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Vice president before tribunal, sign of growing democracy

Zambia’s democracy is not yet matured but certainly it has been growing steadily. For the first time in the country’s history the Vice president has been subpoenaed to give evidence before a tribunal investigating a cabinet minister. Vice President Dr Guy Scott was like any other ordinary witness as he testified in the Tribunal probing allegations of abuse of office against Tourism and Arts Minister Sylvia Masebo. And like other witnesses, Dr Scott was also subjected to cross examinations by both the defence and prosecution teams.

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In his evidence Dr Scott defended Masebo for cancelling hunting safaris concessions and firing of managers at Zambia Wildlife Authority (ZAWA). He submitted that it was within the minister’s jurisdiction to ensure that ZAWA is properly run and that problems at the institution can affect the minister. In the absence of the board at ZAWA the minister had to act to save the organisation.

The Vice president endured close to three hours before the Sylvia Masebo tribunal as he gave evidence on the matter surrounding the dismissal of ZAWA senior managers and the cancellation of the hunting safari tender.

This is a sign that Zambia’s democracy is on the right path. Not only are citizens now able to take legal recourses against public officers suspected of abuse of office, but even senior government officials are made to appear before tribunals.

As the country celebrates its golden jubilee this year, there is need for concerted efforts by all citizens in promoting democracy, transparency and accountability and rule of law. These tenets should be properly nurtured.

The Masebo tribunal has set a good precedence by subpoenaing the Republican Vice President to appear as a witness.

 

 

Multinational corporations and tax evasion

It is a fact that Africa has not fully benefited from multinational corporations due to tax evasion, financial flaws and corruption being practiced by these companies.

In Zambia, this is a familiar situation that has left the country at the mercy of multinational corporations, especially in the mining sector. Despite Zambia being the world’s eighth largest producer of copper, revenues from the mines only account for less than 5 percent of Gross Domestic Product (GDP). This is negligible considering the increase in copper exports and favorable prices on the metal market.

What factors have then contributed to Zambia being literally robbed of her wasting assets (copper and other minerals)?

As cited earlier, tax evasion, financial flaws, corruption and other corporate frauds have made Zambia lose billion of kwacha from multinational mining corporations. Recently Vice president Guy Scott told parliament that Konkola Copper Mines has been involved in financial scam and that government was carefully monitoring the situation at the mine which has debts of about $1.5 million. It has been alleged that KCM has been falsifying its incomes to evade tax. But KCM is just among many multinationals linked to corporate fraud.

Another factor is that  Zambia Revenue Authority (ZRA) and Bank of Zambia (BoZ) lack capacity to monitor the operations of not only mining companies but also other multinational corporations working in Zambia. The two institutions cannot therefore adequately tax multinational corporations resulting in the country losing its much needed resources to finance service delivery by the government.

Similarly, most of the copper that is extracted in the country end up on the international market in raw form. The country has fewer refineries to enhance the value of copper. Though Zambia is the eighth largest producer of copper, it is the fourteenth in the world in terms of producing refined copper. With more copper refineries set up the country can benefit both from taxes and employment creation for many Zambians. At the moment, the copper extracted from Zambia is creating employment opportunities outside the country, a situation which is worrisome.

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Zambia is not fully benefiting from the mines

But perhaps one of the major factors is that the judiciary has not taken a keen interest in prosecuting multinational corporations for fraud and tax evasion. Apart from KCM that was fined K10 billion (not rebased) for polluting Kafue River, no multinational corporation has been criminally prosecuted for corporate fraud. Since most of the allegations against multinational corporations have come from civil society organisations and pressure groups, government institutions have appeared disinterested in the matter. The battle to ensure that multinational corporations contribute adequately to state coffers in accordance with their profits has been solely left to the civil society and pressure groups. Yet government has admitted that some multinational corporations are involved in reaping the country out of its resources.

Alongside tax evasion and other frauds, multinational corporations especially in the mining sector have greatly benefited from various incentives entered into during the acquisition of mines. For instance, the recently released Foil Vedanta Report titled “Copper Colonisation Vedanta KCM and the copper loot of Zambia” says;

“KCM’s Development Agreement only requires it to pay 0.6% in royalties, fixed until 2018, and they have even argued that this is too high. Royalties are calculated as a percentage of the market value of minerals less the cost of smelting, refining and insurance, handling and transport from the mining area to the point of export or delivery within Zambia. KCM’s agreement allows them to deduct 100% of capital allowance from any investments made – such as prospecting, buildings and equipment, and losses from bad years may be carried over into good years”.

