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Dipak tips PF govt on how to survive economic crisisBy Stuart Lisulo on 12 Jun 2019
President Edgar Lungu, the Judiciary and all MPs must freeze their salaries for the next two years if government will free up much-needed funds to reinvigorate the struggling local economy, says former Commerce Minister Dipak Patel.
And Patel has urged government to cancel the incoming Zambia Airways project because it would intensify additional pressure on the fiscus.
In a detailed 12-point plan advising government on effective measures to help free up resources, Patel, who served under the Frederick Chiluba and Levy Mwanawasa administrations, challenged President Lungu to freeze his salary, among other public officials’ salaries, for the next two years as one key measure designed to reinvigorate Zambia’s ailing economy and attempt to unlock the liquidity crunch.
Below is Patel’s submission to the government:
Several ministers have recently pronounced that they would welcome alternative ideas, here are a dozen of them, if the government can “bite the bullet”.
This is not the usual government pronouncement of “we have put measures in place” that mean little to ensure confidence in anyone.
Almost 50% of government revenue goes towards civil servants pay. The other huge expenditures other than debt repayment and general inefficiencies, are on oil, fertiliser and medical supplies and other government procurement. As a start that which will have an immediate and significant impact, the government should:
1) Amend the Petroleum Act, as the former Minister of Finance , Mutati had suggested in his first year, but for reasons unknown, did not, to allow the private sector to import all petroleum products, on condition that they have 2-3 months strategic reserves positioned in all Provinces and allow for private sector to import crude oil through Tazama Pipeline and have Indeni Petroleum Refinery charge a processing fee. In addition, obtain necessary guarantees from Oil Marketing Companies and crude oil importers that assures national security, in terms of financial guarantees and supply. This can be done during the July Parliamentary session.
2) Government remove itself from importation of fertilizers, and allow for private sector importers of fertilizers to place strategic reserves in all Provinces and obtain necessary supply and distribution security guarantees. This will also remove the over inflated prices.
3) Expedite the licensing of generic drugs, and allow private sector to import all necessary drugs, instead of Medical Stores. It would be cheaper for Medical Stores to buy locally and they can confine itself to national distribution.
All the above measures can be safeguarded by the Zambia Consumer Protection Agency for any malpractices, including price fixing.
4) Reduce government travel and its related expenses to bare minimum, by having Ministers, Permanent Secretaries and others travel on economy class and reduced fuel allowances for local travel and other perks. Government should also announce a salary freeze for the President, Vice President, the Speaker and Members of Parliament and the Judiciary for next two years.
5) Put on hold all out of Lusaka government “workshops” and “seminars” and instead have them in-house at all Ministry headquarters.
6) Let IDC immediately undertake forensic audits of all parastatals and make decisions on which ones to keep, and which ones to sell or close down.
7) Cancel the establishment of government owned national airline, and instead in consultation with the private sector put in place policies and incentives for the private sector airlines to flourish, and review the jet fuel tax levies, to incentivize the airline industry.
8) Make a considered decision on the energy sector, that allows for alternative energy industry to flourish (as opposed to current scenario whereby investors have made huge investments in solar and coal-based energy on already negotiated Power Purchase Agreements with Zesco, only to now be told by the Minister of Finance that they need to be renegotiated! Such practices only deter further investments.
9) Government should make a sensible long-term policy decision on Zesco tariffs for a five-year period wherein all consumers are aware what the tariff increases will be, as opposed proposing annual arbitrary increases, which then get cancelled by arbitrary Presidential directives, which only enhances Zesco’s problems and not solve them. How does a business and consumers plan and budget if this practice continues? The government must immediately undertake a forensic audit of Zesco and actually implement the decisions to make Zesco a cost-efficient enterprise. If at all possible, the South African ESKOM experiences should teach us a lesson. Zesco must immediately stop importing items that can be manufactured locally, one example, wooden electricity poles, when they can be made from concrete. We have 100% locally available raw materials to do that. (cement, stones, water, steel, all of which are available in Kafue and elsewhere in Zambia).
10) Mines: The basic problem has been a trust deficit on both sides, the government and mining investors. Whilst it is an undisputed fact that Vedanta/ KCM, and in particular, Anil Agarwal who is uncouth has had a very negative history with his Zambian investment. His alarming comments on demeaning the Zambian government, its leadership, upon the purchase of KCM and boasting that he makes $500 million/ year is not only stupid but also shameful and insulting. It is however another question whether the process used to “take over” i.e. Liquidation of KCM was correct, when all other considered opinions point to a mistake when in fact it should have been an “administrative process”. However, for the mining industry predictability and consistency of mining policy and its taxation have been at the forefront of the problems the government has created for itself. How does a mining investor and international financiers have confidence in government if legally binding agreements are discarded and new taxation regime gets introduced on a repeatedly ad- hoc basis? How do you plan?
11) The logic behind introducing Sales Tax is fundamentally flawed and it is in direct contravention of the World Trade Organization rules, which Zambia is a signatory. It is also flawed because it increases the prices for consumers and it only solves governments problem of its inability to legitimately pay for VAT refunds due to fiscal crisis and huge domestic / foreign debt and foreign exchange rate fluctuations.
12) There should be a transparent process of dismantling domestic debt, and not one that allows influence peddling on who gets paid first and fast. It is common knowledge that there are” commission agents” who work with local companies, to get their debts paid by the government.
Finally, Government policies must be predictable, and ensure that they are consistently, consistent and not the current status quo, where they are consistently inconsistent.
About Stuart Lisulo
Stuart Lisulo is an experienced journalist with a focus on business news.
Email: stuart [at] diggers [dot] news
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