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THE SAFETY NET  

By DARLINGTON CHILUBA

SAFETY net refers to those services that governments are obligated to provide to vulnerable citizens through social welfare schemes such as cash transfers and health insurance (including free health).

Some developed countries include unemployment, housing and maternity-related benefits for unemployed youth and vulnerable citizens registered under given schemes.    

Safety nets are not strictly the same as public goods such as street lighting, garbage collection or roads, which are paid for directly by users through tolling and other fees directly related to their use.

Subsidies also fail to meet the strict criteria of safety nets because they target an item, or outcome, not actual vulnerable citizens.

For example, subsidies are applied on fuel, agriculture produce or such services, not strictly on persons or groups.  Safety nets are different because they tend to target beneficiaries or persons that are typically unable to afford those services without some support.  

Irrespective of the artificial and actual similarities or differences, all these, subsidies, public goods and safety nets, depend on government financing at local and central government (treasury) levels. 

Therefore, without sufficient revenue, it may be unreasonable to expect any government to provide quality services in any sector particularly sensitive ones like health and education without external private sector support.

Providing free services on a thin revenue base is difficult. It is even worse, and self-defeating if major industries are nationalised and not operating optimally to create market efficiencies that create taxable profit.

A functional economy needs an active private sector (or deregulated market) from where government can raise various forms of tax and non-tax revenue to enable the provision of a quality safety net for vulnerable citizens.

Governments that provide effective free services do so from a calculated economics point of view because safety nets are not a philosophical debate, but intrinsic to the very idea of governing.

So instead of rushing to provide free services, successful governments instead create an environment that enables quality social services to be provided uninterruptedly.  

As such, two of the most severely overlooked benefits of liberalisation in Zambia (1991-2001) was the creation of the Zambia Revenue Authority in its current form in 1994 as a conduit to expand revenue sources for government and, secondly, the reintroduction of private enterprise in the economy (market deregulation).

This symbiotic nexus is the template and bedrock of how growing economies should function and is the foundation of modern Zambia.  

In short, the idea was that Government allows private local and foreign companies in the country. This leads to employment and an up-skill of citizens which, by extension, leads to competitive wages and living standards over time, culminating in the creation of the middle class.

All these companies and employees pay various forms of taxes and other contributions in certain categories. Pension and health schemes that receive those contributions also pay tax.  

Ultimately, the point is that Government is not shouldering the burden of employment, social welfare, and economic profit; but collecting revenue from multiple sources it created through deliberate policies.  

The initial results were fractious because the shift from command to free economy was systemic and seismic. Systemic because the entire system of government and policy making system was decentralised from the core, and top to bottom to create efficiency.

Seismic because every sphere of the country had to shift to a new way of thinking so that Government was detached from every psyche of business, social life, politics and so on, hence the word liberalisation.

One example was that all citizens (even civil servants) were now allowed to own personal homes so that when they retired, they did not return to their villages as it so often happened – while waiting for a menial pension.

They could rent out their properties or commercialise them in other ways and ply their trade in familiar cities after retirement.

The intention to lessen dependency on government forced the creation of a private sector and the birth of real private and public partnerships after 1991. Resultantly, financial intermediaries and insurance (which include contributions on behalf of employees) grew exponentially and contributed an average of seven percent a year to the economy between 1994 and 2010.

This means that a significant number of private companies were opened or relocated to Zambia after 1991; and a good number of those private companies contributed to employee health schemes thereby reducing the dependence on the government for this public good. 

Monetary contributions by pension funds led to the expansion of the insurance industry in numbers and services offered.

From the government’s side, increased revenue enabled quality service provision and expansionary programmes such as more hospitals or health posts, community schools and partial free education where necessary.  

Today, there is little dissent that safety nets are an obligation of the government to be met through taxation or other public revenue. The trouble is when an intrinsic obligation becomes a burden on government revenue. In this regard, the government would have neglected its responsibility by overextending expenditure while limiting its own income.

Liberalisation proved that a responsible government expands its revenue base and gives citizens the right to exercise free will within the ambits of the law so that government is relieved of doing everything.

Once this occurs, Government is released to provide quality safety nets and determine what should be free and what should be paid for. This is an outstanding legacy of liberalisation upon which more can be built; the converse would be a restrictive system with full dependency on the state to provide pretty much everything, something that was unsustainable for an ailing economy that the country was before 1991.

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