Are banks willing to give loans to small and medium sized enterprises? Should the informal sector pay taxes? How can the country's economy grow? Listen, watch and read our dossiers on Acces to Finance, the Informal Sector and Business Empowerment.
Mar 6, 2010
Dossiers
Are banks willing to give loans to small and medium sized enterprises? Should the informal sector pay taxes? How can the country's economy grow? Listen, watch and read our dossiers on Acces to Finance, the Informal Sector and Business Empowerment.
Mar 4, 2010
Where is the access to finance?
The role of financial institution in lending money to small enterprises in Zambia is a sticky point. Banks promise to be helpful (…lets dare to care….) , but still the most people wont have a chance for a loan.Its a busy afternoon on Buseko market in Zambia's capital Lusaka. Patrick Zangi is standing in the sun and cuts aluminium bars. The 52 year old man constructs windows and door frames. He has been in the business for more than 35 years but he has never been able to expand it. Patrick blames it on the banks.”They don’t give us information about their procedures and offers.”
Many small and medium enterprise in Zambia are facing difficulties in obtaining loans from financial institutions due to high cost of interest rates. The range is up to 30 percent from the bank, and 15 percent from micro finance institution. That is why Zambian government established a citizen economic empowerment Commission (CEEC) to assist the smes in terms of lending,
Victoria Chirwa of Zambia Chamber of Small and Medium Business Associations critises the work of the CEEC. “We have problem with CEEC cause their condition is too daft the interest rate is reasonable, but the procedure is combasant.”Victoria Chirwa also don’t like that the CEEC demands a business plan,a bank account and collateral among other things. “Only few people can provide all the requirements for CEEC loans.”Mabel Mungoma, the CEEC director general, defends the strict policies of her commission. “The success is not about how many people we funded,it is in how many business are standing after a period .”The CEEC is very careful about giving out loans. In the beginning they made bad experiences with people not paying back. says Mabel Mungoma.
Patrick's business of making iron window frames has been stan
ding for the very long period of over 35 years, yet he has never applied for loan. Patrick is worried about the costs of a loan, he doesn’t want to take one even if he meets the requirements of the CEEC. Like Patrick many small business people are deeply frustrated about the banks, they don’t believe in a change, and for them CEEC does not provide the solutionAli Falaki
Street vending in Lusaka
Time and again the Zambian government has tried to chase vendors from the streets but they keep coming back. The central question is: what makes the vendors come back to the streets?Mulenga Katongo wears a simple traditional wrap and a stained top. She balances a tray of bananas and oranges on her head. Mulenga tries to sell her fruits at city market in Lusaka. On most days the woman in her early thirties walks on the streets to offer her merchandise. Today it is raining and she has chosen to come to the market because there is a shelter to protect her from the rain. But Mulenga is not at ease - her business is illegal. For her it’s not allowed to sell neither in the street nor walking around in the market offering her merchandise. Mulenga suffers from the situation. “We can’t have a situation where there are no vendors in town. What will we eat? We make our money in the streets.” Mulenga says that she couldn’t sell from the markets. It’s too expensive. “There’s a lot of corruption going on”, says Mulenga.
Mulenga has been selling fruits on the streets for three years now as a way of helping the husband sustain the family. They have to pay their children’s school fees and provide their five children with basic needs like many other vendors.
Working with fear
The battle lines between Lusaka city council and street vendors seem to be drawn. Chanda Makanta council public relations manager says, ”it’s very unfortunate that people believe that when they sell on the street they make more money than they would in the market.” But why do the council and the government want these people out of the street despite the hard economic situation the country is facing? Shouldn’t the Zambian authorities be glad that the unemployed find their way out of poverty?
On a normal day, Lusaka streets are crowded with vendors competently balancing trays with fruits and vegetables mainly on their heads. They carry on their work amidst fear of being arrested by police and the council.
Way forward
Is it that these people want to be on the streets and not designated market places simply because they want to reach out to their customers and avoid paying council levy of about 3200 kwacha per day? Mulenga argues, in her opinion the markets are not enough to accommodate all the people selling and she says it is very difficult to acquire stands in the market.
Mercy Phiri from the Lusaka district business association shares the concern of the vendors: “The markets’ space here is not enough and those in top most positions grab the stands first. People who want to get a stand have to rent from those few selfish individuals, who hike the prices and this pushes marketers back to the streets.”
Mercy seems to have a solution for the authorities: “If the government can legalise one street in the town center to allow these vendors to conduct their business especially in the evening when most people are knocking off from work, it would help the vendor. They could even collect levy from there.”
But until the situation on the market changes or the Lusaka city Council declares a street a legal vending place, Mulenga will continue carrying bananas and oranges on her head – always prepared to run away from the police.
Caroline Michelo
The frustrated bio fuel industry
As a landlocked country Zambia has to import 100% of its fuel stocks – a dangerous dependency for the country. Will the amendment of the energy policy influence growth in the bio fuel industry in the country?On his farm in Lusaka Tyson Chisambo bends down to inspect his small Jatropha stalks spread around his knees like a sea of green. He has a nursery with 2 million seedlings on a 2 acre land and also a 10 acre Jatropha plantation in Chilanga.
Jatropha is an energy crop, when crushed it produces fuel, which can be processed into bio ethanol-petrol and bio diesel. Chisambo says he has a processing plant that can crush Jatropha seeds but currently the plant is not working as there is no one trading in bio fuels.
Bio fuel mix
Chairman for the Society Forum for Bio Fuel in Zambia Marriot Nyangu says the government should prepare a value chain, which includes production and marketing instead of only advocating for the growing of Jatropha plants.The government of Zambia in 2007 drafted a law that forces oil companies to mix bio fuel with the regular petrol for sale at filling stations. This is called a blending ratio. Meanwhile the amendment of this law is still waiting for adoption by the Zambia Bureau of Standards (ZBS) in Lusaka.
