Zambian 2013 Budget Reviewed by Kampamba Shula
On 12 October 2012, the Minister of Finance, Hon. Alexander Bwalya Chikwanda, MP, announced the 2013 National Budget. Budget highlights and taxation and other changes as contained in the Budget speech and the Zambia Revenue Authority (“ZRA”) publication.
INDECO (IDC): Past Problems and Opportunities Analysed by Kampamba Shula
INDECO (IDC): Past Problems and Opportunities Analysed
Critical Review of IMF 2013 Zambia ARTICLE IV CONSULTATION report by Kampamba Shula
Debt management is still on track The agreed norm is that for internal borrowing the threshold is 25 per cent of GDP but our debt stands at K17 billion, which is 15 per cent of GDP and for external borrowing, the threshold is 40 per cent and our debt is US$3.1 billion which is 14 per cent of GDP, so we are far below the agreed norms. So even in the long term , Zambia is still on track.
US Economy 2014 First Quarter Analysis and Outlook by Kampamba Shula
New data shows the U.S. economy contracted in the first quarter of this year, keeping pace with shifting expectations but down sharply from the prior already disappointing estimate.
Zambia Debt Analysis
Some might say that Zambia should not borrow externally and even as sincere as they may be they are wrong. When the Government borrows locally “Crowing out” happens.
Friday, June 26, 2020
Tuesday, June 23, 2020
The 13th Floor - Corruption in Zambia
A guy with round gogos recently paid a visit to a government building. On the way up in the elevator the guy noticed that the building did not have a 13th Floor. After asking around no one was able to explain why this was the case. Further research revealed that the thirteenth floor is a designation of a level of a multi-level building that is often omitted in countries where the number 13 is considered unlucky. This brought in the question of when exactly the number 13 became unlucky in Zambia. Ordinarily the superstitious explanation of 13 came up with some saying Loki was the 13th Norse god and Judas was the 13th person to sit for the last supper.
Bungus records that the Jews murmured 13 times against God in the exodus from Egypt, that the thirteenth psalm concerns wickedness and corruption, that the circumcision of Israel occurred in the thirteenth year."
Popularly known for protecting the Holy Grail, King Philip IV conspired with Pope Clement V to have all the people arrested for Satanism after he lost the war with England. This incident took place on Friday, October 13, 1307.
The research led the guy with round gogos to more uneasy findings on the number 13. One theory said if a person has 13 letters in his or her name, the person is considered cursed. Charles Manson, Jack the Ripper, Theodore Bundy, and Albert De Salvo, Jeffrey Dahmer all had 13 letters in their names and they were all murderers. It's a very popular superstition that is widely spread for its many real life examples. As you would expect like any person the guy with round gogos counted the number of letters in his real name and it turned out to be 13. At that point the guy stopped reading. The number 13 inspired this piece of work on corruption in Zambia.
This paper concludes that an integrity system is the solution but before we get there we must deal with understanding of the scope of corruption on the 13th Floor which according to some building elevators doesn’t exist.
This paper has exactly 13 pages and has been uploaded on Friday 13th. The paper is called "The 13th Floor - Corruption in Zambia"
Download below
debitum solvere - Solving Debt in Zambia
Zambia's biggest problem is a moral problem not an economic one. Solving Zambia's debt problem is easy, solving the moral problem not so much.
Solution 1
Anchor the kwacha in copper or gold reserves and create a sovereign derivative ( nkongole paper backed by reserves)...for more read Copper Currency reserve solution
Solution 2
IMF deal so the yields on eurobonds come down. For example if the yields on Zambia's eurobond are 19% after an IMF deal the yields will come down to around 8-9%. Yields here being fancy English for interest paid on the bond.
This solution seems highly likely.
Solution 3
Cheat Yields
The real point of getting an IMF deal is to bring down the yields on the eurobonds and refinance the loans. But there is another way to do this. Firms that own Zambia's debt abroad would be willing to short the debt presuming a profit motive for them.
All these solutions can solve our debt problem but they will not solve our moral problem. The moment people actually realise they can cheat debt, greed and corruption will increase unfortunately.
Greed and corruption are not exactly economic problems, those are moral problems. So the next time someone asks what economists are doing to fix the economy consider this. Economists can solve economic problems, they can't solve moral problems that run down the hearts of human beings.
Zambia and the BIG words we use by Kampamba Shula
Zambia having being colonized by the British led to Zambia obviously becoming an English speaking country. Zambians on average speak very good English however this ability to use big English words has proven a stumbling block in Zambians actually addressing some of its challenges.
