Wednesday, 11 September 2013

The untruth about removal of subsidies emerging

By Nyalubinge Ngwende
In May this year the ruling Patriotic Front in Zambia decided to remove subsidies on fuel and maize grain and rolled backwards the same incentives on farming inputs.

And when government woke up without any warning to remove subsidies on fuel and maize grain, and later reduced similar incentives on farm inputs, it offloaded to the media statements riddled with huge figures of money that it purported it would save and direct to financing infrastructure development.

On Wednesday, May 15, 2013, Mr Michael Chilufya Sata, President of the Republic of Zambia, assured Zambians that the PF government was taking bold steps to facilitate practical and equitable distribution of national resources amongst the general populace.

“Our people have to understand that maize subsidies have been a pillar for the huge economic inequality in our society as they only benefit the already well to do middlemen and not the targeted vulnerable groups of our society. We are simply channelling resources to the very poor citizens of our society and we are certain that for real economic and well distributed growth to occur, these changes are necessary. Therefore, all well-meaning Zambians need to look at days beyond today and tomorrow,” he said.

And according to justice minister Wynter Kabimba, in 2012, the government spent about K750 million on fuel subsidy and the estimated cost in 2013 would have been in excess of K1,100 million.

Kabimba said, after removing subsidies government was going to make a saving of K2.3 trillion annually and that the money would be invested in major sectors to trigger development.

He arrogantly insisted that government will not bow to pressure to remove the subsidies on both fuel and maize.

According to the ministry of finance, government was to gain over K300 million every month from the removal of subsidies on fuel alone, money that was to be used in driving the nation to economic reliance.

Did the government tell the truth about removing subsidies to save money and use it to develop infrastructure like roads? It looks a VERY BIG LIE following the facts that have emerged about gross fiscal indiscipline on part of the Patriotic government, immediately after taking office and leading to increased international and domestic debt.

At the time Sata and the PF took over government from the MMD (Movement for Multiparty Democracy), Zambia had a total debt of US$ 1,667.6 million.

Just in the three months of taking over office, it added US$312.4 million bringing the debt to US$1,980.0 million at the close of 2011. 
A year later in 2012 Sata’s government, which has shown less or no respect to the reason of economics to pursue political ends, increased the debt to US$3,179.6 million.   

No one in government has explained why the debt figures drastically increased. But much of the programmes that preoccupied the new government after taking office included complete removal and replacing of all diplomatic staff from embassies, by-elections caused by bribing opposition MPs with deputy ministerial positions so that they resign to stand on the ruling party.

In addition there has been a clueless rush by the President to open new bureaucratic centres, creating districts in some cases in areas that are only within 15 kilometres of the existing ones.

The government refused to be advised to slow down on its projects despite that most of them did not have clear objectives, apart for political expedience.

Opposition Forum for Democracy and Development leader Edith Nawakwi asked Finance Minister Alexander Chikwanda to be bold and admit that his first PF national budget had burst.

“What we have here is a situation where my elder brother at Finance has burst his budget and he has to look elsewhere for additional financing mostly to finance programme that were unbudgeted for such as new districts and bye elections,” Ms. Nawakwi said.

Four months later, contrary to claims that it folded back subsidies to raise money for infrastructure, government has nothing to show for that. Instead of happily telling the country how much it realised from subsidies and unveil projects where it is going to spend those savings, it has shamelessly continued on a borrowing spree.

It has just drawn a K1, 740 trillion from Eximbank of China to do L400 road project in Lusaka that has been given to AVIC International Project Engineering Company. A project it would have funded from the K2.3 trillion it said it would save from subsidies removal annually.

Yet more embarrassing is the decision to take a loan of US$10 million (K50 million) from OPEC-FID to build schools. Borrowing an amount six times less than the K300 million per month it purported it would gain from killing subsidies, proves that Sata and his administration are congenital liars.   
Today we don’t even know as a country how much we are saving from subsidies and how we are utilising those savings.

The leaders are not telling us so and the media that trumpeted the removal of subsidies as a bold and progressive move that would release money for infrastructure development are ashamed to write the success story of the savings from subsidies. The story is not just there.

More desperate measures are brewing. Government now wants to suspend paying pensions to civil servants for the next 10 years, by unilaterally increasing the retirement age from 55 years provided by the constitution to 65. This means the Patriotic Front regime will not share the burden of raising money to pay pension to public workers, and it will keep from the next presidential election the issue of unpaid pensions.

On top of that the government also wants to stop the pension scheme of paying lump sum package to retirees.

Further, to show that it meant the opposite when it promised more money in people’ pockets, the PF has introduced toll gate fees on all road users including Ox-Carts in villages further pushing upwards the cost of transportation as though the removal of fuel subsidy was not enough.

On the backdrop taking away subsidies that cushioned the cost of living on the ordinary Zambian and acted as a stimulus incentive to production, government went to give a K1.5 billion (US$210million) contract to a Chinese technology firm ZTE for procurement and installationof Closed-Circuit-Television (CCTV) in the streets of Lusaka. This deal is now being investigated for corruption, with Transparency International Zambia calling it a wasteful project that is not a priority.

That is how financially undisciplined President Sata and his government can prove to be. But we still want to ask where the savings from subsidies are going.

Is it the same money that President Sata is using to sneak out of the country, and the nation only comes to know about his whereabouts when a photo of his press aide drinking champagne in a London Hotel appears on the online media?

Or is it the same money that defence minister Geoffrey Mwamba has found useful to travel across the country to conduct a useless endorsement campaign for Sata? Is this campaign adding any value to the efforts aimed at ending the poverty in the country?

The exaggerated paving of roads, creating bureaucratic centres within 15 kilometres radius from State House, and building expensive football stadiums where there are no lucrative football leagues will not quieten the well thinking citizens of this country. Especially if these projects leave the economy of the country in a serious basket case of debt and makes citizens paying more tax to compensate for the idiocy of those in power.

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