This is a problem many Jatropha farmers are facing in Zambia. When the government amended the energy policy to support the bio industry as a sector in 2007, farmers like Chisambo jumped to the opportunity.
Charles Mulenga, Assistant Director at the Department of Energy says government is concerned about the supply of Jatropha in the country: "The study of the extent of cultivation of Jatropha in the country found out that only 10,000 hectares of land is plantation. That is not enough to enable us to come up with a mandatory statement of blending".
The government is currently in talks with the Bio Fuel Association of Zambia and stakeholders about the bio fuel industry. "The growing of Jatropha if encouraged within the outlining districts in the country, the oil produced will not only cater for their oil needs but also build processing plants that will brings jobs" claims Chisambo.
The energy minister Kenneth Konga however disclosed that government is floating shares of the only petroleum refinery Indeni on the stock exchange in-order to boost the energy sector.
Mulima Situmbeko
Links
Jatropha curcas in Zambia
China Asks Zambia To Plant 2 Million Hectares of Jatropha
Forests and the Biodiversity Convention
Access to finances for Zambia
Zambia has a large small and medium enterprise sector. But these businesses need loans from then banks to grow. The million-dollar question is: are banks willing to lend money to them?
It is a hot day at Buseko market in Zambia’s capital Lusaka. Most people gather in the shades of the mango trees. However, the heat of the afternoon does not discourage Moses Mwale, a 52-year-old carpenter at Buseko market. Moses works on a small piece of wood. He looks tired. He must be – the air in his small shop is sticky and he has been working all day.
When he is done working on this particular piece of wood, it will fit perfectly on the left arm of the partially made chair in the corner of the room. Moses loves his work. He would like to expand his business, but there is a problem. Moses says sometimes customers need the finished products in a short time but he ends up loosing business because of he depends on manual equipment. “I need a loan so that I am assisted in getting machinery to ease the work we do”, says Moses Mwale
Growing competition
Whether people are unable to get loans or fearful about getting loans, the banking sector has been dominated by four major banks. Private sector development chairperson Yousuf Dodia says the rules and the benchmarks in giving these loans have been set by the four major players. “This has been the scenario for many years, but in the last 24 months we have seen four new banks come in and these banks are mainly African banks. So the group of competitors in the banking sector has grown quit a lot,” Dodia says.
Businesses like Moses Mwales still depend on the government to take responsibility. Moses says the government should encourage small businesses by softening up loan restrictions from banks, but bank of Zambia head of public relations Kanguya Mayondi says Zambians do not have a healthy borrowing culture. “When people hear about borrowing it sends chills in peoples minds, but the only chills it should send is through our conscience - are we ready to pay back?,” asks Kanguya.
Dark cloud of competition
With 2010 bringing close the implementation of the COMESA customs union it will mean zero tariffs for goods moving among member countries. What this means is that goods coming into Zambia from Kenya or Zimbabwe will come in duty free and likewise goods manufactured here in Zambia will go into these countries duty free.
Banks can help in the financing of small manufacturering businesses like Moses Mwale, who does not feel like a potential bank client, probably because of high interest rates. This is true for most SMEs in Zambia unless the government steps in and takes advantage of the coming competition.Yousuf Dodia says the government should see the dark cloud of competition within the region and support the private sector in a more aggressive way.
Stephen Mdoma
It is a hot day at Buseko market in Zambia’s capital Lusaka. Most people gather in the shades of the mango trees. However, the heat of the afternoon does not discourage Moses Mwale, a 52-year-old carpenter at Buseko market. Moses works on a small piece of wood. He looks tired. He must be – the air in his small shop is sticky and he has been working all day.
When he is done working on this particular piece of wood, it will fit perfectly on the left arm of the partially made chair in the corner of the room. Moses loves his work. He would like to expand his business, but there is a problem. Moses says sometimes customers need the finished products in a short time but he ends up loosing business because of he depends on manual equipment. “I need a loan so that I am assisted in getting machinery to ease the work we do”, says Moses Mwale
Growing competition
Whether people are unable to get loans or fearful about getting loans, the banking sector has been dominated by four major banks. Private sector development chairperson Yousuf Dodia says the rules and the benchmarks in giving these loans have been set by the four major players. “This has been the scenario for many years, but in the last 24 months we have seen four new banks come in and these banks are mainly African banks. So the group of competitors in the banking sector has grown quit a lot,” Dodia says.
Businesses like Moses Mwales still depend on the government to take responsibility. Moses says the government should encourage small businesses by softening up loan restrictions from banks, but bank of Zambia head of public relations Kanguya Mayondi says Zambians do not have a healthy borrowing culture. “When people hear about borrowing it sends chills in peoples minds, but the only chills it should send is through our conscience - are we ready to pay back?,” asks Kanguya.
Dark cloud of competition
With 2010 bringing close the implementation of the COMESA customs union it will mean zero tariffs for goods moving among member countries. What this means is that goods coming into Zambia from Kenya or Zimbabwe will come in duty free and likewise goods manufactured here in Zambia will go into these countries duty free.
Banks can help in the financing of small manufacturering businesses like Moses Mwale, who does not feel like a potential bank client, probably because of high interest rates. This is true for most SMEs in Zambia unless the government steps in and takes advantage of the coming competition.Yousuf Dodia says the government should see the dark cloud of competition within the region and support the private sector in a more aggressive way.
