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POVERTY AND POTENTIAL: AN ECONOMIC ILLUSION

In the current global system, a country without a vibrant financial (services) sector would be difficult to conceive because even the most obscure nations have a record of electronic financial transactions – irrespective of how small. For Zambia, the financial sector in its current form was created after the liberalisation exercise of 1991. Hitherto, the same heavy reliance on copper that we currently exhibit was more worrisome because assets were subjected to political and centralised decision making.
Government owned all commercial activity to the extent that political decisions were superimposed on logical economics. Whatever the history domestically as well as regionally – and there is a lot of it for and against – it is the future that prompts a rethink of economic value. Market driven economics gives private markets the power to assess a nation’s economic viability. That viability, one way or another, must fit into the function of the international financial architecture.
For example, Namibia recently reported having oil reserves. Thereafter, the Organization of Petroleum Exporting Countries (OPEC) announced the possibility of a partnership with Namibia (according to a Reuters report of April 24, 2024). Of course, oil is unlike other precious resources largely because it has a widely respected cartel in OPEC that looks out for the interests of member states. Nations can opt out if they wish; but the message being communicated by Namibia is that it prefers the stability, credibility and reach of OPEC to co-manage this valuable resource now, than go it alone.
Botswana has done the same with its diamonds, partnering with DeBeers. All these partnerships largely depend on ultimate beneficiary outcomes, especially for the nation state. In fact, over time, Botswana has renegotiated its agreement with DeBeers so that its share of wallet from its own resources increases appreciably. These agreements with global cartels do have their upside and downside.
For example, the London Metal Exchange (LME) was not much favourable to copper producing countries until the resurgence of China reasserted the “internal value” of the metal. That increased demand translated into better returns for Zambia after 2006. For reiteration, the importance of having precious minerals lies in their ability to generate beneficial returns to the country, by and large. At this point, if nationalisation can generate unselfish economic returns to its citizens, then so be it.
Privatisation does not curtail government’s role in resource management; on the contrary, government begins to appreciate the value of the asset directly through either shareholding or taxation and other policy. To put it practically, if a nation can generate viable returns from oil outside OPEC, or diamonds away from DeBeers then it should be supported. Zambia, like other copper producing nations benefitted more from China than the LME in recent times. These are difficult decisions, but ultimately it is the citizens that must benefit from the value of the resource.
For a country, wealth is measured variously but most prominently through the stability of the financial system. That is, the ability of the financial sector to generate transactional value within the economy on one hand, and the contribution of the real sector to economic growth on the other. After much reflection, poverty and economic potential are much the same thing. Poverty is reality, while economic potential is merely an intention to eliminate or leave poverty behind. It takes collective leadership across the board to make bold decisions that can be unpopular in their current environment.
China serves as a recent example of visionary collective leadership. Botswana has been that country for a while and even Libya before its near obliteration. These nations grew from utilising organic capital, both mental and natural. Challenges will always be there, but the collective resolve of the leaders should help spur economic emancipation and bring about progress for the better interest of the citizenry.

 

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