Movement for Multiparty Democracy (MMD) President Dr. Nevers Sekwila Mumba says that the Patriotic Front (PF) government is about to waste One Billion Dollars of tax payer money because of their stubborn insistence to keep Zamtel as a parastatal and borrow $300 million to
Dr Mumba said poor Zambians for decades into the future will be saddled with the $1 billion bill because the government may need to compensate LAP GreenN for nationalising Zamtel and to maintain the loss-making parastatal’s inefficient systems.
Dr. Mumba said that the PF government did not follow proper procedure when nationalising Zamtel in 2012 and have not compensated LAP GreenN who paid $257 million for the company and invested a further $170 million. LAP GreenN has sued the Zambian government and claimed damages of $480 million. In addition, he said the Government may have to bear its legal costs which could potentially run into millions of Dollars, especially if LAP GreenN are awarded costs in addition.
“It is absolutely shocking that within a year of grabbing Zamtel, the PF government made sure they turned a profit-making enterprise into a loss-making company such that they have now been forced to borrow $300 million to recapitalise Zamtel, and this is on top of various loans they have already obtained from the local commercial banks, also for Zamtel. When we discussed this issue with my Economic advisers, we were all astounded at the sheer magnitude of this wastage.
“The forced re-nationalisation of Zamtel, exacerbated by the deportation of key management staff such as the former CEO Hans Paulsen, dealt a huge negative blow to investor confidence which had been built over 20 years under the MMD,” Dr. Mumba said.
Dr. Mumba said that if government loses the court case, the $480 million compensation will have to include interest for 5 years at the Bank of Zambia average lending rate of 11% per annum. He said this amounts to over $700 million since PF are not likely to sell Zamtel before the next elections. He said that the $300 million loan the PF
government is planning to obtain shall be another Eurobond which shall attract interest of 9% per annum.
He said if this loan is paid in 5 years, the total repayments shall amount to over $400 million, without counting other loan arrangement costs which in themselves can run into millions of Dollars. He said the total figure comes to almost $1.2 billion, without including legal fees for the court case. He said Zambia’s recent credit rating
downgrade could potentially make the figures far worse.
Dr. Mumba said $1 billion can build ten modern hospitals with one thousand bed spaces or five General hospitals like the University Teaching Hospital. He also said the money can build 1,000km of roads, a distance comparable from Livingtone to Ndola.
He wondered how any sitting government can be so irresponsible to waste so much money for their selfish political reasons. He said the final impact on Zambians will be terrible because there will be less money for schools, hospitals, roads and other important projects.
He noted that the declining Zambian economy under PF will make the impact of the $1.2 billion very huge, especially when the repayments for the other three Eurobonds which total $3 billion are factored in. He said he expects the PF to do the only thing they know which is to borrow the $1.2 billion in another Eurobond issue.
Dr. Mumba said the Zambian economy was built on a foundation of free markets and vibrant private sector, of which the MMD were the architects and builders. He said that 50 years of Zambian history has demonstrated that governments tend to run parastatals inefficiently which is the reason only 7 parastatals are profitable out of 42.
He stressed that the role of government is to provide the right regulatory framework and investment climate to ensure that all companies perform well. Dr. Mumba said the PF will find it hard to resist siphoning out part of the $300 million loan to use for campaigns next year.
Dr. Mumba holds a Masters Degree in Public Policy and Governance that includes modules in Economics from Regent University in Virginia USA.