Professional Documents
Culture Documents
ZIPPA Board: Muyunda Mwanalushi (Chair), Jonathan Chileshe (V/Chair), Murray Sanderson (Exec.
Sec.), Wilphred Katoto (Hon. Treas.), Ernest Beele, Mary Kakumbi, Charles Lungu, Chearyp
Mkandawire-Sokoni, Sara Ngulube
Property Rights in The writer's emphasis on the need for title deeds
Zambia
applies also to urban areas. The Peruvian economist,
Hernando de Soto, has drawn attention to the huge
amounts of physical wealth in the hands of poor
people, who, for want of title, lack the incentive to
Property rights sound dry and theoretical. But they improve their properties and the ability to pledge
are vital for economic development. And if official them as security for loans.
regulations can hold back development, as we saw
in the July journal, absent or insecure property Contractual entitlements are another kind of
rights are even more damaging. property right. Such rights should present few
problems. In countries where the courts are
Property rights can be placed in five categories - efficient and completely independent, and where
personal, geographical, contractual, intellectual the role of confidence and trust in business dealings
and monetary. 'Personal' stands for security of body is well understood and respected, legal contracts
and of personal possessions. This is fundamental, are fully dependable. But this does not yet apply in
but it need not concern us much in Zambia. Suffice it Zambia, as is clear from an article in this issue on
to note that lack of such security in countries to our the unhappy situation in the mining industry.
north precludes economic development in vast
areas. Intellectual property rights are important for artists
and musicians, as well as for manufacturers with
Geographical rights are property in the physical patents and trade marks. But they are difficult to
sense of land and buildings. Until colonial times all protect, especially in Africa. This makes it hard for
land in Zambia was communally owned, and in rural even brilliant persons to benefit from their talents.
areas much of this continues. Land for all sounds
fine, and cultural loyalty is attractive, so communal Sound money is also a property right, though it is
ownership still has much public support. But it has much ignored. Monetary savings can be a major
serious drawbacks. These are explained in general source of investment. But they soon lose value
terms in a famous article, 'The tragedy of the when governments print money as a means of
commons' by Garrett Hardin, from which some unofficial taxation. Zambia's persistent double digit
passages are quoted here. The next article, by John inflation may seem low in comparison with rates
Hudson, former chief executive of the Zambia recently experienced in Zimbabwe. But inflation
National Farmers Union, examines communal which averages even ten per cent quickly destroys
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the value of pensions and cash deposits. society that believes in the freedom of the commons.
Freedom in a commons brings ruin to all.
Clearly, property rights in Zambia are still far from
secure. How do we compare with other countries? The National Parks present another instance of the
The 2009 International Property Rights Index ranks working out of the tragedy of the commons. At
Zambia 106 out of 115 countries, just nine places present, they are open to all, without limit. The
from the bottom. This is in sad contrast to Zambia’s parks themselves are limited in extent -- there is
top ranking among African countries in the only one Yosemite Valley -- whereas population
Economic Freedom of the World 2009 Annual Report. seems to grow without limit. The values that visitors
Property rights, no less than economic freedom, are seek in the parks are steadily eroded. Plainly, we
essential for economic development. must soon cease to treat the parks as commons or
they will be of no value to anyone.
The Tragedy of the Commons In a reverse way, the tragedy of the commons
reappears in problems of pollution. Here it is not a
Garrett Hardin (1968) question of taking something out of the commons,
The tragedy of the commons develops in this way. but of putting something in -- sewage, or chemical,
Picture a pasture open to all. It is to be expected radioactive, and heat wastes into water; noxious
that each herdsman will try to keep as many cattle and dangerous fumes into the air; and distracting
as possible on the commons. Such an arrangement and unpleasant advertising signs into the line of
may work reasonably satisfactorily for centuries sight. The calculations of utility are much the same
because tribal wars, poaching, and disease keep the as before. The rational man finds that his share of
numbers of both man and beast well below the the cost of the wastes he discharges into the
carrying capacity of the land. Finally, however, commons is less than the cost of purifying his
comes the day of reckoning, that is, the day when wastes before releasing them. Since this is true for
the long-desired goal of social stability becomes a everyone, we are locked into a system of "fouling
reality. At this point, the inherent logic of the our own nest," so long as we behave only as
commons remorselessly generates tragedy. independent, rational, free enterprisers.
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It was not due to spite or resentment, nor even to even though the legislation was passed in 2008.
reduced profitability, but because this un- Administrative opacity is a problem worthy of a
negotiated, unilateral cancellation of their paper on its own: it is one of the greatest threats to
contractual rights shattered their confidence in the security and to building trust.
dependability of the Zambian Government.
