Alexander Nkosi posts

LETTER TO MY PRESIDENT: MINES, ECONOMY AND THE NEED TO ADDRESS THE NATION.

Dear My President,

In 1970, Zambia produced the same amount of copper as Chile. In 2018, Chile’s copper production rose to 6 million tonnes while Zambia could only afford a paltry 861, 946 tonnes. Chile’s export earnings as of 2017 had risen to USD 34 billion (copper ore – USD 16.6 billion, refined copper – USD 14.9 billion and raw copper – USD 2.41 billion) while Zambia’s earnings remained low around USD 6 billion. The largest copper producer in the world is Chile’s state owned company called Codelco. The annual production for this state owned company is around 2 million tonnes, twice the total production for Zambia and it earns over USD 10 billion every year. This company is further investing over USD 30 billion in expanding copper production.

Chile’s economy is characterized by a high level of foreign trade and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Exports of goods and services account for approximately one-third of GDP, with commodities making up some 60% of total exports.

Today Zambia has even fallen behind war torn Congo DR in terms of copper production. Today Chile’s state owned copper producer is investing USD 30 billion , almost twice our debt, implying that with proper management of our resources we could have financed our development projects with copper earnings and remained with more to invest in areas that are visibly lacking like manufacturing, agriculture and tourism. What is even more interesting is that Codelco only produces 2 million tonnes of copper while the remaining 4 million is produced by private companies.

Out of the USD 6 billion Zambian earns from copper exports, our government is on its knees begging that mining investors allow it to get a paltry USD 200 million. This USD 6 billion is not even ploughed back into the economy. We are so vulnerable such that mining companies can easily arm-twist us with impunity. What is happening in the mining industry is unacceptable. Production is going down, plants are closing, miners are losing jobs, contractors are not paid, support industries are closing, even traders/ shop owners are registering low sales. Overall economic activities on the Copperbelt have gone down. Youth unemployment has never been this high, giving rise to mushrooming of youth gangs like Tokota boys.

Today we are being told that for over 15 years, only two mining firms have been declaring profit. What have we been doing all this 15 years? Our copper is finishing and yet over ten mining firms are not declaring profit but they keep operating and government is fine with it? Why can’t we do a thorough production and export audit for all mining firms? We can actually procure advanced scanning equipment, fence off all mining firms and monitor all minerals leaving the mines. We don’t need to change policies and mining tax regimes every now and then, all we need are stable policies and a tax regime with a lot of transparency and close monitoring of all mining activities. Incentivise value addition, approach foreign firms that produce copper products to come and set up plants here through joint ventures with local firms. This will not only boost copper production but also create more jobs in the manufacturing firms for copper products. With the likely boom in electrical cars, Zambia can easily attract investments into local production of these cars.

Our people now suspect that some of our leaders are compromised. Either they don’t have the capacity to manage the sector or they are mismanaging the sector for selfish motives. While we keep changing policies and threatening mining firms, they have no time to listen to our threats. They fire our people, decide when to pay contractors, how to pay them and close plants whenever they feel like doing so. In response, we keep issuing threats and while issuing more exploartion licenses. What is the logic behind this? How are we dealing with suspected tax evasion and tax avoidance? This matter is an emergence and it cannot wait for next week.

Amidst all this, opposition leaders have swiftly acted by camping on the Copperbelt to console our people while handlers of our President are busy flooding Facebook with pictures of his fitness routines. What picture is this sending to the country amidst this pending economic crisis? We need to read the situation and act swiftly. My prayer is that the President travels to the Copperbelt today to take firm action. He should address the nation from there on issues beyond the mining sector. The Minister of Finance addressed us yesterday and left us more confused:

●》We were told Zambia has debt sustainability assessments running up to 2036. We were informed about debt sustainability plans in 2016 but in 2018, the minister admitted government borrowed USD 2.6 billion which has not been dusbursed as government is carefully assessing the debt situation. Why didn’t the same debt sustainability assessments guide us before borrowing? Why borrow guided by assessment and say disbursements have been halted pending more assessments? It is hard for citizens to believe that the USD 2.6 billion has not been disbursed given that most government obligations for the year haven’t been met and given that we are struggling to raise money through securities. This lack of clarity is what gives rise to speculation.

●》On preparedness for payment of the first eurobond principal, some years back Hon. Chikwanda told us we had a sinking fund, Hon. Mutati told us we were putting in place measures to ensure we are ready by the time it is due but yesterday Hon. Mwanakatwe informed us we only had USD 10M in the sinking fund and she would present plans on how to deal with the situation to cabinet. Clearly, we have been talking of plans and more plans but less action. We have foreign exchange reserves dwindling, arears growing, annual debt obligations eating us up, unmet obligation growing, agricultural production dwindling and we are struggling to tax mines, how can anyone realistically believe we are capable of taking that USD10 million to USD 750 million ? There is need for clarity on this issue.

●》Amidst these economic challenges, our minister admitted that our economy is likely to grow below 3% the next couple of years. We have registered one of worst agricultural production performances in many years. The Minister of Agriculture is quoted urging agro dealers not to hold government to ransom by giving deadlines on when money owed to them should be paid and yet we depend on the same agro dealers to supply inputs on credit in 2019. Amidst all this, we still emphasise economic diversification is hinged on the agricultural sector. How?

There is no better time to address the nation than now and put in place strong measures. As we approach elections, there is a tendency by senior government officials including ministers to engage in double dealing by aligning themselves with the opposition, especially with the current situation on the Copperbelt which is a key determinant of election outcomes. There is need for government to be strong and focused. We cannot be seen to be growing the workforce everyday when we are struggling with the huge wage bill. This undermines our austerity meaaures and sends wrong signals to the public over whether there is consistency between pronouncements made by the Minister of Finance and actions by various key actors in government.

Every challenge has a solution and we are going to support you through thin and thick. Our loyalty is built on sincerity, truthfulness and love for a better Zambia. We want to flood social media with solutions and hope for a better Zambia. We want to flood social media with pictures of the President meeting miners, mining companies, contractors and addressing the nation at such a critical time and not doing his fitness routines. We stand by you, we stand by the people of Zambia, we stand for development.

Thank you,

Alexander Nkosi

(Development Planning and Evaluation Expert)

LEAVE A REPLY

Please enter your comment!
Please enter your name here