The Mulungushi Syndrome, a lesson for Zimbabwe

Dr Kenneth Kaunda, the first Prime Minister of Northern Rhodesia, arrives at london Airport to lead his Government’s delegation at the Northern Rhodesia Independence Conference
Dr Kenneth Kaunda, the first Prime Minister of Northern Rhodesia, arrives at london Airport to lead his Government’s delegation at the Northern Rhodesia Independence Conference

I think it was 1968 – three years after Zambia obtained its Independence under the leadership of Kenneth Kaunda and UNIP. Kaunda stood up in the Mulungushi Hall in Central Zambia and made a speech announcing that every firm that employed more than 100 people had to be majority Zambian owned. It was Zambia’s own version of our current indigenisation thrust.

UNIP had come to power and inherited an economy dominated by copper, which was shipped in vast quantities to world markets – at the time Zambia was one of the largest supplies in the world. Not quite so easy to see was a rapidly growing private sector in all other sectors of the economy. Incomes were lower than in Zimbabwe and South Africa, but the future looked good and Zambians had a new sense of optimism.

The major multinational companies that produced the copper quickly recognised that they could not win in a direct confrontation with the state and elected to withdraw and allow government to assume ownership and control. In a surprisingly short time this was achieved and the international giants withdrew their management and took their funds out of Zambia to pursue their goals elsewhere. Smaller companies found the new policy unacceptable and either opted to sell out or to fight for their assets and control. They lost. Many were simply dispossessed and left the country with their entire assets in a suitcase.

The impact was immediate and catastrophic for the new nation. Companies stopped investment and halted maintenance, property values fell and the GDP stopped growing. Over the next 40 years Zambia suffered little or no growth, high rates of inflation and declining incomes. Not everyone was poor, the policy had created many fortunes overnight, executives at the helm of state companies were earning big salaries and perks and corruption and cronyism had become embedded.

Then in a shock defeat, anticipated by no one, Chiluba beat Kaunda who retired and took up his now respected role as an elder Statesman. Chiluba did not bring about the changes that Zambia needed and in the next election, Zambians changed their leadership again. The new government, made up of younger Zambians who had been working abroad or in the local administration and private sector, recognised that they had to change to give the country a new lease of life.

They faced huge problems, the mines were almost bankrupt and very little copper or any other product was finding its way into global markets. The cost of living was high and wages low. Inflation and poor monetary and fiscal policies had made the Zambia Kwacha the laughing stock of the region. Every filling station employed two people at each pump – one to count the blocks of cash being used to pay for the fuel, the other to put the fuel in your tank.

Quietly and without fanfare they abandoned Mulungushi. They engaged the multilaterals and adopted tough fiscal and monetary policies; they made life tougher for the majority and said it was necessary to get the economy back onto its feet. They canvassed the world for companies to take over the main driver of the economy – the mines. Vast complexes of mining investment and machinery were transacted for nominal value in return for new investment in technology and equipment, exploration and mining. Slowly the economy began to recover and in the past decade, Zambia has become one of the main beneficiaries of Foreign Direct Investment (FDI). By 2009 Zambia was growing at near double digit rates and incomes were improving, the Kwacha was realigned and strengthened and macroeconomic policies brought into line with best practice internationally.

Last year, at the annual mining indaba in South Africa, one of the largest gatherings of its kind in the world, the Zambian Minister of Mines used Zimbabwe as an illustration of just how Zambia would NOT behave, ever again. His remarks were greeted with laughter from the audience of 800.

As a direct consequence of Zanu (PF)’s indigenisation policy, FDI has dried up, capital flight remains endemic, the banking sector is extremely fragile and the GDP has slowed or even contracted since the elections.

Company closures are continuing and employment in the formal sector declining. This will be the worst agricultural season for many years, despite good rains. Tax revenues are declining and this poses an immediate threat to our fragile stability as the budget is simply not big enough to meet even a fraction of our needs.

It may be a tough pill to swallow but our leadership must wake up and appreciate that the days of achieving wealth by taking away from others what they have created by their own efforts are over. If we want to rejoin the real world that exists “out there” we must make the kind of changes that the Kenyans and the Zambians have made in the past decade. They are now reaping the wind of rapid growth and investment. We have already done much of what is needed to realize the future, let’s get on with it and finish the job so that we can all get back to making a decent living.