Clearly these incentives are too generous to give a company like KCM that reportedly recuperated its investment within three months after it was sold.

How then can Zambia maximise on it benefits from multinational corporations and in particular mining companies?

Government needs to devise forensic auditing methods for multinational companies operating in the country. Some of these companies have put up deceptive Corporate Social Responsibilities (CSRs) programmes and yet they are not contributing to government coffers as much as their profits. These companies have gotten away with huge profits through falsifying their true accounts.

Further, the Ministry of Finance needs to strengthen the capacity of Zambia Revenue Authority (ZRA) and Bank of Zambia (BoZ) and Central Statistical Office (CSO) to enable them monitor operations of mining companies and other multinational companies operating in Zambia. Without adequate capacity by these institutions, the country will continue failing to account for its resources.

The government should revisit some of the Development Agreements entered with the mining companies. Though it is not easy to renegotiate mining development agreements, some which will run till 2024, the government can use its political muscle to table the matter before these companies.

Strengthening the judiciary and other investigative wings to criminally prosecute mining companies can also help to scare them and reduce cases of tax evasion, corruption, corporate fraud and vices being committed by multinational companies. At the same time government investigative wings should develop interest in issues of multinational corporate affairs.

Copper is a diminishing asset and therefore the country needs to make the most out of it while it lasts. As the Foil Vedanta Report notes, civil society organisations and pressure groups have a greater role to play in raising awareness on the need for the country to benefit from it resources.

Hopefully, the just ended 3rd International Association of Prosecutors African-Indian Ocean Regional conference held in Livingstone will also come up with solutions to the problem of multinational corporations’ illegal practices.

By Nicholas Bwalya

Zambia’s Newspaper Headlines 04/03/2014, Daily Nation

Attorney General Mumba Malila says Masebo erred

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More borrowings amidst free falling kwacha

Finance Minister Alexander appears to be in comfort zone as the kwacha continues to fall and is seeking pleasure in increasing more debts for the country. He has just successfully pushed parliament to increase government borrowing from the domestic loan threshold of K200 million to K13 billion. Amidst fears from economists and other stakeholders that the country is quickly falling into another debt trap, the minister is still insisting that government should continue to borrow more money to fund infrastructure development.

Zambia’s current debt stands at slightly above $3.1 billion from around $500 million in September 2011 when the PF government came into power. When the country was in serious debt crisis between 1980 to around 2005, it had an external debt of about $7 billion.  The country had to be subjected to a strenuous Highly Indebt Poor Country (HIPC) programme before the debt was cleared.

Against this background therefore it is expected that government, and in particular the Minister of Finance, already understands the seriousness of Zambia’s debt crisis under HIPC and would not therefore like to experience a similar problem. Are government’s arguments for more borrowing justified and are the investments derived from borrowing able to sustain debt repayment?

Economists are concerned that most of the borrowing is not being channeled into investments that are able to generate repayment funds. If anything, much of the debt appears to be going into consumption related ventures such as wages for civil servants and cushioning the budget deficit incurred in last year’s budget. The IMF has already warned that Zambia’s debt would double by 2018 if the current rate of borrowing is not arrested.

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Finance Minister Alexander Chikwanda seems relaxed amidst a free failing kwacha and an increasing debt burden.

In the first two months of 2014, inflation has been going up and now stands at 7.3 percent while the local currency is trading at around K5.8 to a dollar. With the government targeting end of year inflation of no more than 6.5% at the end of this year, this target looks farfetched.

Evidently, there is everything to worry about the direction of Zambia’s economy under the PF government. It does not take an economist to realize that the country’s economy will not be able to create the 200,000 jobs targeted this year. Neither will the country attain a 7 percent Gross Domestic Product (GDP) growth.

Where is the Bank of Zambia to explain the free fall of the kwacha? What about other technocrats within the Ministry of Finance? Surely there is need for more information on the performance of the kwacha and where the borrowings are going.

