Success (part 2)

In my last post, I mentioned how I came to the conclusion that investment was the answer to the development of Zambia. I also mentioned that Zambia has to become more productive to compete on the global markets so that it can first get ahead before having the capacity to refine the way it operates to reach some sort of equilibrium state.

If I were President, I would look at the entire country the same way I look at my company. I want everyone to be busy, to be productive, and to be happy. There are millions of people though, all of different skills and different ages – meanwhile what is required to run the country has a complexity beyond what I can know. So instead of thinking of all the things I don’t know, here is my best guess based on what I do know.

There are three different time frames for the investments that are needed.

Short term (under 5 years), Medium term (5-19 year), and Long term (20+ years)

Short Term

Zambia needs to first improve its low skill work force. Simple things like the trades (construction, mechanics, etc). The life expectancy for the average Zambian today is just 39 years. So if we want to see changes in the next 5 years, we need to look at trade schools which can improve a person’s skills within 2 years. Right now the state of the government trade schools is pathetic and this forces Zambian companies to import these skills to get the job done, thus increasing the cost of doing business, and decreasing the competitiveness of its exports on the global market.

Medium Term

Zambia needs to look to two things, its health care and its infrastructure. Infrastructure, at least, has grabbed a lot of attention from the government, however, the purpose for this attention isn’t to improve the enabling environment for businesses to operate in, and instead, it is to gain votes for the next election. There are hundreds of km’s of roads that were built just 2 years ago and are already falling apart because the contractors who built them were not monitored properly, or the gov’t used cheap specifications when accepting bids for those contracts. Regardless, the end result is a perpetual state of repair which is so inefficient that it hurts.

Then there is health care. A year ago there was a photo of a woman giving birth to child in the parking lot of a health care clinic (with no nurse or doctor in sight) which was published on the front page of the news. The photo captured the essence of a defunct health care system where the vast majority of the population is effectively without access to any health care professional. The impact this has on the quality of life, and on the economy, is astounding. In a country where some 25% of adults are HIV positive – and not living to the age of 40, clearly this is an area that has to be addressed before Zambia can feel any success. I remember the day my friends wife went into labour, and we drove from one clinic to another, continuously being turned away because either the power was off, or the water was off, or the doctor was out. Then I learned that the biggest hospital in the country, UTH (University Teaching Hospital) was no different – they didn’t have a water tank!!!! Seriously, the hospital shuts down when the city turns off the water, which is often.

Long Term

Investing in education. There are many days when I think of stopping everything I’m doing with Rent-to-Own and refocusing all my effort towards education in Zambia. There are so many reasons why this is the most important thing for Zambia’s long term development. The first reason is for health awareness. The link between education and health is undeniable. There is a stat that indicates something like every extra year a girl spends in school; the chances of her getting HIV go down by 10%. Then there is the use of family planning – which reduces the average size of a family, which allows parents to invest more in each child. Then there is the skill level of Zambians and their ability to contribute to the economy. The talent pool. The list goes on, and the reason I think I care about this so much is because I believe that a good education should be a human right. It’s true that Zambia has mostly free primary education, but it’s also true that the quality is outright pathetic. Kids are in class a maximum of 60 days a year, and most of those days they’ll receive less than 4 hours of instruction. This is how someone can graduate from high school without knowing what a percentage means, or knowing how to spell simple words.

Please don’t rush out and donate to an organization that is building schools, because much like hospitals, the problem isn’t to have another building, the problem is to have qualified people doing the teaching and providing the health care. I’ve been to schools here where there are over 300 students and just 2 teachers. I’ve seen how the average student receives just 12 hours of instruction a week, and how failure rates for standardized tests can reach 95% in rural areas.

What does the first step look like?

Unfortunately, underlying all these investments, there needs to be a tax base. Luckily for Zambia, there are thousands of tons of copper being produced every week. So what is the problem here? Low royalties. The current government scrapped windfall taxes that earned Zambia some $400 million when the price of copper goes above $6000/ton. Well, prices are now above $8000 and the same tiny taxes are being collected. I could go on and on about this, but instead I’ll put a link to a blog that does this for me - http://www.zambian-economist.com/search?q=copper It is common knowledge that the Chinese (and other) mining companies that operate in Zambia, pay bribes to the government to control these taxes – and that the Zambian government accepts these bribes. So if I were to add an “immediate term” change that is required, I’d adjust the royalty scheme so that more money is paid in taxes and less in bribes. I also wonder why the president didn’t immediately come out and condemn the shooting of 10 miners by a Chinese manager! Seriously, what is going on here? Chile’s president comes to save their miners trapped underground, meanwhile not a peep from Zambia’s president when his miners are being shot at. - http://bit.ly/b9RKwE

With adjustments to the royalties collected, the gov’t could work towards training better teachers, paying wages on time, paying better wages, and starting to privatize the trades institutes, and paying for more research into HIV and Malaria prevention, and focusing on quality infrastructure.

The bottom line here, don’t forget, is to run the country like a business. Have happy citizens, healthy, educated and productive citizens. Somehow I feel that this isn’t the goal of the current government, and somehow I feel like Zambians don’t expect their government to live up to these standards.

Time to put my head back down and just keep doing what I know. Rent-to-Own. More productive SME’s in the rural areas and more jobs.