Latin America Banks on Independence
The new Bank of the South shatters neoliberal economics
By Mark Engler
Latin American leaders launched the Bank of the South at a ceremony in Buenos Aires on Dec. 9, 2007. The back will support regional development in order to wean the region of institutions like the International Monetary Fund and the World Bank.
In the closing weeks of 2007, a region in revolt against the economics of corporate globalization issued its most unified declaration of independence to date.
On Dec. 9, standing before the flags of their countries, the presidents of Argentina, Bolivia, Brazil, Ecuador, Paraguay and Venezuela, along with a representative from Uruguay, gathered in Buenos Aires and signed the founding charter of the Banco del Sur, or the Bank of the South.
The Bank of the South will allow participating governments to use a percentage of their collective currency reserves to strengthen Latin America’s economy and promote cooperative development. It plans to begin lending as early as 2008 with around $7 billion in capital.
By itself, the bank represents a serious challenge to U.S.-dominated institutions, such as the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank (IDB). As part of a larger trend, it signals a major break from the policies of “free trade” neoliberalism that dominated in the region throughout the ’80s and ’90s.
The Bank of the South’s creators are keenly aware of the significance of this break. In the words of Venezuelan President Hugo Chávez, the bank is “aimed at freeing us from the chains of dependence and underdevelopment.” Ecuadorian President Rafael Correa concurred, arguing that with the bank, “South American nations will be able to put an end to their political and financial dependence that they have had with the neoliberal model.”
Officially, the international financial institutions are keeping their tone upbeat. On Dec. 11, IMF Director General Dominique Strauss-Kahn told Agence France-Presse that the new bank is “not a problem; it’s maybe an opportunity.” Similarly, Augusto de la Torre, World Bank chief economist for Latin America, said, “As far as the World Bank is concerned, this new initiative is not perceived as a competitor.”
But in March 2007, as Latin American leaders were first discussing the creation of a new body, one anonymous insider at the neoliberal IDB told the Financial Times that the Bank of the South represented the largest threat to his institution in decades. “With the money of Venezuela and political will of Argentina and Brazil, this is a bank that could have lots of money and a different political approach,” he explained. “No one will say this publicly, but we don’t like it.”
Breaking Washington’s hold
There is good reason for those invested in the Washington Consensus to dislike the Bank of the South. In recent decades, the IMF, the World Bank and the multilateral regional banks have largely controlled poorer countries’ access to credit and development financing. These institutions allowed developing countries to avoid defaulting on their debt, provided funds in some difficult times and gave a nod of approval to private creditors. But the price the countries paid in return was steep.
In order to stay in their good graces, developing nations have had to privatize industries, open markets to foreign businesses, liberalize capital flows, keep monetary policy tight and implement fiscal austerity (that is, cut needed social services for their people). In the end, such policies proved disastrous in Latin America.
Per capita GDP, which had been growing at a steady rate throughout the ’60s and ’70s, grew hardly at all in the subsequent two decades of neoliberalism. During the latter period, the region also developed some of the highest levels of inequality in the world.
The Bank of the South would work to remedy this situation. Unlike the preexisting financial institutions, the new bank will be run by Latin American countries themselves, will not be dominated by any single nation and will be free to support development approaches that are much more sensitive to the needs of the poor.
A May 2007 statement of South American finance ministers affirmed that the new bank and other mechanisms of regional integration “must be based on democratic, transparent and participatory schemes that are responsible to their constituencies.”
With the exception of Paraguay’s Nicanor Duarte Fruto, each of the Latin American leaders involved in the Bank of the South was elected in recent years on a mandate to split from Washington. Well aware of the failures of economic neoliberalism in the region, and under pressure from an enlivened citizenry, the bank’s members have outraged the international business press by working to do just that.
Several governments have moved to free themselves of direct oversight from the IMF by repaying loans early. In December 2005, Argentina and Brazil announced that they would pay off $9.8 billion and $15.5 billion, respectively. The IMF, which benefits from interest payments on long-term loans, was nonplussed.
Argentina, which was a model of the IMF during the ’90s and suffered severe economic collapse in 2001, vocally declared good riddance. Then-President Néstor Kirchner triumphantly proclaimed that throwing off the chains of IMF debt constituted a move toward “political sovereignty and economic independence.”
Since then, Latin American governments have been one-upping each other in their acts of defiance.
In Bolivia, upon taking office in 2006, President Evo Morales announced he would let the country’s standing loan agreement with the IMF expire. In May 2007, he declared Bolivia would withdraw from a World Bank arbitration center that handles investment disputes, usually favoring corporate interests. Nicaragua has similarly rejected the authority of the center.
Correa topped them by ejecting the World Bank’s representative to Ecuador in April 2007. He declared the officer a persona non grata in the country, insisting, “We will not stand for extortion by this international bureaucracy.”
That same month, Chávez announced that Venezuela would withdraw from membership in the IMF and World Bank altogether. While the country is still working out the details of this move, the prospect is unprecedented in the era of corporate globalization.
The ability of oil-rich Venezuela to provide its neighbors with financing they previously might have needed to beg for from Washington is a significant factor in their willingness to break with the IMF and World Bank. Venezuela has offered billions in support to countries—including Argentina, Bolivia and Ecuador—and those backup funds make many countries less susceptible to threats of capital flight than in the past. Along with investments from China and India, it dramatically reduces Washington’s ability to starve dissident leaders of financial resources when governments grow, in its view, disobedient. The Bank of the South will help to formalize a source of alternative finance and place it under regional control.
Rude awakenings
The establishment of the Bank of the South comes at a particularly bad time for the IMF. The institution’s troubles were brought into relief at its annual fall meetings in mid-October, after which the Washington Post contended, “the International Monetary Fund needs restructuring, and maybe a bailout.”
IMF lending has plummeted in recent years, as its supposed beneficiaries have launched a rebellion. Cutting ties with the fund is not just a Latin American phenomenon. Russia, Thailand, Indonesia and the Philippines have also pursued strategies of early debt repayment. Many Asian countries that were burned by the region’s neoliberal financial crisis in 1997 are building large cash reserves to prevent a return to the IMF in times of economic downturn, and they have recently worked on creating a regional currency exchange that will further increase their distance from Washington.
These developments are sapping both the IMF’s influence and its cash flow. Its loan portfolio has dwindled from nearly $100 billion in 2004 to around $20 billion today. A single country, Turkey, now accounts for the bulk of its lending. The IMF has lost almost all influence in Latin America, with lending there plummeting to a paltry $50 million, less than 1 percent of its global loan portfolio. As recently as 2005, the region had accounted for 80 percent of its outstanding loans.
Deprived of lucrative interest payments from poorer countries, the IMF is now desperately trying to meet its $1 billion administrative budget without dipping into its gold reserves. In stark contrast to the triumphalist pronouncements made in past fall meetings, in 2007 the IMF’s newly installed Dominique Strauss-Kahn confessed that “downsizing is on the table” for the institution.
