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Yes, Zambia’s debt is criminal!By Diggers Editor on 13 Nov 2019
“Countries world over survive on debt. It’s only in Zambia where we have made it look like it’s a criminal offence to accrue debt. If you were given an option, for instance, where would you rather be? To have a very clean balance sheet with no debt and no school, no hospital, and no road? Those other governments that say that ‘we maintained reserves at X billion dollars’ why were we undeveloped? How did it help us to maintain that clean balance sheet when the mortality rate and illiteracy levels were so high all over the country? If those that speak about debt were saying ‘money was borrowed and wasted’ then they have an argument. But if money was borrowed and invested in things that we can see, then our lives as people have improved because of that debt,” says National Assembly Chief Whip Honourable Brian Mundubile.
This information from the Patriotic Front Central Committee chairman for Legal Affairs is misleading in many ways. In essence, what he is trying to paint is a picture that Zambians are dying less now because of government’s continued borrowing. Which statistic is he basing this argument on? Honourable Mundubile is further suggesting that if borrowed money is invested in things that can be seen with eyes, then it is not a waste. Which economist can agree with this theory? This PF official should not be allowed to mislead people with this cheap politicking.
Borrowing funds to build a school, a road or hospital is not inherently problematic. The problems arise with the extent of the borrowing, the conditions of the loans and the secrecy that surrounds the borrowing. Government has an obligation, under the law, to publicly disclose material information, not only to taxpayers, but to investors, but this has not been happening.
That is why citizens, including Mr Mundubile, has no idea exactly how much money Zambia owes to external and domestic creditors in total, and the investors who hold Zambia’s bonds equally have no clue. That already is mismanagement of borrowed funds. In fact, it is criminal to borrow without the knowledge of Parliament if the law says ‘you need parliamentary approval.’
Prioritization of projects is the second factor that makes Zambia’s debt criminal. Why borrow US $135 million to buy a presidential jet when public universities are closing down due lack of funding? How can a poor country spend millions of borrowed dollars to buy solar hammer mills, which have completely no use in a hunger crisis? Has the PF government ever wondered what Zambians would rather have between a flyover bridge in the capital city and uninterrupted electricity supply in their homes? How wise is it to invest all resources in decongesting traffic when businesses countrywide are closing down? How is a dual carriageway on Zambezi Road to Foxdale Residential Housing complex in Lusaka more important than a tarred road from Chipata to Chadiza?
It is very important that Mr Mundubile is stopped from misleading citizens by creating a shallow interpretation of project financing. We don’t need to attend a school of economics to understand the basic concept of public and private financing of projects, and how it has been abused under this administration.
We know that public financing of infrastructure principally comes from taxation, but the PF government has long exhausted this channel, so they are now heavily dependent on borrowing. Spending money that they don’t have. The PF is, in fact, not only borrowing for infrastructure projects, they are also borrowing for public spending. That is why the public sector balance sheet is in a terrible state.
The even bigger criminal debt that the PF has continued to accrue is under private financing of the so-called infrastructure projects. This is typically done through project finance where a project-specific company is awarded a contract to deliver a particular infrastructure project. A well-known form of this project finance is what the PF proudly refers to as Public Private Partnerships (PPPs).
This is where the criminality occurs. When a company is awarded a contract to construct the Lusaka-Ndola dual carriageway at US $1.3 billion or K17.5 billion, Mr Mundubile will rush to say, “government will not spend a penny on the project”, and some PF fanatics start clapping because they think their bosses in Cabinet have very powerful skopodononos.
But an enlightened citizen must ask questions: what’s in it for that investor if government won’t pay for the project? The answer is simple. Government is leasing away this infrastructure to private hands for almost nothing in return. The builder of the Lusaka-Ndola dual carriageway will collect toll fees and other revenue benefits on the road for 25 years before handing the infrastructure back to government; at that time, the road will be back in a deplorable state and government will be looking for another loan to fix it.
This is also exactly the kind of contract government signed with the company that was single-sourced to construct toll gates and to install speed cameras. The 17-year long deal dictated that this company would get 90 per cent of proceeds, while government takes the remaining 10 per cent.
This is not only prevalent under road infrastructure; it’s also happening with State institutions. The loan contract that government signed with Star Times of China under the ZNBC digital migration tender is not any different.
Star Times, through Top Star, has ring-fenced ZNBC cash flow and directed earnings towards loan repayment for as many as 25 years, until the full loan amount is paid. In what state will ZNBC and this digital equipment be 25 years from now? Meanwhile, these contracts are single-sourced. State House is directly involved in the awarding of contracts.
This is the criminality that Zambians refer to when they condemn the PF government’s ‘libido’ for borrowing. Yes, elsewhere, governments borrow, but they have proper plans for investments in the productive sector. Leaders are accountable and they don’t steal. When they’re implicated in corruption, they resign on moral grounds. They don’t get protected by a sitting President.
So, once again, Mr Mundubile must stop misleading citizens. If we may ask the PF Chief Whip, what single benefit has the US $3 billion or K40 billion Eurobond loan brought to Zambia? How has it helped Zesco if people are going 18 hours without electricity? What transformation has it brought to the railway sector?
Ati mortality rate was high when Zambia’s balance sheet was clean…Honourable, please! If PF members are no longer dying in the manner they used to die while in opposition, it does not mean that the country’s mortality rate has improved. People are dying more now because your government has borrowed money to build a hospital that has no medicine.
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