When assessing a country's attractiveness for The 2008 Act removed the entitlement of the holder
investment, the key ingredients of a mining policy of a prospecting licence to the grant of a mining
fall into three main categories: licence following successful exploration. This
entitlement is an important internationally
1. Stability of legislation. recognized pre-requisite for exploration. Indeed,
2. Security of tenure of mining rights. why would one risk millions of dollars in an already
high-risk business if one is not entitled to a licence
3. Incentives and guarantees for investment.
to mine what one finds?
Let's look at the status of these three ingredients.
The requirement for the holder of a mining licence to
Stability of legislation possess an annual operating permit may seem
innocuous. However, the potential for separating
The Mines and Minerals Development Act of 1995
ownership of a resource from permission to exploit
was amended by subsequent Acts no fewer than
it is very worrying. In practice, it would be (and
eight times, and finally replaced by the 2008 Act.
actually has been) a small legal step to nationalize
This new Act has already been amended twice. By
the resources of an established mining operation
these frequent changes Zambia has shown the
while relegating the current owner to contract
international business community that it cannot
mining and mineral processing.
safely rely on stable legislation.
The requirement to obtain written access
Security of tenure of mining rights
agreements from traditional rulers and legal
Security of tenure lies at the core of any assessment occupiers of land is also disquieting, as the
of a country's attractiveness to investment within a relationship between surface and mineral rights can
competitive environment. This is particularly true be difficult to determine. No access agreement
for exploration, which is the future of Zambian means no right of entry to your mining right and,
mining. Create uncertainty here, and serious once again, there is only limited recourse to appeal.
investors already in the country will cancel or curtail This has led to situations where explorers have been
their exploration programmes. Many potential held hostage by individuals looking for a large
investors will go ahead only if they are confident financial return before the first borehole is even
that licences obtained will remain in their drilled. Even worse, access agreements have been
possession as reliable concessions to explore for the arbitrarily cancelled after millions of dollars have
commodities stated. been invested.
The 2008 Act has a number of problems. Incentives and guarantees for investments
Probably the most contentious provision allows for At the time of privatization of the copper mines, the
applications for mining rights within an existing Government and its advisors considered it essential
right, subject to consent from the holder of the right. to provide binding Development Agreements in
Furthermore, consent cannot be unreasonably order to instill sufficient confidence for the large
withheld and, in the event of denial of consent, the investments required to revitalize the sector.
applicant has the right of appeal, but there is no
The 2008 Mines and Minerals Development Act
provision for appeal by the holder of the mining right.
cancelled the agreements and removed the
Imagine the situation where a portion of your
Minister's power to enter into any agreement for the
mining licence where you have invested, say,
grant of a mineral right. From the industry's
USD500 million has been awarded to another
perspective, by unilaterally canceling the
company resulting in compromised security and
Development Agreements, Zambia has shown the
integrity of your operation. Having suffered this,
international business community that it may not be
would you expand existing operations or develop a
able to rely upon legally binding agreements.
new mine elsewhere in the country?
Sadly for Zambia the current Mines Act contains no
In exploration the situation is even worse, as many
provisions governing incentives and guarantees for
mining rights have actually been granted within
investment. In a highly competitive world where it is
prospecting licence areas without consent from the
essential to actively attract investment, this is a
holders. This has been going on since around 2004,
glaring omission.
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Conclusion reduce its availability to others.
Current mining legislation contains many provisions
which entail uncertainty. The greatest offenders Given the intangible nature of IP, innovators face a
concern security of tenure, while the greatest challenge to appropriate the economic benefits of
omission relates to investment guarantees. Both their ideas. In order to overcome this problem,
are features essential for the development of a governments grant intellectual property rights
vibrant mining industry, and they require urgent (IPR) to assist innovators and provide incentives for
review, benchmarking against international best innovation and IP dissemination. Recently an
practice. Without such a review trust will not be Intellectual Property Rights Indaba was co-hosted
rebuilt. Until this is done, do not expect responsible by the Free Market Foundation (FMF) and
large-scale, high-cost, high-risk exploration, which International Policy Network (IPN). The indaba
is desperately needed in order to find deposits that covered fundamental aspects of intellectual
can replace the aging, high-cost mines of the property rights and focused on three major fields:
Copperbelt. software, health care and music.
Author: Grant Gatchell, Ndola
The keynote address was delivered by Douglas
Lippoldt, Senior Economist & Policy Analyst at the
The Importance of Intellectual Organisation for Economic Co-operation and
Property Rights
Development. According to Lippoldt, “Technological
development is the tool to accomplish greater
economic development”. In order to develop
By Jasson Urbach technologies and increase the capacity of
Most rational people know the importance of technologies within the economy, it is essential that
defending their property. If you acquired property in technology is well protected so that there is an
a legal manner you would expect there to be some economic incentive to develop and/or 'import' new
type of recourse if someone disposed of it illegally. technologies.