Stephen Mdoma
SHOE MAKER BLAMES BANKS FOR HIS INABILITY TO EXPAND
Getting a loan from a commercial bank or micro finance institution is usually not a problem in Zambia - but what is, is the cost of borrowing. It costs up to 30 percent to borrow money from a commercial bank and 15 percent from a micro finance institution.
Kingsley Mwewa, 50, makes shoes in a market stall measuring just two square meters of floor space. An old sewing machine rattles everyda
y from his little stall as one pair of shoe after the other is produced. A pile leather material, shoes (old and new) and shoe soles are disorderly heaped on shelf on the opposite wall to a huge stall window where Mwewa displays the latest produced shoes. The leather, glue, rubber and sweat forms a cocktail of smells that is difficult pin point in description.
But Mwewa and his teenage assistant have been working in this little stall for the last eight years and the only problem their business has is not the smell or the floor space it is access to loans to expand the business. “It’s very difficult to get a loan from commercial banks,” Mwewa says. “They will ask you for collateral and even the interest rates are very high. The only people who can give you a loan are the microfinance institutions but they charge even higher interest rates.”
But its not only small business people that complain about the lack of access to finance. Zambian President Rupiah Banda recently cautioned banks that the high lending rates hinder the growth of small business and therefore limit employment opportunities for Zambians. He said this at the official launch of the First National Bank in November 2009. First National Bank was the fifth bank to open shop in Zambia in less than one year.
The reason why small businessmen like Mwewa as well as economists and politicians complain about lending rates in Zambia is that the inflation rate which is a major factor in determining the interest rates that the banks charge is at 9.8 percent. Why then is access to finance so expensive at 30 percent when inflation is barely 10 percent? But commercial banks claim the cost of doing business in Zambia is very high and that is reflected in the cost of borrowing.
From her glass demarcated office at the top of the most prestigious bank in Zambia, Mizinga Melu, the Managing Director of Standard Chartered Bank and also Vice chairperson of the Banks Association of Zambia, looks closely into her computer screen to analyze the latest financial data sent to her e-mail box.
“Yes, inflation has come down, but If you look at the statutory reserves banks are required to have with central bank and the cost of some of the fixed deposits … they cost quite a bit,” Melu says. “We also have to pay a high cost for the telecommunication and other expenses which all have to be reflected in the lending rates.” She adds that although the average lending rates in the country are between 25 and 30 percent, some people (companies and individuals) can access loans at rates as low as 15 percent.
Poor credit culture
The background to special treatment is the poor loan repayment culture in Zambia. Until two years ago, Zambian businessmen and farmers would borrow money from banks without the slight intention of paying back. Others would hoop from one bank to the other borrowing money and simply disappear.
To nab this culture, the Bank of Zambia created the Credit Reference Bureau, an institution that tracks activities of borrowers and shares that information with lenders with the intention of keeping bad characters out of the financial system. Although it has been in existence for the last two years, the Bureau has done very little to help synchronize the lending rates and the inflation rate.
Economic analyst, Yusuf Dodia says the problem is bigger than the credit reference bureau. “Although the country has 17 of banks there sector is largely dominated by four banks with a network of branches spread throughout the country. The problem is that there is no competition to push lending rates down.” Mr. Dodia says.
Mr. Dodia however predicts that in the next two years the competition among banks will impact on lending rates.
Central Bank dates Islamic Banks
The central Bank which regulates financial institutions is currently plotting several plans to compel commercial banks lend money cheaply. The Bank of Zambia wants bring to the market Islamic banking.
“Islamic banks do not charge interest on money borrowed,” Caleb Fundanga, the Bank of Zambia Governor says. “What they do is that the loan is converted into shares in the project the borrower wants to invest in.”
But until Islamic banking is introduced, Mr. Mwewa banks on customers support not financial institutions to make his shoe making business grow. He plans to employ five other people but this is a long term vision.
“I believe my shoes will be worn the world over …and I want my grandsons and daughters to take over this business and what I believe in is that it will grow!” Mwewa declares.
It’s a dream many small businessmen and women in Zambia have. But these dreams would have been easily realized were it not for the unaffordable lending rates that banks charge on loans.
Kingsley Mwewa, 50, makes shoes in a market stall measuring just two square meters of floor space. An old sewing machine rattles everyda
y from his little stall as one pair of shoe after the other is produced. A pile leather material, shoes (old and new) and shoe soles are disorderly heaped on shelf on the opposite wall to a huge stall window where Mwewa displays the latest produced shoes. The leather, glue, rubber and sweat forms a cocktail of smells that is difficult pin point in description.But Mwewa and his teenage assistant have been working in this little stall for the last eight years and the only problem their business has is not the smell or the floor space it is access to loans to expand the business. “It’s very difficult to get a loan from commercial banks,” Mwewa says. “They will ask you for collateral and even the interest rates are very high. The only people who can give you a loan are the microfinance institutions but they charge even higher interest rates.”
But its not only small business people that complain about the lack of access to finance. Zambian President Rupiah Banda recently cautioned banks that the high lending rates hinder the growth of small business and therefore limit employment opportunities for Zambians. He said this at the official launch of the First National Bank in November 2009. First National Bank was the fifth bank to open shop in Zambia in less than one year.
The reason why small businessmen like Mwewa as well as economists and politicians complain about lending rates in Zambia is that the inflation rate which is a major factor in determining the interest rates that the banks charge is at 9.8 percent. Why then is access to finance so expensive at 30 percent when inflation is barely 10 percent? But commercial banks claim the cost of doing business in Zambia is very high and that is reflected in the cost of borrowing.
From her glass demarcated office at the top of the most prestigious bank in Zambia, Mizinga Melu, the Managing Director of Standard Chartered Bank and also Vice chairperson of the Banks Association of Zambia, looks closely into her computer screen to analyze the latest financial data sent to her e-mail box.
