Tuesday, July 17, 2012


By Dr. Mbita CHITALA – Executive Director- Zambia Research Foundation;
 www.mbitachitala.blogspot.com; 0976 030398; mbitachitala@yahoo.co.uk

It appears that it is only now that everybody has realized that the unacceptable unemployment and underemployment in our country Zambia must be addressed before our country is destabilized. The IMF and the ILO on May 21-22, 2012 held a National Conference “Towards a New Growth Strategy for Employment, Decent Work and Development in Zambia” where they continued feeling sorry for Zambia without offering any tangible programmatic advice.

The African Development Bank on 9 July 2012 also hosted a “High Level Policy Dialogue Seminar on Youth Employment“ in Lusaka where many Cabinet Ministers from our country and others from Angola, Madagascar, Malawi, Mozambique and Mauritius attended. Prof. Mthuli Ncube, the Vice President of the African Development Bank (AfDB) warned the participants that “Youth unemployment has become a potential source of social, economic and political instability of nations.

Today’s young people face a real and increasing difficulty in finding decent work. This was evident in the last two years, with youth-led movements from Africa to Europe calling for social justice, freedom and jobs.” Addressing the delegates, the Zambian minister of Finance, Alexander Chikwanda said, “Youth Unemployment is a ticking time bomb for all of us.” He added, “We need to create a healthy workforce with the right skills to meet the challenges of a modern economy, this can be achieved by encouraging productivity and entrepreneurship. This will require the joint efforts and solidarity of both the public and private sectors. As government, we need to provide the necessary governance and accountability, as well as building the credibility of the State.”

The Zambian minister for information, broadcasting and labour, Fackson Shamenda, concurred, “There is a lack of co-ordination in our efforts to address the issue of youth unemployment. We need to find appropriate mechanisms to better co-ordinate our programs if we are to achieve our goals.”

These cries continue to be made by many of our citizens with a hope that someone will come up with a program to address the crisis. Poverty It has been an evident fact for many years that poverty, unemployment and underemployment continue to present major challenges for the Zambia. Our country’s GDP growth rate in 2010 was 7.6 per cent, projected to be 6.8 and 7.7 per cent respectively in 2011 and 2012. With increase in copper prices and hence exports, the current account deficit has narrowed to less than 2 per cent of GDP.

The above notwithstanding, growth has not been translated into meaningful human development. Widespread poverty, unemployment and underemployment still ravage our people. Poverty is particularly widespread in rural areas, where over 80 per cent of the population live below the poverty line, compared to 34 per cent in urban areas. Poverty, especially in rural areas, is characterized by high vulnerability to shocks that often erode development gains or exacerbate existing poverty.

The most recent Living Conditions Measurement Survey indicates that 64 per cent of all Zambians live below the poverty line. Half of these cannot afford the basic minimum food requirement and are, therefore, classified as extremely poor. Life expectancy at birth in Zambia remains low at 47.3 years, Adult Literacy rate of 15 year olds and above is 71.4% and Zambia’s HDI rank for 2011 was 150 out of 169 countries.

Why should there be so much poverty and suffering amidst so much wealth? What should be done is the necessary question for all policy makers to address to eradicate this poverty. And it starts with achieving full employment of our people. Unemployment The formal sector in our country has been steadily diminishing as the main source of employment in Zambia since 1992 when our country conducted a thoughtless privatization. As a percentage of the total labour force, formal sector employment has been declining over the years from 75 percent in 1975 to 10.3 percent in 1999 according to the report by the CSO, (Selected Socio-economic Indicators, 1999).

In addition to the parastatal demise and downsizing of the public service forced on Zambia by the Breton Woods Institutions and the Paris Club creditors, many jobs were destroyed. From a peak of almost 900,000 formal employment in Zambia before privatization, the country’s formal employment went downwards towards 350,000 after privatization. The destruction of jobs in the Mining Industry was particularly symptomatic of the crisis.

A study by ODI in 2009 observed as follows: “There is some homogeneity in the response of the mining companies to the crisis. The mines have closed mining units, laid off workers, reduced the scope of work done by mining contractors and suspended contract labour and recruitment. In addition, mines have suspended overtime work, renegotiated supply contracts so as to reduce supplier prices, deferred payments to suppliers and contractors and deferred exploration and non-essential capital expenditures. Mopani Copper Mines has …reduced the scope of work for contractors by 40% and the use of contractors’ labour by 30%, and has suspended hire contracts and recruitments. The mine expects to lay off 215 workers at Nkana and 467 workers at Mufulira during 2009. Konkola Copper Mines has reduced expatriate staff by 18%. It has laid off workers. Total job losses at Konkola Copper Mines in 2008 could be estimated at 6667 workers. Chambeshi Metals closed down Luanshya copper mines, with 1719 workers laid off. The Chambeshi smelter was closed, and 240 workers and 267 contract workers lost their jobs. First Quantum Minerals has renegotiated its supply contracts. It has deferred other non-essential exploration and capital expenditure programmes and has reduced working hours from 12 hours to eight hours per shift, with 70 workers laid off. (Excerpts from ODI. 2009. Global Financial Crisis Discussion Series Paper 10: Zambia )

Since the end of privatization, getting employed in the formal economy has continued to elude many Zambians. Our streets are full of many educated and skilled Zambians who have chosen to be part of the lumpen working class or reverted to backward subsistence farming. In aggregate terms, according to the Central Statistics Office (CSO) Census of Population and Housing (2000), the number of persons engaged in informal sector activities in 2008 was approximately 3.6 million, which, as a percentage of the total labour force stood at about 79 percent. Figures from the Labour Force Survey of 2008, with the reference period being 2006 indicate that of the 5,410,619 people in the labour force, only about 522,176 were in formal employment, with the rest unemployed or having to eke out a living in the informal economy.