Ignoring the wider picture, pro-free trade pundits have generally responded to the Bank of the South by minimizing its significance and predicting failure. The Wall Street Journal characterized the bank as but one of Hugo Chávez’s many madcap schemes, insisting that it is “unlikely to live up to his grandiose vision.” Meanwhile the Economist asserted, “The IMF can sleep easy.” It pointed out that the Bank of the South’s founding agreement lacked many details about its governance and lending policies, and that disagreements persist among the region’s key players.
It is true that Latin America has a history of internal disputes thwarting dreams of regional unity—and that quarrels persist today. While Venezuela and Ecuador have pushed for the bank to have a far-reaching mandate, Brazil prefers a more modest institution. To the disappointment of many of his progressive supporters, Brazilian President Luiz Inácio Lula da Silva has adhered to conservative economic policies designed to keep Brazil in good standing with foreign creditors. The country also runs a large internal development bank, which loaned $38 billion in 2007 to fund national projects. Therefore, Brazil has less to gain directly from making the Bank of the South into a robust regional lender.
Activists, while generally positive, have expressed some concerns. Environmentalists worry the Bank of the South, while more democratically managed than its counterparts in Washington, may nevertheless develop a similarly destructive record of funding large-scale, ecologically harmful construction projects.
Other progressives, ranging from the members of the Jubilee South coalition to Cuban commentator Eduardo Dimas, have argued that the institution must go beyond traditional development lending to support such measures as land reform, a common regional currency and projects explicitly designed to promote political solidarity in the region. These would more closely link the bank with the Bolivarian Alternative for the Americas (ALBA), an initiative through which the Venezuelan government has paid for Cuban doctors to provide services in the region and has promoted other forms of mutual assistance.
Reservations about the Bank of the South’s mandate, however, should not obscure the swiftness and severity of Latin America’s assault on the international financial institutions.
Chávez first floated the idea of the bank in 2006, and the speed at which it has come into existence has been shocking. The widespread support within Latin America for independent bodies such as the new bank suggests that the days when the United States could act as an economic overseer dictating policy for countries across the globe are coming to an end.
Upon the inauguration of the Bank of the South, even Lula da Silva delivered a message of defiance to the North. “Developing nations must create their own mechanisms of finance,” he said, “instead of suffering under those of the IMF and the World Bank, which are institutions of rich nations.” He added bluntly: “It is time to wake up.”
Labels: BANK OF THE SOUTH, HUGO CHAVEZ, LULA DA SILVA, NEOLIBERALISM, SOUTH AMERICA
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Full speech: 2008 budget presentation
By Ng'andu Magande
Saturday January 26, 2008 [03:01]
BUDGET ADDRESS BY THE HON. NG’ANDU P. MAGANDE, MP
MINISTER OF FINANCE AND NATIONAL PLANNING
DELIVERED TO THE NATIONAL ASSEMBLY ON 25TH JANUARY 2008
1. Mr. Speaker, I beg to move that the House do now resolve into Committee of Supply on the Estimates of Revenue and Expenditure for the year 1st January 2008 to 31st December 2008, presented to the National Assembly in January 2008.
2. Sir, I am the bearer of a message from His Excellency the President recommending favourable consideration of the motion I now lay on the Table.
3. Mr. Speaker, over the past five years, the nation has achieved macroeconomic stability characterised by growth in the real Gross Domestic Product (GDP) in excess of 5 percent per annum, the reduction of inflation to single digit, a stable exchange rate, declining interest rates, a stable financial system, the removal of the external debt burden, and a substantial build-up in foreign exchange reserves. These achievements have resulted in notable successes in the creation of jobs and wealth, and the reduction in poverty levels.
4. Sir, our cherished and chosen vision is to be a prosperous middle income country by 2030. This will be achieved by creating a nation of dynamic, self confident and vibrant entrepreneurs. Our foremost challenge, this year and in the medium-term, is to create the fiscal space that will allow us to marshal both human and financial resources. This will enable us to accelerate the implementation of the Fifth National Development Plan.
5. Mr. Speaker, to realise this vision, the theme of this year’s budget is “Unlocking Resources for Economic Empowerment and Wealth Creation.”
6. Mr. Speaker, the preparation of this Budget has benefited from broad-based consultations with various stakeholders. This is in line with this Government’s policy of openness and transparency. I, therefore, wish to express my utmost gratitude for the valuable contributions made by various organisations and individuals.
7. Mr. Speaker, my address this afternoon comprises five parts. In Part one, I give an overview of the performance of the global economy during the past year. In Part Two, I discuss developments in the Zambian economy during the same period and this is followed, in Part three, by an outline of the Government’s economic policies for 2008. In Part Four, I present details of the 2008 Budget. Finally, in Part Five, I conclude my address.
PART 1
PERFORMANCE OF THE GLOBAL ECONOMY IN 2007
8. Mr. Speaker, preliminary estimates indicate that the world economy registered a robust real GDP growth of about 5.0 percent, largely driven by strong expansion in China, India and Russia. These favourable developments mitigated the lower growth recorded in the advanced economies, especially the United States, which experienced a significant reduction in investments in residential property.
9. Mr. Speaker, this sustained growth in the world economy continued to drive the price of commodities upwards, with oil prices reaching record levels. Further, lower oil production by the Organization of Oil Producing and Exporting Countries (OPEC), and a smaller rise in oil output in non-OPEC countries contributed to the high oil prices.
10. Sir, the prices of non-fuel commodities similarly increased during the year, with copper prices rising by 12.6 percent to US $3.15 per pound.
11. Sir, in 2007, Africa posted real GDP growth of 5.7 percent, a modest 0.1 percentage points above the growth recorded in 2006. However, Sub-Saharan Africa recorded a robust real GDP growth rate of 6.1 percent, which was 0.4 percentage points above the 2006 level.
12. Sir, on balance, these global developments had a positive impact on Zambia’s terms of trade.
PART II
PERFORMANCE OF THE DOMESTIC ECONOMY IN 2007
MACROECONOMIC PERFORMANCE
13. Mr. Speaker, preliminary estimates indicate that the macroeconomic outturn was satisfactory. The growth in real GDP continued to be positive at a preliminary estimate of around 6.2 percent, which was lower than the target of 7 percent. This was mainly on account of the lower than projected growth in the primary and secondary sectors of the economy.
14. Mr. Speaker, despite the adverse external shocks associated with high international oil prices, an end of the year single digit inflation rate was achieved for the second year running. As at end-December 2007, annual inflation was 8.9 percent, which was consistent with the revised target of 9 percent but was above the 8.2 percent achieved in December 2006.
15. Mr. Speaker, with regard to the fiscal outturn, a strong revenue performance and the slow utilisation of resources by Government institutions explains the lower domestic borrowing. Preliminary estimates indicate that in 2007, domestic borrowing amounted to K437 billion or 0.95 percent of GDP against the target of 1.2 percent.