“Yes, inflation has come down, but If you look at the statutory reserves banks are required to have with central bank and the cost of some of the fixed deposits … they cost quite a bit,” Melu says. “We also have to pay a high cost for the telecommunication and other expenses which all have to be reflected in the lending rates.” She adds that although the average lending rates in the country are between 25 and 30 percent, some people (companies and individuals) can access loans at rates as low as 15 percent.
Poor credit culture
The background to special treatment is the poor loan repayment culture in Zambia. Until two years ago, Zambian businessmen and farmers would borrow money from banks without the slight intention of paying back. Others would hoop from one bank to the other borrowing money and simply disappear.
To nab this culture, the Bank of Zambia created the Credit Reference Bureau, an institution that tracks activities of borrowers and shares that information with lenders with the intention of keeping bad characters out of the financial system. Although it has been in existence for the last two years, the Bureau has done very little to help synchronize the lending rates and the inflation rate.
Economic analyst, Yusuf Dodia says the problem is bigger than the credit reference bureau. “Although the country has 17 of banks there sector is largely dominated by four banks with a network of branches spread throughout the country. The problem is that there is no competition to push lending rates down.” Mr. Dodia says.
Mr. Dodia however predicts that in the next two years the competition among banks will impact on lending rates.
Central Bank dates Islamic Banks
The central Bank which regulates financial institutions is currently plotting several plans to compel commercial banks lend money cheaply. The Bank of Zambia wants bring to the market Islamic banking.
“Islamic banks do not charge interest on money borrowed,” Caleb Fundanga, the Bank of Zambia Governor says. “What they do is that the loan is converted into shares in the project the borrower wants to invest in.”
But until Islamic banking is introduced, Mr. Mwewa banks on customers support not financial institutions to make his shoe making business grow. He plans to employ five other people but this is a long term vision.
“I believe my shoes will be worn the world over …and I want my grandsons and daughters to take over this business and what I believe in is that it will grow!” Mwewa declares.
It’s a dream many small businessmen and women in Zambia have. But these dreams would have been easily realized were it not for the unaffordable lending rates that banks charge on loans.
FACTS
By Joshua Jere, Brian Mwale, Hadijah Nabbale
CONSTRUCTION BOOM CREATS EMPLOYMENT IN ZAMBIA.(fact box)
Zambia has about 4,700,000 people in the labour force.
According to the Ministry of labour, about 85.5 % are in employment.
The construction industry currently offers jobs for more than 40 thousand people.
Permanent secretary from ministry of labour adds that they expect more people to be employed in the field and starting training programme.
The construction industry happened to be one of the major sectors in Zambia.
Last year it contributed about 7.5% of the gross domestic products (GDP).
According to the Ministry of labour, about 85.5 % are in employment.
The construction industry currently offers jobs for more than 40 thousand people.
Permanent secretary from ministry of labour adds that they expect more people to be employed in the field and starting training programme.
The construction industry happened to be one of the major sectors in Zambia.
Last year it contributed about 7.5% of the gross domestic products (GDP).
Banks in Zambia loose millions to the informal saving culture.
Less than one third of the country’s population has a bank account. Research indicates that the biggest percentage without Bank accounts are the informal sector. But there alternatives to the official banking.
At the COMESA Market located right in the heart of Lusaka, South African jewelry and baby clothes, Vitengi from DR Congo and fruits from Zimbabwe are displayed on small stalls. Walking among the stands is Lovemore Ngwenya. He is not there to spend money but to collect it .He stops at a stall where a young man is rolling out chapatti. He stops and gives Ngwenya 3,000 kwacha in honor of his day’s contribution.
A group in COMESA Market aimed at assisting Marketers is comprised of 23 people. Each day, each member contributes 3,000 kwacha. At the end of day, the total sum of money collected is given to one member of the group. This is a saving plan on small scale. The system is called Chilimba. Every member of the group has a number. When their number comes up, they get all the money collected on that day. Marvis Chibwe a member of the group says saving in the Bank requires too much time which she lacks due to her busy schedule.
Ililonga Muyunda, the Executive Director of Zambia Consumer Association, says for many semi urban and rural consumers the banks are not in their physical location. “Banks are loosing business because once the informal sector is organized and sensitized there is a lot of business”. Muyunda expressed the need for Banks to cash in on the positive saving culture displayed in the chilimba system.
According to Simataa Simataa an independent analyst Banks are slowly changing to attract the informal sector “A couple of years ago, having an account was a privilege of the few. However Banks have realized this too and they’ve gone down .I know of banks that have gone as low as 20,000 kwacha for opening an account”.
Banks may be reaching out but it is still not enough, at the Market, stand owners still prefer to give the money to Lovemore Ngwenya in their Chilimba system. However, at the close of the day the member whose number was up didn’t get his share. Ngwenya says one member of the group was unable to make his contribution in time. He says he will make a follow up the following morning to come up with the total amount required for the member in waiting.
But if worse comes to worse Lovemore may have to accept an item like a Radio Set instead of the money - just like banks go for Collateral. So far Lovemore never had to take any Chilimba Collateral. His group members have a high discipline in honoring their share. A discipline many Banks would love to see in their clients.
Barbara Namisango
At the COMESA Market located right in the heart of Lusaka, South African jewelry and baby clothes, Vitengi from DR Congo and fruits from Zimbabwe are displayed on small stalls. Walking among the stands is Lovemore Ngwenya. He is not there to spend money but to collect it .He stops at a stall where a young man is rolling out chapatti. He stops and gives Ngwenya 3,000 kwacha in honor of his day’s contribution.