 In 2009, the Employment and Earnings Inquiry Report published by the CSO estimated that Zambia had 671,246 workers in the formal sector. Of these, 66% were employed in the private sector (442,378 workers), 21% or 139,234 in Central Government, 5% in Local Government and about 8% in parastatal companies. On average, it would appear that out of the total working population of about 7 million in our country’s total population of 13.5 million, only about 650,000 Zambians are in formal employment and the rest about 6,350,000 in informal operations.

However, using the narrow international definition followed by the ILO, unemployment in Zambia has been established to be at 13% . However, recognizing that many people have been out of work for so long that they have stopped looking for jobs, broad unemployment must be higher. With the decline in formal sector employment, the informal sector has become the principal source of employment and livelihood for most Zambians. This is a sector where people survive under the doctrine “One for oneself and God for us all”. It is a sector in the towns of lumpen elements, crooks, prostitutes, vagabonds, all that mass of humanity hovering between suicide and insanity. In the rural areas, they are essentially subsistence cultivators often dependent on state aid to make them survive just sufficiently.

It is evident that for the rural people to progress from their torturous lives and enter the civilized world, they must transcend their peasant existence and be farmers or workers in the formal economy. Similarly, the lumpen elements in the towns must be facilitated to get formal jobs or be enabled to be small entrepreneurs.

Youth Unemployment

As concerns young people who every policy maker appears to be afraid of, and who comprise the future of Zambia, the Central Statistics Office reported that unemployment is a more serious problem in the young age groups of 12.-14 (19.9 percent); 15-19 (22.6 percent); 20-24 (20.8 percent) and the 25-29 (13.9 percent). The peak is in the age-groups 15- 24. Given that young people (under 25 years) in Zambia comprise about 63 percent (roughly 6 million) of the total population, youth unemployment must be a special concern for Zambian policy makers. In fact, every year, over 240,000 school leavers are entering the labour market without hope of finding a job.

Incidentally, youth unemployment in Zambia highly correlates with poverty since our country has no social (unemployment) benefit system that would otherwise cushion the youth from deprivation due to unemployment. Indeed, crime and other forms of juvenile delinquency can be traced to unemployment-related deprivations.

Youth unemployment should therefore be a matter of special concern to the PF government and all those political parties that want to form government to address. The PF won the 2011 elections on the promise to deal decisively with this youth unemployment and it is important they actualize their program urgently.

Employment analysts have argued that the Zambian economy must generate more than 400,000 new jobs in net terms per year to ensure that the unemployment rate does not rise. To absorb new entrants into the labour market, the economy should generate more than 600,000 net new jobs per annum. This is the challenge that the PF government must address. This is also the challenge of all political entities that want to rule us to provide answers to.

Without doubt, it is only by creating jobs for people that a country can meaningfully eradicate poverty. In developed democracies, this is the litmus taste for an efficient and effective governance system on which political parties contest for power.

The battle of ideas is between neo-liberals who advocate for monetarist programs of austerity and perfect markets and the supply siders who advocate growth and creative state intervention. History is on the side of the later as the current global financial crisis attests.

Existing Policy Framework on Employment The official policy document on employment in Zambia is the National Labour Market and Employment Policy which was developed by the Ministry of Labour and Social Security and some stakeholders many years ago in 2000. The policy document identified policy areas for improving the functioning of the Labour market and promoting employment. The main strength of the policy document was its recognition of the need for a coordinated approach to employment promotion. The policy suggested an institutional framework for coordinating and implementing a national labour market and employment policy. The policy was however a still borne document as it died as soon as it was drafted and no attempt to put it in practice has ever been made. The policy remains unimplemented largely on account lack of political will and financial constraints.

A related policy document that broadly dealt with employment were the Poverty Reduction Strategy Papers (PRSP). However, a major weakness of the PRSPs was that they had in themselves no strong foundation of employment-targeted programs. At best, employment was treated as a sector issue, linked to programs of agriculture, tourism, industry, mining, transport, roads, energy, water, environment, HIV/AIDS, education and health. Employment promotion in the PRSP was not assigned a major role as a means of improving access to income and lowering poverty rates. Rather, it was regarded as a by product of sector policies - which sector policies could not address the challenge of employment by themselves.

Without addressing employment creation the PRSPs were doomed to fail in poverty eradication. They continued the neo liberal structural failures we have witnessed for many years which have prevented our country from making a meaningful take off.

The PRSPs also failed to adequately analyze the dynamics of the informal economy or present a well-orchestrated approach to poverty reduction for working people in informal employment. It is hoped the PF government will soon come up with a more realistic developmental program to address employment creation.