16. Mr. Speaker, Zambia’s external position remained positive during the year under review. This was reflected in the strong build-up of Gross International Reserves (GIR) to US $1,080.2 million or 3.6 months of import cover against the target of 2.5 months.
EXTERNAL SECTOR DEVELOPMENTS
17. Mr. Speaker, preliminary information indicates that, in 2007, external sector developments were largely positive. The overall balance of payments recorded a positive balance of US $266.3 million compared to US $821 million in 2006. The current account balance recorded an estimated deficit of US $856 million, compared to a surplus of US $120 million in 2006. This was largely accounted for by a higher deficit in the income account.
18. Sir, the current account deficit was financed by increased external capital inflows in the form of foreign direct and portfolio investments of US $853.5 million and project grants of US $153.6 million.
19. Sir, although the trade surplus declined to US $686.4 million from US $1,183 million in 2006, both total exports and imports increased. Total exports increased by 11.9 percent to US $4,273.4 million compared to the US $3,819 million recorded in 2006. However, imports rose at a higher rate of 37.4 percent to US $3,622.3 million, largely on account of increased investment in the mining sector.
20. Sir, metal exports rose by 10.2 percent to US $3,400.3 million whilst non-traditional exports were 24.5 percent higher, at US $924.4 million, largely due to the growth in the economies of our trading partners.
EXTERNAL DEBT
21. Mr. Speaker, preliminary information indicates that the stock of external debt increased by 9.5 percent to US $2,035.2 million in 2007 from US $1,859.0 million in 2006. The increase was largely accounted for by the 16.7 percent growth in private sector external debt to US $980.7 million, related to investment in plant and machinery by mining companies. The stock of Government external debt increased by 3.5 percent to US $1,054.5 million in 2007 from US $1,019.0 million in 2006, mainly due to new disbursements to support the budget.
22. Sir, the amount of US $635 million reported in last year’s Budget was adjusted upwards during the year. This adjustment was to reflect undelivered HIPC Initiative debt relief from some of the bilateral creditors with whom we have not yet reached agreement.
FOREIGN FINANCING
23. Mr. Speaker, in 2007, foreign financing continued to compliment our domestic resources. In this regard, our co-operating partners disbursed a total of US $503.6 million. Of this amount, US $356.1 million was disbursed as project support while US $147.5 million was for direct budget support. Project support comprised US $125.8 million for Sector Wide Approach Project Support (SWAPS), US $153.6 million for project grants and US $76.7 million for project loans.
24. Sir, on behalf of the Zambian people and, indeed on my own behalf, I wish to sincerely thank our cooperating partners for their continued support to our development agenda.
DOMESTIC DEBT
25. Mr. Speaker, preliminary figures show that the stock of domestic debt and other public liabilities declined by 7.1 percent to an estimated K8,885.5 billion in 2007. The decrease was primarily on account of a decline in the stock of domestic arrears to suppliers of goods and services and the Pension Fund.
26. Sir, domestic arrears to road contractors and other suppliers of goods and services fell by 16.5 percent to K370.5 billion while the stock of pension arrears were reduced by 31.9 percent from K396.5 billion in 2006 to K269.9 billion in 2007.
27. Mr. Speaker, the stock of Government securities increased by 11.6 percent to K6,966.1 billion in 2007, compared to an increase of 25.7 percent in 2006. The increase in the stock of Government securities was on account of the rise in the stock of Government bonds by 20.7 percent to K3,904.8 billion and Treasury bills, which rose by 1.8 percent to K3,061.3 billion. This partly reflects intensified monetary operations by the Bank of Zambia to contain liquidity pressure arising from the accumulation of international reserves.
MONETARY AND FINANCIAL SECTOR DEVELOPMENTS
28. Mr. Speaker, monetary and financial sector developments continued to be favourable during the year. Inflation was contained within single digit, money supply growth slowed down, commercial bank lending rates continued to trend downwards, and the financial sector remained sound.
29. Sir, the 2007 single digit inflation was reflective of an appropriately firm monetary policy stance and a favourable fiscal outturn. In addition, the appreciation of the Kwacha against major international currencies further dampened inflationary pressures.
30. Mr. Speaker, preliminary estimates show that annual money supply growth slowed to 25.9 percent in December 2007 from 45.1 percent in December 2006. This was largely due to the reduction in the Government borrowing from the banking system by 21.6 percent. However, lending to the private sector registered a strong growth of 44.5 percent.
31. Sir, in an effort to further reduce the cost of funds, in October 2007, the Bank of Zambia significantly reduced the statutory reserve ratio on Kwacha and foreign currency deposit liabilities from 14 percent to 8 percent.
32. Mr. Speaker, the composite weighted average yield rates on Treasury bills and Government bonds rose to 13.4 percent and 15.6 percent, in December 2007 from 9.2 percent and 12.6 percent in December 2006, respectively. This was largely due to efforts by the Bank of Zambia to contain money supply growth and inflationary pressures.
33. Sir, in line with falling inflation, commercial banks’ lending rates fell to 24.4 percent in December 2007, from 27.9 percent in December 2006. However, commercial bank interest rates remained relatively high contrary to the Government’s expectations. Lack of positive cooperation seems to indicate the failure of liberalisation and market forces.
34. Mr. Speaker, in 2007, the Bank of Zambia also continued to consolidate financial system stability by enhancing supervision of the financial sector. As a result, the performance of the banking sector remained sound and was well capitalised, profitable and liquid while the performance of the non-bank sector was fair.
35. Sir, other significant developments in the sector during the year included the commencement of operations by the first credit reference bureau early in the year. It is expected that once fully operational, the Bureau will assist in improving the credit culture in the country. Further, the National Payment Systems Act was enacted in June 2007.
CAPITAL MARKET DEVELOPMENTS
36. Mr. Speaker, the Lusaka Stock Exchange continued to record impressive gains in 2007. Market capitalization in Kwacha terms rose by 31.6 percent to K17,206.1 billion whilst in US dollar terms it rose by 41.2 percent to US $4.5 billion.
37. Sir, the other notable development was the Government’s introduction of longer dated bonds of 7, 10, and 15-year tenors. The introduction of these longer dated securities will help deepen the financial markets, by extending the yield curve and providing benchmark rates for the market.
SECTOR PERFORMANCE
AGRICULTURE
38. Mr. Speaker, preliminary data show that the agriculture sector grew by 2.8 percent in 2007 compared to a growth of 3.0 percent in 2006. The slower growth in the sector was due to poor prices for crops such as cotton and tobacco. Nevertheless, for the second consecutive year, a food surplus was achieved with cumulative stocks reaching 628,396 metric tonnes.
MINING AND QUARRYING
39. Mr. Speaker, the mining sector registered positive growth in 2007, albeit at a slower rate. Preliminary figures show that copper production increased by 1.5 percent to 523,435 metric tonnes from 515,618 metric tonnes in 2006. However, cobalt production declined by 9 percent, to 4,229 metric tonnes in 2007 from 4,648 metric tonnes in 2006. The slow down in the metal output was mainly on account of flooding at some of the mines in the first half of the year.
