Tag: economy

Our rulers have failed to reason, think

Our rulers have failed to reason, think

The economy of our country has collapsed but our rulers want to pretend that all is well and its business as usual.

They don’t even want to talk about it. They are preoccupying themselves with petty things that really don’t matter.

They can try to evade this reality, but they will not be able to evade the consequences of evading this reality.

They are busy trying to crush their opponents “like a tonne of bricks”. But a sensible leader is not motivated by the desire to annihilate opponents, but by the desire to solve problems and make life better for his/her people.

It’s very clear that our rulers are failing to reason, to think. Probably we are expecting too much from them. Reason is not automatic. And those who deny it cannot be conquered by it. We shouldn’t count on them to address this problem and make things better.

Everyone can see that our economy has collapsed. It can’t be concealed. The hardest thing to explain is the glaringly evidence which everybody has decided not to see or acknowledge.

We have no alternative but to push them aside and usher in a new leadership – a revolutionary leadership – next year.

Fred M’membe
Mwika Royal Village, Chinsali

Statement of Socialist Party on Zambia’s shrinking economy

Statement of Socialist Party on Zambia’s shrinking economy

As we have consistently been warning, our country’s economy has collapsed.

And one didn’t need to be an economic expert to foresee the consequences of the irrational path that was being pursued by our rulers – unbridled borrowing and irrational expenditure.

All the advice given to them – even by the World Bank, the International Monetary Fund and their other multilateral and bilateral partners – was ignored and arrogantly scoffed at.

Today they are like soaked chickens – humbled by the reality they can’t ignore or conceal and do not know how to resolve.

We are clearly headed for very serious economic challenges. Our economy is shrinking at a frightening rate.

Next year’s budget has been reduced by 47 per cent. This means that the 2021 budget will only be K56,180 bn. The government’s wage bill was K25,601bn at the beginning of this year. And debt repayment was K33.726bn. This gives us a total of K59,327bn – which is K3,149bn more than our 2021 budget.

This means that without very serious down sizing, retrenchments or massive
international assistance, government will only barely manage to service the debt and pay salaries in 2021 and nothing else.

What does this mean for the Zambian people, especially the poor? More suffering, more agony, more poverty, more despair!

Zambians have no sensible alternative but revolutionary change if they have to harbour any hope of a reversal of fortunes. And only a revolutionary party – the Socialist Party – with a revolutionary programme can deliver the nation out of this hell.

Issued by Fred M’membe, President of the Socialist Party

Mwika Royal Village, Chinsali

September 4, 2020

Zambia’s catastrophic economic outlook

Zambia’s catastrophic economic outlook

Good morning ladies and gentlemen from the press. Welcome to today’s Press Briefing. The focus of this briefing is on the catastrophic economic outlook for our country and its consequences.

A. A reminder of what the Socialist Party previously stated

As you may still remember, last year (on the 15th October) the Socialist Party had called for a Press briefing in this venue. That Press Briefing looked at the downgrading of the Zambian economy by Fitch Ratings and the accompanying ramifications.

In that briefing we had come to a conclusion that the prospects for economic growth in Zambia were diminishing and that the chances of stopping the country’s economic downfall were becoming minimal each year. Public debt was singled out as the most important impediment to attaining macro-economic stability. Debt servicing alone was going to consume about 24% of government revenue during 2019 to 2022 and that the increase in external borrowing during 2019 would make Zambia’s debt stock more vulnerable to foreign exchange volatility given the globally increasing interest rate levels. We pointed out a number of related concerns:

1. Lack of transparency and timely debt accounting information by the Ministry of Finance that could be interpreted as a purposeful and highly dangerous attempt to conceal the real situation and levels of external debt contraction.

2. Poorly informed and implemented tax reform measures introduced through the 2019 Budget that were meant to increase revenue. These could at the most marginally increase government revenue, but not significantly reduce fiscal deficit.

3. Deteriorating governance indicators. High levels of corruption, lack of accountability and misallocation of resources and poor priority setting are contributing to the dilemma.

We also elaborated and outlined the economic consequences. Some of which were;

1. “The current account deficit will continue to widen. This will continue to increase the demand for foreign currency and put pressure on the Kwacha. The stability of the kwacha cannot therefore be guaranteed. “

2. “Some short-term liquidity injection will be needed merely to stabilize the Kwacha. Without a deal with the IMF, it is hard to imagine how this cash can quickly be secured without further exacerbating the debt situation and deterioration of the Kwacha. A deal with the IMF and an austerity programme would however make a PF government that is increasingly losing popular support and internally divided more vulnerable. The possibility of losing the 2021 elections would be high. As things stand, the PF government would rather sacrifice the Zambian economy than lose political power.”