Government needs to seriously consider domestic sources of raising funds to support infrastructure development being implemented. There are a number of tax incentives, for instance, that have been given to mining companies. These should be removed to enable the country increase its revenue. Solely depending on borrowing may seem attractive at the moment but is disastrous in the medium and long term when time to pay back these debts is due.

Zambia’s Newspaper Headlines 28/02/2014

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LAZ warns of mass demonstrations

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Quest for an independent judiciary

The judiciary is one critical arm of government because it is  responsible   for  dispensing justice. When the judiciary is compromised, injustice thrives leaving citizens without any recourse for settling disputes.

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Chief Justice Lombe Chibesakunda. Her appointment was rejected by parliament.

Zambia, like other African states, has grappled with the separation of powers between, the three arms of government namely judiciary, legislature and executive. In many instances the executive has had more powers than the other two, a situation which is not ideal for democracy and rule of law. Largely this has been due to the fact the president, who is part of the executive, appoints members of the judiciary and legislature.

In the case of the judiciary, the president appoints all judges, including the chief justice, who is in charge of it. Though parliament (legislature) has to ratify these appointments, this exercise is merely academic and not a requirement. Even without ratification by parliament, a member of the judiciary can still be appointed, as the case was with the current Chief Justice Lombe Chibesakunda.

The appointment of judges by the president has been a major concern for those advocating for an independent judicial system. For instance, when President Michael Sata nominated Mutembo Nchito for the position of Director of Public Prosecutions (DPP) a lot of eyebrows were raised about his impartiality. Some Members of Parliament (MPs) under the parliamentary select committee were apprehensive that he would not be impartial as he had a pending legal case involving the defunct Zambian Airways debt with Development Bank of Zambia. But Mutembo’s appointment still went through the select committee.

Similarly, Lombe Chibesakunda’s appointment as Chief Justice was rejected by the parliamentary select committee but President Michael Sata over ruled it. And despite many calls from opposition parties and civil society organisations for her to resign, the Chief Justice has remained adamant.

Recently President Sata elevated High Court Judges Evans Hamaundu and Albert Wood to the position of Supreme Court Judge subject to ratification by parliament.

The two judges have issues to clear before they are ratified by parliament. Judge Hamaundu was the chairperson of the Tribunal appointed to probe Justice Minister and Patriotic Front Secretary General Wnyter Kabimba. Judge Wood is at the centre of the disputed Chikopa Tribunal and also faces a complaint of misconduct in the manner he handled the case involving DBZ and JCN Holdings with Post Newspapers. The complaint has been filed through the Judicial Complaints Authority by Zambian Voice, a civil society organisation championing good governance. It is therefore not strange that most observers have questioned the timing of the promotion of the two learned judges.  Wouldn’t their promotion have waited for the two judges to come clear of these issues?

When the appointment of people at the summit of the judiciary such as Chief Justice, DPP and Supreme Court judges is perceived to be irregular or raises suspicions, it breeds mistrust into the judicial system. The entire judiciary becomes questionable; a situation that sends fears among law abiding women and men but most importantly has potential to scare away foreign investors.

In law, they say that justice must not just be done but must be seen to be done, so too is the fact that judges must not just be impartial but must also be seen to be impartial as they dispense justice. Perception of judges has a huge bearing on the confidence of citizens in the judiciary. The more judges are perceived to be biased or irregularly chosen, the less confidence citizens have in the judiciary.

The Zambia people must therefore continue to demand for a judiciary that is completely detached from outside interference especially from the sitting government. Without an independence judicial system, justice for many Zambians, including foreigners, shall remain a much sought after rare commodity.

By Nicholas Bwalya

Zambia’s Newspaper Headlines 26/02/2014

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UPND takes lead in Katuba

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Cycle of political prosecutions and persecutions: Zambia’s case

By Nicholas Bwalya
In Zambia the difference between “persecution” and “prosecution” is getting more obscured as the political landscape becomes more diverse. Depending on which side of government one is on, one cannot differentiate prosecution from persecution.

