A Quick Summary of the Presidents Address to Parliament
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Today (10th September 2021) the President of the Republic of Zambia, Hakainde Hichilema, opened parliament to applause and roars of jubilation from his party. This excitement was only muted as he began to explain his vision for the country. The theme of the speech was an outline of the goals of his administration. The message is simple, we will work hard to build sustainable growth or as Euripedes said “Much effort, much prosperity” (as quoted by the president). 

Just this week the president had presented his full cabinet, with a total of 25 ministers. He has been clear on his policy of no corruption and the new ministries (Science & Technology, Green Economy and Small Businesses) show a progressive mindset. In this article I will evaluate what I believe to be the key elements of the speech and provide some numbers to fit the task.

 

 

Fiscal Policy

“ We will implement policies to address the fiscal deficit while ensuring confidence is restored in the markets” 

Part of President Hichilema’s unique selling point is his economic prowess and respect from  the international business community. Since his election win, prestige financial papers like Bloomberg have featured Zambia more frequently than throughout the entirety of 2020 under Edgar Lungu. Currently the fiscal deficit (referring to when a country spends more than earnings) stands at 9% of GDP. In 2020 it peaked at 13.5% of GDP, with the government’s external debt totaling $1.7 billion per year. In 2020 we were the first African country to default on our loan obligations, causing the country’s credit rating to drop exponentially. President Hichilema and his Finance Minister Dr Situmbeko Musokotwane will need to address this as the country’s top priority. 

 

Monetary Goals 

“ We must sustain livelihoods, ensure affordable cost of living”

Over the last year the country experienced inflation rates averaging at 15 – 20% and regionally areas like Northern Province experienced up to 30% annual inflation. The inflation was largely due to low dollar reserves and import price rises. This last month, the Kwacha became one of the best performing currencies in the world, the effects of which on inflation we will likely see soon. Similarly a likely IMF will settle monetary pressures, meaning Zambians can expect a drop in the cost of living soon. 

The president’s goal with regard to infrastructure is to ‘maintain’ the current roads and enhance the country’s rail system. According to the latest ZRA reports the most frequently used method of trade is road (80%), with air (6%) a distant second. The president understands a strong Zambian rail network will dramatically reduce the cost of transportation, which currently accounts for 60% of the cost of goods. This will likely in turn help balance the countries trade and hopefully if implemented make Zambia an export giant. This is however a big if as there is a heavy cost in building rail infrastructure (nearly $1 billion minimum) and is not a short term plan.  

 

 

On Agricultural Diversification 

“ It is only through agriculture that transformation that we will end hunger and improve nutrition while accelerating economic growth”

As rightly stated by the president, 80% of the country’s Agricultural output is produced by small-scale farmers. There are more than 1 million of them and the rest of the country rely on locally produced foods in order to sustain themselves. 60% of the country live below the poverty line and it is estimated the drought of 2018 – 19 has left 430,000 Zambians facing famine. This was further affected by COVID disrupting the food security and causing food led inflation in the country. The president has promised to increase the country’s capacity to produce diverse products as we currently rely heavily on Maize production (Nshima). This is likely to be one of the most difficult areas to revamp, but if done correctly we can indeed become the ‘breadbasket’ of Africa. 

 

On Mining and Manufacturing 

“ To this end, we will pursue an export-led trade strategy that will focus on continuous improvement in the competitiveness and quality of our exports” 

The president has promised various reforms in order for the government to allow local producers to increase the quality of their goods. Zambia is tied with Germany as 5th for the country with the most borders (8). This presents a unique exporting advantage the president has highlighted. By using regulation to enhance productivity of our manufacturers through ‘reducing the steps necessary to gain permits’ the president is likely to increase participation in the industry. According to Stanbics Purchasing Managers Index imported Chemical goods used by manufacturers contributed heavily to costs of production and a stronger kwacha is likely to help this. The manufacturing sector has the potential to bring thousands of jobs and this will likely be a priority. The president has also promised to review the current mining tax system. 

 

 

Conclusion 

Key points left out of this piece are the promise for increased technology and e-commerce, investment in science, and increasing the sustainability of Zesco and to give every deserving person the right to education. As you can see there is a lot for the president to begin work on. His emphasis on decentralization will allow his government to have the power to achieve these goals. At Financial Insight, we do not tend to discuss political topics, so the breadth of financial knowledge displayed today has signalled a significant change in the environment. The government has chosen to take the country’s key issues head on, and we hope to bring all the data as they try !

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