The provision of employment for Zambians is also articulated in a number of policy documents, including the following:- . The Vision 2030 of becoming a prosperous middle-income nation by 2030; Zambia Decent Work Country Programme (Z-DWCP), 2007 – 2011 and 2012-2015; . The Sixth National Development Plan (SNDP, 2011-2015), as well as its predecessor – the Fifth National Development Plan (FNDP, 2007-2010); The Private Sector Development (PSD) Reform Programme; and The Micro and Small Enterprise Development (MSME) Policy. It is not known whether these policies are part of the PF government’s programs as their implementation is yet to take root. It would be useful if the PF government could make a categorical statement on their attitude towards these policy documents, so that, if need be, new documents which are consistent with their manifesto provisions are prepared.

What is consensually agreed by all Zambians is that employment opportunities must be created and this require supporting infrastructure to be established. What Should be Done? As inferred in this article, it appears employment creation has been relegated to the margins of economic policy and yet it is supposed to be the basis on what any progressive macroeconomic policy is anchored on. The thrust of a limited number of employment initiatives has been through the implied benefits of economic growth.

The assumption that high GDP growth has resulted in job creation, has not been so for Zambia. There is growing evidence of jobless growth in Zambia which challenges the wisdom of relegating employment to the margins of economic policy. That is why there is a compelling reason to change our attitude of lassie faire and adopt a more direct and integrated approach to employment promotion is necessary.

Our Government is advised to adopt a direct approach to employment promotion by designing and implementing an Employment Strategy that is anchored in a workable National Economic Plan. This strategy shall guide the nation on job creation in the short, medium and long-term and provide for an institutional mechanism for coordinating and linking macro, micro and all sector strategies and programs on employment. It would be patriotic and progressive that the Hon AB Chikwanda, Minister of Finance convinces his colleagues to ensure that in his 2012/13 fiscal budget estimates, employment creation is placed at the center of the macroeconomic framework, and not as a residual of it. In this way, an employment strategy will become one of the most potent tools for fighting poverty.

Policy analysts and observers have shown that in addition to the constitution and good governance, the other urgent challenges of the PF government is to create 600,000 net new jobs per annum; to raise the proportion of the labour force in the formal sector employment to 50% by 2015; to reduce the official unemployment rate from 13% to 7% by 2015 and also raise labour force participation rate. In the literature, countries that faced such difficulties as Zambia currently faces, introduced employment creation programs.

The earliest job creation programs were conducted in the United States and Germany.
United States:
The first large scale job creation programs in the United States were introduced as part of the New Deal during the Great Depression. Departments like the Civil Works Administration, Public Works Administration, Civilian Conservation Corps, , and most prominently the Works Progress Administration created thousands of jobs for the unemployed.

In 2011 President Barak Obama, in an opening bid for re-election discussed using innovation economics as the basis for his jobs creation program.

Although Adolf Hitler in the early 1930s saw the construction of autobahns primarily as a military advantage, construction of the Autobahn system provided employment for the masses affected by the crisis of the Weimar Republic The construction of the Autobahn had a side benefit of creating a new tourist industry.