Wikipedia defines persecution as ‘the the systematic mistreatment of an individual or group by another individual or group’ It adds that the most common forms are religious persecution, ethnic persecution and political persecution, though there is naturally some overlap between these terms. The inflicting of suffering, harassment, isolation, imprisonment, fear, or pain are all factors that may establish persecution’. It also defines ‘prosecution’ as the legal party responsible for presenting the case in a criminal trial against an individual accused of breaking the law.

The cycle of prosecution or persecution of people perceived, rightly or wrongly, to be against the establishment, especially the government, is as old as this land now called Zambia.

During the time when colonialists were colonising this territory, many Africans were both persecuted and prosecuted. They were prosecuted for disobeying unjust laws set up by the colonial masters. On the other hand they were persecuted for resisting to be governed by outsiders. Most  freedom fighters today at one time in their lives were either jailed, fugitive or came into conflict with the  ruling colonial government. And subsequent governments have also practised different forms of prosecution or persecution of their rivals.

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During the one party rule of Dr Kenneth Kaunda, prosecution or persecution of his perceived adversaries was a norm rather than an exception. Many citizens who dared criticise the UNIP rule were brutalised through various means. This list includes former president late Fredrick Chiluba and Brigadier General Godfrey Miyanda among others. The latter was at one time even” blacklisted” from dealing with any government institution or going into town. Such was the persecution of perceived enemies of the government, which characterised the UNIPs almost three decade rule. It is, however, important to note that during Dr Kaunda’s rule, Zambia was under a state of emergency, which allowed the government to detain any person without trial. Those who were prosecuted through the courts were counted as “lucky ones”.

After the change of government in 1991, the new MMD government led by Chiluba also devised ways of prosecuting or persecuting its perceived foes. And Dr Kaunda was among the victims. The former president suffered prosecutions or persecutions under the MMD rule. Apart from being detained on Christmas Day for trumped up charges, he was also declared stateless by the High Court. Dr Kaunda fought countless court charges, some of which continue to haunt him till today through the legal bills he accumulated. The inclusion of a parentage clause in the 1996 Constitution (current constitution) was specifically meant to bar him from contesting for the presidency.

One would therefore ask, was Dr Kaunda being prosecuted or persecuted during the MMD rule?

When in 2011, Levy Mwanawasa became president, he launched a serious crusade against corruption. He succumbed to public pressure to remove his predecessors (Dr Chiluba’s) immunity so that he could be prosecuted for corruption. How this case ended is already in public domain. But President Mwanawasa also detained then opposition leader Michael Sata for theft of a government motor vehicle. Since this charge was unbailable, Sata spent over three months in remand prison at Kamwala before he was acquitted. At the time he was arrested Sata was already a thorn in the MMD government of Levy Mwanawasa.

Again one would ask, was Sata being prosecuted or persecuted by the MMD government?

During the rule of Rupiah Banda, when defence Minister George Mpombo resigned from government, everything remained normal until he began to criticise Banda’s regime. The law enforcement organs began to pursue him. Within a few months after his resignation he was charged with uttering fake documents for one of the imprests he had retired whilst he was defence minister. Today Mpombo is a convict and will need to prove otherwise with his appeal to the High Court.  Rupiah’s government also suspended the then opposition dominated Lusaka City Council, accusing the councillors of illegally allocating land to themselves. A committee was allegedly constituted by then Local Government Minister Brian Chituwo to probe the councillors. By the time the MMD lost power in 2011, no report was made public about the matter.

Similarly, since coming into power in 2011, president Sata’s crusade against corruption has seen a number of former leaders in the Rupiah government being arrested. Rupiah Banda himself leads the group. Some former leaders such as Dora Siliya have publicly complained of persecution by the PF government. But the PF government has denied these accusations.

What is however clear is that there is an element of selective justice in the application of the law. For instance, when accusations of corruptions were labelled against Justice Minister Wynter Kabimba and then Defence Minister Geoffrey Mwamba, the president urged the Anti Corruption Commission (ACC) to seek his approval before investigating them. The ACC then disclosed that the two ministers had been cleared of all charges. But after the resignation of GBM from cabinet these charges have resurfaced. GBM is now facing eight counts of corruption, abuse of authority and making false documents.

