Lessons from Kaundanomics

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A story is told that a few years after independence in 1964, Kenneth Kaunda, Zambia’s first president, visited one of the mines in the mineral rich Copperbelt Province and was immediately struck by the complete absence of Zambians in senior management positions. He proceeded to ask the mine owners as to when they reasonably thought Zambians would be ready to occupy positions of influence within the country’s mining sector. With straight faces, the mine owners responded “not before 2003, Mr. President.”

Following independence from Britain, Zambia’s economy was organized broadly along capitalist free market lines. The economy, split up into mining and non-mining sectors, was wholly in the hands of foreign private interests. The copper mines, the country’s jewels, were owned a 100% by Anglo American Corporation and American Metal Climax. Both companies having obtained the rights to mine copper in perpetuity from Cecil Rhodes’ British South Africa Company (Rhodes had himself obtained the mining rights under dubious circumstances). The non-mining sector – including banks, insurance companies, construction companies and so on – were similarly in the hands of foreign interests.

The logic, or at least hope, in organizing the economy in this way was that unfettered foreign capital would not only drive productivity improvements at home, including knowledge and technological transfers, but would, crucially, play a big role in meeting the newly independent country’s social expenditure targets. The latter point was of vital importance given that the colonial government had disproportionately privileged whites in the provision of social services.

Unsurprisingly, unfettered foreign capital did the exact opposite. Instead of re-investing a considerable proportion of their profits in local operations, the mining companies externalized almost everything. Before independence, mining companies had re-invested about 50% of their profits in Zambian operations. After independence, the rate of re-investment fell to about 20%, according to estimates by Oliver Saasa, a Zambian development expert.

Things were not any better in the non-mining sector. Saasa estimates that the outward remittance of dividends to foreign owners increased by 84% in 1966, two years after independence. As for the commercial banks, they continued just as before to favor resident Europeans in the provision of credit facilities. Only 15% of bank credit was extended to Zambian citizens, a move that constrained the emergence of an indigenous entrepreneurial class. In as far as funding the state purse was concerned, the mining and non-mining companies utilized all manner of gimmicks, including “invisible costs,” to ensure that their tax liabilities in Zambia were kept to a bare minimum.

It very early on dawned on Kaunda and his team that “the encouragement of private investment inevitably meant the promotion of the dominance of foreign enterprises in the productive sectors of [Zambia’s] economy.” Rather than be engaged in a never-ending game of dubious logic with the foreign capitalists, Kaunda decided to act.

On 19th April 1968, he announced the Mulungushi Reforms and ordered that the state would henceforth take a controlling position in all private retail, transport and manufacturing firms in the country. In the following year, at a community meeting in the historic township of Matero, Kaunda announced a partial nationalization of the country’s mines.

80% of the economy was now in the hands of the state. A process of realigning the objectives of enterprise with those of the country was immediately set into motion. The copper mines were to fund a generous “cradle to the grave” welfare system that would reverberate beyond the Copperbelt and benefit everybody. Within a decade of the reforms, Zambians were occupying leadership positions in the economy putting to shame the dire predictions made in the 1960s. More importantly, free education and free healthcare for all with guaranteed social mobility became the mantra by which the country was to live by.

In 1991, Kenneth Kaunda graciously exited from office after losing that year’s elections. The new government, intoxicated by the fumes of neoliberalism then sweeping the globe, embarked on an ambitious privatization program whose coup de grâce was the re-transfer of the mines to foreign private interests.

Immediately afterwards, unemployment and destitution, particularly on the Copperbelt, became the order of the day. Access to quality social services, once guaranteed to all, were now the preserve of a tiny elite. A schism ran right through the country forming class cleavages wherever it went.

In our hurry to get rid of Kaunda, we had also gotten rid of Kaundanomics and we therefore lost our way.

Grieve Chelwa is a postdoctoral fellow at Harvard University. 

This article was originally published on Africa is a Country.

 

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