Henry Kyambalesa on Zambia’s:  Advocacy for Economic Liberalization

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By Henry Kyambalesa

Saturday, June 10, 2023

The fate of less-developed countries has become one of modern civilizat­ion’s major sources of concern. The extreme and persistent poverty, hunger, ignorance, and disease which have come to characterize life in such countries are certainly unprece­dented in human history.

Unfortu­nately, there are clearly no easy answers or quick fixes to the seemingly self-perpetuat­ing socioeconomic problems facing less-developed countries.

However, three elements are fundamental to the improve­ment of the quality of life in less-developed countries. Firstly and foremost, govern­ment officials in such countries need to make a sustained effort to contribute positively to the attain­ment of lasting political stability, as well as ethnic, religious and industrial harmony.

History and experience have taught us that political instabili­ty and civil strife are disrup­tive to economic and all other kinds of produc­tive human pursuits and endeavors and are, therefore, detrime­ntal to socioeconom­ic develop­ment.

Secondly, government officials in such countries need an arsenal of sound and stable economic policies, incentives and initia­tives in their quest for higher productivi­ty, greater competitive­ness in the global market­place, and sustained expan­sion of their countries’ econo­mies.

And, thirdly, government officials in such countries need to learn that their countries’ real future does not hinge on seeking the compassion of, or excessive and protra­cted reliance on, industrialized nations in matters of socioeconomic develop­ment, such as by calling for a new international economic order (NIEO), or by overly relying on efforts to “spread the wealth” worldwide spawned at the summit of G-7 leaders and Mr. Boris Yelt­sin, former Russian president, held in Denver in June 1997.

They need to take full responsi­bility for finding viable solu­tions to their domestic problems, as Akashambatwa Mbiku­sita-Lewanika, founder and former presi­dent of the defunct Agenda for Zambia party, has advised in the following words:

“Just as we must stop blaming external fac­tors for our … problems, we must also stop looking to exter­nal intervention for solu­tions; the funda­mental pro­blems facing us, as well as their critical solu­tions, lie within the grasp of … [our] nation[s].”

Given the extreme and astonishing poverty and human suffering which have, by and large, gripped less-developed countries, government leaders in such countries have no time to waste—they need to work briskly in finding viable solutions to the catalogue of socioeconomic ills facing their countries.

For a great number of less-developed countries where national economies were initially captained by monopolistic state enterprises, one of such solutions is the liberal­ization of commercial and industrial activities in a deliberate effort to make them the preserve of the private sector. This matter constitutes the subject of this article.

The term “economic liberalization” refers to the process by which a country’s government pursues the following measures, among a host of other related measures: (a) selling or privatization of state-owned assets and enterprises to private investors; (b) removal of investment restrictions and provision of investment incentives; and (c) revocation of price, foreign-exchange and currency exchange-rate controls.

With respect to the selling or privatization of state-owned and operated enterprises which could have been either established by national governments or nationalized from private owners, several reasons are cited by O. C. White and A. Bhatia (1998:22) and Gerry N. Muuka and Binta Abubakar (2002:14) as having prompted national governments to sell or privatize the companies. That is, to:

(a)  Reduce fiscal (or budget) deficits by reducing loss-making companies’ dependence for funding on the national government;

(b)  Develop the private sector;

(c)  Broaden ownership of commercial and industrial undertakings;

(d)  Foster competition and, thereby, boost economic efficiency in commercial and industrial sectors;

(e)  Reduce the administrative burden of state-owned companies on the national government;

(f)  Gain access to private investors’ capital and technology;

(g)  Raise revenue from the sale of state-owned assets and enterprises; and

(h)  Comply with requirements imposed by The World Bank and the International Monetary Fund associated with funds borrowed by the national governments to meet domestic budgetary shortfalls as well as address critical educational, healthcare and infrastructural needs.

There are a number of benefits that can accrue from privatizi­ng government-owned assets and business undertakings. As David M. Chilipamushi (1994) and N. A. Deassis and S. M. Yikona (1994) have reasoned, privatization can stimulate private investment, give econom­ic power to a greater number of people through stock ownership, promote competition and encourage efficiency in commerce and industry, beef up government coffers through the sale of govern­ment holdings in State enterprises, as well as ease the financial burden of state compa­nies on the public treasury.

Moreover, as C. Pitelis and T. Clarke (1993) have noted, the reduction of govern­ment involvement in commerce and industry which follows the privatization of state enterprises results in reduced public-sector borrowing and government spending.

However, governments committed to privatization need to address a number of issues, such as the pace of privatizat­ion, the choice of companies or industries to be affected, and the conduciv­eness of existing policies and conditions to the evolvement of a sound market econo­my.