CONSTRUCTION
40. Sir, preliminary data indicate that the construction sector continued to register positive growth of 13.3 percent in 2007, slightly lower than the 14.4 percent recorded in 2006. The favourable performance in the sector continues to be driven by construction of residential housing, investments in the mines, road construction and other civil works, reflecting strong economic growth and rising incomes.
MANUFACTURING
41. Mr. Speaker, the manufacturing sector recorded a positive growth of 3.4 percent. This growth was broad-based with increased value addition in most of the sub-sectors. However, the growth was lower than the 5.7 percent recorded in 2006. This was mainly on account of the negative growth in the textiles and leather sub-sector.
TOURISM
42. Sir, the performance of the tourism sector was encouraging. The number of tourists coming into the country is estimated to have increased by 6.4 percent to 805,059 in 2007. This resulted in an increase in room and bed occupancy, number of beds and employment levels. In turn, the sector’s earnings increased to an estimated US $188 million from US $177 million in 2006.
ENERGY
43. Mr. Speaker, the energy sector faced a number of challenges related to the supply of electricity and petroleum products in the face of increased demand. Electricity generation increased marginally to 9.7 million megawatt hours from 9.6 million megawatt hours in 2006. This was due to the power rehabilitation works being undertaken by ZESCO. In the petroleum sub-sector, supply was generally reliable despite the shutdown of the INDENI Oil Refinery for rehabilitation works. The move by the Government to allow oil marketing companies to import finished petroleum products eased disruptions in supply.
TRANSPORT AND COMMUNICATIONS
44. Mr. Speaker, the transport, storage and communications sector continued to perform positively, with output increasing by 22.5 percent compared to 22.1 percent in 2006. A robust expansion was recorded in all the sub-sectors, except for rail transport, which recorded negative growth, mainly on account of the poor state of the rail infrastructure.
SOCIAL SECTOR DEVELOPMENTS
EDUCATION
45. Mr. Speaker, in 2007, the Government recruited and placed 10,600 teachers in various schools in the country. This was augmented by a countrywide distribution of textbooks and other school requisites. In addition, the Government continued with the programme of rehabilitation and construction of class rooms and teachers’ houses. In this regard, construction of 31 high schools commenced country-wide.
46. Sir, the Government also enrolled a total of 452,974 pupils in grade one, a 2 percent increase from the previous year. In relation to gender, more female children accessed education in the first grade than their male counterparts.
47. Mr. Speaker, with regard to tertiary education, the Mulungushi University was established as the third public university in the country. In addition, the Government continued with the programme of rehabilitation and development of infrastructure across the country. This programme included works at the University of Zambia, Copperbelt University, Evelyn Hone College and trades training institutes.
48. Sir, this is a true demonstration of the Government’s commitment to improving the standard of education for the future generation.
HEALTH
49. Mr. Speaker, the focus of the Government in 2007 was to provide access to quality health care. In this regard, the Government abolished user fees in 54 rural districts and recruited over 1,100 frontline medical personnel.
50. Sir, in addition, the Government continued with the programme of infrastructure rehabilitation and development. An x-ray theatre and maternity wing were completed at Samfya whilst construction works for the new hospitals in Chadiza and Mumbwa reached an advanced stage. Other programmes included the construction of 33 health posts in various districts across the country. Further, the Cancer Disease Hospital was commissioned and has currently over 300 patients on treatment. This number is expected to rise to 1,800 patients this year as more patients become aware of the availability of the facility.
51. Sir, the provision of essential drugs and medical supplies was scaled up in 2007 with Medical Stores Limited making 83.5 percent of its deliveries on time. However, there is an urgent need to institute effective measures to safeguard medicines and hospital equipment once they are delivered to health institutions.
HIV/AIDS
52. Mr. Speaker, the HIV/AIDS pandemic continues to be a major challenge as it mostly affects the productive age groups. In 2007, the number of cases diagnosed increased to 30,960 from 29,515 in 2006.
53. Sir, the Government continued to make headway in ensuring that more of our people living with HIV/AIDS have access to anti-retroviral therapy. In this regard, a total of 137,000 patients accessed free anti-retroviral therapy countrywide compared to 75,000 in 2006.
STRUCTURAL REFORMS
54. Mr. Speaker, the Government continued to implement reforms under the Public Expenditure Management and Financial Accountability (PEMFA), Public Service Management (PSM), Financial Sector Development Plan (FSDP) and the Private Sector Development (PSD) Initiative. With regard to PEMFA, progress has been made in providing the required environment and resources for the reforms. In 2007, the key milestones included the following:
(a) The IFMIS Solution provider came on board and the design and implementation of the system started;
(b) Data collection for the economic census commenced. This will improve the National accounts statistics compiled annually; and
(c) Three provincial offices for the Auditor-General’s Office were constructed and completed in Solwezi, Mongu and Kasama to increase audit coverage.
55. Mr. Speaker, under the Financial Sector Development Plan (FSDP), the Government launched the Rural Finance Programme last year to improve access to financial services particularly in the rural areas. The programme will be private sector driven.
BUDGET PERFORMANCE IN 2007
56. Mr Speaker, the overall budget outturn in 2007 was strong despite challenges in the execution of capital projects. Preliminary figures indicate that total resources mobilised, including borrowing to cover the budget deficit, amounted to K10,720.1 billion. Of this amount, revenues and grants accounted for K10,176.1 billion while K544.0 billion or 1.2 percent of GDP was borrowed. Total expenditure releases at K10,720.1 billion accounted for 89.7 percent of the Budget. An amount of K8,794.1 billion or 81 percent of the total expenditure releases were directed towards current expenditure while K1,926.0 billion or 19 percent was absorbed by capital expenditures.
57. Sir, domestic revenue collections at K8,522.1 billion were above target by K405.0 billion or 5 percent. Higher company tax and import VAT receipts largely accounted for this performance. Grant receipts from cooperating partners amounted to K1,654.1 billion, out of which K581.9 billion was direct budget support. Direct Budget Support receipts were above target by 10 percent, reflecting the support that this Government continues to enjoy from our cooperating partners.
58. Mr. Speaker, due to the slow absorption by the Ministries, Provinces and other Spending Agencies, the 2007 Budget allocations could not be disbursed in full. This was, in part, a reflection of capacity constraints within spending agencies and contractors in the private sector, delayed procurement, and structural factors associated with the Budget cycle.
59. Mr. Speaker, for domestically financed expenditures, General Public Services accounted for the largest share at 36.6 percent, followed by the social sector at 33.8 percent and Economic Affairs at 14.5 percent. Other functions accounted for the balance.
60. Sir, General Public Service releases, which are primarily activities of an operational nature for the general running of Government, amounted to K3,487.3 billion, representing 93.5 percent of the target. Of this amount, K959.5 billion went towards the payment of domestic and external debt, reflecting the Government’s commitment to meet its debt obligations.
