Masoka 

The Demise of the Zambian Street Kid 

Masoka was born to a happy rich family

At age 15 he had to his name two brand new cars, a motor bike, bicycle, an iphone and ipod among other un-necessaries

His home…a hill mansion in the matter of festivities

Then Masoka happened…

His parents lost to the greedy and un-satiated thirst of death

Solemn celebration held for them

Property properly grabbed and wiped clean all assets that were to Masoka’s name

And what does he do

He gets high to get by

Profanes the holy to find comfort

Reality too harsh to survive sober

The self professed holy pointing fingers professing he is cursed

A good for nothing

He wanders around barefoot

Half dressed…dressed in half nakedness treading the chilly days of Lusaka

Finding comfort out of the thin warmth of a cardboard

So he spends his nights

His life cannot square that of a pauper

It is by no means better

Gruesomely spiced by the ridicule of the privileged

He has no vision no future no hope

He lives by the minute of the hour

Those available to help…sadly only do so to appreciate their privilege of a better life than his

They help to realize their humanity

Appreciate and accentuate their status and organization

                “It is good publicity to lend a helping hand

                It will make our organization known”

So I heard one of them say

As the sun broke down on what seemed a tranquil day

Its rays beamed amiss on Masoka

The evening’s air swept by

Masoka retired to restful quiet in the drowsing murmur of the second hand cars that roam Lusaka

He wandered far away from the accustomed haunts of street boys

Sought a desolate place that was in harmony with his spirit

Under the Mandahilll bridge

He laid himself down on the ground, disposed upon his back, with his hands clasped upon his breast

And thus he would die in holy calm.

Excellence in Poetry Bittersweet-poetry-Zambia.

Currency Rebasing Exercise Undertaken By the Government of Zambia: Its Advantages and Disadvantages.

On the 23^rd of January, 2012, the Bank of Zambia approved a monetary policy recommendation to rebase the Zambian currency, the Kwacha. This monetary policy was approved with a view to address costs associated with an accumulated loss in the value of the Kwacha that undermines its basic functions such as store of value, medium of exchange and measure of value. Following the announcement of this measure, a lot of public debate and speculation followed. This paper seeks to explicate the monetary concept of rebasing a currency and elucidate the pros and cons associated with implementing a monetary policy of this nature.

In strictly economic terms, a currency is a designated medium of circulation and exchange in goods and services. In this sense, a currency can take the form of coins and paper money. The term currency sometimes includes credit instruments and other forms of exchange. This use of the term currency is of comparatively recent origin dating from the period of the abolishment of the gold standard in 1929. Earlier uses of the term were more restricted. Currency in an economy is cardinal as it is needed to transact the business of an economy (Microsoft Encarta, 2009). Basically, the volume of commodities and services in an economy has to be matched by a given volume of currency. During periods of increased production, the volume of currency tends to rise and during recessions it may fall. But overtime, currency is more sensitive and vulnerable to inflation which intends to corrode its functions as a store of values.

The Zambian currency is called the Zambian Kwacha and Ngwee which were designated at the time of the country’s independence in 1964. The set of Zambian currency currently comprises nine banknotes and five coins. Earlier this year, the Government announced that it was going to rebase the Zambian currency, the Kwacha by slashing off three zeros and introduce coins for lower value denominations instead of notes. The rebasing exercise is intended to be implemented over a period of six months within which the government hopes to withdraw the old currency. High currency denominations that characterize the existing banknotes are intended to be reduced by introducing new lower denominations with three less zeros. The announcement of this exercise has brought much fervent discussions and speculation among economic analysts, scholars, business people and the general public.