Pace of Privatization:

All too often, there is a tendency for govern­ments commit­ted to economic liberalization to be obsessed with speedy privatiz­ati­on of state and ‘parastatal’ companies without considering the very likely possibility that they are merely shifting the monopolis­tic positions enjoyed by such compa­nies from govern­ment to private hands if new, private investments are not quickly made in the lines of business in­volved to provide the necessary competition to the buyers of the companies.

It is advisable that, while privatiz­ation should be consid­ered to be an essential element of the liberalizat­ion process, the pace of its implementation should be treated with equal seriousness, otherwise the benefits expected to accrue from such a program (such as lower prices, high-quality products, and greater variety and abundance of products in an economy) cannot be realized at all.

Choice of Sectors:

Apart from the need for a cautious and well-calculated pace of privatiza­tion, it is important to determine whether there are some sectors of a country’s economy in which it would make sense for national and/or local-government involve­ment. In Zambia, for instance, examples of such sectors are those involving copper mining, electricity supply, and posts and telecommunica­tions (Africa Research Bulletin, 1992 & 1993).

Admit­ted­ly, there are—in Zam­bia, at least—as many advocates as there are opponents of govern­ment involvement in such economic sectors. Countries facing this kind of dilemma can perhaps do well to pick a leaf from the following examples drawn from the United States, which, to date, is clearly the exemplary and most advanced free market system in the world:

(a)  The National Level:  The Federal government has main­tained a monopoly in the provision of postal servic­es through the U.S. Postal Ser­vice. The combined volume of busi­ness of private postal service compa­nies (including United Parcel Service, Federal Express, DHL, and numerous small postal facilities across the country) is far below that of this govern­ment monopoly.

(b)  The Local Level:  In the country’s states, the local provi­sion of electric power, public transport, and tele­phone services is generally undertak­en by state-regulated monopo­lies. In the State of Colora­do, for example, public transport is catered for by the Re­gional Transportation District (RTD), and water in the City and County of Denver is supplied by Denver Water.

An Enabling Environment:

The success of a privatization program is greatly dependent upon governmental commit­ment to the creation of an enabling environment for the evolvement of a market economy—that is, a socioeconomic environment in which business entities can, to use the words of Joe Webb (1999), “succeed or fail on their own merit.”

Ernst & Young, Inc. (1994) has identified several important aspects which should constitute such an environ­ment; these are:

(a)  Trade liberalization and promotion of exports to beef up foreign reserves;

(b)  Revocation of price controls;

(c)  A sound legal framework designed to protect private investment and facilitate the functioning of a market economy;

(d)  A well-developed financial market;

(e)  Good infra­structure—including energy, water, telecommunications, and transport facilities;

(f)  Governmental assis­tance in nurturing entrepreneurial and management skills; and

(g)  Government programs designed to reduce the negative impacts of a transition to a market economy on vulnerable individuals and institutions.

A Final Word.  Forget about socialism. It contributed to the disintegration of the former USSR and the collapse of the former East Germany. It caused voters’ disenchantment with Kenneth D. Kaunda and the United National Independence Party (UNIP) in Zambia. And it has led to greater misery and destitution in countries where it is currently being pursued.

Jair Bolsonaro, former President of Brazil, was not joking when he made the following comment concerning oil-rich Venezuela on September 24, 2019 in a speech delivered at the United Nations General Assembly in New York: “It is fair to say [that] socialism is working in Venezuela—they are all poor.”

The same can be said about other socialist / communist countries worldwide, including Castro’s Cuba.

With respect to the misconceptions regarding the People’s Republic of China as being a robust and successful ‘socialist’ or ‘communist’ country, an editorial that appeared in News China in February 2019 has summed up the actual reason for the country’s economic success in the following words: “China’s economic success in the past decades has been established on the premise of a liberalized and vital private sector.”

In November 2018, the same news source carried a similar message: “Chinese President Xi Jinping affirmed in a meeting … that the [Chinese] government will support the private sector to become bigger and stronger.”

Also, the following quote excerpted from the South China Morning Post (March 6, 2023) highlights the country’s yearning for foreign private investment:

“[Former] … Premier Li Keqiang said China will make greater efforts to attract and utilize foreign capital, by expanding market access to foreign investors, especially in the modern service sector.”

News China (May 2023) has perhaps provided a more succinct assessment of the private sector’s contribution to China’s economic performance in an editorial in the following words:

“The importance of the private sector [in China] has long been recognized and is dubbed ‘56789,’ an allusion to the private sector’s contribution [amounting to] … 50 percent of the country’s tax revenue, 60 percent of national GDP, 70 percent of technological innovations, and 80 percent of urban jobs, with private firms accounting for 90 percent of all enterprises.”

For reasons I have articulated in my other articles on this subject and the rationale for economic liberalization I have encapsulated above, therefore, politicians who genuinely love their respective countries and their fellow citizens would adamantly resist the temptation of considering socialism as a potential ideology for improving the general welfare of the majority of people in their countries.