Fighting the Corona Virus Head on Now and the Economy
Chairman for Economics and Finance
United Party for National Development (UPND)
The Corona Virus (Covid-19) is now a reality in Zambia. The confirmed cases have rapidly increased in numbers from two, ten days ago to 35 by March 30. For those who may be thinking that this number is small, remember this: even countries that are most infected in the world now started with low numbers.
Beyond the health problems, Covid-19 also brings serious economic challenges. Covid-19 will disrupt the economy. Yet, if the economy and the finances of the country are not from start quickly re-aligned towards the fight against the pandemic, the economic and health outturns will both be far worse.
The starting point is to identify the emerging broad strategies for tackling the pandemic. Health experts tell us that Covid-19 is spread primarily through human contact. Tackling it therefore requires restricting human movements so that physical contacts amongst them are minimized or prevented. For some countries, the preferred strategy has been to tightening human contacts gradually. In other words, “take some relatively light measures to restrict human contacts, then observe the situation and if the pandemic escalates, tighten further”.
Other countries have taken the approach of “lock down”. Lock down means compelling people to stay at home except for clearly defined cases. As an example, health personnel must be exempted from movement restrictions, since they clearly belong to critical personnel in the fight. Further, lock downs may be undertaken only in some geographical locations within a country but not everywhere. This is what Namibia has done. The idea is to isolate certain provinces, districts, towns or parts of towns and subject them to a lock down because it is deemed that, from scientific evidence, they are the ones that are infected or are at greatest risk of being infested. The specifics in such cases are informed by the health experts.
The choice between a gradual strategy and a lock down, to some extent, reflects the fear by economic managers that the latter strategy is not sustainable from the economic point of view. A lock down indeed means that most economic activities stop. However, international experience has clearly demonstrated that a gradual strategy merely postpones the unavoidable – a lock down.
Zambia’s response to the pandemic so far has been gradualist. The government has aggressively appealed to the public to improve their hygienic practices like frequently washing hands with soap. Correctly, schools and colleges were quickly shut and the learners sent home. Unfortunately, these measures have not changed peoples’ hygienic behaviours adequately as demanded by the fight against Covid-19. People still gather in significant numbers at funerals. Markets remain crowded. And, of course, both long distance and local distance commuter buses are as over-crowded as ever. These are but a few examples of unsatisfactory behavioral changes in Zambia despite the efforts to date from the government urging people to change.
Further, valuable time was lost in delaying the lock down of international passenger traffic into Zambia. At the time educational facilities were closed, international traffic into Zambia was still permitted. On arrival at Lusaka airport, passengers were scanned. However, the facilities were not adequate to detect patients whose symptoms had as yet not manifested. Mere closure of educational facilities while the external borders of the country remained open was therefore not useful because it was known that the pandemic could only arrive in Zambia from abroad. Inevitably therefore, that was how the first two cases of patients entered Zambia from France. A weak close down from outside Zambia was finally announced on the 25th of March 2020. Surprisingly, it still allows international travelers (who must be quarantined for 14 days on arrival) to enter at a time when all neighbours have shut out external travelers.
The strategy of instituting mild measures and then wait to see whether the pandemic is being contained or not has no track record of success anywhere in the world as of now. If anything, it has resulted in bigger problems. Learning from the experiences of countries that delayed in effecting travel lock (Italy, USA, the UK), it is probable that the virus will spread swiftly in Zambia. Now that Covid-19 has entered the country, it will spread by taking advantage the of human congestion found in our townships and in public transport. For the Zambian government to expect anything better, it must describe what superior plans and arrangements it has put in place compared to Spain, Italy, the UK, the USA and other rich countries.
Rich countries including the USA are struggling to cope with Covid-19. Testing machines, bed spaces and human resources to deal with the pandemic are inadequate. In the case of rich nations, they may have the money to spend but the required tools to fight the pandemic such as testing machines are physically not available from anywhere in adequate quantities. One therefore shudders to imagine what a poor country like Zambia can do if the pandemic spread at the scale seen in Italy and other rich nations.
On account of this alone, common sense suggests that more aggressive preventative measures must be instituted without dely. A lock down must be instituted as most of our neighbours have done. In fact, in relation to the neighbouring countries that surround us, Zambia is already locked down because they have shut their borders with us. This is not the case for passengers coming from afar whose airliners still land in Zambia.
At this late hour therefore, the government should ideally have already completed the design of the lock down. Which provinces? Which towns? What aspects of life are affected? Etc. While health experts take the lead in designing the lock down, other stakeholders must have input. The business community including the mines must give inputs because a lock down will very seriously affect them. Churches, security, civic, traditional and community leaders must all be involved and their roles spelt out clearly. Importantly, lawyers must also give input because, as John Sangwa recently stated, there is need to re-align some legal relationships in the country which obtain under normal situations to the objectives of the lock down for its duration. A lock down is a mammoth organisational and logistic task. It must be designed comprehensively and clearly. Its success or failure will hinge on how well it has been designed.
