Lusaka: A Copperbelt University lecturer has observed that the principle of ‘government has no business in business’ should be discarded. Professor John Lungu, a senior lecturer in the School of Business, challenged the government to rethink its strategies on economic growth and development.
But commerce minister Felix Mutati said there would be no economic policy reversal in the country, saying a shift will scare away investors and distort the market system.
Commenting on concerns expressed by various stakeholders about the negative impact of the Economic Partnership Agreements (EPAs) which Zambia and other African Caribbean Pacific (ACP) countries will be signing with the European Union to result in free trade area and market reciprocity, Prof Lungu said the concept of the EPA is coming from countries Europe where the government is a key player in every business.
'Zambia has welcomed privatisation and liberalisation as channels driving the economy and these channels are anchored on a principle stating that government has no business in business but in Europe, governments support SMEs and industries through linkages such as finding them markets and assistance with subsidies but locally SMEs fend for themselves and how do we sign EPAs in this context?' asked Prof Lungu. 'Besides records indicate that SADC is our largest trading partner, so do we sign EPAs with SADC or the EU? Actually it is time that our government should rethink the country’s strategies on economic growth and development because government has a role in business and it is happening everywhere.'
Another CBU senior lecturer in the school of business, Davidson Chilipamushi, said the government must have a role in business by ensuring that favourable and enabling policies are in place. 'Given the lessons learnt during the global economic downturn governments must play a key role in various sectors of the economy and they government let everything to the private sector,' said Chilipamushi, who is former permanent secretary in the Ministry of Commerce, Trade and Industry.
'We need broad-based but clearly defined policies. For example, Rwanda is using the ICT sector as a pinnacle for the development process whereby almost everyone has a computer or access to it and even Europe is using the services sector to drive its economies while Botswana is putting education as focal point for its development process and as long as Zambia doesn’t follow these patterns then the country will forever remain a least developed country.'
And Zambia’s former Ambassador to Libya Mbita Chitala argued that there was need to restore self-confidence by returning to a mixed economy where state capitalism co-exists with strong social democratic policies. 'In the aftermath of the global financial crisis, there is need to return to mixed economy and we must restore our self-confidence and trust in our own people and we must nationalise those companies that are struggling as well as increasing our stake in all the mines which must be declared strategic to our nation,' said Chitala.
However, in an interview, Mutati said Zambia had come a long way in terms of policy maturity and consistency; hence attracting huge investment flows. 'As a nation, we have matured in terms of policy implementation and to be specific, in the exchange rate regime. We have been consistent for many years and on repatriation of profits and many other policy issues, we have also shown consistency, as a consequence there has been a colossal investment, for example, we have seen over US $4 billion being pumped into the mines because they have seen consistency,' Mutati said.
'If we shift to mixed economy policies, we may bring in some level of controls whereby demand and supply will get to a point of dis-equilibrium, hence creating distortion in the market, for instance, our neighbour Zimbabwe tried to control the exchange rate like setting up margins to follow but this resulted in high demand and low supply hence having serious problems that propelled the formation of unofficial parallel market structures, which cannot be controlled, thus reaching a stage of abandoning own currency.'
He explained that having price controls would also create a thriving black market that would be difficult to control and would worsen the current crisis. 'We need to address the supply side capacity in order to find out constraints that are creating the inability to meet demand and we are working on several initiatives to support small and medium scale enterprises since we believe they are the next layer of economic growth and we think if fully supported, SMEs will create jobs and move the economy forward, so change of policy does not arise,' Mutati said.
Even at the last G-20 summit, the United States insisted on local market protectionism but the bulk of that economy is driven by exports and not consumed locally so it hurts more than those people you want to deny your market and you may end up suffocating since in trade what you do to yourself, others will also do it amongst themselves like ‘tit for tat’ affair.'
Mutati said the global economic community was in a hurry to complete discussions at the World Trade Organisation (WTO) in order to establish a trade regime that was predictable and based on rules.
He said last year, Zambia earned about US $5 billion from Non-Traditional Exports (NTEs) because the country participated in world trade. 'Imagine if we had embraced mixed economy policies, which is to bring in some controls and protect our markets, that opportunity to earn money could have been lost and we could have lost in other areas like copper exports, ZEGA flowers, among other products,' Mutati said. 'The levels of control that we are advocating for at regional and international level is to have some form of protection for sensitive and infant industries. For example, there is a new mobile phone assembling plant Mtech and it needs maturity to be competitive then we can invoke safeguard measures that can be applied for a period of time five years and by then that industry can be able to compete effectively even and we apply these decisions on the basis of rules and there will not be ‘tit for tat’ affairs and each country can apply these measures.'
He said the government had constituted a team, which had been sent to the Copperbelt to see how manufacturers could be helped.
'Rather than saying that today we have changed policy to introduce controls, we can apply these safeguard measures like we are doing on the Copperbelt whereby companies that have been supplying the mines are not competing effectively in the midst of outside competition, we can apply those measures so that within a period, they will be able to compete effectively,' said Mutati.
'That way, a country where those companies come from will also continue buying cables and this is predictable and trade-rule based. We can’t stop arbitrarily because they would also stop buying cables from Zamefa, meat from Zambeef, maheu drink from Trade Kings. Actually these markets take time to build, since it involves steady delivery and trust and when we stop, it would mean that these companies will start all over again and it is not easy to be competitive again especially that many Zambian companies are contemplating to go regional.'