A group in COMESA Market aimed at assisting Marketers is comprised of 23 people. Each day, each member contributes 3,000 kwacha. At the end of day, the total sum of money collected is given to one member of the group. This is a saving plan on small scale. The system is called Chilimba. Every member of the group has a number. When their number comes up, they get all the money collected on that day. Marvis Chibwe a member of the group says saving in the Bank requires too much time which she lacks due to her busy schedule.
Ililonga Muyunda, the Executive Director of Zambia Consumer Association, says for many semi urban and rural consumers the banks are not in their physical location. “Banks are loosing business because once the informal sector is organized and sensitized there is a lot of business”. Muyunda expressed the need for Banks to cash in on the positive saving culture displayed in the chilimba system.
According to Simataa Simataa an independent analyst Banks are slowly changing to attract the informal sector “A couple of years ago, having an account was a privilege of the few. However Banks have realized this too and they’ve gone down .I know of banks that have gone as low as 20,000 kwacha for opening an account”.
Banks may be reaching out but it is still not enough, at the Market, stand owners still prefer to give the money to Lovemore Ngwenya in their Chilimba system. However, at the close of the day the member whose number was up didn’t get his share. Ngwenya says one member of the group was unable to make his contribution in time. He says he will make a follow up the following morning to come up with the total amount required for the member in waiting.
But if worse comes to worse Lovemore may have to accept an item like a Radio Set instead of the money - just like banks go for Collateral. So far Lovemore never had to take any Chilimba Collateral. His group members have a high discipline in honoring their share. A discipline many Banks would love to see in their clients.
Barbara Namisango
MONEY MAKING WHEELBARROWS
In the busy capital city of Zambia, Lusaka, 28 year old Sakala Lyson has begun an unusual business. And he is making a decent living with his wheelbarrow which is also known as a ZAMCAB. For the young man this was a way out of unemployment.
At the busy market place in central Lusaka, a row of wheelbarrows is lined up just outside the entrance of the market. This is where Sakala Lyson has been doing business for the past two years. He owns one of the wheelbarrows which are called ZAMCABS in Zambia. He pushes it for customers who want to transport their goods to various points within the market and town. Sometimes he even pushes his loaded wheelbarrow as far as 10 km within the city. “I tried to work in the companies but I could not find what I wanted, so I decided to come here and work as a Zamcab driver because I get money which I use to feed my family at home”, says Sakala.
MAKING ENDS MEET
He rents a house for his family – that is 2 children and a wife. In a couple of years he wants to send his children to school. This will be an additional cost. Before starting his Zamcab-business, Sakala was unemployed. It is a common problem in Zambia: Lusaka province has the highest unemployment rate at 29% according to the 2005 labour office survey report. Zambia is a very youthful nation. As such a lot of these youths just idle instead of working. “When you talk of the economic way of looking at it this is a resource - youths who are still energetic and vibrant”, says Steven Chamo, the Director of operations at the Organisation for Zambian Youth Entrepreneurs. “They are able to do anything you can think of but they are still at home doing nothing but abusing alcohol and drugs”
At least Sakala Lyson is not like those other youths who just gave up. With his Zamcab business he is able to make a decent living. On a good day he earns 20 USD. But when business is not good he goes home with 6 USD only. Even so this is enough to keep him going. He also has big plans for the future. “I have developed. My life has changed. I now have things which I didn´t have before. So now I want to do some other business. I want to go further”, says Sakala.
TOUGH LIFE
Sakala Lyson didn’t go far with his education. He lost both parents when he was a child and he only went up to grade 7. Nobody was there to pay for his school fees. It is difficult for young Zambians to find a decent job especially if they are a school dropout. “Jobs are very few and shrinking everyday. But youths have hidden potential in them. They should always mind what they have. What they have is greater than what they don’t have”, says Steven Chamo. He tries to encourage young unemployed Zambians to use their talents.BIG CHALLENGES
It’s been raining heavily in Lusaka for over 3 hours now. There is mud all over the market place. Big puddles of rain water and little brown streams are flowing everywhere. This is bad for Sakala’s zamcab business. Being a Zamcab operator is not easy. He has to carry very heavy loads and this puts a lot of strain on his back. Congestion and the danger of being hit by cars in the busy city of Lusaka are not the only challenges in for him. Sakala has to fight for a fair price for his services: “When you explain to someone that you are carrying something heavy and you ask for so much, then they say no I have the money and people can give you peanuts.”
Steven Chamo says, some people in Zambia consider zamcab operators to be failures. But looking at the high rate of unemployment at least people like Sakala Lyson are able to make ends meet. He is happy with what he is doing for now. He is even advising others to join the zamcab business. Apparently, he doesn’t mind competition: “I am appealing to school leavers even those who stopped working. They can come and join us because the bible tells us that God blesses a hard worker.”
Patricia Sundu
Government incurs huge losses through taxes
Mukwanda Danny operates a Zamcab business at the Soweto Market in Lusaka. With this business he feeds a family of five. Mukwanda is among thousands of people joining the lucrative informal sector.The informal sector is absorbing thousands of entrepreneurs. About 70 percent of the working people are operating different- not registered- businesses in Lusaka. Mukwanda Danny operates a Zamcab or wheelbarrow where he ferries goods for vendors to and from the market at a fee. “I get about 500 and 600 thousand kwacha (more than 100 USD) in a month. I pay my rent and I pay school fees for my children”, says Mukwanda. That is equivalent to the average Zambian income. Yet, Mukwanda hesitates to pay taxes. He feels that the government has not assisted him: “The majority of us do not benefit in any way from the government’
The informal sector within Lusaka falls under the City Council. But in 2009 the Council collected only 14,000 billion kwacha (about 64,400 billion USD). That is way below the target of 80 billion kwacha (368,000 billion USD). The Council Public Information Officer Chanda Makanta says the best they have collected was in 2005 with a collection of 16,000 billion kwacha (73,600 billion USD).