In a world with no property rights or loosely
enforced property rights there is no economic Lippoldt also stated, “A significant number of
incentive to protect, improve or even acquire countries, both developing and developed, have
property. substantially strengthened their IPR's
environment”. Lippoldt demonstrated that there is
With increased investment in an economy, income a statistically significant positive relationship
per capita increases. Higher per capita incomes lead between IPRs, foreign direct investment, trade,
to greater levels of saving. This in turn leads to research and development and patent applications.
greater levels of investment, thus completing the In other words, by strengthening IPR one can
virtuous cycle. Therefore, it is imperative to protect reasonably expect FDI, trade, R&D and patent
property rights so that this investment in the applications to increase.
economy can occur and grow.
Lippoldt cautioned, “IPRs are just one factor,
Similarly, intellectual property rights (IPR) play a amongst others, that influence innovation”. IPRs
key role in the ability of rights holders to capitalise are not a silver bullet policy solution - they account
on their innovations. But what exactly is intellectual for just a portion of the variation in the economic
property (IP)? The World Intellectual Property indicators. Successful implementation of IPR
Organisation refers to IP as creations of the mind, regimes depends on complementary factors such as
for example, inventions, literary and artistic work, the quality of legal institutions, markets and
and symbols, names, images and designs used in infrastructure. Simply put, the efficacy of
commerce. IP is omnipresent and surrounds us in intellectual property reform is ultimately subject to
nearly everything we do during the course of our the environment in which IPRs operate.
everyday lives.
According to the 2009 International Property Rights
The intangible nature of IP should not detract from Index (IPRI), which covers 115 countries around
its importance to society. One of the major benefits the globe and represents 96 per cent of world's GDP,
of this intangible nature is that IP has a tremendous South Africa ranks 24th. The index shows that the
ability to reach a vast number of people at one time. countries ranked in the top 20 per cent are 9 times
More specifically, IP does not have the same wealthier than countries ranked in the bottom 20
characteristics as tangible property. For example, per cent. More importantly, the index demonstrates
the shirt that I am wearing precludes anyone else the positive and statistically significant relationship
from wearing it. However, the use of IP, such as a between property rights and gross domestic
software programme, by one person does not product (GDP) per capita. More specifically, a one
5
point increase in the IPRI score predicts a USD7,616 chosen the correct path, and he did not query the
increase in GDP per capita. desire to be rich. His concern was whether market
fundamentalism has an adverse influence on the
The Index also shows that low-rated countries with values of rich people.
improving IPRs prosper, whereas high-rated
countries with declining IPRs stagnate. For SA this There is nothing wrong with ambitious people who
means that the hard work we have done to achieve want to be wealthy. Rather than discourage people
our position is not over. We need to constantly from having the desire to be wealthy, we should
improve, or else we risk slipping down the ranks. For encourage the rich to grow their businesses as long
if property rights are not strongly enforced, there is as they comply with the laws of the country. We
little economic incentive to invest, improve or even need more wealthy individuals not less.
to acquire property. “Conspicuous expenditure” has also been blamed in
a similar vein as a supposed by-product of
Author: Jasson Urbach is an economist with the capitalism, again linking unpopular values with
Free Market Foundation. capitalism. However, conspicuous expenditure is
not a problem for the rich - they can afford it - but
The real problem is misinformed anti-market Apartheid was not capitalism but a racist social
fundamentalism, which is fundamentalism in the agenda by those in power at the time. Similarly BEE
true sense of the word. It is blind faith that is in is blamed on a capitalist agenda, which it is not - it is
conflict with reality. The wealthy and those aspiring a political and social agenda that has nothing
to be wealthy have been condemned as greedy and whatsoever to do with capitalism.
ruthless. However, in a true capitalist environment
it is hard work and providing value to consumers Capitalism does not promote high prices, the
that allows people to become wealthy. In such an exploitation of anyone or corruption. On the
environment there is proper application of the rule contrary, it is capitalism that exposes and
of law, no one is granted special statutory privileges, eliminates corrupt and inefficient businesses. This is
there are no barriers preventing competitors from unlike socialism in which malinvestment survives by
entering any market, private property and persons virtue of the power of governments to perpetuate
are respected and protected, and there is unlimited wealth-consuming follies by transferring taxed
opportunity for upward mobility available to the wealth from productive citizens to state industries.
innovators and producers who best serve Note that capitalism does not promote monopolies
consumers. but rather efficiency and service through
competition. The existence of inefficient
Whilst President Mbeki expressed concern in his “parastatals” such as Telkom, that charge high
widely publicised 4th Nelson Mandela Annual prices, cannot be blamed on capitalism.