3. “The Socialist Party projects that gross international reserves will continue to deteriorate. Three months of import cover will be difficult to sustain. At these low levels of international reserves, any negative changes affecting the country’s ability to earn foreign exchange would entail a disaster for the economy. It is a precarious situation.”

4. “The chances of outstretching monetary policy and instruments to leverage macro-economic stability are unlikely. In the absence of robust fiscal reforms, the Zambian economy is in free downfall.”

B. What is the current economic status?

Ladies and gentlemen, a lot has happened over the past 6 months. Unfortunately, the developments validate our earlier – rather negative and pessimistic – analysis of the economic trajectory.

The dire situation we find ourselves in may not yet be apparent to all. There are several analyses from multilateral organisations, financial institutions, research and consulting groups as well as from Zambian government departments that are helping us to sketch the magnitude and depth of the crisis.

The current picture of the Zambian economy is characterised by the following:

1) A highly volatile domestic currency, especially over the past 2 weeks. The kwacha is continuing to depreciate – at K14 to a dollar it is at its lowest since November 2015.

2) High international and domestic debt and servicing levels – with the ratio of debt to GDP estimated to reach 90% given a depreciating Kwacha.

3) Reductions in export earnings, foreign direct investments (FDI), portfolio investments, development assistance and other external sources during 2017 and 2018 as well as the first quarter of 2019. During the same period imports have not significantly reduced and balance of payments have continue to remain wide – above 4.5%.

4) To finance the current account, the authorities resorted largely to drawing down on foreign currency reserves. The move brought down reserves to USD1.6 billion – just sufficient for 2 months import cover! This development contributed to exerting huge pressure on the Kwacha.

5) An overstretched monetary policy toolkit applied over the years in the absence of significant fiscal consolidation.

6) Elevated financial sector vulnerabilities.

7) Poorly handled and negotiated mining tax regime changes.

8) Revenue disruptions due to the re-introduction of sales tax and abolishing of VAT.

9) Relatively poor agricultural performance due to insufficient rainfall in the southern half of the country; and much more disastrous

10) A government that seems clueless, detached and quite often unwilling to take remedial action that is perceived to hurt its re-election prospects.

This is an extremely precarious situation. At this point we may quickly look at developments in the global economy and explore if developments in the global economy could help to moderate the situation.

C. Does the global scenario offer much hope for Zambia?

At the global level, China that has been the locomotive of growth for three decades. The projections for 2019 are that China will register the lowest growth rate (of about 5.4%) since 1990.

The USA trade war against China, a chaotic British exit from the European Union, the fluctuations in the global oil prices, and threats of military confrontations in several parts of the world and a number of other factors are all adding up to lower down global economic growth prospects.

Consequently, the global demand for commodities, including copper will not be that high. These developments have a negative domino effect on developing countries, Zambia inclusive.

During of the financial crisis in 2008, the major world economies quickly engaged in a coordinated fiscal stimulus to counter the crisis. For now, we do not see any urgency in this direction. The global economic slowdown will have to worsen before coordinated action is realised. A sudden change in the fortunes at global level should therefore not be expected. For developing countries with weak fundamentals like Zambia, this is the worst-case scenario.

D. What are the consequences for the Zambian economy?

1. Zambia’s projected growth for 2019 was initially pegged at 4.2%, but with the world economy slowing down more than initially expected, the projections were revised downwards to 3.1%. However, weight of current domestic developments may start threatening even this low GDP growth projection. A growth rate below 3% is becoming a possibility.

2. For a small, landlocked and mono-cultural export economy like ours, currency reserves to cover 4 months of imports make economic sense and help to flatten risk levels. The current low level of import cover (at 2 months) erodes economic confidence and activates currency speculation. Without decisive fiscal and monetary intervention, the reserves will continue to dwindle.

3. During 2018, this depreciation of the Kwacha did not immediately push up inflation. Inflation remained within the anticipated 6-8% range. As a result, the Bank of Zambia (BOZ) maintained what could be termed as a neutral policy stance – maintaining its policy rate constantly at 9.75% – which was the lowest since 2014. As we entered 2019, the expectations were that monetary policy, through the Bank of Zambia (BOZ), was likely going to continue with inflation targeting with fewer changes in the interest policy rate. This would have allowed for a continued correction from 2018. Under this scenario, the exchange rate will as well have remained stable at 11 to 12 Kwacha to a dollar. However, the first quarter of 2019 was not encouraging: Exports continued to decline in January and February, external debt servicing payments were rising, private sector activities experienced contractions, and the international reserves continued to fall. The space for controlling inflation has therefore disappeared. The Socialist Party therefore sees inflation rising beyond the range for 2018. Double-digit inflation rates will be most likely.

