Polygamy is just a selfish matter for men - Kalyalya
By Chiwoyu Sinyangwe and picture by Collins Phiri
The Post Wed 10 Nov. 2010, 09:30
Wait an everlasting minute Chiwoyu Sinyangwe!
You can't misrepresent Dr. Kalyalya's professional life by giving it a wrong title. That is totally unacceptable. The title you unwittingly assigned it, albeit sensational, was just a small part of the conversation. It made little sense because the man had made quite an effort to share with you and your readership his private life and his swath of contributions to Zambia. I take exception to this kind of misrepresentation.
My interest in Dr.Kalyalya's abridge version of his life story, as he puts it, is not about the misrepresentation, though. I want to weigh in on his take on the two issues that I toy with in my spare time. For the records, the story does not start from the question below but if you click here, you will find out exactly where.
And by the way Chiwoyu, yours was supposed to be the Q, and his the A. Dr. Kalyalya attributes our nation's inability to move forward to poor work ethic which, in my view, includes simple missteps like these. As for the rest of the readers, please follow the line of thought by Dr. Kalyalya as he responds to Chiwoyu's question on mining taxes:
A: What is your take on increasing tax revenues from the mining sector through imposition of the windfall tax?
Q: Although it is not my area and I should be cautious, there is the issue called policy credibility. You can’t just be changing policies from one to another because when investors come, they look for a horizon… I would like to think that within the variable profit tax regime, there is still a lot that can be done perhaps which we are not doing. How is profit made? Profit is made from two things; the revenue side and there is the cost side. I think there is a big scope to a lot on the cost side. Are the costs that are being allowed for tax purposes supposed to be allowed? That’s one of the key issues. Is the cost regime transparent that we are taxing what we need to tax? I have my doubts on that. And that is where a lot of energy to push this regime to the levels of transparency… let’s not kid ourselves, these mining companies employ top-notch tax accountants, tax lawyers. So, we have to be able to match that because these mining companies always look for legitimate ways by which they avoid companies to pay tax. Now, are we strong enough to pierce to that? That is where the challenge is for colleagues in ZRA and government. Really equip our people to have the systems in place which can ensure that certain costs are not allowed so that there is enough revenue above cost which can be taxed. Now, we have a difficulty, the growth in the mines is growing but revenue to Treasury…it’s not nice we don’t raise enough revenue locally then we go to donors to ask because at the end of the day they will say ‘but you people you have enough resources. What are you doing with them?’ Because at the end of the day, what they also give is tax revenue from their own nationals. What we need, whatever regime we are in, is to ensure that it delivers to the full. Until we get that, mere changing will not deal with that problem because you might frustrate the other side and then they don’t invest.
This man is crafty. That is my first impression. He straddles between the political and business flimsy branches with the skill of an orangutan, yet he takes a calculated shot at the core of the issue with an incredible degree of humility. Let this be a lesson to some, if not all, Zambians. When discussing national problems, do not be economical with the truth. It will not help any of us. This is what I am referencing:
1. Policy credibility. One of the major consideration in deciding where to plant huge sums of cash is sovereign stability followed by policy credibility. The revision of tax regime must be done in a manner consistent with the original contractual agreements. Knee-jerk reactions to a booming economy can be disastrous. Dr. Kalyalya skilfully deconstructs the systemic problems with the mining taxes from the formulation phase through implementation. The first part of the equation begins with the percentage which yields revenue (Revenue Side). That is done from a weak point. It is formulate in haste, with a view to feed our insatiable appetite for money which, when we get, we don't know how to manage. In other words we take a short-term view on a longer-term matter. The reason, according to Dr. Kalyalya is, we start out without a plan. Although I would take a slightly different path on that one; we do have plans, they are just not the kind we confidence in to guide our decision making.
The second part of the equation, also negotiated from a weak point, is the number and nature of allowable costs for tax purposes. Admittedly, we don't do a great job here either. From my outsider's point of view, we either don't have a comprehensive business picture of the mining business or we are simply poor at making our case. Dr. Kalyala says, "...let’s not kid ourselves, these mining companies employ top-notch tax accountants, tax lawyers. So, we have to be able to match that because these mining companies always look for legitimate ways by which they avoid companies to pay tax. Now, are we strong enough to pierce to that?" I bet I can answer that for us. We cannot, for the simple reason that we don't have a sufficient stock of qualified professionals who are brave enough to look a politician in the eye and offer an alternative view, "...we are getting shafted here, bwana." Most of the individuals positioned to speak for Zambia are feeble-minded and corrupt. They spend countless hours figuring out how to steal public funds. And as they get to be good at that, they lose their professional edge. They get a little rusty. ask anyone of them when they last wrote a professional paper, not as a requirement for their job but their profession. When they sit before the small boys who graduate from my classes, they are already defeated. But Dr. Kalyalya would not spare the ZRA and the administration, he recognizes the gravity of the situation and calls them on it. Lack of seriousness is killing Zambia! It is a serious matter and calls for frank talk. What a guy!