61. Mr. Speaker releases towards the economic affairs function amounted to K1,384.4 billion, representing 98.3 percent of the target. Of this amount, K1,175.0 billion or 84.9 percent went to Agriculture, Forestry, Fishing, and Transport.
62. Sir, these releases covered the following main programmes; the Fertiliser Support Programme, Strategic Food Reserve Programme, Food Security Pack, Farm Mechanisation and Irrigation Fund. Other programmes included the construction and rehabilitation of roads, for which K419.8 billion was released.
63. Mr. Speaker, total releases to the social sectors amounted to K3,220.7 billion, representing 99.2 percent of the target. Out of this amount, Education accounted for 54.4 percent, Health 24.9 percent, Housing and Community Amenities 9.2 percent and Social Protection 8.2 percent.
PART III
ECONOMIC AND SOCIAL POLICIES FOR 2008
Macroeconomic Policies for 2008
64. Mr. Speaker, having stabilised the macroeconomic environment, the key challenges are to transform these positive developments into improved living standards, more jobs and sustained broad based economic growth.
65. Sir, these developments have already started impacting on poverty levels. The statistics from the Living Conditions Monitoring Survey of 2006 indicate that poverty levels dropped to 64 percent in 2006 from 68 percent in 2004. The statistics also show that during this period, urban poverty dropped from 53 percent to 34 percent whilst there was an increase in rural poverty from 78 percent to 80 percent.
66. Mr. Speaker, these facts challenge us to consolidate the measures that have led to the significant reduction in urban poverty and to redouble our efforts to arrest and reduce the high levels of rural poverty. I want to assure you, Sir, that the Movement for Multi-Party Democracy (MMD) Government stands ready to meet this challenge. An immediate programme for this year is the rehabilitation of the damaged rural roads which will be done once we receive the road equipment in March. This should open up the rural areas for more and viable investments to uplift the living standards of our people.
67. Sir, the dramatic decline in urban poverty has taken place during the period in which annual economic growth has consistently been above 5 percent. Therefore, achieving higher levels of economic growth is an important weapon in the fight against poverty. Further, the execution of the Budget needs to be improved. This is particularly relevant with respect to the programmes that focus on the development of the rural areas.
68. Mr. Speaker, against this background, the Government’s macroeconomic objectives for 2008 are to:
(a) achieve real GDP growth of at least 7 percent;
(b) bring down end-year inflation to no more than 7 percent;
(c) limit domestic borrowing to 1.2 percent of GDP; and
(d) maintain the coverage of gross international reserves at no less than 3.6 months of import cover.
69. Mr. Speaker, attaining the growth objective in 2008 demands that the private sector must play a stronger role in economic development. It is also imperative that Zambians, through the Citizens Economic Empowerment Programme, participate fully in the various economic activities. In addition, availability and access to credit will need to be enhanced. On our part as Government, we will continue to focus on implementing structural reforms and providing infrastructure so as to lower the cost of doing business.
FISCAL POLICIES
70. Mr. Speaker, the objective of the Government in 2008 is to continue to consolidate fiscal discipline by maintaining lower levels of borrowing and prudent budget execution. This will entail improved cash and treasury management, enhanced domestic resource mobilisation and effective coordination with the monetary authorities.
BUDGET EXECUTION
71. Mr. Speaker, in 2008, the Government will improve capacities of Ministries, Provinces and other Spending Agencies to evaluate and implement capital projects on time.
72. Sir, the budget for 2008 is being presented one week before the end of January. This breaks our past tradition when the budget has been presented in February. This demonstrates the resolve of the Government to quicken the implementation of project execution. As we plan to improve the capacities of Ministries, Provinces and other Spending Agencies in project implementation, I wish to appeal that this august House also breaks a record by approving the estimates by end of February 2008.
DEBT AND AID POLICIES
73. Mr. Speaker, the Government’s long-term debt management objective will be to raise adequate levels of financing at minimum cost and risk. In addition, we will pursue strategies to ensure that the national public debt is maintained at sustainable levels over the medium to long term.
74. Sir, with respect to domestic debt, the Government will place emphasis on settlement of domestic arrears, specifically to the Public Service Pension Fund and suppliers of goods and services. On the external debt front, the Government’s strategy will be to source external funds, when required, on concessional terms and ensure that any new borrowing does not undermine debt sustainability. The Government will also intensify efforts to consolidate the legal framework governing the contraction and management of debt.
75. Mr. Speaker, the Government adopted the Aid Management Policy in 2007. The objective of the Policy is to ensure that the country has a clear, systematic and well co-coordinated approach to acquire, utilize and manage aid. This will involve regular reporting, monitoring and evaluation of the aid to ensure effective implementation of the Fifth National Development Plan. Through the Joint Assistance Strategy with our cooperating partners, we shall be receiving aid in a coordinated fashion and in a manner that will reduce the transaction costs of such aid to Government.
_MONETARY AND FINANCIAL SECTOR POLICIES__
76. Mr. Speaker, the overriding objective of monetary policy in 2008 will be to maintain single digit inflation for a third consecutive year. In this regard, a key challenge will be to enhance coordination between fiscal and monetary policies so as to effectively manage liquidity and maintain macroeconomic stability.
77. Sir, financial sector policy in 2008 will remain focused on maintaining financial system stability and on developing and deepening the financial sector. With regard to financial system stability, the Bank of Zambia will introduce risk based supervision. In addition, the Government will continue with the recapitalisation of state-owned non-bank financial institutions so as to enhance the stability of the financial system.
78. Sir, the external sector environment is projected to remain favourable and the foreign exchange market is expected to remain relatively stable. This will support the attainment of the foreign reserve target. However, external shocks such as high oil prices and adverse weather conditions are likely to present a challenge in attaining the inflation and reserves objectives.
KEY SECTOR POLICIES AND INTERVENTIONS
ECONOMIC SECTORS
AGRICULTURE
79. Mr. Speaker, agriculture remains a key sector for the nation’s economic development. The focus in 2008 will be on improved cash crop production, livestock and fisheries development. Programmes that enhance crop production such as the Fertilizer Support Programme and irrigation development will continue to be supported. In livestock development, key programmes will include active disease monitoring and control, and restocking of livestock.
80. Mr. Speaker, under fisheries development, the key strategy is to ensure compliance with fisheries regulations so as to reduce the depletion of fish in our main water bodies. In addition, aquaculture development, especially by women, will be encouraged.
MINING
81. Mr. Speaker, investment in the mining sector, on the back of the high global commodity prices, has been an important engine of economic growth for Zambia. This investment has involved not only the establishment of new mines but has also attracted additional investments in mineral exploration, with very promising results.
82. Sir, in 2008, the role of the Government in the mining sector will continue to be that of providing an enabling environment for private sector led investment. In this regard, as announced by His Excellency the President during the opening of the 2nd Session of the 10th National Assembly, the Government will be introducing a new fiscal and regulatory framework for the mining sector.
