1 August 2012

Zambia: CEEC Failing Local Enterprise

analysis

THE South African BEE was launched to redress the inequalities of the Apartheid era by giving black Africans, some "coloureds", Indians and some Chinese of South African citizenship economic privileges previously inaccessible to them.

It has a lot to do with the country's background. According to Wikipedia BEE includes measures such as employment equity, skills development, ownership, management, socioeconomic development, and preferential procurement.

After the transition from Apartheid in 1994, it was decided that direct intervention in the distribution of assets and opportunities was needed to resolve the economic disparities created by colour-bar policies. BEE intended to transform the economy to be representative of the demographics, specifically race population of the country. BEE was defined in the 2001 Commission Report as:

"...an integrated and coherent socio-economic process. It is located within the context of the country's nation transformation programme, namely the RDP (Reconstruction and Development Programme).

"It is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer ownership, management and control of South Africa's financial and economic resources to the majority of the citizens." The measures were fully enacted into law through the BEE Act of 2003.

Namibia, which came from a similar background like South Africa's, struggled to come up with its own BEE policy. After a protracted seven-year process, the policy euphemistically called the New Equitable Economic Empowerment Framework (NEEEF) was launched last year. The NEEEF replaced the Transformation of Economic and Social Empowerment Framework (TESEF). In almost all Sub-Saharan African countries some semblance of BEE exists in one form or another.

For Zambia, while the policy and the law have been in place for about six years now, not much has been achieved in terms of the CEE fund empowering the citizens, as the name entails. Leaders seem to have given a lip-service to the issue. Zambia's Citizens Economic Empowerment Commission (CEEC),a body corporate created by CEE Act number 9 of 2006 to promote the economic empowerment of targeted citizens, instead seems to have been targeting beneficiaries on political basis.

In line with the Act, economic sectors are required to be responsive to the needy to empower local players like contractors, suppliers and others, instead of foreigners. One such sector where foreigners have continued to dominate despite the availability of the policy to even the field is the road construction sector.

According to former Transport, Works, Supply and Communication minister, Yamfwa Mukanga, the category, "where the most lucrative contracts are, is dominated completely by foreign-owned companies." It is against that backdrop that Mr Mukanga issued a policy statement on July 25, 2012 to direct the Road Development Agency (RDA) that a minimum of 20 per cent of subcontracted works of all road contracts awarded, should be given to firms with 51 per cent Zambian ownership interest.

Under this new arrangement, the RDA will pre-select subcontractors, predefine the works that they will do and make the payment for the work carried out directly to the selected subcontractors. The move is aimed at empowering local contractors, create jobs for citizens and enhance capacity among the local contractors to contribute to sustainable economic development.

This is in line with the CEE Regulations (Preferential Procurement) of 2011. "This initiative by the Government is also aimed at upgrading the local contractors from grade six to grade one. I refuse as minister responsible for Transport, Works, Supply and communication that our indigenous contractors should be restricted to National Council for Construction (NCC) grades 5 to 6 while the big league ... is dominated completely by foreign owned companies," states the statement.

Mr Mukanga pledged "to do everything possible" to change the scenario and called for support from all citizens and stakeholders. The policy directive was prompted by the fact that currently the road sector accounts for 16 per cent of the total National Budget. We are told that last year alone, K4 trillion worth of road works were committed by the defeated MMD government. Most of it went to foreign contractors and a few to MMD-sympathising local contractors.

Imagine if the 20 per cent (or K0.8 trillion) of that went to the local contractors dotted around the country! Their financial positions could have been enhanced. The Government's move to empower the local contractors, therefore, is timely and should be supported by all well-meaning Zambians regardless of their political thoughts. More importantly it should be replicated to other sectors.

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