For our country, we certainly must come up with a job creation program that is effectively and efficiently managed. The following programmatic suggestions are made;
1. The Rural Roads Program could be expanded and must involve maintenance of feeder roads along the lines of the PUSH project;
2. The Clean Towns Project which could be introduced and this could involve painting public buildings and city clean-ups and create more than 5,000 net new urban jobs by 2015;
3. Promoting micro and small enterprises in the informal economy consistent with Article 20 of the PF Manifesto which is very clear on this. Alll that is needed is plain implementation. The fact that the informal economy has become such a sizeable place of work should make it a special target for actions to reduce poverty. In this regard, special attention could be paid to the following: . Coordinating efforts that offer assistance to micro and small enterprises. Within this context,
- access of small entrepreneurs to credit and to land resources should be facilitated through cooperation between government and the private sector. There is no justifiable reason to suspend the work of the Citizen Empowerment Commission. To the contrary, if Managers have been found wanting by the PF government, they should allow the normal course of Law to visit the accused. There is no justification to close the institution as the case is now. Zambia suffers opportunity costs. . - Providing financial support for technical training, business development, and credit access programmes institutions involved in Small Scale Enterprise promotion. It is important for the government to create an institution on the lines of the repealed Small Industries Organization which during its heydays was phenonmenal in supporting entrepreneurs .The current system where the ZDA took over the work of SIDO/SEDB and has marginalized SSMEs development and promotion was a disservice to Zambia’s efforts to promote industrialization programs.
- Registor and mentor 1,000 small enterprises and train more than 5,000 entrepreneurs in business and technical skills.
-  Building more industrial estates and premises for small enterprise manufacturing and trading. The formation of more industrial estates such as the Chinika complex and Makeni Complex in Lusaka can help realize this in an organized way.
  4 Supporting agriculture and rural development strategies to create 20,000 net new jobs for rural people and that more than 500,000 small farmers are organized in out grower schemes by 2015: within this, special attention should be paid to:
. The building of feeder roads, bridges and communication networks using labour-intensive methods. . Construction of residential houses (3 million national deficit) and public buildings- introduce government guaranteed social housing scheme to lacal councils as advocated by Art. 4 of the PF Manifesto.
. Land reform and extension services
. Construction of dams and irrigation facilities using the Rural Investment Fund.
  . Supervised agriculture (e.g. out grower schemes) which must be undertaken using labour-intensive methods.
  . Setting up community level organizations (or cooperatives) in order to facilitate the supply of inputs and access to finance, marketing, extension and veterinary services.
. Establishing more Integrated Resource Management Projects using village action groups along the lines of the Luangwa Integrated Development Project. .
  . Use of village- level processing technologies for various oil seeds such as sunflower, castor and groundnuts and the setting up of agro processing industries in rural areas.
- Ensure that the proportion of workforce employed in non-agricultural industries is raised from 20% in 2009 to 65% in 2015
. Setting up of lapidary facilities in the small-scalegemestone mining areas and create 1,000 job opportunities.
  - Tax the Mining companies equitably and fairly by re introducing windfall taxation
  - Implement the Zambianization Policy to ensure that unless the skill is not available in Zambia, all employment shall be performed by Zambians.
5. Preserving jobs in the private sector by means of revising the tax regime and maintaining a constant monitoring of trade-offs in policy in order to ensure that no objective is achieved at the significant expense of another. Criminalizing the minimum wage as Statutory Instrument 35 signed by the Hon. Minister would appear to be inconsistent with advancing job creation and should therefore should be cancelled.
6. To strengthen the employability of labour, special attention should be paid to:
  - Strengthening the availability of skills by supporting a substantial increase in private sector expenditure on training, augmenting skills and infrastructural development through an Infrastructure and Employment Investment Programme and by improving the interface between labour market needs and the education system.
- Improving the functioning of the labour market by establishing a Labor Market Information System (LMIS). A data base for the labour market must be established.
- Youth employment and skills development; The announcement by Minister Kambwili that the government plans in 2013 to introduce a compulsory six months youth national service skills development program will go a long way in supporting this initiative. The currently underutilized infrastructure in the Zambia National Service (ZNS) provides a ready avenue for both short term mopping up measures as well as long-term skills training initiatives. More than 250,000 School Leavers can be given skills at the Zambia National Service every year.
  - Introducing a youth learner ship wage and a youth training subsidy for companies providing youth apprenticeship programmes and on-the -job training. There can be 100,000 young people receiving private sector on- the –job training every year by 2015and have a minimum of 150,000 youth on the TEVETA managed apprenticeships every year. This is consistent with Art. 9 of the PF Manifesto which provides for the government to collaborate with industry to provide learner ship/apprenticeship practical training.

The Challenge The most famous equation in physics is Einsteins’s E = MC squared. The equivalent for macroeconomis is GDP = C + I + G + NX (or X – M) where, C represents personal consumption on goods and services; I denote investment and refers to new business investment in both public and private sectors; G denotes government budget (i.e. revenue less expenditure); and NX denotes net exports.

According to many observers including our own Dambisa Moyo in her book “How the West Was Lost (2011)”, it is the process of managing those indicators that makes a difference in any country. A country must strive to deal with consumption by increasing savings which in turn will impact on increased industrial production and increased exports while at the same time, there is assurance that the government fiscal position ensures that any deficit can be financed.

An industrial policy aimed at providing supportive measures to promote sustainable enterprises is a historical necessity. The fact that in Zambia’s 1998 GDP which has not changed substantially ever since comprised consumption about 88%, investment constituted about 14.4% , government net revenue constituted about negative -6.6% and net exports constitutes negative -9.0% should make policy makers worried that their GDP is skewed towards consumption at the expense of production. There is need to change this so that net exports and investment take a bigger share in the GDP equation. The average United States GDP comprises for instance of about 70% consumption, investment of 15%, net government revenue of 15% and net exports of 5%. This is the norm in many rich and middle income countries.

So far, our country has been failing to address successfully the unemployment crisis. We agree with Daron Acemoglu and James Robinsom (2012) in their recent book “Why Nations Fail” that “nations fail because their extractive institutions do not create the incentives needed for people to save, invest and innovate.” Pp372 It is also true as Greg Mills in his insightful book “Why Africa is Poor” (2010) that Zambia is poor because its leaders make this choice. Zambia is not poor because it has been denied the market and financial means to compete, that it has no technical expertise, that Zambians are lazy, that Zambia lacks natural resources, that Zambia has no private sector, that Zambia’s population density is too low, that the land holding structure impedes entrepreneurship and that Zambia’s governance structures are weak. All these reasons are neither here or there. Our country is poor because those who have had power to rule over us made choices that condemned us to continued poverty.

As Zambia is part of the global village, we can learn a lot from the experience of other countries that have implemented employment creation programs. As noted in this essay, Job Creation Programs are undertaken by a government of a nation to assist unemployed members of the population in securing employment.

A cornerstone of Keynesian economics, job creation programs are especially common during times of high unemployment as is the case in Zambia presently. They may either concentrate on macroeconomic policy in order to increase the supply of jobs, or create more efficient means to pair employment seekers with their prospective employers. In the appendix, we have presented case studies of several countries that have successfully implemented job creation programs.