For example, it is not uncommon to hear reports saying Zambia must “diversify” from mining to agriculture or statements like Zambia must enhance “diversification” from mining to agriculture. To diversify or diversification is on average a big English word. If we are to break this down in simple terms we would say to “diversify” is to do something different from what you are currently doing. The question we must ask then is, what mining do Zambians really do? Which big mines in Zambia are owned by Zambians aside from the minority stake owned by government? Why do people say Zambia must diversify from mining to agriculture when in truth most of our people are farmers already in agriculture. May the reason be because we have chosen to use the big word “diversification” instead of using a simple word many people would understand?
Zambia has for a long time struggled with what is called the problem of corruption. Why do we assume that everyone in Zambia actually knows what the word “corruption” means? If this doesn’t make sense to the reader please consider the translation of the word “corruption” in a local language of your choice. Then consider if this local language translation has a positive or negative connotation.
Considering in truth that many people do not really understand the word corruption beyond simple “bribery”, Why do we have an institution in Zambia called the Anti-Corruption Commission?. In mathematics two negatives make a positive. The words "Anti-Corruption" is supposed to be two negatives making a positive except corruption is not negative when translated in a local language. There is a difference when you call the Zambia police force the Zambia police service. There is a difference when you call the Zambia prisons service the Zambia corrections service. Same reason ZRA must be called the Zambia revenue service not Zambia revenue authority.
Quite recently Zambia declared Gold a "strategic asset". There is no standard definition of a strategic asset and no one knows what it means but it gets the crowd going. Sometimes in Zambian we use big words unnecessarily.
Until we begin to realize that the words we choose to use limit the parameters of our solutions we will be going around in circles. As Einstein said "We cannot solve our problems with the same thinking we used when we created them"
Why declaring Gold a Strategic Asset is a problem by Kampamba Shula
Zambia is moving to amend gold-mining rules in order to treat the metal as strategic asset. Cabinet agreed to amend the Mines Act to align it with a policy set last October to recognize gold as a strategic mineral. That requires production by artisanal miners to be bought through the state-owned mining investment company ZCCM-IH Plc. Cabinet’s May 20 approval to modify laws and regulations stemmed from a proposal from the mines minister.
There is no standard definition of a strategic asset in the context being specified by the ministry. According to strategic management, Strategic assets are anything rare and valuable that a firm owns. This definition does not prove very helpful in our analysis in this context.
The only reference of a strategic asset that makes any sense in this context is with regards to portfolio management of investors. Gold has been used as money to a greater or lesser extent for much of the history of civilisation. As a store of wealth and, a hedge against systemic risk, currency depreciation and inflation, gold has historically improved portfolios' risk-adjusted returns, delivered positive returns, and provided liquidity to meet liabilities in times of market stress.
THE Bank of Zambia (BOZ) [1]says preparations to start keeping gold as an alternative foreign reserve with a mining firm have advanced. BOZ is currently preparing to house gold as an alternative foreign reserve as the metal is not kept the same way as currencies. The issue at hand was where the final purification would be done. The strategic importance of an asset relative to a given set of asset classes and risk policy is traditionally evaluated in the context of asset allocations for optimised portfolios on the Markowitz (1959)[2] mean-variance (MV) efficient frontier. The optimised allocations are presumed to be a measure of the asset’s importance and role in improving portfolio reward-to-risk.
There have been some studies that have found an important role for gold or its surrogates in a strategic asset allocation. Such studies are almost always based on a relatively large return premium for gold. Strategic asset allocation typically focuses on asset classes rather than individual assets. For this reason institutional investors may consider that investment in gold should properly be considered in the context of a basket of well diversified investable commodities.
The context in which Gold has been declared a strategic asset is an important consideration. In Zambia, declaring gold as a strategic asset has led many to presume that gold should now become the preserve of Zambians only. Whilst this view has its merits, the flipside is if gold is made as a preserve for Zambians only then it will become difficult for small scale gold miners to source finance and partnerships from foreign partners to help them mine at a large scale.
As economist Milton Friedman once said, “There is No Such Thing as a Free Lunch.” The first rule, which is always true, is that there is scarcity, and scarcity necessitates trade-offs. The second, which is almost always true, is that when someone offers you something “for free,” he expects something in return. There is a trade-off that has to be accepted by all stakeholders, failing to recognize this trade off will inevitably lead to inaccurate conclusions.
[2] Markowitz, H. (1959) Portfolio Selection Efficient Diversification of Investment. John Wiley & Sons, New York.
[1] BoZ ponders gold reserve, Daily Mail, Nancy Mwape, April 22, 2020
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