No one should have any illusions about the huge challenges newly appointed finance minister Dr Bwalya Ng’andu is up against.
The economy is in a mess and it may get messier unless strict measures are put in place and adhered to at all levels.
There is no doubt that Zambia currently has a liquidity problem and this is affecting everyone. The little money generated is being used to service foreign debt and public sector emoluments, leaving little to service social sectors.
We note that Dr Ng’andu at his first Senior Management Visioning Meeting said, among other things, that there was need for the government to narrow the gap between the commitments made in the implementation of austerity measures and the action taken. He says the current challenge is that “we have agreed on measures over the last few years but we need to step up on our action… that the government needs to restore fiscal fitness by taking a more granular approach in identifying the specific actions that need to be taken to achieve sustained economic stabilisation and growth.
Dr Ng’andu called on his staff to take a more professional approach to finance and economic management and “to be critical in tackling the challenges that face the economy.” He outlined three critical success factors as effective expenditure control, debt management, and enhanced domestic resource mobilisation.
These observations are critical and deserve attention by the entire executive branch of the PF.
But is Edgar Lungu going to give Dr Ng’andu the space and time to implement his fiscal plans? We doubt it.
As Ackson Sejani observes: “It is very difficult to work under a visionless president. It doesn’t matter whether you are Felix Mutati, Margaret Mwanakatwe or Bwalya Ng’andu, you will fail if the head is not functioning well. No finance minister can succeed under Mr Lungu because he has his priorities upside down. He prioritises his personal comfort and politics above the economy. That is why he will tell his finance minister to prioritise buying a [presidential] Gulf stream [jet] above service delivery in critical sectors like agriculture, education and health. You can’t have a President who insists on bringing back deputy ministers in an economy which is on its knees. When the Minister of Finance objects, she is served a notice of dismissal! You can’t have a President paying lip service to the fight against corruption and when that same economy suffers under the weight of corruption, you throw the minister under the bus as a sacrificial lamb. It never works that way.”
Dr Ng’andu should also critically analyse what the World Bank is saying, which is that Zambia needs to be put back on a stronger growth trajectory.
World Bank country manager Ina Ruthenberg says: “Zambia’s economy picked up slightly in 2018 – from 3.4 per cent to 3.7 per cent in 2017 (supported by strong performance in the services sector). However, recovery was constrained by poor agricultural harvest, lower copper prices, and macro-fiscal challenges that affected private sector activity. Rebuilding market confidence – how? Calling for bold fiscal and debt management efforts supported by reforms in key State-Owned Enterprises…Zambia’s poverty levels are already very high – we need to do everything to avoid that they deteriorate further. Growth rates are not even close to those needed for effective poverty reduction, which is about 7 per cent. As I travel the country, I can see that we are facing situations of hunger in some parts of Zambia and dispensaries in the hospitals are empty, I hear. It is quite dramatic: hungry school children don’t learn. Decisively addressing Zambia’s macro-fiscal challenges and a very careful fiscal consolidation is urgently needed. However, this needs to be done very carefully. We have painfully learned around the world and in Zambia: public budget needs to ensure funding for key public service delivery, particularly in social spending, including social cash transfers to the most vulnerable and needy. In Zambia they are mostly in the rural space.”
Dr Ng’andu’s job is gigantic. He comes in at a time the country is still engaged in confusion over the impeding reintroduction of General Sales Tax to replace Value Added Tax. Here he’ll have to consult further, widely, and seriously interrogate the pros and cons of GST over VAT.
Given the poverty levels in Zambia, the government cannot narrow its decisions to mere avoidance of VAT refunds. Don’t kill the few businesses that still offering employment to our citizens with Sales Tax.
As they say, effective governance is difficult to attain when those most affected by poverty have trouble getting their voices heard and their interests taken into account by service providers and decision makers.
Also there’s this monster of provisional liquidation/government takeover of the Konkola Copper Mines.
Dr Ng’andu will need not just professionalism, cooperation from the PF machinery, but also respect for his fiscal decisions. But respecting his decisions will be the first hurdle. This is not a regime that tolerates frugality. Austerity measures do not apply to Edgar. And should the executive not vary its way of doing this, the finance minister will not manage to sail the ship safely home.
As Sepp Blatter once noted: “The roof will do its job only as long as the foundations are doing theirs. If the ground slides, the whole building will fall down.”/SM