In 1933, John Maynard Keynes (1883-1946) published “The Means of Prosperity” in which he argued that unemployment could be reduced by counter cyclical public spending when an economy is down. This contradicted the classical treatment of unemployment to let wages go down until the demand for labour caught up with supply and to cut back on spending to compensate for the fall in tax receipts. Keynes believed, as many of policy makers do, that these policies were mistaken. Governments must intervene by spending money in public projects like roads and so on. And this is the theoretical premise on which job creation programs are anchored.

The best advice to our policy makers in Zambia is to adopt growth policies and abandon austerity programs that have not seen us make any meaningful headway against poverty eradication since we adopted structural adjustment programs. END

Appendix: Global Examples of Job Creation Programs

In this last section,we to present as an appendix a summary of studies conducted by other researchers. I am particulary indebted the study by Stephen Devereux and Colette Solomon Employment creation programmes: The international experience, Economic and Labour Market Analysis Department, International Labour Office, Geneva,August 2006. A summary of their cross country survey is presented in the following analysis. Even as the following is discussed and recommended for Zambia to consider adopting, it should be noted that, while the experiences of other countries with employment creation programmes is instructive and informative, each programme is designed and implemented in a particular context, and the impacts of each programme are highly context-specific. There is no guarantee that a programme that was successful (or unsuccessful) in Argentina or South Africa will succeed (or fail) elsewhere. Any lessons (or ‘non-lessons’) that are drawn for employment creation programmes from this cross-country review must therefore be drawn with caution, and carefully adapted to various diverse local circumstances between and even within countries.

One useful ‘lesson on lesson learning’ from South Africa is that successful experiences can be replicated across provinces, but that mechanisms for sharing and learning these lessons should be integrated into programme design. It is equally important to build in mechanisms for learning from mistakes and approaches that fail to achieve the intended objectives: ‘learning from failure’ is as important as ‘learning from success’.
The Government has formulated a Social Emergency Programme, one component of which is the Jefes y Jefas de Hogar workfare programme which started in 2001. The Programa Jefes had reached around 2 million beneficiaries by the end of 2003, providing them with about US $160 per month in exchange for work in community projects or training. The transfer amount was set low enough to target poor people and also not to discourage them from seeking more permanent jobs. The Programa Jefes was intended for unemployed household heads who have children at home. The design and implementation of Jefes builds on the success of its predecessor, the Trabajar programme. Targeted at the poor unemployed, Trabajar provided wages to beneficiaries in return for their work on small infrastructure projects proposed by local governments and NGOs. It was carried out over a period of six years, from 1997 to 2002, across all of Argentina’s 23 provinces.

The Labour Emergency Programme (PEL), started in 2001, provides temporary employment and vocational training to the unemployed, through projects that either create employment or affect employment creation. It contains a sub-programme for Community Development, which aims at creating productive employment for vulnerable women, especially heads of households. Activities specifically include those which are not traditionally performed by women, such as bricklaying, building and carpentry.
While the long-standing Food-For-Work (FFW) programme is the main employment creation programme in Bangladesh, the Rural Maintenance Programme (RMP) provides an interesting contrast and raises important considerations. The FFW programme is an umbrella of different projects which is implemented by several ministries with donor assistance. Donor support to the programme has been declining and, of the total foodgrains allocated under the programme in1999/00, about 60 per cent was provided by the Government. Since 1975, the FFW programme has created both food-waged employment to landless and marginal farmers during the slackagricultural season, as well as land infrastructure such as rural road construction and maintenance, irrigation channels, flood control and embankments.

 In addition, the FFW Programme has had long-term development impacts such as improved nutrition and increased agricultural production. The RMP is a relatively small cash-based project run jointly by CARE Bangladesh and the Local Government Engineering Department (LGED). Poor women are given year-round work, such as the maintenance of rural earthen roads. Work has been undertaken on 75 per cent of such roads in the country. An average of 60,000 destitute women per year have been supported by the programme.

The RMP is funded with the proceeds of Canadian wheat monetized at the port of entry. While the FFW programme has clearly had demonstrable positive impacts on food security, the RMP programme has a zero leakage rate and is more cost-effective than FFW, because commodity handling costs are greatly reduced.

The RMP has also had important long-term developmental impacts, both economic and social. For one thing, introducing bank accounts for poor women has facilitated their savings behaviour and provided them with access to formal financial institutions, which they would not otherwise have had. Secondly, women have also been given an opportunity to negotiate and self-manage infrastructure maintenance activities. Thirdly, in 1992 RMP began a phased approach which allowed women to stay in the programme for four years, after which they are expected to ‘graduate’ out of RMP into self-supporting income-generating activities.

Employment Guarantee Scheme of Maharashtra (EGS): The EGS was introduced in 1972/73, when the State of Maharashtra faced an acute drought. It was given statutory status in 1979. The EGS Act provides that any adult person in rural Maharashtra has a right to work as an unskilled manual labourer, provided they register at the local level as a person seeking work. The State must provide work within 15 days of being demanded. The permissible works are rural, especially agricultural, infrastructure (which includes minor irrigation works), soil conservation, afforestation, de-silting of tanks, stone-cutting and road construction and maintenance. Wages are paid at piece rates and, while initially lower than market wages, in 1985 a Minimum Wage Act was passed to regulate EGS wages.

