By DARLINGTON CHILUBA
A FREE gift or service has an actual price or cost to the one who decides to provide that service. This means that the free gift, or service, is procured at a price from its source and all additional costs such as transportation or value addition are consumed or borne by the service provider so that the ultimate beneficiary can get the service freely.
The fact that there is an attached cost makes this an economic and financial decision that must be done with utmost attention and seriousness.
This topic becomes more complex when broadened to national level where government must decide whether the whole economy can function on free services or, better still, to choose select sectors to provide free services for.
Whatever the decision, free services, whether framed as empowerment or subsidy, must necessarily have corresponding revenue or income to finance their provision.
Nations that successfully provided free services such as health and education did so without sacrificing government revenue and economic efficiency.
Economic efficiency is important because the growth sectors like mining and financial services are allowed to function at optimum economic levels to make money for the government, in addition to tax receipts.
In fact, it is not uncommon for taxation trends to correspond with trends in the need to provide free services.
For instance, at the time of introducing the free-market economy in Zambia in 1991, there was neither revenue nor a revenue base and debt was in excess of US$7.5 billion. Without revenue, economic efficiency cannot be present because there is no income for the country.
A government without income cannot function efficiently, let alone afford to offer free services. That scenario is compounded when the same government bars free commerce (or private enterprise), thereby restricting its own income sources.
As such, the decision to continue offering free services was quickly abandoned while simultaneously creating the Zambia Revenue Authority (ZRA) in its current form in 1994.
It became more reasonable to adopt specific sectors to offer free services for two principal reasons, among others: firstly, to protect local businesses and secondly to create an avenue where these local businesses can become commercially independent and viable.
A free-market economy can be detrimental to small businesses because they may not have the capital to compete at the highest level. It is normal in most countries, even the developed world, to protect citizens in one form or another against market forces.
So, what is now called the Farmer Input Support Programme (FISP) was created as that protective mechanism for local farmers wherein the government provides the inputs and buys the produce from the same farmers.
This was done without hindering demand and supply forces which dictated the free market operations for bigger corporate firms.
Another consequence – and weakness – of open markets and multi-party politics which was foreseen after 1991 was that each successive ruling party was likely to economically develop its stronghold more than other regions.
To avoid such a negative possibility, in 1993, the President proposed a solution to this conundrum and his team came up with a skeleton of what became the Constituency Development Fund (CDF) which was presented to cabinet and later parliament, eventually becoming law.
The ultimate goal was to make Government the foremost service provider, instead of the ruling party.
By making this a policy and constitutional guarantee, citizens were not anymore forced to join political parties in exchange for financial or social-economic relief because the law now guaranteed funding at ward and district levels.
The councils were not there to count and recruit members for the ruling party but became conduits for development as now guaranteed by law. Consequently, both the FISP and CDF have become on-budget commitments for successive administrations to provide tangible development for the citizens.
Their consequent inclusion in the national budgets meant that future government revenues would – and should – sufficiently cater for these services. Politics was forced to become about constitutional guarantees and not strongholds.
Overtime, the selective funding of these free services became strategically planned and fused into the function of the government’s financial cycle.
No wonder, during one of the more difficult times in recent economic history, 2019-2021, when government revenues became insufficient to service interest and capital on our foreign loans, the government did not suspend these obligations.
To ensure continuity, the Ministry of Finance came up with some of the most creative ways to ensure that that these programmes would not be subjected to unfortunate circumstances concerning external debt – and thus abruptly terminated.
So while foreign perception did not favour Zambia at that time, government made sure they provided the best possible collateral to entice banks to lend money to the government to keep the subsidies running for three consecutive seasons.
This was done without sacrificing overall revenues or market efficiency. Government placed a significant number of government bonds with the lending institutions, proving once again that free services cost money.
Noticeably, funding for these two selected subsidies born in the 1990s has increased even after the country has embarked on another World Bank/IMF programe. The finance ministry has not received its due credit for that effective initiative.
If we are to learn anything, it is that free services are not about populism. They should be carefully researched and anchored on a sustainable vision that does not collapse the economy in the end. This is typically where socialism fails.
The point is not to create citizens that are dependent on free gifts but design mechanism that propels citizens to better living standards.
The liberalisation agenda of the 1990s laid a strong enough platform that can, should and has been built on so that while some succeed on merit, others are helped up the ladder because of government policy.