83. Mr. Speaker, the mining sector under this framework will begin to adequately contribute to the advancement and the social and economic welfare of the people of Zambia. At the same time, the new regime will secure an appropriate return on investment by mining companies. The additional revenues arising from the new mining tax regime will be set aside and a clear and transparent mechanism for their utilisation will be established.
84. Sir, the proposed framework will also ensure transparency in the accounting and utilisation of mineral revenues and also protect the rights of all those investing in the mining sector.
85. Sir, another major policy intervention in 2008 will be to review the Petroleum (Exploration and Production) Act of 1985. Recent developments in this area have highlighted the inadequacy of this legislation in securing our national interests in the sector. The objective is to lay the groundwork for the eventual prospecting and production of oil.
TOURISM
86. Mr. Speaker, the Government will continue to undertake infrastructure development in the sector so as to improve accessibility to tourist destinations. In addition, resources will be made available to enhance the sustainability and conservation of Zambia’s wildlife and its eco-systems. In particular, in 2008, we will begin the recapitalisation of the Zambia Wildlife Authority so as to improve its operations.
87. Sir, investment by both domestic and foreign investors will also be enhanced by implementing the provisions of the new legislation with respect to the tourism sector. The legislation provides for the creation of a one-stop shop to licence investors in the sector, and thus reduce the cumbersome licensing procedures.
ENERGY
88. Mr. Speaker, addressing the looming energy deficit is a major challenge facing our nation. In this regard, expanding electricity generation is critical in order to support private sector growth and to counterbalance the expected power shortage in the country and the region as a whole.
89. Sir, works on the Kariba-North Bank Extension and the Itezhi-Tezhi Projects are due to commence this year. In addition, the finalisation of the Rural Electrification Master Plan will help identify energy options in rural areas and provide a framework to increase accessibility.
90. Mr. Speaker, in the petroleum sub-sector, the Government will continue with measures aimed at further stabilising the supply of petroleum products. In this regard, a mechanism to supply crude feed stock to the INDENI Oil Refinery over the next two years has been put in place and will be fully operational this year.
SOCIAL SECTORS
EDUCATION
91. Mr. Speaker, the Government’s focus in the education sector will continue to be on the recruitment of teachers and infrastructure development. As a retention strategy, the Government will develop a number of schemes to improve the environment for teachers in rural areas. Further, to increase enrolment of children in schools, the Government will construct more classrooms both at basic and high school levels.
HEALTH
92. Mr. Speaker, it is critical to improve the provision of health services so as to raise and sustain the productivity of our people. The Government will, therefore, continue to invest in the sector in order to improve the supply, distribution and management of drugs and other medical supplies.
93. Sir, the Government will focus on the recruitment of frontline medical personnel and infrastructure development. One of the key strategies in infrastructure development will be the expansion of the capacity of training institutions to increase their enrolment levels.
STRUCTURAL REFORMS
94. Mr. Speaker, implementation of structural reforms will be stepped up in order to support private-sector-led growth and strengthen public sector management. The slow pace in the implementation of structural reforms in the recent past has compromised the ability of the Government to effectively drive the development agenda. In addition, it has impeded the development of the private sector.
95. Sir, implementation of the Financial Sector Development Plan (FSDP), Public Service Management (PSM), Public Expenditure Management and Financial Accountability (PEMFA), and the Private Sector Development (PSD) Initiative will be quickened. Under the PEMFA programme, the Integrated Financial Management Information System (IFMIS) pilot sites will “go live” in 2008. In addition, the Treasury functions will be strengthened in order to improve cash and expenditure management by introducing more efficient payment systems. This will improve overall budget execution.
96. Sir, the Financial Sector Development Plan aims to address weaknesses in the financial sector. In 2008, a key milestone under this programme will be to obtain a sovereign credit rating for Zambia. This will, among other advantages, aid in deepening the financial market by enhancing access to the international capital markets by both the Government and the private sector. In addition, the Government is reviewing legislation in an effort to strengthen the financial sector.
PART IV
THE 2008 BUDGET
97. Mr. Speaker, in 2008, the Government proposes to spend a total of K13,761.4 billion or 26.7 percent of the GDP estimated at K51,559.0 billion. Of this amount, K9,828.4 billion or 71.4 percent will be financed by domestic revenues while K2,278.9 billion or 16.6 percent will be grants from our cooperating partners.
98. Sir, the balance of 12.0 percent is the deficit of K1,654.0 billion or 3.2 percent of GDP. This will be financed by domestic borrowing of K618.8 billion or 1.2 percent of GDP and external financing of K1,035.3 billion or 2.0 percent of GDP.
99. Mr. Speaker, I now present details of expenditure and revenue measures for the 2008 Budget.
EXPENDITURE MEASURES
100. Mr Speaker, expenditures under the General Public Services, Education and Health functions will remain high in 2008. As a percentage of the total expenditure, General Public Services will account for 32.8 percent, Education 15.4 percent and Health function 11.5 percent. The allocation to the Economic Affairs function is projected at 16.7 percent while that to Defence and Public Order and Safety is 7.1 percent and 4.2 percent, respectively.
101. Sir, the summary of the 2008 expenditure is as follows:
GENERAL PUBLIC SERVICES
102. Mr. Speaker, under the General Public Services function, the Government has made a provision of K4,514.2 billion. Of this amount, General Government Services will account for 59.6 percent, Legislation 14.5 percent, Centralised Administrative Services 11.8 percent and Executive 8.0 percent.
103. Sir, one of the key programmes under this function is debt management. As such, the Government has provided K720.0 billion to meet domestic and external debt payments. A provision of K350.5 billion has also been made for payment of arrears. This is in line with the Government’s policy to dismantle a substantial amount of arrears owed to suppliers of goods and services so as to free resources for developmental programmes. Further, an allocation of K100.0 billion has been provided for Awards and Compensation for payment of court judgements and litigations against Government.
104. Sir, other key provisions include K309.4 billion for facilitating the constitutional review process, K103.0 billion for grants to Local Authorities and K60.0 billion for Constituency Development Fund. A further K90.7 billion has been provided for contingency reserve meant to cater for unforeseen and unavoidable expenditures. The balance will go towards regular Government operations.
PUBLIC ORDER AND SAFETY
105. Mr. Speaker, the Government proposes to spend K581.8 billion or 4.2 percent of the total budget on the Public Order and Safety function. Of this amount, K437.0 billion will be for police services. Other sub- functions such as law courts, prisons, immigration, passports and national registration function will account for K144.8 billion.
106. Sir, an amount of K60.0 billion has been provided for construction of houses for the police and K24.0 billion for prison infrastructure development and rehabilitation. Further, in order to enhance policing, the Government has provided K15.0 billion for the recruitment of 1,500 police officers.
ECONOMIC AFFAIRS
107. Mr Speaker, expenditure on Economic Affairs is projected to be K2,300.8 billion. Of this amount, the Transport sub-function will account for 51.4 percent, Agriculture, Forestry and Hunting 34.8 percent, General Economic, Commercial and Labour Affairs 6.3 percent while the balance will be accounted for by Fuel and Energy, Tourism and Mining sub-functions.