Financing for the EGS is raised from additional taxes imposed on citizens of Maharashtra by the State administration, which are paid mainly by the urban professional classes. Jawahar Rojgar Yojana (JRY): Launched in 1989 by merging two operational programmes, the National Rural Employment Programme (NREP) and the Rural Landless Employment Guarantee Programme (RLEGP), JRY was the biggest employment programme ever sponsored by the Government of India. A centrally sponsored scheme, like its predecessors, 80 per cent of JRY funding came from central government. An important and novel innovation is that 80 per cent of the combined central and state budgets for JRY were released directly to the Village Panchayat, to be utilised for village works, with the remaining 20 per cent being spent by the District Rural Development Agency (DRDA). This devolution of power and funds to the village level was considered a bold initiative.The primary objective of JRY was the generation of gainful employment for rural unemployed and under-employed men and women living below the poverty line. The secondary objective was to create a base for sustainable employment by improving rural economic infrastructure, and creating direct community and social assets for the poor, particularly scheduled castes and scheduled tribes. There was a stipulation that 30 per cent of employment opportunities should be given to women. JRY was initially dispersed throughout India, without any specific focus on ‘backward areas’ until late 1993, when it started to concentrate on ‘backward districts’.The JRY has been restructured and renamed, and is no longer an employment creation programme, but a rural infrastructure development programme.

Under the Jawahar Gram Samridhi Yojana (JGSY), as it is now called, each Gram Panchayat has the responsibility of preparing an annual action plan for taking up works, according to the felt needs of the people. The stipulation that 60 per cent of the budget be allocated to wages and no more than 40 per cent to materials is no longer operative. However, the types of works that are taken up at the village-level are inevitably labour-intensive.

The Employment Assurance Scheme (EAS): Broadly modelled on the Maharashtra Employment Guarantee Scheme, the EAS was launched in 1993/94 in 1,772 identified backward blocks located in drought-prone, desert, tribal and hill areas. EAS outlay in 1994/95 was Rs.8.5 million per block.The primary objective of this programme was the creation of additional wage employment in lean seasons. The secondary objective was the creation of durable economic and social assets. There per cent on minor irrigation, 20 per cent on rural roads and 20 per cent on construction of school and pre-school buildings (anganwadis).

EAS was restructured in April 1999. It is a single wageemployment programme and is no longer demand-driven. Fixed annual outlays are made for each state. These are based on the incidence of poverty, with the poorer states receiving relatively more funds. Allocations are based on an ‘index of backwardness’, which gives 50 per cent weight to the inverse of agricultural productivity and 50 per cent to the proportion of scheduled castes and scheduled tribes in the population. While 70 per cent of the funds allocated for each district are further distributed among the blocks, 30 per cent is retained at the district level to be used in areas of distress or those experiencing labour migration.

Another successor scheme to JRY is the intensified JRY (IJRY) programme. Based on criteria like low agricultural productivity, commercial and industrial backwardness and a high concentration of scheduled castes and scheduled tribes (SC/ST), 120 districts have been identified as IJRY districts. In 1994/95, outlay per district on IJRY was Rs.73 million.

Finally, the JRY ‘umbrella’ scheme subsumed special innovative projects, and aimed at addressing specific problems faced by the rural poor in each district. The Ministry of Rural Development earmarked Rs.1,000 million for this scheme in 1994/95. In 2005, under its National Common Minimum Programme, the Government of India made a commitment to enact a National Rural Employment Guarantee Act. This will “provide for the enhancement of livelihood security of the poor households in rural areas of the country by providing at least one hundred days of guaranteed employment in every financial year to every household whose adult members volunteer to do unskilled manual work” (Government of India,2005). Employment shall, as far as possible, be provided within a radius of five kilometres of the household’s village. Each State Government will prepare an Employment Guarantee Programme, which will include the undertaking of productive works that contribute to the creation of “durable assets”. Wages will be paid either wholly in cash or in cash and in kind.

 In response to the financial crisis, was a package of emergency job creation measures, collectively known as Padat Karya, to provide assistance to those who had lost their employment in the formal sector. This initiative was in effect a revival of earlier labour-intensive job creation programmes, also referred to as Padat Karya, which had built infrastructure such as village roads, schools and irrigation channels throughout rural Indonesia during the 1970s and 1980s. As with the earlier interventions, the Social Safety Net was not one single job creation programme, but a variety of disparate projects grouped together.

What these projects had in common was that they theoretically drew on labour-intensive methods, to undertake small-scale village-based infrastructure or public works projects, thus providing opportunities to local unemployed or under-employed labour. Since its re-launch in 1998, Padat Karya has expanded to comprise 13 sub-programmes, involving 8 executing agencies and reaching more than 300 districts. It is mainly funded through reallocated funds from ongoing loans from donor agencies and other redirected resources, as well as from other newly designed initiatives. In response to criticisms that the Social Safety Net schemes were poorly planned and hastily implemented, several new initiatives have been developed, including new employment programmes that emphasise empowerment and use community-based approaches to generate employment and incomes.