The second part of the equation, also negotiated from a weak point, is the number and nature of allowable costs for tax purposes. Admittedly, we don't do a great job here either. From my outsider's point of view, we either don't have a comprehensive business picture of the mining business or we are simply poor at making our case. Dr. Kalyala says, "...let’s not kid ourselves, these mining companies employ top-notch tax accountants, tax lawyers. So, we have to be able to match that because these mining companies always look for legitimate ways by which they avoid companies to pay tax. Now, are we strong enough to pierce to that?" I bet I can answer that for us. We cannot, for the simple reason that we don't have a sufficient stock of qualified professionals who are brave enough to look a politician in the eye and offer an alternative view, "...we are getting shafted here, bwana." Most of the individuals positioned to speak for Zambia are feeble-minded and corrupt. They spend countless hours figuring out how to steal public funds. And as they get to be good at that, they lose their professional edge. They get a little rusty. ask anyone of them when they last wrote a professional paper, not as a requirement for their job but their profession. When they sit before the small boys who graduate from my classes, they are already defeated. But Dr. Kalyalya would not spare the ZRA and the administration, he recognizes the gravity of the situation and calls them on it. Lack of seriousness is killing Zambia! It is a serious matter and calls for frank talk. What a guy!
2. Forward looking. Dr. Kalyalya bluntly distributes responsibility over institutions for reasons we appear to be poor. I will tap on the serious absence of a plan issue once again. We need a national plan assembled by professionals whose lives would not be negatively impacted if it focused on the pressing issues facing the nation, medium and long-term. Because we seem not to have that right now, Dr. Kalyalya observes, "That is where the challenge is for colleagues in ZRA and government. Really equip our people to have the systems in place which can ensure that certain...." No serious person can argue with that. It's that simple yet not easy, for a reason. We seem to be conditioned to think, because we are weak in the planning, the negotiation and the implementation areas, we will simply prostrate before the donors and our budget shortfall will be made up. Dr. Kalyalya saw that coming too. So he advises, "...donors to ask because at the end of the day they will say ‘but you people you have enough resources. What are you doing with them?’ Because at the end of the day, what they also give is tax revenue from their own nationals." Yes indeed, Dr. Kalyalya. For how long shall we remain shameless panhandlers?
Good job, Dr. Kalyalya, for your candid responses to not so difficult problems.
Now let me switch gears. I always say learning begins where agreement ends. Up until this point, I have agreed with everything Dr. Kalyalya said. He held his own, rather remarkably. But the inflation issues was either not properly decoded or the good Dr. had the inflation edges in a serious state of disrepare. I have inserted my comments. Part two:
Q: While the current low inflation is one of the achievements that can be associated with you at Bank of Zambia, people are saying the benefits are not being felt by ordinary Zambians and bank interest rates still remain high. What is your comment?
A: Inflation is the rate of change in the price level from one period to another. It doesn’t mean when inflation has come down, prices have gone down. The missing word here Dr. Kalyalya is "all." Not all prices go down. So one can actually think of Inflation as the net change in the price level. It does happen in certain cases, when mealie meal prices come down, everybody sees it. But when airfares come down, do you see that? Inflation is a basket that includes all these things which you are not interested in but are happening but we look at the rate of change from other things. Actually, Dr. Kalyalya, the contents of the basket ought to be revised from time to time to reflect the consumption interests of the majority. This is where the regular Kawayawaya gets to be included. Inflation should be understood by as many people as possible if the fiscal and monetary policies are to be deemed effective and meaningful. Needless to say, the type and number of contents of the basket are not etched in stone. Interest rates are now at 20 something…but what we have seen is that in the banking sector, there are two types of interest rates because the market is segmented. Big players can negotiate. It’s the small players who are not able to negotiate and that’s the group we are speaking to… when we talk to the banks, they say cost of doing business is very high. But we are also quick to point out that the cost of money is also contributing to this. You are looking at another person to make the adjustment. What we are saying is that everybody should be making adjustment. It is very tricky because we cannot dictate, (Time out!) we had done it in the 1980s, and what happened? Money become scarce and inflation went up (Time out!) and interest went higher.
First, Yes Dr. Kalyalya, you can dictate. You dictate by setting interest rates. Every banking institution licensed in Zambia should adhere to the set rates. This is what monetary policy is supposed to be about.
Second, how did you do it that reduced the volume of currency in circulation and consequently drove inflation up? Did the Zambian seller become so creative all of a sudden as to factor tight money supply in the price of their wares? Dr. Kalyalya, when the volume of M1 (currency) goes down, in an economy as ours was in the 1980, inflation falls simultaneously. I think we can both agree that it was the second half of that decade when the Zambian economy began to tank. And tank it did, irreversibly. This cost KK an election. Talk of a blind policy having tiered effects. Any way, the natural response of an organ such as BOZ, depending on where you are on the business cycle, in the given scenario is to lower interest rates. And it is wrong to say, interest rates went up as thought they were an auto-variable. Interest rates are changed. For this you and BOZ ought o take responsibility. Looking at the structure of the economy at the time and the income levels, lowering interests would not have made dramatic impact although one would argue that it would still be an absolute necessary move.
But more importantly, your pronouncements underscore the point I made earlier this month that Zambia does not have mechanisms in place to effect monetary and fiscal policies. If anybody is better informed than Dr. Kalyalya, please step forward, this student is ready to learn.
My final question is, what exactly did you do to make two opposing forces to go in the same direction at the same time - reduce M1 and drive up inflation?
The fact that inflation has come down to where it is now, believe me, it is feeding into other areas. We may not see it from the personal point of view unless you are doing business…
Final note: For handling the mining taxes expertly, I confer upon you the rational thinker of the day. You have gone where no one dares go. And those in the corridors of authority who attempt to speak to that issue only demonstrate irrational hubris.