The council is unable to collect taxes effectively. “The council is understaffed and more so, there is no regulation in place demanding the inclusion of the informal sector”, says Chanda Makanta. She is calling for reforms in the sector.
Tax reforms
Love Mtesa, an economist expert, agrees that Zambia urgently needs some reforms: ‘’This should have been done yesterday, ” Mtesa says the economy will be improved with a better taxation policy. He says in 1962 every person above 18 years was paying taxes and by then the kwacha was strong against the dollar. “But now the exchange rate is unbelievably high and the government looses billions of money in uncollected taxes”, says Mtesa. This money could help improve the infrastructure in the country. Experts say, with reforms and proper policy to regulate the sector, every of the nine constituencies within Lusaka would end up having an additional school every year, and maybe two health facilities would come up in a year as a way of plowing back to the community.
Jane Kariuki
Mar 3, 2010
Zambia employement statistics
Figures from the Central Statistics Office, Zambia
Zambia employement statistics....
At least 60 percent of the Zambians work in the informal sector.
Break down of Zambia's employement statistics....
The proportion of the unemployed among persons aged 12 years and above for the nation was estimated at 14 percent in 2006. (child labor)• Looking at sex differences at national level, 13 percent of the males and 15 percent of the females were unemployed.• Urban areas recorded higher unemployment rates (32 percent) than rural areas (5 percent). • The highest unemployment rates for females were recorded in Lusaka Province at 41 percent followed by Copperbelt with 40 percent.
Poverty in Zambia -1991 - 2006
Results show that poverty levels declined from 70 percent in 1991 to 64 percent in 2006.
The average monthly income for a Zambian household is K 500.000 (~ 100 USD)
Access to health care
In Zambia the majority of households, about 95 out of every 100 Zambians, in urban areas have access to health facilities, while in the rural households 94 out of every 100 Zambians are reported to have used the facilities.
Income
20 percent of Zambians are living fabulously wealthy lives while the remaining 80 percent just manage to get by. At least 95 percent of workers in the informal sector still do not earn enough to lift themselves and their families out of poverty.
Sources
Article by Kabukabu Kawanambulu Ikwueme:
Zambia: Zambia’s Informal Sector Facing Major Challenges..
Zambia's Informal Sector Facing Major Challenges
Joseph Basoga
Zambia employement statistics....
At least 60 percent of the Zambians work in the informal sector.
Break down of Zambia's employement statistics....
The proportion of the unemployed among persons aged 12 years and above for the nation was estimated at 14 percent in 2006. (child labor)• Looking at sex differences at national level, 13 percent of the males and 15 percent of the females were unemployed.• Urban areas recorded higher unemployment rates (32 percent) than rural areas (5 percent). • The highest unemployment rates for females were recorded in Lusaka Province at 41 percent followed by Copperbelt with 40 percent.
Poverty in Zambia -1991 - 2006
Results show that poverty levels declined from 70 percent in 1991 to 64 percent in 2006.
The average monthly income for a Zambian household is K 500.000 (~ 100 USD)
Access to health care
In Zambia the majority of households, about 95 out of every 100 Zambians, in urban areas have access to health facilities, while in the rural households 94 out of every 100 Zambians are reported to have used the facilities.
Income
20 percent of Zambians are living fabulously wealthy lives while the remaining 80 percent just manage to get by. At least 95 percent of workers in the informal sector still do not earn enough to lift themselves and their families out of poverty.
Sources
Article by Kabukabu Kawanambulu Ikwueme:
Zambia: Zambia’s Informal Sector Facing Major Challenges..
Zambia's Informal Sector Facing Major Challenges
Joseph Basoga
Mar 2, 2010
Zambian informal sector saving under mattresses
The Central bank closed commercial banks that don’t measure up to the set standards. this fills the hearts of the micro small and Medium enterprises with fear of loosing the money.
According to Mungomba an economic Analyst many people in the sector now keep their money in the homes because they fear the long process of compensation in case such an incidence occurred.
Informal sector prone to Robbery…….
Mongomba said in so doing the people expose themselves to dangers of being robed. He added that the sector needs to develop a culture of saving if it is to attain economic growth.
The Governor Bank of Zambia urged commercial Banks to introduce new products aimed at encouraging people improve their saving culture. He said the development has enabled banks get money to lend out to the business sector.
Barbara Namisango
According to Mungomba an economic Analyst many people in the sector now keep their money in the homes because they fear the long process of compensation in case such an incidence occurred.
Informal sector prone to Robbery…….
Mongomba said in so doing the people expose themselves to dangers of being robed. He added that the sector needs to develop a culture of saving if it is to attain economic growth.
The Governor Bank of Zambia urged commercial Banks to introduce new products aimed at encouraging people improve their saving culture. He said the development has enabled banks get money to lend out to the business sector.
Barbara Namisango
Mar 1, 2010
LOOKING FOR ALTERNATIVE OILS
THE ZAMBIAN GOVERNMENT LAST MONTH INCREASED THE PRICES OF FUEL BY 15% WHILE THE FUEL PRICES ON THE WORLD MARKET HAVE BEEN STABLE FROM LAST YEAR 2009. ECONOMISTIS IN THE COUNTRY WONDER WHY GOVERNMENT IS NOT PUTTING FOCUS ON FINDING ALTERNATIVE OIL RESERVES FOR THE COUNTRY RATHER THAN CONSTANTLY INCREASING THE PRICES OF FUEL.