Is GBM being prosecuted or persecuted for resigning from government or was he being shielded from these charges because he was a minister? What about other ministers still serving in government, will their fate be similar to GBM’s should they quit cabinet? Or shall we have to wait for the next government after PF to revisit corruption charges against current ministers? Can this scenario also explain why some opposition members have crossed over to the ruling party so that their alleged offences are protected? These and many questions are begging answers.

What is apparent from all the administrations that have served this country, including the PF, is that law enforcement agencies are swift to pounce on members from opposition or those perceived to be against them. If for instance dismissed deputy ministers Ronlad Chitotela and Rodgers Mwewa were from the opposition, their cases would be before the courts of law by now. But because they are MPs from the ruling party, the wheels of ‘justice’ are likely to move very slowly against them. Or probably their cases may never come for prosecution till another government is in place. These are the realities that have unfortunately dogged our democracy, rule of law and good governance in general.

It is undeniable that the rule of law in Zambia has lamentably failed to gain ground, mainly because institutions that are entrusted with promoting democracy are always under compromise from the politicians in power. Institutions like the police, ACC, Drug Enforcement Commission, Office of the Director of Public Prosecutions, Office of the President, the judiciary, and parliament among others, cannot function independent of the ruling elite. Some of these institutions have been and continue to be used to pursue government opponents, real or imaginary.

As one observer noted: ”State machinery (institutions) are the greatest weapon the Zambian governments has used to either prosecute or persecute their opponents. Though it may seem like someone is being prosecuted by the courts, the motive is mainly persecution. Trumped up charges can be thrown at someone with the main aim of persecuting that person. They (ruling politicians) can take you to court knowing that after a lot of court appearances, the DPP will enter a nolle prosequi. The motive is simply to intimidate you, since they know that you will also incur legal bills. Even if you want to sue the state for wrongful imprisonment, it does not bother them because they know that it will take another five or more years. Moreover even when you win the case, it is the state that pays and not those in government who were persecuting you.”

Against this background, what is the solution to this apparent abuse of state institutions by sitting governments to prosecute or persecute opponents?

At the root of this problem is the country’s constitution, which give powers to the head of state to appoint all officers managing these institutions of democracy. As long as all officers leading these institutions remain political appointees, their allegiance will be to their master, in this case, the sitting Republican President. The principle of separation of powers, which is a vital ingredient to the rule of law, remains a pipe dream in Zambia.

 

Zambia’s fiscal and monetary policies: where are we going?

Zambia is among many African countries that have been registering economic growth for the past decade. The country’s economy has been growing at an average of 6-7 percentages with inflation getting into single digit in 2011. Mainly this improvement has been attributed to the government’s prudent fiscal and monetary policies. By 2011 Zambia had attained the Middle Income Status with a credit rating of B+. With a stable political environment, the country has also improved on the ratings as a destination for doing business by foreign investors. At the start of 2011 Zambia’s foreign debt stood at around US$500 million and an international reserve of 5 months import cover.

Following the change of government from the MMD to Patriotic Front that occurred in September 2011, a number of changes have also taken place. The PF government has continued with similar economic policies of the MMD. However, having campaigned on a platform of “lower taxes, more jobs and more money in your pockets”, the PF government has in the last three budgets increased the Pay As You Earn (PAYE) tax threshold from K2000 to K3000 thereby “putting more money in the worker’s pockets”. But it is grappling with maintaining fiscal and monetary stability.

Since coming into power, the PF has embarked on massive infrastructure development of roads, hospitals, universities and schools. But these ambitious developments have put a lot of pressure on resources resulting in government resorting to borrowing. Apart from the US $750 million Euro Bond that the country obtained, the government has also borrowed from bilateral and multilateral partners to finance infrastructure development. Within two years of assuming office the PF government has raised Zambia’s external debt to about US$3.1million. This debt represents almost twice the amount that the country accrued between independence in 1964 to around the 1990s.

For the first time in 10 years the country last year registered a budget deficit of 8% against the governments’ projected figure of 4%. Some analysts have cited the massive creation of new districts, high increase in civil servants salaries and large numbers of unbudgeted for bye elections as being responsible for the budget deficit. In the 2013 national budget for instance, only K4 million was set aside for bye elections but over K90 million was used. On the other hand the local currency (Kwacha) has also depreciated to record lows trading around K5.5 to a dollar.