How do the options for dealing with Covid-19 relate to the economy? As health experts warn us, taking timid and ineffective measures will certainly mean soon we shall have thousands of patients. These will be taken away from their work places or their businesses, meaning production in mines, factories, farms etc. will suffer. The economy will shrink and foreign exchange earnings and government revenue from taxes will also shrink. Probably for a long time. In addition, the country will suffer huge financial losses arising from both lost production and the cost of looking after thousands of Covid-19 patients. In other words, doing nothing or very little will result in both economic slowdown and huge financial costs. Taking ineffective measures is not saving the economy from close down because in reality the scale of patients will drain the economy financially and still lead to a lock down anyway. This is what we have seen in Italy, the UK, the USA and Spain.
A lock down is a calculated risk of seriously restricting human movement, either nationwide or in designated places (where this is still possible). The purpose is to block the Covid-19 from spreading. No doubt, a lock down immediately shuts down the economy in the affected areas. The lock down leads to stoppage of production in mines, factories, farms and other sectors since no one is allowed to go to work. Most trucks and buses will be parked. This means workers will be sent away from work. Marketeers will not be able to sell their merchandise in the manner they do today in the crowded markets. Companies lose money because there is nothing to sell. Countries that effect a lock down take the gamble that for the period of the shut-down, the pandemic will be arrested and the country can thereafter pick up the pieces and resume normal economic activity. The lock down must therefore be executed thoroughly and efficiently so that the pandemic ends quickly.
But a lock down requires money beyond that just needed to prevent infections and to treat Covid-19 patients. A lock down also requires money to assist some people and institutions who may experience extreme negative effects that arise from it. For example, some companies may never be strong enough to re-open business after the lock down due to loss of business. Employees may be sent off during the shut- down without being paid because the employers are unable to pay. How do they survive during and after the lock down? A woman out there who sells fruits and vegetables on the street depends on the tiny profits made per day to be able to feed her family that day. This means that if the lock down prevents her from selling, she will fail to feed her family. Examples abound on the vulnerable and how they survive during and after the lock down period.
Vulnerability arising from the lock down at all levels- corporate, small and medium size enterprises, micro enterprises, individuals etc. is what has motivated some governments to establish funds to deal with such issues. Examples of such countries include South Africa, the USA, Kenya and Germany. The funds come in different forms such as public feeding programs, subsidies, loans, and tax breaks depending on what the specific requirements are.
In the case of Zambia, the Minister of Finance recently announced that the government has put aside K57million as an Epidemic Preparedness Fund. A further K659 million under Contingency and Response fund has been approved. Also, the Minister made tax concessions to the mining industry as well as commitments to accelerate payments of arrears to contractors and pensioners so as improve liquidity in the economy. There are no details about how this money, especially the Contingency Fund, shall be utilised. Certainly, there is no indication made that the money may be used for mitigation measures against the effects of the lock down because presently, the same is not envisaged in the response by the Zambian government.
The absence of a lock down plan by Zambia reflects the reality of the chaos in the public finances of the country, the results of the careless over borrowing for infrastructure since 2011. Some infrastructure is there – highways, township street, cameras to record over speeding, street cameras to capture criminal activities, electric power, etc. The absence of a fund to support the vulnerable under a lock down demonstrates one obvious fact – that the development process is multi-dimensional. Concentrating efforts on a single or on a few aspects of development (such as roads) leaves the country exposed to risks that emerge from areas that have been neglected. For example, sadly, the street cameras financed by foreign loans cannot address the present health challenge that threatens Zambia.
As things stand now, out of every Zambian Kwacha collected in government revenue, at least 90 percent is utilised for paying government loans and paying public salaries, leaving only 10 percent for other government services and activities. With so little left, any significant outlay towards supporting the vulnerable under a Covid-19 pandemic block down can only be financed if the government defaults on some loans and also suspends paying salaries for some public workers on top of those it is already failing to pay.
In countries where the governments have offered financial mitigations packages described above, the funds were borrowed from financial markets. For Zambia, the borrowing option on open markets is hard because the country is already over borrowed. The alternative windows that are open are those announced by the international agencies like the International Monetary Fund (IMF), the World Bank and now the African Development Bank (AfDB).
The government must therefore act swiftly to secure funding that will support, among other things, support for the vulnerable under a lock down. For now, there could still be possibility for a partial lock down that isolates the most infected areas. Delaying the lock down might means that when it is finally effected, it might have to be imposed on the whole country. Further, the suggestion by the IMF requesting countries that have lent money to poor countries like Zambia to suspend repayments of debt during this crises period must be pursued.
The Zambian government must also demonstrate its commitment by re-aligning its priorities. For example, the adventure to re-establish a national airline ought to be shelved as it will merely take away resources from critical areas like health. Also, the government ought to stop encouraging and tolerating unnecessary bye elections because these have already wasted so much of the financial resources of the country. It is hard to understand why, at the time when the government is struggling to gather financial resources to fight the pandemic, money is made readily available for a bye election in Luena (Western Province). The Luena bye election was deliberately induced. Neither does it augur well for the government on one hand to urge the population to practice social distancing and on the other hand indirectly encourage villagers to crowd together at the bye election political rallies.
Money to mitigate the effects of lock down must be found now.