Lecture about greed under South Africa's capitalist
system, he stressed that his government had Stalin and Mao each massacred over 30 million of
6
their own citizens in the name of communism - that fundamental disincentives to diversification in
is evil. Any system that denies its citizens the right Zambia has been the chronically over-valued
to freely undertake economic activity is evil. exchange rate.
Capitalism, like money, is neither good nor evil. In
this sense capitalism is neutral. It is neutral Over the years Zambia's consistently high inflation,
regarding religion, morals, ethics, good, evil or any by international standards, has pushed up domestic
other subjective beliefs and values. To equate prices. But the decline in kwacha buying power has
capitalism with evil is propaganda designed to not been adequately reflected in the exchange rate.
confuse the majority of our people. During the era of fixed exchange rates this was
deliberate. Yet under the subsequent floating
It is a capitalist economic environment, conducive exchange rate policy we have also seen a mounting
to maximising the economic freedom and disparity between the nominal exchange rate and
prosperity of its citizens, that will best serve SA. It the 'real' (or realistic, i.e., inflation and productivity
creates wealth while socialism destroys it. adjusted) exchange rate. The nominal exchange
Interventions in the market mechanism distort or rate has for long remained largely static, despite
subvert the proven benefits of capitalism and are some ups and downs. Indeed today's nominal rate
usually negative for citizens. Capitalism gets of approx. $1 = K4,800 is the same as in October
incorrectly blamed for the consequences. 2004. Such stability is artificial. It has resulted from
enormous inflows of aid, and recently of foreign
Questioning the 'morality' of capitalism is a investment, and by loan forgiveness. This has
favourite strawman of its opponents. It is people created the 'strong' kwacha, when a realistic
who are good or evil, moral or immoral, not exchange rate which reflected domestic inflation
economic systems. However, it is true that might have been $1 = K7,500 (or higher). Just
capitalism, or economic freedom, rewards peaceful imagine what a boost such a rate would have given
voluntary exchange, while socialist systems reward to all kinds of exports, while enabling local produce
their leaders and impoverish their followers. and manufactured products to replace imports.
However, it is not the responsibility of the economic
system but of religious, political and other leaders Few Zambians have ever taken much notice of the
and institutions of civil society, especially the family, persistent damage the chronically over-valued
to create a climate of virtue. exchange rate has done to their economy, and its
lack of capacity to generate income, wealth, food
Author: Ayanda Khumalo is the Deputy security, employment and welfare. By contrast, the
Chairman of the Free Market Chinese understand the growth-and wealth-
Foundation inducing effects of a strategically under-valued
exchange rate.
Correspondence - The Exchange Moving the real exchange rate to a level where
Rate Zambia can compete internationally will not resolve
all of Zambia's growth related problems. There are
Strong kwacha frustrates diversification issues of human capital, the lack of integrity in
public systems, weak infrastructure, and the sense
Sir, of entitlement among organized labor that all need
to be addressed. But, not moving the real exchange
Concern about diversifying the economy is not new rate in the appropriate direction will ensure that
in Zambia. Way back in 1949 the colonial Zambia's future repeats the pattern of recent
government commissioned a report on broadening decades - persistent poverty, “hungry farmers on
the economy's industrial base. The First National fertile land”, low average rates of economic growth,
Development Plan (1966-1970) highlighted the distorted development, and minimal diversification.
need to diversify the economy away from copper. A
1984 study repeated that message. Indeed, Malcolm F McPherson, Harvard University
Zambian governments have regularly emphasized 30 August 2009
the need for diversification.
Report on Charter Workshop
Desire is one thing, practical effect is another. Your
recent journal on 'Enabling diversification' identified
several obstacles. Curiously, there is no mention of
the exchange rate. Yet, while other obstacles and The July issue of the journal mentioned plans for a
distortions are important, one of the most workshop on customer service charters. This was
duly held in Lusaka on 24th September. It was
7
arranged in liaison with Cabinet Office, and Assistant Commissioner of Ghana's Internal
attended by the first three charter institutions, as Revenue Service, which has operated a taxpayer
well as by the Public Service Management Division charter since 1994.
and the Ministries of Mines and Tourism, which are
soon to launch their own charters. The general The participants displayed an impressive
public was strongly represented, and we also had determination to make the charter concept work in
representatives from the Triangle of Hope Initiative. Zambia. Among the concluding resolutions was a
The star of the show was Mrs. Joyce Amoah-Ntim, recommendation to hold a follow-up workshop in 6
months time to review progress.
Disclaimer
The views expressed in this journal are those of the authors. They are not necessarily shared by members or by
ZIPPA, which has no official view.