GOVERNMENT ABANDONED THE PROJECT OF HARVESTING BIO FUEL THROUGH THE JATROPHA PLANT WHEN THE COUNTRY IS IN DIRE NEED OF SUCH RESERVES. WITH A GROWING ECONOMY THE ZAMBIAN GOVERNMENT NEEDS TO INVEST IN ALTERNATIVE OIL RESERVES INORDER TO HAVE A FAVORABLE ECONOMY.
THE INCREASE IN FUEL PRICE HAS RESULTED TO THE PRICES OF COMMODITIES TO SKY ROCKET BY ALMOST 100%. THIS IS AS A RESULT OF THE PRODUCTION AND TRANSPORTATION COSTS THAT INCREASE IN RELATION TO THE FUEL COST.
Mulima Situmbeko
GOVERNMENT ABANDONED THE PROJECT OF HARVESTING BIO FUEL THROUGH THE JATROPHA PLANT WHEN THE COUNTRY IS IN DIRE NEED OF SUCH RESERVES. WITH A GROWING ECONOMY THE ZAMBIAN GOVERNMENT NEEDS TO INVEST IN ALTERNATIVE OIL RESERVES INORDER TO HAVE A FAVORABLE ECONOMY.
THE INCREASE IN FUEL PRICE HAS RESULTED TO THE PRICES OF COMMODITIES TO SKY ROCKET BY ALMOST 100%. THIS IS AS A RESULT OF THE PRODUCTION AND TRANSPORTATION COSTS THAT INCREASE IN RELATION TO THE FUEL COST.
Mulima Situmbeko
UNEMPLOYMENT LEVELS SOARING IN ZAMBIA
Zambia has a target of 7% economic growth. But this is being compromised by high levels of unemployment. As a result a lot of people have decided to join the informal sector in order to make ends meet.
The issue of unemployment has become a hot topic for debate. This is so because a high percentage of the population in the southern Africa nation of about 12 million people is unemployed. The Ministry of Labour is trying very hard to create employment. But the issue of policy framework formulation and implementation on creating more jobs for Zambians has faced a lot of hurdles.
One of the contributing factors to high unemployment levels is that some companies closed down after being privatized a few years ago. Most of the people who lost their jobs during this privatization process joined the informal sector by starting up small businesses.
CHALLENGES AND RISKS
Sakala Lyson, stays in Lusaka the capital of Zambia and every morning goes to the city market which is the main market in Lusaka. Here he has a business whereby he transports people’s goods from one point to another using a wheel barrow also known as a ZAMCAB. On a good day he makes approximately 20USD but when business is not good he takes home about 6USD only. This helps him to pay rent for his modest house, pay school fees for his two children and feed the family.
Though he is able to make a decent living, Sakala Lyson faces many challenges. For instance he does not have health insurance although his job is labour intensive and poses some health risks. Carrying heavy loads puts some strain on his back. He works in a very competitive and dangerous environment.
SENSE OF DESPERATION
According to Mr Steven Chamo, the Director of operations at Organisation for Zambian Youth Entrepreneurs, says the high unemployment levels have created a feeling of despair especially among the youth. His organization aims at bridging the gap existing between the youth who are doing small businesses and government through dialogue.They also conduct entrepreneurial trainings for the youth.
Although the government of Zambia is doing everything possible to create more jobs for people like John Sakala, Mr Chamo thinks that it should do more because a lot of people are suffering.
Patricia Sundu
The issue of unemployment has become a hot topic for debate. This is so because a high percentage of the population in the southern Africa nation of about 12 million people is unemployed. The Ministry of Labour is trying very hard to create employment. But the issue of policy framework formulation and implementation on creating more jobs for Zambians has faced a lot of hurdles.
One of the contributing factors to high unemployment levels is that some companies closed down after being privatized a few years ago. Most of the people who lost their jobs during this privatization process joined the informal sector by starting up small businesses.
CHALLENGES AND RISKS
Sakala Lyson, stays in Lusaka the capital of Zambia and every morning goes to the city market which is the main market in Lusaka. Here he has a business whereby he transports people’s goods from one point to another using a wheel barrow also known as a ZAMCAB. On a good day he makes approximately 20USD but when business is not good he takes home about 6USD only. This helps him to pay rent for his modest house, pay school fees for his two children and feed the family.
Though he is able to make a decent living, Sakala Lyson faces many challenges. For instance he does not have health insurance although his job is labour intensive and poses some health risks. Carrying heavy loads puts some strain on his back. He works in a very competitive and dangerous environment.
SENSE OF DESPERATION
According to Mr Steven Chamo, the Director of operations at Organisation for Zambian Youth Entrepreneurs, says the high unemployment levels have created a feeling of despair especially among the youth. His organization aims at bridging the gap existing between the youth who are doing small businesses and government through dialogue.They also conduct entrepreneurial trainings for the youth.
Although the government of Zambia is doing everything possible to create more jobs for people like John Sakala, Mr Chamo thinks that it should do more because a lot of people are suffering.
Patricia Sundu
HIGH LENDING RATES HINDER GROWTH OF SMALL BUSINESSES
A government official recently caused a stir when he accused commercial banks of deliberately keeping lending rates high despite the mushrooming of banks in the last one year. But his comments where greeted with applause by his audience largely composed of small and medium enterprises!
Lending rates in Zambia have remained stubbornly high ranging between 25 and 30 percent. Inflation which is one of the key factors in fixing interest rates, has reduced from a high of 19 percent two years ago to 9.8 percent today. This has sparked outrage from the private sector and some politicians suggest that commercial banks have formed a curtail. President Rupiah Banda recently said the high lending rates are harming economic growth.
