ECONOMIST Professor Oliver Saasa says it worrying to see Zambia handling the coronavirus pandemic outside the Presidency when it is a multi-faceted problem.
And Professor Saasa says Vice-President Inonge was right when she attributed the Kwacha depreciation to coronavirus in Parliament.
In an interview, Monday, Professor Saasa wondered why President Edgar Lungu had relegated the coronavirus situation to the Minister of Health when there was more to pandemic than just the health aspect.
“The challenge is less to do with whether or not coronavirus will lead to the challenges that people are talking about. So the question we should be asking ourselves is ‘what do we do now that we are affected?’ Look at what Kenya is doing, look at what South Africa has done, look at what Angola has announced, look at what the United States has done…are we also doing the same thing? If we are not doing the same thing, it will not be cholera or another epidemic, that isn’t coronavirus that will lead to the problem, it will be our reaction. How do we mitigate? The biggest problem we have is that we have allowed this to be handled outside the Presidency by the Minister of Health. This problem is not actually health alone, the health aspect is only when it comes to medication. That’s why we saw in South Africa, the President has put in place an inter-ministerial committee chaired by the President himself. They meet three times in a week, this is because the problem of addressing this is much more than just health,” Prof Saasa said.
“But if you leave it because you look at it as just a disease and you leave it to the Minister of Health…I remember the Vice-President was challenged to say how come the President hasn’t spoken yet? Then her response in Parliament was that ‘the Minister of Health is making statements’. Unfortunately we have to get out of that thinking because the problem with this virus is multifaceted, multi-dimensional, and multi-sectorial. It has to take the leadership straight from State House. This is an emergency, and we are actually getting too late in addressing this because the best time is this when we haven’t recorded any case yet because now the prevention is better than cure. This is a time when we must actually shine and show leadership. But we haven’t seen that yet.”
And Prof Saasa agreed that the coronavirus was causing the Kwacha depreciation.
“Coronavirus is affecting the entire global economy and because of that, almost all the major economies have received a very serious effect as a result of the pandemic recently declared by the World Health Organisation (WHO). For Zambia, it’s not spared and this has a direct effect, not only on the exchange rate but on literary everything on the economic front in Zambia. When you look at the scenario in Zambia, more than 75 per cent of our foreign exchange comes from copper; it comes from copper production and export. This means that we are very dependent on foreign exchange earnings. As much as more than 75 per cent comes from copper and the substantial part of that export goes to the global economy. In fact, there is very little that is retained in Zambia. So in other words, what happens out there is what will determine whether or not there will be a good price for copper, whether we will be affected by what’s happening in those economies,” Prof Saasa said.
“If we can talk specifically with respect to China, as are aware China is the epicenter of the coronavirus. At the moment, the projected 2020 growth of China has been scaled down from somewhere around six per cent to around five per cent. Essentially, it means the economy in China is negatively affected. This is where now Zambia comes in. If China is negatively affected, then it also affects the demand for copper and even the price for copper will be negatively affected. So when it negatively affected, it means we will get less foreign exchange because it accounts for 75 per cent. So if you get less foreign exchange it means that we will have fewer Dollars coming in. If there is fewer Dollars and Kwacha, what happens? The exchange rate will worsen because then there will be more competition for Dollars because they are fewer and therefore, the Kwacha depreciates. So the honourable Vice-President is very correct, the coronavirus actually has ripple effects.”
Prof Saasa further expressed concern that businesses might start closing down given that neighboring countries where COVID-19 had broken out were closing their borders.
“At the moment, we are getting more than 40 per cent of our imports from South Africa. You may be aware, on Sunday, the President of South Africa announced major changes including closing of the borders, there will be certain level of reduced economic activities. When that happens, it means that the problems in South Africa will lead to major problems within the country because it means that the flow of our imports would actually slow down because there would be reduced production in some of the sectors. You may discover that even in the malls, you might discover that Shoprite, Game, Pick n Pay may actually start having problems of bringing in any new stock in their shops. When that happens, it means there is a depression of economic activities. Again, that actually affects our exchange rate,” said Prof Saasa.
“Then when you look at the mining sector in Zambia, they are going to reduce production because of the economic effects of the virus in terms of reduced captalisation, not being sure about productivity of labour, we may end up in a situation whereby we have to reduce because people stop going to the mine especially if they announce that it has actually come in Zambia. So if there is reduced production in the mining sector and the mining sector accounts for much of our foreign exchange then you can see how the effect will be on the exchange. Essentially what this means is that the coronavirus is not only affecting negatively the exchange rate, it will affect almost across the board including the credit rating of Zambia. So you would find investors start leaving Zambia because they are not sure of the economic stability because of this problem. So that itself will have an impact not only on foreign exchange but across the board, economic performance of the country.”