SUBSIDY REMOVAL: 2014 HOTTEST MOVE

THE removal of subsidies on fuel is debatably one of the most  controversial policy measures which the current government has come  with this year.

It is a single move which has remained hot to date, more than six  months down the lane.

 The measure which was accompanied with the reduction in the Farmers  Input Support Programme (FISP) will remain so for a long time to come  because of its impact on lives of people.

Like I stated in this forum on May 8 2013, the move could have been  better handled than it was.

To start with any subsidy on the price of a commodity reflects what  the government wants to achieve at that particular time and,  therefore, it has several opportunity costs.

I indicated then and still indicate that due to the scarcity of funds,  the government will always have to make choices on what to spend the  limited resources on and what to forego.

Wisely or not the subsidy on fuel prices was introduced to mitigate  the effects of the high prices of the commodity in the country.

It followed the realisation of the cardinal role the commodity plays  as the lubricant of the entire economy and therefore the argument  whether it was the right thing to do or not will remain relative and a  matter of policy objective.

In my view the increase in the prices of fuel is among a few changes  which affect the national economy and all citizens including those in  the countryside who may not be able to board any form of motor vehicle  at all.

They are affected through the ripple effects which are quite drastic  and effective.

The same goes with the adjustment in the prices of mealie meal which  ironically affects even the self-catering rural dwellers through the  immediate effects.

The subsidy on fuel is distinctive in that it can be on consumption  and on production at the same time depending on what the subsidised  fuel is used for.

Therefore, whether to continue with the subsidy is neither wrong nor  right, but depends on what the Government wants to achieve at a given  time.

In short, the government was neither wrong nor right in removing it.

I stated that from the detailed justification which came through then  Mines, Energy and Water Development minister Yamfwa Mukanga when  announcing the measure and the subsequent one by President Michael  Sata it was clear that the government meant well.


What the government did not do is to prepare the minds of the people.

The responsible ministry should have psyched the people by offering  prior information on how the government had been performing on the  subsidy and some of the challenges.

That did not come from the ministry or ministries responsible until  President Sata told the nation on May 2 that in 2012 alone, the  treasury redirected resources amounting to K754 million from
implementation of other government programmes to the fuel subsidy.

According to State House for the 2013 budget, the Government already  paid K571.5 million in fuel subsidies.

It was estimated that more than K1.1 billion would have been paid in  2013 as subsidies if no adjustment were made to the price build up  and/or the pump price.

Our government had an opportunity to ensure the data resonated well  with the status quo, during the unveiling of the 2014 National Budget  in October this year.

One expected Finance minister Alexander Chikwanda to inform the nation  that so much money was saved following the removal of subsidies on  fuel and the reduction on FISP.

He should have gone a step further - like he did last year on the  Eurobond funds – by telling the nation the areas in which the saved  money would be spent on.

That could have gone miles in helping to bring the issue to rest once  and for all.

On the other hand, however, the removal of subsidy on maize and  fertiliser - justifiably or not - helped to revive the argument on the  need to diversify consumption from nshima to other foodstuffs.

Like I asked then, were Zambians created to survive on only nshima  made from maize meal as staple food? What of other crops like rice,  sweet potatoes, cassava, Irish potatoes, macaroni, finger millet and  sorghum?

The overdependence on maize and its products has amplified the  position of the cereal crop to a political produce.

Yes, the continued dependence on nshima made from maize is not helping  us at both household and national level.

I would say the development provides all of us with an opportunity to  rethink on our feeding choices and come up with alternatives to maize.

I feel even at the peak of the subsidy on its cultivation, maize has  been grown by the local small scale farmers at higher cost given the  low productivity.

Reducing or eradicating the overdependence syndrome on maize would  require the total change of the mindset by the citizenry, including  the farming community.

For that to occur, the Government should play an active role in  marketing and popularising the consumption of other foodstuffs,  including nshima made from other crops.

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