Currency rebasing or “lopping” as it is known in other terms, is a monetary policy instrument carried out by the central bank of a country with a view to lop off ,mostly, some zeros from a local currency. Rebasing involves dividing of a currency unit by some denominator (BOZ, 2012). In the case of Zambia, the Zambian currency note was recommended to be rebased or divided by a common denominator of 1000. This recommendation implies that the largest note which was K50, 000 will be divided by 1000 to now have the newly rebased largest currency in circulation as a K50 while the lowest rebased note will be K1 from K1, 000. In a contextual example, this means that if the price of bus fares is K3, 500 before rebasing, the same fare after rebasing will be K3.50. This in essence does not change the value of the currency or its purchasing power. Currency rebasing also engrosses a broader review of currency complexity like enhancing security features and introduction or reintroduction of lower value denominations.

A number of reasons can be cited as to why central banks rebase their currencies. Major among them is the value-eroding effects of long run sustained inflation. “Zambia experienced high levels of inflation during the 1990s and early 2000s which peaked at 188% in 1993. Such high levels of inflation resulted in inconvenience and risks involved in carrying large amounts of currency for transaction purposes, increasing difficulty in maintaining book-keeping and statistical records and ensuring compatibility with data processing software; and high costs on payment systems, particularly the delivery of banking services through a greater use of technology such as Automated Teller Machines” (Ibid). The recent years have seen declined inflation to a single digit and fundamentals like steady GDP growth which are said to have provided for a favourable implementation of currency rebasing in Zambia.

Rebasing a currency is something that is implemented from time to time in many countries and is usually done when macroeconomic fundamentals or indicators of an economy are stable for a currency rebasing exercise. There has been a lot of speculation and discussion about rebasing or “lopping” off three zeros from the Zambian Kwacha and the effects that this might have on the Zambian economy. Discussed hereafter are the pros and cons associated with the monetary policy of rebasing the Zambian Kwacha on the Zambian economy.

A number of advantages arise from the exercise of rebasing a currency. Firstly it should be noted that the policy of currency rebasing is monetary neutral. This means that rebasing a currency does not explicitly increase or decrease the value of the Kwacha, nor does it change the exchange value against any foreign currency. Rebasing a currency only has the major advantage of making commercial calculations and transactions in the economy easier (Haabazoka, 2012). The exercise of rebasing the Zambian Kwacha was inevitable as transacting in Kwacha had indeed become inflexible with too many banknotes to transact. Rebasing also comes with the advantage of improving transaction efficiency in the economy. In perspective, a 1,000 denomination rebased currency can considerably reduce the time taken to complete lofty cash value transactions thereby improving general transaction efficiency in the entire economy.

Rebasing the Kwacha also aids the economy by improving exchange transactions through increased divisibility of currency. The current Zambian currency has some rigidity in terms of divisibility. “Divisibility is one of the properties of a good currency. There have been times when a person buying an item using a bigger Kwacha denomination has had to be asked by a cashier for an additional note in order to make it easier to issue change to the customer. For example, a person who buys something for K6000 using a K10000 note, would be asked by a cashier to add another K1000 either as a single note or other notes amounting toK1000, to the K10000 that he tendered to the cashier so that he can be given a single K5000 note as change” (Sichiliango, 2012). The intended currency rebasing exercise would help solve this problem of divisibility as lower denominations and even Ngwee will be re-introduced for easier divisibility.   

A rebased currency can also aid participants in an economy with portability, convenience and increased safety of money. This aspect of rebasing the Kwacha would increase the agility with which business transactions can take place. This would also help reduce cost and time incurred in customizing standard accounting packages since most of these are developed in countries where values are mostly in millions and rarely go into billions or trillions. This would also help reduce complications incurred in input accounting information by simplifying financial data entry and reporting in lower or smaller numbers mostly going up to millions (BOZ, 2012).

Some economic analysts have argued that the rebasing exercise might cause might impart a psychological effect making economic players in the country feel like they have lost some buying power or value of their incomes. This might make them increase their prices and thus cause inflation which might be good for the local economic players in the short-run. This inflation may initially increases business profits, as wages and production costs tend to lag behind price increases, leading to more capital investment and payments of dividends and interest. This may also temporarily improve the balance of trade if the same volume of exports can be sold at higher prices. Government spending also rises because many programs are indexed to inflation rates to preserve the real value of government services and transfers of income. Officials may also anticipate higher tax revenues from inflated incomes (Jones, 2009).