4. The cumulative impact of increasing debt servicing, declining exports, low currency reserves and climbing price pressures is toxic. Overall private consumption will be negatively impacted, macro economic stability will be hard to sustain and economic growth prospects for 2019 and beyond will be compromised.

5. For the Zambian working masses, the poor, unemployed, students and all Zambians already facing economic hardships, their situation will continue to worsen. Prices of essential commodities will escalate, earned income in kwacha will lose its purchasing power, taxation levels and user charges will increase and poverty levels will not reduce.

6. Zambia’s global economic ratings will definitely fall below those for 2018. Future borrowing will therefore be more costly for the country. In some quarters, there have been suggestions of a) printing money, b) auctioning the country’s assets, and c) refinancing of old debt through new debt contraction from China. All these “options” point to a naïve and misplaced understanding of what it takes to instil confidence and stabilise a fragile small economy. There is no substitute for policy consistence and predictability. None of these “options” come anywhere nearer. They would actually trigger the opposite and condemn future generations of Zambians to economic malaise that would take decades to overcome.

E. What should the government do?

1. In our last Press Briefing, we advised the government that the first thing is to own up that the economy is in great danger and the livelihoods of millions of Zambians are at stake. We described the economic crisis as a national disaster of high magnitude. This description remains true today.

2. We further stated that the PF Government must also acknowledge their policies and actions to-date have greatly contributed to the difficult situation the economy finds itself in. In trying to find solutions a non-partisan approach was urgently needed. All Zambian stakeholders, including workers’ representatives, peasant associations, academia, political parties and movements representing the masses of our people have to be engaged in building consensus on the options for saving the economy from total collapse.

3. About 7 months down the road, this advice has been ignored with severe consequences for the entire economy and the Zambian people. Time is running out.

4. What Zambia is going through is part of a globalized capitalist crisis. The typical menu of capitalist solutions will not deliver. They are in effect a contributing factor. We realize that the opposition political parties in Zambia are largely advocating for more austerity and more external assistance. They are equally misdirected. The sheer incompetence and desire to maintain political power at all costs by the PF administration is worsening the situation in Zambia.

5. We still reiterate the need to win back the trust of the Zambians and international finance markets that the PF government can still be entrusted on the helm of the economy for another 2 years. The actions for gaining this trust would still include: (i) maintaining a lean cabinet. The recommendation of the NDF to reintroduce deputy cabinet ministers is heading in the wrong direction; (ii) drastically cutting the allowances of the top leadership by 50%; (iii) Reducing the costs of international travel by 60%; (iv) reversing the increases in salaries of all constitutional position holders; (iv) cutting the cost of running the government fleet by at least 40%; (v) cutting the bill for workshops and conferencing by 70%; (vi) Undertaking concrete governance measures that would point to a zero tolerance approach towards corruption.

6. The socialist party still recommends that external debt contraction and sustainability be a constitutional responsibility under close parliamentary scrutiny. There is need to embark on developing a legal framework that would constrain a sitting government from incurring unsustainable debt levels that have potential to destroys the entire economy.