South Africa:
Unlike many parts of the world where unemployment is largely cyclical – e.g. seasonal due to slack periods in agricultural production – in South Africa the causes of unemployment are structural and historical, which presents particular challenges. One response has been the Government’s launch of the Expanded Public Works Programme (EPWP) in April 2004. Coordinated by the Department of Public Works, the EPWP is a nationwide initiative aimed at creating temporary employment for hundreds of thousands of unemployed South Africans, developing the skills of the unemployed, and providing essential social services and physical infrastructure to disadvantaged communities. The EPWP covers all spheres of government and state-owned enterprises, and involves reorienting line budget functions and conditional grants, so that government expenditure results in more work opportunities, particularly for unskilled labour. There is agreement that the EPWP must make use of appropriate technology, should substitute machines for labour wherever possible, should not displace existing permanent jobs, and that all opportunities must meet a real demand for services.

The Dar es Salaam experience: After the serious failure of public-sector solid waste collection in Dar es Salaam, a city consultation identified solid waste management as the key priority within the city. Over the last years, the Dar es Salaam City Council, with support from ILO and others, has made significant progress in tackling the problem. The government has adopted by-laws regulating the waste collection and the three municipalities in Dar es Salaam have formally advertized, tendered and awarded contracts to micro-enterprises for waste collection and street sweeping. The households generating the waste pay directly to the waste collection enterprises.

 Much has been achieved in terms of employment creation, income generation, social integration, waste collected and disposed, area covered and environmental cleanliness in general: • More than 2000 jobs have been directly created and 50 micro enterprises are involved in waste collection, some of which are community-based enterprises. These jobs are primarily held by poor women and men. Child labour in waste collection has been eliminated where formal waste collectors are operating effectively. • The cleanliness of the city has been improved and the waste collected and disposed on the official waste dumpsite has dramatically increased since 1995 and now covers 40 % of the total household waste generated in the city: END