The Jesuit Centre for Theological Reflection (JCTR) posits that rebasing the Kwacha may enhance confidence in the currency in the short run (JCTR, 2012). The exercise would also make it easier for foreign investors to participate in the economy through enhanced transaction convenience. This would attract investments that would lead to economic growth. This is so because rebasing might have some positive effect on the kwacha as it, to some extent, might show the monetary policy commitment of the government towards lowering and stabilizing inflation. Among many considerations for investment made by international investors is the viability of an economy in terms of currency and exchange rate dynamics which are suppose to be secure and easily calculated, this can be ensured by rebasing the Kwacha.

Rebasing in most case involves some changes in the print layout of a currency to enhance security features. This helps to bring in high and more confiscated security features to a currency and secures the economy against counterfeit currency as liquidity control is ensured (Ibid). Investor confidence is enhanced with an assurance of high standard currency security features which in turn make an economy more attractive for investment. The complexity of inflationary pressure that might be associated with counterfeit currency in the economy is eliminated.

It must also be appreciated that the rebasing of the Kwacha is a well meant declaration of political will and national determination to take the Zambian economy to a position of sound performance. Rebasing of the Kwacha will help money that has been kept out of the economic system resurface in exchange for new currency when the process is in its implementation phase. This will self regulate to keep in check how much liquidity is in circulation and will serve as a control measure for curtailing illegal hoarding of large sums of money, smuggling and underground economic activities that largely go untaxed. The exercise in its totality will serve as a roll call of liquidity in circulation; remove calculation, portability and transaction inconveniences, and, if rightly implemented, improve the economic outlook of our economy for enhanced chances of greater economic growth of the Zambian economy.

Currency rebasing comes with its own costs. These costs make up for the cons of undertaking such a monetary policy exercise. Common to the disadvantages of undertaking currency rebasing is the psychological effect that the rebasing has on the general public and players in the economy. Illusionary perspectives and misunderstanding that a rebased currency has some loss of buying power is more common than not. Therefore, this “might cause a bit of inflation as people are going to adjust prices upwards. People might want to increase prices so that they feel comfortable because you receive your salary in millions and all of a sudden it’s reduced. So, everyone would want to increase the price on their rent, on the commodity to reach that million” (Haabazoka, 2012). This in the short-run might cause pervasive “inflationary psychology” which might eventually dominates private and public economic decisions.

Inflation ensuing from increasing prices caused by change in the psychology of the economy might in turn make the economy unviable and unattractive for investments. This Inflation might cause unwanted prices and employment distortions and widespread economic uncertainty. It may further erode the real purchasing power of current incomes resulting in reduced consumption. Raw material and operating costs may respond quickly to inflationary signals thus making the cost of doing business in the Zambian economy high. This might further trigger high export prices eventually restricting export sales and creating deficits in trade and services (Jones, 2009).

Rebasing the currency might also cause more pressure on the by rattling portfolio investors to seek refuge in the US dollar and abandon the Kwacha (Haabazoka, 2012). This would entail less demand for the Kwacha thus its depreciation. Depreciation might in turn hurt the local economy by making the cost of commodity and machinery imports high. This would make the whole exercise of rebasing the Kwacha futile. Further, the cost-push inflation created by the illusive loss of buying power might result in repetitive price increases which would in actuality erode the purchasing power of money and other financial assets with fixed values, thus creating serious economic distortions and uncertainty in the Zambian economy (Microsoft Encarta, 2009).

The implementation of rebasing comes with high minting costs and many demands of educating and disseminating information to the masses. Usually this is done to enlighten the public and maintain confidence in the currency. But attached to this are high costs associated with printing and information dissemination. “JCTR notes with concern that the Kwacha rebasing exercise was not provided for in the 2012 budget. Resources will have to be redirected from other activities to this one or government will have to borrow outside the budget” (JCTR, 2012). This mighty make the government run on a budget deficit with negative implications for the local economy like reducing credit for local investors if the government was to borrow internally.

