SUBSIDIES

The previous weeks have been quite something with issue of subsidies in the air, fuel increment cascading to the increment of everything including the basic needs for survival as well as upkeep. We saw UNZA students taking to the streets… having a go at it with the Zambia Police, teargas, stones flying, rooms burning it was crazy, people calling in and giving the government a piece of their minds... some even mispronouncing the word as ''subsidiaries.''  It was quite eventful. For some it was the 1^st time they were hearing of such a term hence the unrest… we heard of some people explaining to their friends that subsidies were some chemical that they put in mealie meal so that the germs die… and one Miss NIPA Participant was asked what subsidies were and unashamedly she answered that subsidy is “self-confidence…” and obviously before we know it the famous easterners will be naming their kids Subsidy or Sabu for short… lol 

But really what are subsidies and how do they affect the economy? I’ll go for the most common definition: "a subsidy refers to a payment made by the government to a producer. Subsidies can be direct – cash grants, interest-free loans – or indirect – tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebates. This form of support can be legal, illegal, ethical or unethical. Subsidies are used for a variety of purposes, including employment, production and exports." Often subsidies are regarded as a form of protectionism or trade barrier by making domestic goods and services artificially competitive against imports. Subsidies may distort markets, and can impose large economic costs. Financial assistance in the form of a subsidy may come from one's government, but the term subsidy may also refer to assistance granted by others, such as individuals or non-governmental institutions.

That said, the government of Zambia removed subsidies on fuel and agriculture these have been some of the biggest expenditures of the government. It is safe to say that fuel subsidies add to the fiscal deficit, which in turn causes inflation. Reducing fuel subsidies would improve Zambia’s fiscal balance and create fiscal space for increased investment in infrastructure and other development activities. Environmental damage caused by the steady rise in the sale of fuel vehicles due to price differential between diesel and petrol can also be reversed over time.

With benefits of removing fuel subsidies known to everyone, it eventually boils down to the political economy of reform. Looking at it from way back it can be said that governments actually give subsidies as part of a political bargain — they are “a visible way to deliver benefits in exchange for political support.” Because they are a symbol of populist action by successive political leaders, these subsidies, once started, get permanently locked-in.

Something to critically look at though, is that, even if subsidies may free up resources for development, people have little confidence that this will happen given high levels of corruption in the country. The government would dread the scenes witnessed on the Nigerian streets where people came out with banners saying “Remove corruption, not subsidy”.

It is a very delicate issue, as in,. if you raise fuel prices, it has a cascading effect on the economy. The government should work out a solution so that this impacts the economy in the least manner but also brings down the fiscal deficit.

If fuel subsidies were meant to help the poor, then they were very poorly targeted. I might not have the statistics but I believe that billions of dollars/kwacha have been spent by the government in the past. Yet we haven’t seen a reduction but an increment in the poverty levels and reports that the MDG’s will not be met by 2015.

Allow me to highlight the fact that even if poor households previously got only a small portion of direct subsidies, the effects of subsidy removal on their incomes is far higher than for richer households. This is partly because raising fuel prices has a significant impact on inflation and cascading effects throughout the economy, via sectors such as transport and agriculture.

But the problem of removing fuel subsidies is not limited to chaotic democracies. Even China was unable to fully pass on fuel price increases at all times during 2010 and 2011. Elsewhere, attempts at fuel subsidy reduction were reversed within a few days in Ghana in 2008 and in Nigeria in January, and postponed in Indonesia earlier this year.

Overcoming political and public opposition to fuel subsidy removal would have been the order of the day in Zambia and for the current regime, in my thinking, hence the decision to go ahead and just announce the removal.

Just my thoughts really, subject to discussion… sometimes if we resist change we will end up being crushed. Let us be knowledgeable be well read so that when we want to argue we are well informed and not following the masses blindly. Let us work at developing and improving our country. Individual efforts always ripple out to the development of a country as a whole. God Bless Zambia.

Intellectual Capital - "The Virtue of Creativity"

The ultimate resource in economic development is people, not capital or material resources. The greatest need in less developed countries is people who can do the new organizing job: this is the job of building an effective organisation of skilled and trained people exercising judgement and making responsible decisions.

Many times I have had conversations with people asking them, “If you had to win K 1 billion, what would you do”?? Various answers follow including “I’ll make a plan when I have the money” then in my mind I wonder what plan do you have that will ensure your survival and your living in life even after you’re past the age were you can work for somebody. (I’ll talk in length on this subject in my following posts). Makes me ask the questions, Where is the creativity, innovation, initiative your goal for leaving and adding value to this life you've been given??

“There many ways of killing a rat” goes the saying, some go to greater lengths to kill one while putting their lives at risk. It is our desire to always find easier way of doing things! Hence the saying “laziness is the mother of all invention” of course combined with creativity. Much as hard work (i.e. physical labor  can add value to what you’re doing, working SMART adds enterprise and invention to everything you do. Work becomes knowledgeable in the sense that it becomes productive in the required potentiality and your work becomes more profoundly cognizant for those benefiting from the service being offered. The cause of wealth is knowledge. This cause lies in the human hand. Being unhappy with your job or what you do doesn't help you or anybody; besides if you’re unhappy do something ‘different’ about it. Only you determine your happiness nobody else has the ability to. Remember this, and it will always remain true that good and morally admirable people make work environments, friendships, cities and even nations happy places in which to find oneself for which one gives thanks; whereas the company of vicious people is no fun at all unless you’re one of them…

For entrepreneurs, and enterprising individuals always be on the lookout for real and unusual talent. The first law is to listen; you must be meek yet shrewd enough to endure the humbling eclipse of self that comes in the process of found learning from others. Sad to say I have met a number of people in such high and influential position and some in lowly positions who never seem to want to learn but consider themselves an authority and a know it all, they don’t listen to any advice and don’t take criticism very well ending up being all moody and upset, when the advice doesn't suit their ears. This makes one unapproachable and highlights insecurity. True creators have a passionate love for learning; they thirst to get reality straight and true, they know that learning can come from one as small as a baby and/or the eldest citizen alive, they want what they create to endure, they want to withstand the buffering’s of the wind and sea, like a spray-drenched vessel “built to last”

That’s one of the way’s to learn to tap into your creative part (in my coming post I’ll highlight some important parts that will help tap into ones creative psyche). Capitalization (the act of capitalizing on an opportunity) is not constituted by formal instruments wholly but rather by creative wit and the sheer joy of creating something solid, substantial, lasting and worth loosing ones shirt for. The zest in creating arrives like justice earned. There is something more than money that most creative creators aim for. Because money may flow or not flow but there is and should always be something more a higher calling if that higher objective withers they too wither.

It’s our quest to reach the stars

We will stumble and fall to the ground

We however must quickly pick up our pieces

And rise again until we reach our goal