By Changala Siame SG EFF
Appreciation of currency in a depressed economy is a catalyst for further depressing job creation opportunities in a country.
Actually, the celebration thereof, is a celebration of poverty as any meaningful industrialization gained is threatened by influx of cheap imported consumer goods. Job opportunities dwindle with a increase in importation of goods. A country becomes a dumping market place for consumables as currency appreciates.
We are a lost nation because our leaders place high priority on borrowing as a form of income sources rather than generating income through appreciation of utilization of our abundant endowed natural resources such as arable land, abundant rainfall, most well watered distributed land in Africa but only second to DRC, Diamond, Gold, Emerald, Oil, Copper, Cobalt, Zinc, lead, Manganese, Iron, Uranium, to mention but a few. Primary Industries could be built around these natural resources to further boost the development of secondary and tertiary industries, industries known for massive job creation. This is how countries with the desire to develop their country do, generating income from their natural resources rather than borrowing, especially borrowing from Bretton Woods Institutions IMF/World Bank. A philosophy highly believed by the Economic Freedom Fighters-EFF, Center-Left , Pan-Africanist political party.
Our leaders, and the entire country fails to appreciate a depressed currency because both the citizens and the national leaders love the easy way out. Citizens love appreciated currency because imports become cheaper and never realise the negative economic effect on the existing manufacturing industry, in the line of products being imported. One the other hand, the government celebrate because it makes payments of external debt cheaper and increasing their appetite to borrowing more. Borrowing which is unfortunately mainly spent on consumption for purposes of appeasing electorates.
This is the case of the UPND government that wants an easy way out. They make decisions that inherently nip in the bud of incentivizing job creation. To them,an appreciation of the currency validates the decision of over stating the benefits of importing finished oil and fuel products. An idea the exacerbate the ineptness of willingness to revamping INDENI, the oil refinery company.
In the abundance of ignorance, costs are inevitable. We cannot develop a country by looking at the appreciation of the currency as being the sole most important signal of strangulation of an ailing economy. The theory is true but it’s only validated by a certain specific economic structures. A currency appreciation is a positive macroeconomic indicator. This theory is only actualized well in country whose increased output or manufacturing base, is owned by indigenous citizens, coupled their governments willingness to have a strong control on externalization of funds generated in the country. Thus, for such economies, even the appreciation of currency convey a real economic gain for purpose of replenishing and purchase of new machineries.
Our case is different, if you see some foreign exchange gain in the country, it is as a result of increased copper output, an output owned by foreign investors. We thinly benefit from the perceived benefits except for collection of government taxes and low paying jobs to the citizens. Unfortunately, even if we now have some form of ownership for Mopani Coppers Mines and Konkola Copper Mines, the two are mining giant houses who are at the verge of collapse. They seriously need recapitalization. If one ever doubted, look at the current prevailing copper prices and is how little we are benefitting, depressed production by the two mines.
When copper and other mineral resources and gem stones are sold in our country, the money does not return in the country’s coffer but are in offshore accounts. Mining houses inflate capital expenditure and other mining services purported to have been incurred. All these payments are done outside the country, from the investor’s country origin or a country from where practice of transfer pricing is apt. These funds the investor’s home country or host nations, do provide a cheap accessible source of capital to local industries, industries that in turn manufacture goods that we love consuming including tooth picks.
What a normal country does, when the country has had its currency appreciated, it should encourage the citizens to buy manufacturing machineries rather than spend money on consuming goods. Deliberately, a sensitive government, if the appreciation is not as a result of Bank of Zambia fortnight interventions to stabilize the currency, but out of genuine appreciation of the currency as a result of increased exports of agricultural products and/or mineral resources, is to reduce or remove import duty on manufacturing machineries and increase import duty on all consuming goods for the period in anticipation of prolongation of currency appreciation.
This is the only way to guarantee a path of job creation through industrialization by encouraging local enterprise to purchase capital equipment. It’s only in such circumstances we are going to appreciate a devalued currency, which is deliberately done by a country, that truly owns the key factors of production, in turn, the economy. In such a scenario, even when the currency depreciates, we be able to appreciate our manufacturing industry as they would enjoy a trigger entry on the global market through competitive goods and services for exportation .
Hence to save the soul of our nation, we need to formulate an economic policy that will ensure all sales out put from our mineral resources returned into the country’s coffers for reasonable economic time, for purpose better monetary stabilization of our currency.
A country that would really want to benefit from her mineral resources should not only look at employment and taxes from the foreign owned mines as the only benefits but also look positive effect allowing gradual externalization of funds. That is the only way to create job opportunities for the country.
In a nutshell, we should know how to appreciate depreciated currency with a strong view of encouraging exportation of manufactured local goods and services, a industry we have to build. Otherwise, appreciating appreciation of currency without a deliberate reduction of import duty on machinery is a celebration of poverty. Job creation will continue being a pipe dream.
Wherever we want to go our, our feet shall take us there. We have hope that refuses to die.