In an effort to address these challenges the PF government has resorted to implementing short term measures such as removing fuel and fertilizer subsidies and introduced a number of controversial Statutory Instruments (SIs). Notable among them were SI 33 banning transacting in foreign currency and SI 55 to monitor inflows, outflows and international transactions. Statutory Instrument 32 was intended to monitor balance of payment while SI 31 was revoked to allow NGOs pay tax on imported goods. Auctioning of emeralds outside the country has also been banned.

But these measures have far reaching implications on policy stability, which is vital in attracting investors. The PF government is risking foreign investors by failing to maintain stable policies.

In its 2013 October Country Report for Zambia the International Monetary Fund (IMF) warned that the country’s medium term growth outlook was uncertain due to significant policy uncertainties. The Breton Group has charged that Zambia’s current fiscal stance is unsustainable and warned that government debt would rise to over 50 percent by 2018. Warning against raising the Personal Income Tax free threshold, the Fund advised government to prioritise preserving the hard won macroeconomic stability, reduction of fiscal deficit and increased international reserves.

“This will require mobilising additional domestic revenue, realigning spending priorities, and creating fiscal space for infrastructure investment, while also maintaining a business environment that encourages job creation” it said.

Finance Minister Alexander Chikwanda is however not bothered by concerns raised by IMF, insisting that government is on the right path in managing the economy. He said that Zambia’s current external debt of $3.1 billion and internal debt of K17 billion is manageable.

“Our external borrowing is only 14.4% of the GDP which is far below the 30% internationally agreed Debt Sustainability Threshold for developing countries. Our internal debt of K17 billion is 15% of GDP which is way below the Debt Sustainability Threshold of 25% of GDP’ said Mr Chikwanda on a ZNBC television programme dubbed Sunday Interview.

The Minister added that the country can still borrow up to $6 billion and $1.2 billion externally and internally respectively without the debt sustainability getting out of hand. But if government will continue to borrow, it simply means that the borrowing will be at higher interests now that the country’s credit ratings have tumbled from B+ to B.

According to the 2014 national budget, the PF government targets seven major policy objectives which includes, creating at least 200,000 decent jobs, achieving real GDP growth of more than 7%, attaining end of year inflation of no more than 6.5%, increase international reserves to over 3 months of  import cover, maintain a fiscally sustainable public external debt, increase domestic revenue to over 21% of GDP while also limiting domestic borrowing to 2.5% of GDP and contain deficit to no more than 6.6% of GDP.

As these economic fundamentals are being targeted, various interest groups and economists however point to a number of sectors that have been or are allegedly being neglected by the PF government.  The Agriculture sector, for instance, has failed to drive the economy with most farmers being frustrated by late delivery of farming inputs and the over dependency on maize. Last year then Agriculture Minister Robert Sichinga apologized in parliament for the late delivery of farming inputs through the Farmer Input Support Programme (FISP). Prices of mealie meal, the country’s staple food, have increased by 100% in the last two years. A 25 Kg bag of breakfast mealie meal now costs at around K75 compared to K35 in September 2011.

Another sector which could contribute to the country’s economic growth is mining. It is generally agreed that Zambia has not been generating enough taxes from mining and in particular copper. Government has acknowledged this fact. While the country is the largest producer of copper in Africa, the mining sector only contributes about 5% to the GDP. But despite calls by various interest groups for the introduction of windfall tax, government has remained adamant. This is contrary to the PF promises during the run up to the 2011 elections. Currently, PAYE is the largest contributor to the country’s revenue, a situation which is unhealthy.

The tourism sector remains a sleeping giant in terms of contributing to the government’s revenue. But it is largely under developed. Benefits from the recently held UN World Tourism Organisation (UNWTO) conference remain to be seen. What has just been reported about the conference is that it was the “most successful with delegates of about 4000 people”. In terms of the economic benefits, these are yet to be felt.

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High poverty levels force people to live in unsanitary places

It is therefore very apparent that the PF government has a long way to go to grow the economy. There is need for the government to harness the potential that are idling in all sectors of the economy. Meeting all the targets set out in the 2014 national budget is not enough without the trickledown effect on the general population. Employment creation especially for the young people will help to reduce extreme poverty which currently stands at over 60% of the population.

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