The President said this when he officially launched First National Bank, the fifth commercial bank to open doors in less than 12 months. "I'm deeply concerned that while inflation has reduced to less 12 %, interest rates have remained very high." President Banda said." This has the effect of limiting the expansion of the economy because Small and medium enterprises can not borrow money to expand their business and employ more people."
Kingsley Mwewa,50, is a shoe maker in Zambia capital city Lusaka who says his business would have expanded were it not for the high lending rates. From his two meter squared stall in Chilenji Market, Mr Mwewa slams a small hammers on the edges of a piece of leather to smoothen it out. He has already made four pairs of leather shoes for school going children selling at only at 10 dollars. Mr. Mwewa says he once borrowed about 500 dollars from a microfinance institution but the loan left him poor than before. “The banks will ask your for collateral and so many other conditions before they can give you a long at a high rate. The only people who can give a loan are microfinance institutions but their interest rates are so high that after servicing the loan you become poorer than before.” Mr. Mwewa said.
Interest rates average 31 percent in Zambia
In an effort to lower interest rates through competition, the central bank attracted into the economy several banks to open shop. From only nine commercial banks operating by the end of 2008 the number has grown to 17 banks. But interest rates have only marginally reduced.
Economic analyst, Yusuf Dodia says there is not enough competition among commercial banks to push lending rates. “Zambia needs more investors in the financial sector because at the moment the newly opened banks are comfortable not to jump out of the band wagon of high interest rates. It is a fast way to recoup their investments if they keep interest rates high.” He says.
But commercial banks have recently justified the high lending rates as a reflection of the high cost of doing business in Zambia. Bankers Association of the Zambia Chairperson and Managing Director for Citi Bank, Savior Chibiya says banks like other business operate in the same economy where the cost of doing business is very high. “ We also have to pay a very high cost for Telecommunication and electricity among other cost which also add up to our cost of operation.” He says.
Central Bank dates Islamic Banks
The Central Bank is now dating Islamic banks with a view of attracting them to enter the Zambian financial sector. Islamic banks do not charge interest rates but will enter into an equity arrangement with the borrower. Until the loan is serviced, the two partners will share profits.
Central Bank Governor, Dr Caleb Fundanga says officials from his bank have had meetings with Islamic banks from Saudi Arabia. “Yes we have had meeting with some Islamic banks but we can not disclose yet the outcome of the meeting at this point.” He says.” But it must be understood that it the private sector not the central bank will introduce Islamic banking in Zambia.
Meanwhile, Kingsley Mwewa the shoemaker sustains his business by re-investing into the business but given the demands from his four children, one them a college student , the business is unlikely to expand.
Joshua Jere
Lending rates in Zambia have remained stubbornly high ranging between 25 and 30 percent. Inflation which is one of the key factors in fixing interest rates, has reduced from a high of 19 percent two years ago to 9.8 percent today. This has sparked outrage from the private sector and some politicians suggest that commercial banks have formed a curtail. President Rupiah Banda recently said the high lending rates are harming economic growth.
The President said this when he officially launched First National Bank, the fifth commercial bank to open doors in less than 12 months. "I'm deeply concerned that while inflation has reduced to less 12 %, interest rates have remained very high." President Banda said." This has the effect of limiting the expansion of the economy because Small and medium enterprises can not borrow money to expand their business and employ more people."
Kingsley Mwewa,50, is a shoe maker in Zambia capital city Lusaka who says his business would have expanded were it not for the high lending rates. From his two meter squared stall in Chilenji Market, Mr Mwewa slams a small hammers on the edges of a piece of leather to smoothen it out. He has already made four pairs of leather shoes for school going children selling at only at 10 dollars. Mr. Mwewa says he once borrowed about 500 dollars from a microfinance institution but the loan left him poor than before. “The banks will ask your for collateral and so many other conditions before they can give you a long at a high rate. The only people who can give a loan are microfinance institutions but their interest rates are so high that after servicing the loan you become poorer than before.” Mr. Mwewa said.
Interest rates average 31 percent in Zambia
In an effort to lower interest rates through competition, the central bank attracted into the economy several banks to open shop. From only nine commercial banks operating by the end of 2008 the number has grown to 17 banks. But interest rates have only marginally reduced.
Economic analyst, Yusuf Dodia says there is not enough competition among commercial banks to push lending rates. “Zambia needs more investors in the financial sector because at the moment the newly opened banks are comfortable not to jump out of the band wagon of high interest rates. It is a fast way to recoup their investments if they keep interest rates high.” He says.
But commercial banks have recently justified the high lending rates as a reflection of the high cost of doing business in Zambia. Bankers Association of the Zambia Chairperson and Managing Director for Citi Bank, Savior Chibiya says banks like other business operate in the same economy where the cost of doing business is very high. “ We also have to pay a very high cost for Telecommunication and electricity among other cost which also add up to our cost of operation.” He says.
Central Bank dates Islamic Banks
The Central Bank is now dating Islamic banks with a view of attracting them to enter the Zambian financial sector. Islamic banks do not charge interest rates but will enter into an equity arrangement with the borrower. Until the loan is serviced, the two partners will share profits.
Central Bank Governor, Dr Caleb Fundanga says officials from his bank have had meetings with Islamic banks from Saudi Arabia. “Yes we have had meeting with some Islamic banks but we can not disclose yet the outcome of the meeting at this point.” He says.” But it must be understood that it the private sector not the central bank will introduce Islamic banking in Zambia.
Meanwhile, Kingsley Mwewa the shoemaker sustains his business by re-investing into the business but given the demands from his four children, one them a college student , the business is unlikely to expand.
Joshua Jere
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