Zambia is pregnant with opportunities but the country is facing delicate economic risks that demands focused leadership. Given the strong focus that Michael Sata placed on social infrastructure in transport, health and education, coupled with ramping up of social cash transfers it is reasonable to assume that poverty will hopefully fall in the next few years. If PF can focus on sorting out the politics of the country, including delivering a new constitution, the future for Zambia may well be very bright. That is a big “if”. At the moment the PF leaders appear completely oblivious to the economic potential and risks facing the country. The risks have been there for the last year or so, other risks were triggered by the Budget 2015, and yet others by Michael Sata’s death. Surprisingly, though it was public knowledge he was sick, PF appeared to have made no contingency planning. Over the course of this week, we hope to explore some of the economic risks facing Zambia. We cannot do without saying a few words on the political context following Satas death. We have always said the political economy is important. Economics follows politics and vice versa. When Sata recently died in London after being Head of Sstate for three years, power temporarily transferred to the politically weaker Vice President Guy Scott until a presidential by-election is held late January 2015. Sata has left behind a chaotic government which had previously been too centralised at State House with minimal discretion to ministers resulting in a backlog of decisions. It was a government created in his own likeness. A big question facing the country is, how will these previously bound ministers now acting with new found freedom behave over the transition period? For the first time these ministers are having to make decisions - and not only that they cannot be told what to do by the ceremonial Guy Scott. This new freedom among ministers and existing disunity within the Patriotic Front (PF) has introduced new political risks at a time when Zambia faces tricky policy challenges. There is no front-runner to replace Sata within PF. The simple reason is that there is no consensus about where the power lies between the Cabinet ministers, Central Committe, PF Parliamentarians and the general membership. Indeed we do not know how the contender will be chosen and how that may affect party unity. There is no defined government hierachy at president. Acting President and Vice President Guy Scott MP has responsibility as temporally head of Cabinet and State. He is possibly followed by the Leader of Government Business in the House and Government Chief Whip Yamfwa Mukanga MP. Then we have a suite of vocal cabinet ministers such as Finance Minister Alexander Chikwanda and Edgar Lungu (Defence and Justice Minister). However, it is very much a cabinet led goernment of equals. The PF itself is deeply divided party. There are power struggles between many competing camps. One faction is led by the increasingly popular Edgar Lungu (Defence and Justice Minister) possibly with support from Chikwanda, but one cannot be sure. Another is led by acting President Guy Scott with certain support from highly partisan Post. But how much he is in league with Kabimba is unclear. Separately, Satas son Mulenga Sata (Mayor of Lusaka) has made clear his intention to replace his father and he is certainly in campaign mode despite his public protestations to the contrary. We believe that whoever replaces Sata stands a strong chance of winning the presidential by-election due to the advantage of PF leveraging state resources within a short period of time and general disorganisation among the opposition. Though PF has become alienated in some urban areas, we believe recent by-elections in rural areas indicate that PF have increased their popularity. They currently have a clear majority in parliament and that gives them a solid platform. The challenge for UPNDs Hakainde Hichilema is that he does not to have the structural organisation and reach to build on 18% he gathered merely 3 years ago when he came third. But he certainly appears to have a better chance than MMDs Never Mumba who is overseeing a party even more disunited than PF after Sata. MMD of course faces the challenge that Zambians appear not keen to return MMD after just 3 years in the wilderness. It is important to step back and remember that these parties never pushed Mr Sata strongly for a justifiable medical board. They wee content to let Changala take the matter to court without sufficient legal backing. Perhaps the reason is that these leading opposition parties were not and are still not ready for a presiential by-election. They were clearly playing for time by not forcing PFs hand, hoping that their time will come in 2016. The prospect of a pact has also been ruled out. That said, a victory for the opposition candidate in January should not be ruled out. It is still possible though perhaps unlikely. What is clearly more analytically interesting is that an opposition victory would most likely deepen the current political challenges and generate greater economic uncertainty. The last sentence may puzzle some of our dear readers. We seem to be suggesting that PF winning a presidential by-election would reduce economic uncertainty relative to the opposition winning. That is certainly the Zambian Economist position. Our simple reason is that a new opposition president would come into power with fewer MPs than PF. They would also only have a mandate for 18 months or so during which they must launch a new budget from the scratch. That could lead to a very turbulent period, especially if the president is untested! The most likely opposition party capable of challenging the PF is UPND, which is unprepared for power with no shadow budget and only has less than 30 seats in parliament out of 150. The bottom line is that investors dont like change. Let alone untested and unclear changes. Therefore power switching to the opposition. We hope the above gives you our judgement of the political context. In future posts we dis us the current economic situation in the next post, and the pressing economic challenges. Stay with us.
Posted on: Mon, 10 Nov 2014 13:28:50 +0000
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