ECONOMIC OBSERVATIONS AND RESEARCH

DURING THE ZAMBIA TRIP

I. Zambia’s Investment Climate: Constraints to Productivity & Growth: According to the World Bank, the below 6 problems - in order of severity - reflect the concerns voiced by Zambian businessmen. (Note: this is as viewed by Zambians, and not by foreign investors. There are positive reasons to invest in Zambia.) This study was validated by a comparative analysis of these conditions to other countries:

A. Cost of and Access to Finance: By far the largest constraint across the board. The average interest rate is 28%, with medium size firms paying 37%, while large firms pay 20%. Collateral averages three times the loan value. The primary reason for this is the crowding out by government spending - dries up credit and provides lenders with a low-risk alternative.

B. Macroeconomic Instability: Zambia has experienced chronic fiscal imbalances – exceeding 13% of the Gross Domestic Production (GDP). The average inflation rate, since 1991 has been 53% - moderating to 15-20% in 2003. In 1991 it took 65 Kwachas to buy one dollar and 4550 Kwachas to buy one dollar in 2002. (Currently, it is about 3,331 to 1 dollar.) The country’s interest payment on external debt has far exceeded its interest income from foreign sources. (But, as mentioned in our original report, many countries – such as the USA – have begun forgiving Zambia’s loan debts.)

C. Tax Rates and Administration: Figures show that the highest marginal tax rate in Zambia is 5 points higher than in its neighbors. And, just as important, is the frequency of penalties arbitrarily added to tax bills. Business’s feel constrained by tax administration, as well as the tax rate, because of: high frequency of tax policy changes, the value-added tax, and the Zambia Revenue Authority’s (ZRA) behavior regarded as arbitrary and punitive.

D. Regulatory Policy Uncertainty: The Government’s history of frequent and unpredictable changes to key policies greatly reduces the appeal to foreign and domestic investors – usually being inconsistent and unpredictable. This adds to the amount senior management spends on regulations, completing forms, and dealing with government officials. Also, there is the issue of mandatory termination benefits. For instance, an employee of 20 years must legally receive 40 months of severance pay upon termination, which has a deterrent effect on hiring. On the other hand, those with less then 20 years employment with a company can be terminated without any severance pay.

E. Crime and Corruption: Over 77% of firms in Zambia claimed losses to theft, robbery, or arson. Only half of these incidents were reported, and of those reported only a quarter were solved – suggesting low confidence in outcome, and the need for improvement in the police and judiciary system. Adding to this, firms lack confidence the judicial system will enforce contractual and property right in disputes. While corruption causes a typical firm to spend an average of 1.7% of their total revenues on bribes and government contracts require an average bribe of 3.7% of the contracts’ value.

F. Infrastructure Services: Generally of poor quality and limited availability, electricity is the leading concern – mainly due to unreliability. Zambian firms recorded an average of 37.2 power outages last year (2004). Telecommunications is a severe constraint. The road system has improved in recent years, but limited to a few areas. And many firms, in the industrial districts in major towns, had the added expense of digging wells as a way around the unreliable public water supply.

G. On the upside, the government does have an incentive program to offer foreign investors, such as a 5 year tax break and free land. This upsets local businessmen because they don’t get the same incentives.

II. The Economic Culture: The economic culture has been, as was most of Africa, forever tainted by colonialism. Today, the pros and cons of colonialism remains a hotly debated issue with the cons pointing to the exploitation by multinational corporations as colonialism in another form – neocolonialism. What is indisputable about colonizers is: they had the wealth, they made the decisions, and they spent the money. As colonialism passed through history and the colonizers left, the religious missionaries remained inadvertently perpetrating the same system of dependency.

A. Missionary Outreach: In Zambia there are hundreds of missionaries of just about every imaginable Christian (and a few non-Christian) denomination. Many have been there since the days of colonialism. They infuse large sums of money to build buildings, establish education programs, set-up health clinics, teach essentials of living, and preach their brand of the Gospel. All of which is very good. But seen from Zambian eyes, they have the wealth, they make the decisions, and they spend the money – because most of the financial support and donations come from churches in the US or Europe. The young volunteers we met were there for only a short period of time paid their own way or were supported by family or friends back home, and usually had “spending money” for extras that amounted to a sum admired by the average Zambian. In defense of the missionaries, we spoke with several groups attempting to “partner” with Zambians as a way for the locals to learn skills and become self-sufficient. Also, it is suspected that many become Christians as a way out of poverty. As Chita said: “Many Zambians are Christians in the day, but at night they are followers of shamanism and witchcraft – fear based religion.”

B. Partnerships with foreign corporations were not uncommon. We spoke to several people who worked in large corporations that provided much needed skills and education (Castle Beer/South Africa, Zamtel Communications/Germany, and several water bottling companies).

C. Medical Research and education was also evident. We interacted with several doctors from England doing research on infectious disease while training Zambians in medical skills. However, there is a problem of “brain drain” = as soon as many Zambians receive medical degrees they move to South Africa or Western countries for higher pay.

III. Financing with Chita and Namukale: (We have been psychotherapist for many years – perhaps too long – and we know in most relationships money is the arena which usually indicates the health of a relationship. In writing this report, we have tried to present a complete view – using the Midwayers’ example when profiling the Apostles. They were overwhelmingly positive, but never hesitated to note the shortcomings of each of the Twelve.)

A. Chita and Namukale are young, bright, dedicated proponents of the Revelation. Of this we have no doubts. Their preparation and work to bring the Sunday Conference to fruition was inspiring. Obtaining the speaking engagement at the Mindolo Ecumenical Foundation required a lot of leg-work and persistence, and their choice of organizations for our personal ministry will forever be endeared in our hearts. Chita has a quiet strength about him that is attractive and seems to be of the intellectual/spiritual type leader. He is very creative and a problem solver in the area of electronics. Namukale is outgoing, with an appealing and omnipresent smile. She is engaging and always hesitates before speaking. She appeared organized and seemed willing to learn.