108. Sir, under Transport, the Government has provided K1,181.4 billion. Of this amount, K1,110.7 billion is for road construction, rehabilitation and maintenance, K40.0 billion for the up-grading of Solwezi and Kasama airports and K10.0 billion for the completion of the Chipata-Mchinji rail line.
109. Sir, under the Agriculture, Forestry, Fishing and Hunting sub-function, K185.0 billion has been provided for the Fertilizer Support Programme to small scale farmers to mitigate the high cost of farming inputs. An amount of K10.0 billion has been set aside for the Food Security Pack to assist the vulnerable but viable rural farmers and K80.0 billion has been provided for purchase of agricultural products by Food Reserve Agency, particularly from outlying areas. Further, the Government has provided K24.4 billion and K38.0 billion for fisheries development and control of livestock diseases, respectively.
110. Mr. Speaker, out of the K145.0 billion allocated under the General Economic Affairs function, K50.0 billion has been set aside for the Citizens Economic Empowerment Fund to facilitate entrepreneurship development in the country. This is in addition to last year’s provision, which is still available with the Fund.
111. Other programmes under the Economic Affairs function include K23.0 billion for the recapitalisation of the Zambia Wildlife Authority, K21.5 billion for Rural Electrification Fund and K6.8 billion to facilitate the development of Lusaka-South Multi Facility Economic Zone.
EDUCATION
112. Mr. Speaker, under the Education function, Government has provided K2,118.5 billion or 15.4 percent of the budget. Some of the key activities to be undertaken are the recruitment of teachers, procurement of educational materials and construction of classrooms and teachers’ houses. It is estimated that the Government will recruit 5,000 teachers in 2008.
113. Sir, in addition K350.0 billion has been set aside for infrastructure development. Among the major projects will be the construction of 31 high schools and an extra 1,500 classrooms in line with the Government’s policy of enrolling all seven year old children in grade one.
114. Sir, the Government will also provide resources to upgrade infrastructure and support operations at the newly established Mulungushi University. Additional resources will be provided to upgrade Nkrumah and Copperbelt Secondary School Teacher Training Colleges so that they are able to offer degree programmes.
HEALTH
115. Mr. Speaker, total expenditure on health will amount to K1,586.6 billion or 11.5 percent of the total Budget. This allocation is essential to improve the provision of quality health care. Sir, Government has allocated K117.5 billion for infrastructure development. Key programmes will be the expansion, construction and rehabilitation of district hospitals and health centres as well as housing for the rural medical personnel. In addition, K113.5 billion has been allocated for the procurement of essential drugs. Further, K24.7 billion has been provided for the recruitment of 1,700 health workers.
HOUSING AND COMMUNITY AMENITIES
116. Mr. Speaker, the Government plans to spend K830.6 billion on the Housing and Community Amenities function. A key element of this function is the improvement of water supply and sanitation. In this respect, the Government has allocated K399.8 billion to improve access to safe drinking water, particularly in rural and peri-urban areas. Other programmes such as resettlement, community development, street lighting and the administration of these programmes have been allocated K431.0 billion.
SOCIAL PROTECTION
117. Mr. Speaker, the Government proposes to settle all pension arrears in 2008. This will be achieved by increasing the allocation to Social Protection to K577.7 billion. Of this amount, K435.9 billion will be for the complete payment of pension arrears and meeting the current obligations to the Public Service Pension Fund. The balance of K141.8 billion will go towards other social protection programmes such as the care for the aged, orphaned and vulnerable children.
REVENUE ESTIMATES AND MEASURES
REVENUE ESTIMATES
118. Mr. Speaker, over the past years, the MMD Government has made significant progress in modernising tax policy and administration. The Government remains committed to establishing a broad-based tax structure that is predictable, simpler, fairer and efficient. This will help deliver lower taxation levels while at the same time securing more resources to finance development programmes.
119. Sir, in 2008, domestic revenues are projected at K9,828.5 billion or 71.4 percent of the budget. Tax revenues estimated at K9,133.6 billion represent 66.4 percent of the total Budget, while non-tax revenues at K694.9 billion represent 5 percent.
120. Mr. Speaker, the summary of the estimated revenue, grants and financing is as follows:
REVENUE MEASURES
DIRECT TAXES
121. Mr Speaker, there has been an understandable concern that the tax burden is high. As a responsible Government, we are mindful of the burden of taxation on our workers especially those in the lower income groups. In order to reduce the tax burden, I propose to revise the Pay-As-You-Earn by increasing the non-taxable monthly threshold income from K500,000 to K600,000. The following is the proposed Pay-As-You-Earn regime:
122. Sir, this measure will give tax relief to workers in formal employment earning below K4,535,000 per month. The measure will result in a revenue loss of K64.8 billion, which will go in the pockets of the workers.
123. Mr. Speaker, currently, the interest paid on mortgage for residential property is not tax deductible. The Government fully recognises the aspiration of most families to construct or purchase their own houses. I, therefore, propose to allow mortgage interest to be deductible for tax purposes to any Zambian individual who obtains a mortgage for residential property. It is envisaged that this concession will encourage home ownership.
124. Mr. Speaker, I also propose to increase the low cost housing unit capital expenditure limit for tax purposes from K2 million and K10 million to K20 million. This is meant to encourage employers to build decent housing units for their employees, particularly, in the agriculture sector. This measure will have a minimal revenue loss.
125. Mr. Speaker, in an effort to encourage savings and streamline the collection of withholding tax on interest earned on savings and deposit accounts, I propose to reduce the withholding tax rate applicable from 25 percent to 15 percent. I also propose to abolish the exempt portion of the interest, which is not subject to withholding tax. This measure has minimal revenue impact.
126. Mr, Speaker, last year, this august House approved the proposal to increase the tax credit applicable to persons who are differently-abled from K36,000 per annum to K144,000 per annum. The Government believes that this increase was insufficient. I, therefore, propose an additional increase so that the threshold will now be K600,000 per annum.
127. Sir, I further propose to increase the allowable deduction for any employer who employs a differently-abled person from K500,000 per annum to K1,000,000 per annum for each such person employed. There will be minimal revenue loss as a result of this measure.
128. Mr. Speaker, all the above measures will take effect on 1st April, 2008.
CUSTOMS AND EXCISE
129. Mr. Speaker, in order to support the manufacturing sector, I propose to reduce customs duty on the following: (a) dyestuffs under HS code 3204, glycerine under HS code 1502 from 5 percent to free; and (b) mechanical horses for semi-trailers from 15 percent to 5 percent.
130. Mr. Speaker, in 2006, the Government reduced customs duty on pancakes in order to promote the music industry. This year, I propose to give further concessions to the industry by reducing duty on other musical instruments and art equipment falling under tariff heading 32, 92 and 96 from 15 percent to zero, and those under heading 85 from 15 percent to 5 percent.