Statement of the Socialist Party (Zambia) on the happenings in Zimbabwe

Statement of the Socialist Party (Zambia) on the happenings in Zimbabwe

The plight of Zimbabweans requires our urgent attention.
The Socialist Party (Zambia) is deeply moved by goings on in our sister Republic of Zimbabwe.
What the working class is facing is brutal and cannot be justified. How can an administration that campaigned on a platform of reviving the economy and democracy descend on its citizens using its military power?
The recent fuel hike means petrol prices rose from $1.24 (£0.97) a litre to $3.31 with diesel up from $1.36 a litre to $3.11. At these prices, Zimbabwe has the most expensive gasoline in the world per litre. The next highest is Hong Kong at US$2.06. How can the Zimbabwean government justify this?
Now we hear, in trying to hide its heavy-handedness, the government has blocked Facebook, Twitter and WhatsApp messaging apps amid a crackdown on days of violent protests.
What is the government of President Emmerson Mnangagwa trying to hide from the global eyes?
If SADC cannot come out clear and condemn the military brutality in Zimbabwe, then what else is left of this regional body?
SADC leaders have been firm condemning the West on sanctions on Zimbabwe, and rightly so. But why are regional leaders and the African Union mute over the regime’s brutality against innocent citizens?
And this annoying silence seem premeditated. Not too long ago, we saw the ruling elite unleashing the military against citizens for questioning the elections results in last year’s presidential elections.
The toothless SADC again sided with the ruling civilian-military elite.
Today Zimbabwe is deputy chair of the SADC Organ on Politics, Defence and Security. The organ is led by Zambia. And typical to his defence of the ruling elite in Zimbabwe, Zambian President Edgar Lungu has not issued any concern over events unfolding in Zimbabwe. He was quick to advise the DRC to consider a government of national unity yet he did nothing when MDC leaders were being arrested and several other civilians were murdered or maimed in the aftermath of the disputed elections.
Again, today when our innocent brothers and sisters in Zimbabwe are being shot at and opposition leaders are forced into hiding over the unbearable socio-economic situation – President Lungu and his SADC colleagues seem to be blind to the reality!
We have letdown the people of Zimbabwe for too long. This cannot be tolerated.
It’s unbecoming of our regional leaders to leave these defenceless citizens to the mercy of the police and military.
These people are not attacking the system. They are pleading for a livelihood. Here are the citizens who have stood by the ZANU-PF through the thick and thin since independence. To be killed for asking the government to reconsider the hyper fuel price and to address food scarcities cannot be tolerated.
The primary responsibility of any government, any sane government is protection of its citizens.
We also call upon the men in uniform to restrain themselves from the heavy-handed manner they are treating fellow citizens.
They should realise that the international community is looking and remember that the fourth Nurnberg principle states that: the fact that a person acted pursuant to order of his Government or of a superior does not relieve him from responsibility under international law, provided a moral choice was in fact possible to him.
Our views coincide too with those of the Zimbabwe Human Rights Commission (ZHRC/Commission) which recently raised concern about the fast deteriorating economic situation triggered by the recent monetary and fiscal policy pronouncements.
The ZHRC noted, “Whilst austerity measures meant to transform the performance of the economy may be inevitable, due care and diligence must be exercised to protect the rights and well-being of especially the vulnerable members of society. In particular, it is important to develop pro-poor policies including the setting up of effective social safety nets to ensure access to basic goods and services by all. Section 13 (1) of the Constitution of Zimbabwe implores the state and all institutions of government to ensure equitable development. Further, section 13 (2) requires government to involve the people in the formulation and implementation of development plans and programmes that affect them.”
The ZHRC also urged the national leadership to take urgent steps to rescue the situation as well as protect the value of savings, incomes and pensions. Leaders must also be exemplary and reduce their own extravagance and not make the poor in society bear the bigger brunt and consequences of their policies and decisions.
The Zimbabwean government must realise that it’s the sole duty bearer in terms of addressing economic challenges currently obtaining in that country. No one in our region, including the world at large, should gloss over what Zimbabweans are going through. These are people who are patriotic and hard working. They have stood by their government in the midst of high cost of basic commodities, unemployment, scarcity of fuel, high cost of medicines or lack of it, among other socio-economic challenges. Zimbabweans value their country and the deserve nothing less but normalcy and full enjoyment of their socio-economic rights.

Statement issued by Dr Fred M’membe on behalf of the Politburo of the Socialist Party(Zambia),

Mwika Royal Village,
Chinsali, Zambia

Unemployment undermines human dignity

Unemployment undermines human dignity

Joblessness in Zambia is an extremely serious problem.

One of the main reasons for our very high rates of poverty – 82.2 per cent in Western Province, Luapula Province 81.1 per cent, Northern Province 79.7 per cent, Eastern Province 70 per cent, Muchinga Province 69.3 per cent, North Western Province 66.4 per cent, Southern Province 57.6 per cent, Central Province 56.2 per cent, Copperbelt Province 30.8 per cent and Lusaka Province 29.2 per cent – is the failure of the economy to provide sufficient jobs.

In order to derive a benefit from an economy, people must be able to participate in it; and for most people, the primary means of economic participation is through work.

Unemployment undermines human dignity. It is a terrible frustration and humiliation for a parent to be unable, due to unemployment, provide for the family.

It is equally demoralising for young people to find there’s no work waiting for them when they leave school, college or university.

There is an old joke that the only thing worse than being exploited by capitalism is not being exploited by capitalism.

Things are not easy for the great majority of our people, especially the workers and the peasants. But we cannot abandon our moral responsibilities, even when it is difficult to fulfil them.

Much more needs to be said and to be done if we are to meet effectively the massive problems of human suffering in Zambia today. We all know our people’s suffering. But there seems to be very little action taking place in responding to the suffering of our people.

