By way of introduction I was born in Zambia and have been in business for 35 years in Zambia. I have built up a company which by Zambian standards is considered large with some 1,800 employees. My company has investments in Hospitality, Retail, Construction, Manufacturing and Property Development.
I have lived through the era of extreme socialism, which created an excessively protected economy, and I witnessed the introduction and implementation of the Free Market. The transition in the 1990’s from a protected economy where 80% of all economic activity was controlled by the State to a privatised Free Market was harsh to say the least. Having said this, I believe this was the right thing to do and that there was no other way of transforming the economy.
Since 2000 the change in the economy is quite unbelievable. I have witnessed the emergence of a middle class of people. People, who, because of their skills, have been able to obtain better paying jobs, people who have disposable income, and people who have better access to housing, education and medical facilities. The middle classes are certainly having a positive impact on the economy and are responsible for a significant portion of the GDP growth the country has enjoyed in recent years.
Despite the emergence of a middle class, many people still find themselves outside the mainstream economy and are living very difficult lives. Many of these people are very young with the average age in the country being about 15 years old. There are growing levels of desperation among these young people who are failing to find employment and a means to support themselves. Unfortunately they are now looking to apportion blame for their plight. Most of them are too young to remember where Zambia came from, all the changes that have taken place and the fact that today, we are far better off than we were in 1990, just prior to structural adjustment and economic transformation.
The business community in Zambia acknowledges the challenges that the government faces in dealing with the plight of the under privileged. We continue to urge the government to stay the course and put in place policies that allow the economy to continue to grow and expand. Although the average GDP growth rate over the last decade has been 6%, I believe that this is not enough to see an end to excessive levels of poverty. The country has the resources to sustain a growth rate much higher than this and in the order of 9-10%. Such a growth rate would generate many new investment opportunities and would lead to new job creation and more wealth distribution.
In all of this, I have observed the role of co-operating partners and in particular of DFID. Over the last decade, it appears to me, that DFID and the Business Community have drifted far apart in their thinking and their actions.
The business community is concerned about GDP growth, Investment Policies, the high cost of doing business, the lack of a level playing field, high interest rates, high taxes (for those who pay tax) excessive bureaucracy, lack of skills, inconsistent policy statements and corruption. In short, macro-economic conditions that, if improved, would lead to higher levels of investment and job creation.
DFID on the other hand appear to have embarked on symptomatic treatment programmes, rather than programmes that address the causes of low economic activity, although I do acknowledge that some work in the areas of infrastructural development, education and health have had a positive economic impact.
In my opinion, what is lacking in the area of cooperation is an understanding that in order to eliminate poverty, you have to create investment and jobs. The economies of Europe are extremely concerned about unemployment and when unemployment reaches double digits, the governments of their respective countries begin to panic. In Zambia we have an unemployment rate of a staggering 80% in the formal sector. (There is economic activity taking place in the informal sector but the benefits are hard to quantify). We need to see programmes in place that drag people out of the informal sector and allow them to establish themselves in the formal sector where their contribution to the economy will be far more substantial.
I simply fail to see why the UK, through DFID has not seen the connection between unemployment and poverty in countries like Zambia. Why is not more effort being made to channel DFID’s valuable resources into programmes that will lead to investment and job creation? Why is DFID not working with business to ensure the obstacles to investment and job creation are removed, and business is given the economic freedoms it needs to expand and grow? What none of us in business want to see is either governments or aid organisations getting directly involved in business. Business is best left alone in a well-structured enabling environment with clear, stable and predictable policies.
When I have had this discussion with people in the Aid Industry, I have been told that these remarks are "typical of a businessman" and that I don’t understand!! It is true, I simply don’t understand what these organisations are doing or achieving!
I firmly believe that business is all about people. People have to be able to interact in order to be able to transact. The stronger these links are the more chance business will be done. It saddens me that over the last decade, the business links between Zambia and the UK have got progressively weaker. The High Commission has been substantially reduced in size, the visa office has been moved to South Africa making it ever more difficult for Zambians to obtain visas to visit UK and there is no business desk in the High Commission. At the same time the economy of Zambia has become substantially stronger with exports increasing 10 fold in the decade. Other countries are seeing their companies expanding in Zambia, but I get the impression that British companies are not aware of the opportunities that are being created in Zambia. Why is DFID not working on broad based programmes that will strengthen economic ties between the UK and countries like Zambia? Why can there not be a preferential trading agreement between the two countries like we have within SADC or COMESA? These are the topics that should be on the agenda if both countries are to see mutual benefit through trade and investment.
I believe there is ample evidence that correlates the wealth of a country with the levels of education in the country. Basic education in Zambia is in a sad state, but unfortunately vocational training is in an even worse state! Vocational training has just about completely collapsed and there is very little skills training taking place. We are no longer training artisans like plumbers, carpenters, butchers, mechanics and electricians. None of the aid organisations seem to have any interest in looking at skills training and yet there are many available jobs for people who have these skills. Working with industry, there are many ways that an affordable vocational training programme, along with competent certification could be put in place. Industry is already paying huge sums of money in order to meet their own training needs and with a little imagination, a substantial skills development programme could be put in place. Numerous meetings with stakeholders and cooperating partners have unfortunately not yielded any tangible results. DFID could play a significant role in such a programme but this would require them to work alongside industry!
At the meeting there was much talk about tax. The tax structure of Zambia was designed in the 1960’s and over the years this has simply been patched up to try and make it work in today’s modern environment. The system is in a shambles and does not meet the needs of a modern economy. In addition to it being in a shambles, it is enormously complicated and the very best tax advisors struggle to establish definitive positions with the authorities. This opens many loop holes and leads to accusations about organisations not paying enough tax!! The entire system needs to be modernised, simplified and implemented properly. If this were to be done, then the tax system could become a powerful development tool for growth, investment and job creation. Again, this is an area of activity where DFID could have a profound effect on the economy of Zambia.
Finally I would like to raise a point about the Aid Industry in Zambia. In the UK many organisations are collecting money for projects in Zambia and other African countries. In order to do this, the common theme is to put a photo of a mother holding a sick child on the cover of a magazine or newspaper. This is creating a very negative image of Africa and is not reflective of the many good things taking place in Africa. It also serves as a deterrent for investment as it is the ONLY message that is being given about Africa. At the same time, these organisations that are raising money for projects in Africa are not informing the public how much of the money that they raise actually goes into projects versus how much is spent on administration.
In the UK money raised by aid organisations and charities is a very small part of the economy, whereas in Zambia, it is a very significant part of the economy. We have hundreds of organisations operating here that claim to be NGO’s, Charities, and Church organisations. Many of them, if not most of them, are not paying taxes and in some cases they are misusing their status and they are running commercial enterprises in competition to the private sector. There is a great deal of abuse and misuse and I believe that the public in the UK should have the right to know how the money they give is being spent. Surely it would not be asking too much, to make it a legal requirement for any organisation raising money from the public to indicate to the public how much of it goes into the project and how much is spent on administration, advertising and other non-project costs. There is really a need for greater accountability in this area and for the same standards that are being applied to companies to be applied to these aid organisations that work in Africa.
Source: British Parliament
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