B. However, in the area of economics we struggled. We first recognized the friction over dinner when Chita said: “When a visitor comes to Zambia, we are supposed to cater to and anticipate their every need. But we can’t do this with you because we have no money.” Because we had the wealth, we made the decisions, and we spent the money they expected us to anticipate their needs:

1. We once sat in our hotel room to a late night hour because they would not ask for money for a taxi ride home.

2. We waited for over 20 minutes in a fast-food restaurant saying nothing because they were waiting for us to pre-pay the bill (shortly before this we had given them $100 to spend-and-learn accountability – more on this below).

3. They expressed disappointment and confusion because there had been no follow up on their business proposal of last year and no money forthcoming for renting a place for regular Urantia Book study group meetings – more on this below.

C. When we discussed “accountability” with them, they thought we were challenging their integrity. So we embarked on a method for them to practice accountability. On the bus from Ndola to Livingstone we gave them $100 US - about 331,000 Kwacha - and asked them for a report and receipts on how they spent the money. Two days later we got the well-prepared report with receipts closely accounting for all the money spent. We were surprised that about 1/3 of the money had been spent on non-essentials, like souvenirs – partly our fault for not asking for a proposal or setting the boundaries on how to spend the money. From there, we encourage the model of “proposal-accountability-frugality” as a way of acquiring and spending money.

D. Chita expressed dismay at the prospect of writing another proposal, discounting the proposal method because it didn’t work for him. This became important when discussing the possibility of renting a place for Urantia Book meetings. At the Sunday Conference, we first discussed the need to separate the idea of US readers supporting a business venture in Zambia from the idea of financial support from U.S. readers for renting a meeting place. This was successful. Next we debated the rental space = a house versus an apartment. The idea of an apartment seemed logical because it would be the best from a security viewpoint. We then encouraged Chita & Namukale to look at the availability of apartments in Ndola within an agreed upon price range (we used the $300 USD price range as a somewhat arbitrary figure); as a proposal. They appeared inexperienced and confused about how to go about renting an apartment. For instance:

1. When in the capitol of Lusaka, they sought out a real estate agent (probably a corporate real estate agent) in one of the largest buildings in Lusaka. The agent knew we were out of our league, and made it obvious he didn’t want to deal with us.

2. Chita & Namukale then requested: a financial statement from the Fellowship or Society providing funds, indicating their financial viability and willingness to pay the rent for a period of time, and added that every owner of the rental property would need this (we found out later that Namukale’s mother owned a rental property).

3. As of this writing Chita & Namukale have not indicated they have looked at rental properties in Ndola to see what is available in that price range. Instead, stating they want at least 3 months rent money in the bank before they start looking. Hence, if they see something available they want to be able to secure it immediately. The said most decent rentals do not remain available very long.

E. Since returning home, and after speaking with several people, the question came up: why is there a need for an apartment for a meeting place? Is there a need for a kitchen and bedroom? Perhaps there is. But probably not. Robert Burns of UBLA and Jason Freeth have indicated they are willing to financially support them, but not at a $300 per month level. It appears as if a decision has to be made:

1. Are readers, or groups of readers, in the US willing to rent an apartment in Ndola for study group meetings? In doing so, vis-à-vis, we are providing Chita & Namukale a place to live – and, of course, have meetings. Chita is working for a newspaper at $75 per month and has completed several college classes, but is presently not enrolled in school. Namukale is a recent graduate (business) and has no job prospect. Both live with relatives or friends. We did not meet any of their relatives.

2. Or, do we want to fund the renting of a room or small office area (hopefully with running water and a rest room) in which to meet?

3. Either way, we suggest: doing it for a limited time (1 to 2 years), requiring monthly accountability statements, and an exit strategy for self-reliance.

IV. Conclusions and Recommendations: Chita and Namukale are very good in some areas of economics. For instance, they have been successful at applying for and receiving scholarships for international conventions – the Barcelona, Spain and Philadelphia, PA gatherings. However, we have also observed them functioning with finances at a level that can be described as naïve and inexperienced. Perhaps much of this can be attributed to culture. But as previously stated the culture appears to have a history of economic dependency. Perhaps our age differences came into play (we have 3 sons their ages). But the vague feeling of entitlement was sometimes felt.

A. At this time, we would not recommend capitol funds for investing in a business venture with them until the learning process has been allowed to more fully mature. What we do recommend is when proposals or any other form of communications are received by Fellowship members from Zambian readers that there is a timely response with honest feedback on the strengths and weaknesses of the proposal. Thereby helping them with their learning curve and, especially, to minimize mistrust.

B. Nor would we encourage the renting of an apartment for Chita & Namukale, for the following reasons:

1. We will probably be seen as another missionary-type organization = we have the wealth, we make the decisions, and we spend the money.

2. Chita & Namukale will continue to be recognized as the “chosen ones” by other Zambian readers. For example, Joseph Chanika, the assistant librarian in Nodla, also encouraged us to financially support them in a house or apartment, but where several readers could live – including him. Chita & Namukale were quit clear that they wanted an apartment for the two of them only. (At one point Chita mentioned that other people could have small study groups in their homes because he feared having large groups congregate in one place could lead to the Urantia Book being banned.)

3. By providing Chita and Namukale with an apartment would likely slow their growth toward self-reliance.

C. Our preference – with strict guidelines in place - is the rental of a small secure meeting space where books can be stored, people can congregate for study, and outreach activities coordinated.

(Thank you for your patience, Buck & Arlene Weimer, Pueblo, CO, USA)