Unemployment is not an inevitable and necessary part of human life. Unemployment is ultimately a product of human decisions and can be eradicated by human decisions.

When we speak of the economy or an economic system, we are speaking of policies and plans which control the wealth and resources of a country, about how resources are distributed between people, and about how the means of production – such as land, factories and technology – are owned and controlled.

At the heart of every economic system lies human needs, human abilities and human decisions, and it is the choices which we make in addressing those needs, sharing those abilities, and making those decisions, that determine justice or injustice of economic system. The more powerful our economic position, the greater our freedom of choice, with the working class, the peasants and the poor in general having very little effective choice in their economic decision making. There is thus a moral quality about an economy, a quality which has its roots in the morally correct or incorrect choices by people. And it is the moral quality of the economy that enables us to make judgments about whether or not it is a just economy.

Karl Marx believed that capitalism needed unemployment: the very workings of capitalist production for profit created unemployment, even in the best of economic times.

Marx argued that capitalists are always in competition with one another to create larger profits – by lowering their costs, largely by increasing labour productivity. A key way to do this is to replace variable capital – living labour – with fixed capital, machines.

And because the purpose of capitalist production is to maximise profit, whenever new technology is introduced it usually means a reduction in jobs – the capitalist can make as much, or more, than before, with fewer workers.

“It is the absolute interest of every capitalist to press a given quantity of labour out of a smaller, rather than a greater number of labourers, if the cost is about the same,” Marx wrote.

As productivity increases, capitalists can use fewer workers to produce more, with surplus workers being retrenched.

However, Marx argued, capitalist production is not just a one-way street. While new technology can displace workers from one industry, new industries are continually being developed. Workers are continually being re-employed and then set free. Although it may rise or fall, unemployment itself is a permanent feature of capitalism.

The unemployed are more than just a permanent reserve army of labour on which capital may call, however. They also serve capital by placing a permanent pressure on the wages of those who are employed, encouraging them to work harder for less, at pain of losing their job to someone else.

“Taking them as a whole, the general movements of wages are exclusively regulated by the expansion and contraction of the industrial reserve army, and these again correspond to the periodic changes of the industrial cycle,” wrote Marx.

Capitalism has unleashed the massive productive potential of humanity. It has socialised production, unlocking the possibility of a better world — one based on the power of society-wide organisation and cooperation. Such immense productive power — if placed under the control of workers — could solve the world’s crises. Hunger and unemployment could all be things of the past, but not while production remains geared to profit alone and not to satisfy needs.

Marx believed that working people had both the right and the ability to run society better. In order to do so, however, first they had to take political power from the capitalists and use it to reorganise production in a socially useful way.

We are having such very large numbers of unemployed people became capitalism both creates and needs unemployment.

Capitalists’ investments can be divided into two parts: the part that hires workers, and the part that buys or rents the means of production – machines, raw materials, factories. As capitalism grows, two processes reduce the part of capital that hires workers. Competition leads to concentration: the big fish eat the little fish, or two medium or large companies merge to become a bigger fish. The merged company enjoys greater economies of scale, which basically means that one worker can operate a larger amount of the company’s capital. And whenever there is a merger of two firms, one guaranteed result is retrenchments.

The other process is the capitalists’ drive to increase productivity, which is imposed by competition. Greater productivity means producing a larger number of products from a smaller investment. One way to do this is to drive down wages and drive up working hours. The other way of increasing productivity is to provide workers with more efficient machines or tools. But if workers switch to using more efficient machines, then of course fewer workers are required to produce any given number of products. In a capitalist system, labour-saving technology necessarily destroys the jobs of some workers. This doesn’t mean that the number of jobs falls continuously. Particular industries can find new markets and expand; new industries can be created that need workers; the demand for labour rises and falls with changes in the business cycle. But it does mean that capitalism has an inbuilt tendency to drive workers out of production.

And that is precisely the condition that capitalism needs. Capitalists need a pool of workers who can be drafted into and thrown out of production according to the capitalists’ changing requirements. When the economy is improving, they need workers immediately: hire some of the unemployed. When business turns down, save money ­– retrench them. You can always get more when things pick up.

Whatever the situation of the economy, the pool of unemployed helps keep workers’ wages and other demands down.

Capitalist economists talk about the supply and demand of labour. Marx pointed out: “The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active labour army; during the periods of over-production and paroxysm, it holds its pretensions in check. [The industrial reserve army] is therefore the pivot upon which the law of demand and supply of labour works. It confines … this law within the limits absolutely convenient to … exploitation and to the domination of capital.”