Sunday, July 8, 2012


BY: DR MBITA CHITALA - Executive Director – Zambia Research Foundation Following the understandable rejection and criticism of parts and process of the currency reforms that the Hon. Minister of Finance Alexander Bwalya Chikwanda and the Bank of Zambia have initiated, it is important that the rejections are put into context. It is well known that currency reforms are usually carried out by states to normalize monetary circulation and strengthen monetary systems and they take many forms including deflation, nullification, revaluation, devaluation and so on. In Zambia’s case, we have involved two aspects in our currency reform, namely, 1. Finance Minister Chikwanda signing a Statutory Instrument prohibiting the quoting and pricing of goods and services in foreign currency which appeared to criminalize dollarization and; 2. The announcement on 25 January, 2012 by Bank of Zambia in its Press Release that the PF Government had on 23rd January, 2012 approved their recommendation to rebase the Kwacha by dividing the existing banknotes by 1,000 which effect will cause the cancellation of three zeros on the existing banknotes. Dollariztion Currency substitution or dollarization is a phenomenon where a government allows the use of other foreign currencies to operate side by side with other currencies. This is the policy Zambia adopted on 29 January,1994 when it repealed the Exchange Control Act and abolished exchange controls in an effort to quickly stabilize the exchange rate and gain international credibility. This has worked well since then and a reversal to this policy would appear to be reactionary. Though the Law Association of Zambia has commented that Statutory Instrument 33 of 2012 which criminalized quoting and pricing of goods and services in foreign currency and signed by Hon Finance Minister AB Chikwanda was ultra vires the constitution and that it was therefore a nullity ab initio, it is also true that currency substitution or dollarization tends to undermine our government’s fiscal ability. A sober analysis must be made to determine the cost benefit of doing away with exchange controls since 1994. To some people which appears to include the Hon Chikwanda, in the years that our government allowed currency substitution (1994 to date), our country lost the ability to finance expenditure by printing money. The government also assumed the cost of obtaining the foreign currency that replaced the Kwacha. These costs are of course difficult to calculate but they are high. Dollarization, it has been argued, has prevented our policy makers to exercise any policy autonomy whatsoever and has tended to eliminate the Kwacha (which is one powerful symbol of our national identity and independence) as our national currency. On the other hand, many observers see the repeal of exchange controls allowing for partial currency substitution where the Kwacha was allowed to circulate alongside the US Dollar and other convertible currencies, was the best economic policy as it led to the stabilization of the Kwacha and brought about credibility of the Zambian economy. Following on this argument, the Zambia Association of Chambers of Commerce and Industry (ZACCI) represented by their Vice Chairman for the Northern Region Raj Karamuchand has criticized the introduction of Statutory Instrument No, 33 and argued that it must be withdrawn as it has “the potential of sending wrong message to would be investors and may curtail investment and foreign currency flows. This may lead to the depreciation of the Kwacha and increase inflation levels in the country…..The regulations have also the potential to create distortions in the economy which can boost informal activities at the expense of the formal economy, with adverse effects on the official sources of foreign currency sources and government revenue. The anxiety expressed by the ZACCI has been supported differently by other stake holders such as farmers growing wheat, soya beans, cotton and other export cash crops. The Mining companies who control more than 70% of our export earnings appear to be excused since they currently enjoy Development Agreements which allow them to bank all their export earnings overseas and continue to cheat on Zambia by exporting using FOB considerations but claiming CIF when they invoice for tax purposes. It is important that the government unambiguously states its policy. Is the country reverting to exchange controls as is the case in our neighboring countries including South Africa or we should continue as we have been since 1994 but repeal regulations that prevent investable money from coming to Zambia such as the one sided and subjective money laundering regulations. It is advisable that Minister Chikwanda consults a little more before unleashing potentially injurious policy directives such as the ones in the current currency reforms. Rebasing of the Kwacha Rebasing or redenomination of the Kwacha is another policy scheme which Minister Chikwanda together with the Bank of Zambia have decided to implement without much consensual agreement with the broad society. Contracts for this scheme have already been awarded and a campaign to explain the policy is ensuing. Rebasing in simple language refers to the reduction in the par value of the Kwacha.The question to be asked is what is the rationale for Zambia engaging itself in rebasing its currency? There are two views on rebasing the Kwacha. First, that it is justified to rebase the Kwacha since rebasing or redenomination of the Kwacha according to the Bank of Zambia is aimed at addressing the costs associated with the accumulated depreciation of the Kwacha since 1991 which they allege had undermined the basic function of the Kwacha and furthermore created transaction difficulties. It is argued that since inflation has been broken and Zambia now qualifies as a moderately stable economy with high public confidence in the economy, we can now rebase the Kwacha. This reasons advanced by Bank of Zambia is debatable. It is true that inflation in 1993 was 188% but it not so anymore. It has been below 10% for a couple of years. In all countries where reebasing was done, inflation was very high. For instance Angola reebased its currency in 1995 when inflation rate was 2,672 % while Brazil did the same when inflation in 1994 was 2076%. Now, Zambia’s inflation rate has been below 7% lately and very stable. Public confidence in the economy is very high as evidenced by the growth of FDI in the country. Instead of using this stability argument as the reason for rebasing, on the contrary, it is a good argument for not rebasing the Kwacha at all and leave the status quo. Some policy analysts therefore contend that rebasing the Kwacha is not economically justified. It is a costly inconvenience. Furthermore, contrary to the BOZ that there will be no loss of value, the fact is that, there will be a reduction in the par value of the Kwacha. The new unit of the Kwacha shall replace the old unit with a certain ratio. A similar reform occurred in Ghana where Ghana replaced the old 10,000 Cedi with a new 1 Ghana Cedi by removing four zeros from the old currency. When the reform was implemented in Ghana, it resulted in the birth of an entirely new currency with new symbols. Similarly, Argentina in January, 1992 rebased its currency by re-introducing peso to replace the austral at the rate of 1 peso=10,000 australs, and then pegged its international exchange rate at 1 peso=1US$. After rebasing ,inflation dropped from 172% in 1991 to 1% in 1998. However, the fixed exchange rate which was 1 peso= 1 US$ led to constant flight of dollars and led eventually to de industrialization, unemployment and general recession. In 2001, Argentina abandoned the exchange rate peg and the peso depreciated by 240% and inflation rose from negative levels to 25.9% in 2002 and now has stabilized at 9.6% while international exchange hovers around 3 peso = 1 US$. Of course one good reason why rebasing or redenomination of currencies are implemented is to allow governments to reassert their monetary sovereignty. If citizens and residents lose confidence in the national currency, they may start to use foreign currencies, in other words, they may engage in currency substitution . This can be a psychological and economic blow to a government as the economic policy of a country will be at the mercy of foreign capital and foreign central banks. That is why it is considered important that the government symbolically convinces Zambians that the Kwacha is a worthy currency and that hyperinflation is now a thing of the past by rebasing the Kwacha. Rebasing of the Kwacha can further be justified if it is argued that the PF government intends to make the country attractive to Foreign Direct Investment (FDI). In other words, FDI will come to Zambia if the Kwacha is directly and easily linked and monitored by the world reserve currency the US Dollar which effect will increase FDI confidence in the Kwacha. However, this poses onerous challenges on the government and the Bank of Zambia. The monetary authorities must ensure that inflation will be strictly controlled and that the Kwacha value relative to all foreign currencies will be sustained. In other words, this will mean the Bank of Zambia shifting from their current monetary targeting as agreed with the IMF currently to inflation targeting with all its challenges. The Future Currency reforms should never be used or designed to punish people or to expropriate much of peoples savings as occurred in North Korea in 2009 which resulted in so much damage to Korea and where media reports indicated that the alleged responsible official Park Nam-Ki was dismissed and reportedly executed for his failure to lead the currency exchange successfully. The current currency reforms need not be rushed nor should commentators be told that this is a fait accompli. We should learn from the examples of other countries including our neighbor Zimbabwe and North Korea so that we do not repeat the same costly mistakes. The Statutory Instrument Number 33 of 2016 signed by Hon Chikwanda should be momentarily be suspended to allow for further consultations as it may be unlawful and injurious to our economy. The rebasing of our Kwacha, though, from the economic point of view was unnecessary, needs to be managed well so that the monetary authorities continue to effectively manage the general price level – so that Zambia continues to enjoy low inflation. Email:mbitachitala@yahoo.co.uk www.mbitachitala.blogspot.co. Mobile: 0976 030398