More so, government budget deficits are not good in themselves and detrimental to the economy. The rebasing exercise was not budgeted for when in fact it should have been on the top priority noting that designing, minting and distributing the new currency was going to cost the government billions of Kwacha. “If the country fails to instill discipline in the way it spend public resources, then the three zeros that are been knocked off from the currency now will soon resurface” (Mutesa, 2012). This will only fritter to waste foreign currency that the government could have used on other economic growth ventures.

Another point of concern is the short and speedy period of time within which the currency rebasing exercise is to be implemented. “Six months period is too short for them to implement that policy of rebasing the kwacha because of the uncertainties surrounding Zambia now. We needed to wait for the next two years so that things stabilize. I think the decision is correct but the timing needs to be adjusted” (Haabazoka. 2012). The government should have waited for investors to gain more confidence in the new regime as well as the improvement of the external environment before rebasing the currency” (Ibid). The speedy process with which the rebasing exercise is being done might cause a lot of ill speculations among investors and they may seek to secure their investments in other currencies or countries thereby making our local economy more vulnerable to economic shocks and more ill speculations.

During the introduction of new notes, there may be serious cases of fraud and counterfeit notes if the process and transition is handled in an effective manner. Fraud is likely to be part the collateral damage to the rebasing process but it will sure make a number of people especially in the rural areas lose their financial muscle to contribute to the growth of the Zambian economy. Therefore government will have to spend more and ensure the rebasing process and transition is done in a simple language that every citizen is going to understand. The rebasing exercise also requires expertise to cautiously move and “provide sound advice and experiences from elsewhere otherwise this matter can have negative impact in the longer term if not carefully handled” (Op. cit). Added to this is the extra burden of providing supplementary policy initiatives that might harm the local economy but be necessary to aid the complexity of currency rebasing.

Currency rebasing may boost confidence in the local currency in the short run, but it may also stimulate inflation especially in the absence of supplementary policies measures to deal with the inflation. The implementation of supplementary policy measures may drive the countries policy makers to concentrate efforts on curbing inflation at the expense of implementing other important economic policies. This might negatively affect the local economy as policy measures meant to curb inflation usually have a negative effect on the economy. For example, the government through the central bank might have to influence the availability and cost of money and credit by controlling financial reserves and restraining monetary expansion. These efforts may offset the existing economic balance, reduce real output and employment (Jones, 2009).

In conclusion, it can be said that rebasing the kwacha is necessary and a show of government commitment towards restructuring the Zambian economy. However, government should have vigilantly planned for this exercise to include it in the national budget and give it a longer implementation period of say one to two years.  Nonetheless, the government should supplement this monetary policy measure with sustainable economic growth policies aimed at strengthening the local economy through increased real output, diversifying the local economy, stabilizing macroeconomic variables and instilling a disciplined fiscal policy system.

References.

BoZ,                        (2012), “Press Statement; REBASING OF THE ZAMBIAN CURRENCY”: Lusaka.

Jones, S. L.,     (2009), “Inflation and Deflation.” Microsoft® Encarta® 2009 [DVD]. Microsoft Corporation: Redmond.

Microsoft® Encarta® (2009) [DVD]. Microsoft Corporation: Redmond.

JCTR.    (2012), “Press Statement on Currency Rebasing”. Retrieved from www.jctr.org.zm/DATPress&News.html on 18^th March, 2012.

Habazoka, L.          (2012), Advise on Currency Rebasing. Retrieved from http//.radiophoenixzambia.co.zm/blogbang/govt-advised-to-put-hold-on-plans-to-rabase and http//www.lusakatimes.com.

Sichiliango W.,      (2012), “The Rebasing of the Zambian Kwacha Curreny”, Zambia Daily Mail of February 15, 2012. Retrieved from http.//.www.boz.zm on 15^th March, 2012.

