state repression

The Socialist Party expresses its extreme discontentment at the growing wave of repression against the Anti- Racist Movement in the United States of America. We earnestly beseech the International Community to raise its collective voice to denounce the racially inspired attacks that today define the order of events across the US. We are aware of the fact that, in part and to a large extent, the escalating racial crackdowns are direct spin-offs from the deeply fractured capitalist system. We call upon the United States government to without delay address all forms of structural aggression against the anti-racist protesters.

The Socialist Party calls for solidarity with the victims of systemic violence and implores all organizations of good will to unify and concretise the struggles against racial injustice and physical attacks especially on individuals and civil organizations that seek to defend justice, promote equity and peaceful coexistence. We deplore the senseless assault by the US establishment on those agitating for a more humane and fair society for all. We demand the immediate and unconditional release of the Party of Socialism and Liberation activists and many others from incarceration across the US.

Yours in solidarity

THE SOCIALIST PARTY – ZAMBIA