Saasa cautions govt against extending SoE

THE declaration of the threatened state of public emergency possesses potential to reduce the long-standing positive image of Zambia as a democratic and politically stable country, says Professor Oliver Saasa.

And Prof Saasa has asked Parliament not to extent the invocation of Article 31 of the Constitution on the threatened state of public emergency when it expires next week.

Saasa , a professor of international and economic relations, stated this in his paper titled: Real and Potential Economic Implications of Invocation of Article 31 of the Zambian Constitution.
He, however, stated that there was little evidence suggesting that serious economic and or political upheavals had emerged following the invocation of Article 31.

“While it is still too early to come up with clear real world impact of the revocation of Article 31, the potential threats/risks to smoother return to economic stability are evident. Firstly, the voices from business houses, cooperating partners/donors and civil society organisations calling for dialogue among political rivals over issues that have divided the country speak to the perceived recognition of political stability/harmony as an important ingredient for the needed growth and development,”

Prof Saasa argued.

“This position seems to be motivated by the worsening development conditions in Zambia and the rather slow and fragile economic recovery record thus far posted. Hence, the triggering of Article 31 of the Constitution is perceived to possess the potential to worsen the erosion of confidence in the country’s governance. Based on this finding, secondly, there seems to be an urgent need to address external risks that potentially threaten the smooth economic recovery effort that the country has embarked upon. The analysis in this Paper suggests that the invocation of Article 31 possesses the potential to reduce the long-standing positive image of the country as a democratic and politically stable one and one that has, over the past decades, generally enjoyed international goodwill.”

He stated said the invocation of article 31 had unnerved key investors to the country, especially in the key mining sector – the country’s life blood.

“…the declaration of threatened emergency compromised the preservation of the above tenets? Clear evidence on the ‘real world’ effect of the declaration is yet to come about. The declaration is still under enforcement for several more weeks with a possibility of its extension. Notwithstanding this, to the extent that the Zambian economy is currently stressed, the average investor operating in the country is presently stressed and generally unsure of growth opportunities and prospects,”

Prof Saasa stated.

“There has been an upsurge in the cost of borrowing in the country, which has negatively affected the country’s investment attractiveness. Interest rates on borrowing had risen from about 16 per cent in 2011 to around 40 per cent in 2016. It has since come down significantly during 2017 but still too high for the average local investor to meaningfully access finance. Zambia’s ranking in the World Bank’s 2016 Ease of Doing Business Survey has, consequently, been unsatisfactory, at 98th out of 189 countries; dropping a few places since its 2015 ranking. The country scored relatively well for getting credit [19th] and paying taxes [47th], but scored particularly poorly for factors such as enforcing contracts [134th], trading across borders [152nd] and registering property [157th]. Under condition described above, the last thing that the average investor wants to see in the country’s recovery process is the emergence of an acrimonious political environment that includes the curtailment of human and political freedoms as implied in the Declaration of threatened emergency.”

He stated that positive effort by the government towards economic recovery would be enhanced when political risk factors were maintained to the barest minimum.

Prof Saasa has proposed that Article 31 of the Zambian constitution should not be extended beyond the initially targeted 90 days.

“Thirdly, at the internal level, the relatively fair rating, by sub-Saharan standards, of the ease of doing business in Zambia is a positive sign that should not be disturbed by the effects of the declaration on threatened emergency, which include the curtailment of human freedoms and suspension of the rule of law. The positive effort by the government towards economic recovery would, therefore, be enhanced when political risk factors are maintained to the barest minimum,”

he stated.

“Against these findings, it could be concluded that, in order to circumvent the greatest risks to the economic health of the country following the triggering of Article 31, the restoration and consolidation of investor confidence is key. Given the Zambian economy’s dependence on the goodwill of the international community, not least because it is the main source of development and investment finance, the consolidation of pro-growth strategies, supported by the enhancement of the Rule of Law, are pivotal. The solicitation of an IMF economic recovery package, for example, ought to be seen in this context. It is for these reasons that the President and Parliament are dissuaded from considering the extension of the State of threatened emergency beyond the 3rd of October 2017.”

Prof Saasa stated that the release from prison of UPND president Hakainde Hichilema would have positive impact on the country’s stability and the general state of the economy.

“Another dimension to the economic impact of the declaration of threatened emergency relates to the potential reduction in government revenue if and when productivity of businesses declines under the weight of declaration-induced restrictions,” he stated. “The release from prison of the leader of the main opposition and the toning down of political rhetoric on both sides of the political divide and as prospects for dialogue [are] in the horizon collectively seem to have brought about some level of calming effect over the political impasse.”

Prof Saasa, the managing director of Premier Consult, stated that it was possible Zambia and IMF failed to reach a conclusion on the economic recovery programme due to heightened political tension in the country.

“To the extent that the declaration of threatened emergency could potentially affect the very foundations and principles of human rights and freedoms under a democratic dispensation, there is potential threat to more harmonious relations with development partners, which could result in reduced ODA [Oversees Direct Aid]. While it is too early to conclude that the stalled conclusion on the IMF economic recovery package for Zambia could partially be explained by the political impasse in the country, not excluding the Declaration on threatened emergency, the exhibition of tolerance and accommodation of diverse political views, complimented by a strong adherence to the Rule of Law, should undoubtedly enhance the country’s image,”

stated Prof Saasa.

“There are indications that the IMF package would not be available to Zambia before 2018, if at all it will be concluded, which is contrary to government announced expectation that it should have been forthcoming by August 2016.”

Read the full document here Final Final-Real and Potential Economic Implications of Invocation of Article 31-Oliver Saasa

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