Mutesa, F.         (2012), Comment on Rebased Currency. Retrieved from http//www.lusakatimes.com/2012/03/27/banknotes-printing-starts/.

 

Economic Theory of street vending, a brief.

For so long I have thought of street vending especially in a snob-kind-of-way and held that it just made Lusaka city dirty.

Well, my perspective changed after I read the historical background of street vending. After grasping the historical background of street vending in Zambia and pondering to myself how economically important it is, I realized how important street vending is, especially for economic development. In a young and growing economy like that of Zambia, street vending holds a vital place when it comes to venting off the economic heating of high unemployment.

For most of you who know the unemployment situation in Zambia, which must go without mentioning, you will agree with the view that the situation is rather pathetic. A majority of the youth are unemployed and wallowing in poverty and desperation, not to mention even a greater number of Zambian women who mostly carry the heavier burden of providing for their families. In this light, street vending comes as a good way to vent off the heat of unemployment in the country. I get struck sometimes at why people just go on criticizing street vending without knowing its root cause. A challenge for you, have you ever thought about the root cause of street vending before criticizing? Or do you ever think about anything before criticizing? Getting back to street vending, I suppose it has already struck in your mind about the root cause of street vending in Zambia. Yes! Like I mentioned before, it is unemployment, so the next time you want to criticize street vending, stop and think about its root cause.

I, for once, give credit to the PF government for allowing street vending, I suppose this is a good sign of things to come. At least am hopeful! For those of you talking about street vending as a vice that is making our cities dirty, stop and think back, I mean! Look at Lusaka city, what significant difference would be there even if we chased street vendors? I remember once when street vendors were taken off the streets, the city looked empty rather than clean. And to think we only have Cairo road to boast of as a first class area of our capital city, imagine! The streets of Lusaka are already dirty even left without street vendors. What city cleanliness do you have to pride about at the expense of starving your fellow citizens? Let us not be selfish. Street vendors are in the streets to earn an income, if you want them out, create jobs. Street vending for most of the women you see in streets is a means to an end of  providing bread and meat at their tables. Take a moment to think before taking away peoples only source of livelihood and consider that nobody fancies being in the open scorching sun to make ends meat.

With high unemployment rate standing at over and above 50% with a labour force of over 4 million in our country composed mostly of the youth, street vending can prove a helpful way for solving the macro economic problem of unemployment. Street vending can be a means by which people can be empowered to earn an income. Once people get this form of empowerment, they will have greater spending power than before. Street vending can also help increase the rate of exchange of money, or put simply velocity of money, and therefore can explicitly be used as a means or mechanism for the "trickle down effect" where high income earners pass on some of their income to low income earner, people in formal employment passing on their income to those in informal employment. This is a great deal of money exchange and patriotism, I mean, why go and spend all your money in a South African Transnational company which is on a 5 year tax break while complaining of the poverty you see in your own background?

Street vending can also be of economic importance in solving the problem of food marketing and distribution for our subsistence farmers in the outskirts of our cities. This is especially important in view of the unreasonable quality and quantity standards set by most established food retailers especially of foreign origin. Without mentioning, some quality and quantity standards are deliberately set to favour foreign produce at the expense of our own. It is worth noting that most of the produce that you will find with our street vendors especially vegetables is local produce. In this way a market is created and the supply side problem of our local farmers is solved. Thus, simply put, street vending can create a market for local produce and easy the burden of distribution of commodities.

Therefore, rather than looking at eradicating street vending, I would otherwise recommend that the local government find ways of regulating this "sector". For example, the Kitwe Municipal Council recently allowed street vending from 5pm up. Such legislation empowered by the decentralization act can also be used to institute a form of "street vending permit". This permit would act as a small tax imposed on street vending and help contribute and be part of the tax base for the local government. Our object should never always be to fulfill our own desires and wants but rather live for others too and see how their own means to an end can be harmonised with our own.