131. Sir, the two measures above will result in an estimated revenue loss of K2.2 billion.
132. Sir, in order to encourage local value addition, I propose an export levy of 15 percent on the export of copper concentrates and cotton seed. This is in recognition of the availability of local capacity to process these products. This measure will result in an estimated revenue gain of K148.7 billion.
133. Mr. Speaker, all the above measures will become effective from midnight, tonight.
VALUE ADDED TAX
134. Sir, currently books are exempt from VAT. This means that local manufacturers of books cannot claim input VAT and this makes local manufacturers less competitive. I, therefore, propose to zero rate books for VAT purposes to make the local manufacture of books less costly. The measure will result in a revenue loss of K1.7 billion.
135. Mr. Speaker, infant formula is a major nutritional supplement for babies. Given that infant formula attracts VAT, it makes the product unaffordable to many families. I, therefore, propose to exempt infant formula for VAT purposes. The measure will result in a revenue loss of K2.1 billion.
136. Mr. Speaker, Zambia is becoming a premier international tourist destination offering a wide range of spectacular tourist activities. In order to attract more tourists, I propose to extend the list of zero rated supplies to include new activities such as elephant back safaris, steam train excursions and walking with lions. The revenue loss is minimal.
137. Sir, all the above measures will take effect from midnight, tonight.
138. Mr. Speaker, the issue of the 17.5 percent standard rate of the Value Added Tax is a matter on which I have received numerous representations for many years. I have always promised that I will respond when the economic conditions were appropriate. As part of the Government’s 2008 theme, which is “Unlocking Resources for Economic Empowerment and Wealth Creation”, I propose to reduce the Value Added Tax standard rate from 17.5 percent to 16 percent. This is a wealth creating measure that will give the consumers K21.6 billion, which the Government will forego in revenues. The measure will take effect on 1st April, 2008.
NON-TAX REVENUES
139. Mr. Speaker, I propose to lift the waiver on visa fees under tour packages. This will level the playing field for all tourists visiting the country. In addition, I propose to increase the visa fees by 100 percent. The Government will raise an estimated amount of K35.4 billion from this measure.
140. Sir, this measure will take effect at midnight, tonight.
141. Mr. Speaker, I propose to revise the fees payable under the Passport and Citizenship Act. For the fees on passports, the current rates will continue to apply until the introduction of the new passports with extra features. This measure will result in a revenue gain of K161.9 billion.
142. Mr. Speaker, I also propose to revise the road user fees payable under the Road Traffic Act. This will bring the fees to appropriate cost recovery levels for providing these services. The measure will result in a revenue gain of K76.3 billion and will come into effect on 1st March 2008.
HOUSEKEEPING MEASURES
143. Mr. Speaker, I propose to amend the Customs and Excise Act, the Value Added Tax Act, and the Income Tax Act so as to update, strengthen, and remove ambiguities in certain sections of tax legislation in order to make tax administration more effective. The measures are revenue neutral.
CHANGES TO THE MINING FISCAL AND REGULATORY REGIME
144. Mr. Speaker, in my 2007 Budget Address to this august House, I proposed new tax measures for the mining sector. I also informed the nation that the Government would engage mining companies, with whom we had signed Development Agreements, as part of the process of introducing the new tax regime for the mining sector.
145. Sir, given the complexity of the mining sector, a team of experts was appointed to study this matter in great detail. The findings of the study show that:
(a) the Development Agreements in their current form are lopsided; and
(b) even if mining companies were to move to the 2007 tax regime, the country would still not get a fair share from its mineral resources.
146. Sir, the Government has, therefore, decided to introduce a new fiscal and regulatory regime in order to bring about an equitable distribution of the mineral wealth between the Government and the mining companies.
147. Mr. Speaker, effective 1st April 2008, the new fiscal regime for the mining sector will include the following:
(a) The corporate tax rate will be 30 percent;
(b) Mineral royalty rate on base metals will be 3 percent of gross value;
(c) Withholding tax on interest, royalties, management fees and payments to affiliates or subcontractors in the mining sector will be at the rate of 15 percent;
(d) Withholding tax on dividend will be at zero percent;
(e) A variable profit tax of up to 15 percent on taxable income, which is above 8 percent of the gross income, will be introduced;
(f) A windfall tax will be introduced to be triggered at different price levels for different base metals. For copper, the windfall tax shall be 25 percent at the copper price of US $2.50 per pound but below US $3.00 per pound, 50 percent at price for the next 50 cents increase in price and 75 percent for price above US $3.50 per pound;
(g) Hedging as a risk management mechanism shall be treated as a separate activity from mining;
(h) Capital allowance, that is a depreciation of capital equipment, shall be reduced from 100 percent to 25 percent per year;
(i) A reference price, which shall be the deemed arms length price, shall be introduced for the purposes of assessing mineral royalties and any transaction for the sale of base metals, gemstones or precious metals between related or associated parties. The reference price shall be the price tenable at the London Metal Exchange, metal Bulletin or any other commodity exchange market recognised by the Commissioner General; and
(j) Capital expenditures on new projects shall be ring fenced and only become deductible when the projects start production.
148. Mr. Speaker, the new mining regulatory framework will be provided for in the Mines and Minerals Act. The framework will also have a modern licensing system based on transparent procedures.
149. Sir, these measures are competitive, reasonable and balanced. The expected additional revenues, in 2008, as a result of these new measures are estimated at US $415 million.
PART V
CONCLUSION
150. Mr. Speaker, over the past few years, the MMD New Deal Government has delivered macroeconomic stability and growth, removed Zambia’s debt burden and articulated a clear long-term economic vision, with concrete plans on how this is to be achieved. Further, in the detailed new measures on the mining sector, the Government has laid a firm foundation for the people of Zambia to fully benefit from the exploitation of their natural resources.
151. Mr. Speaker, by increasing investments in education, health and skills in 2008, we choose to enhance the capabilities and capacities of our people. By increasing and encouraging investments in infrastructure such as roads and communications, we choose to facilitate connectivity and the movement of goods and our people.
152. Mr. Speaker, by developing an information exchange forum under Culture Re-modelling, we take the vital step to freely share the rich backgrounds, values and experiences of role models in our nation and the immense and available opportunities. This is with a strong belief that, the knowledge will assist individuals to re-orient their attitudes, refocus their actions towards results, and establish meaningful relationships, to create wealth and build strong communities.
153. Sir, in this year’s budget, the Government has given fundamental tax concessions which will result in taxpayers retaining some K100 billion in their pockets. In addition, the Citizens’ Empowerment Fund will have over K120 billion. Furthermore, retired public workers will receive a total of K269 billion in terminal benefits. To complement the above, banks and other financial institutions will provide further opportunities for our people to access funds.
154. Mr. Speaker, by reducing the tax burden of individuals, clearing the domestic payments arrears, capitalizing the Empowerment Fund and reducing the Government’s borrowing from the banking system, we choose to financially empower our people with funds to engage in productive pursuits.
155. Mr. Speaker, by these deliberate and calculated measures, the New Deal Government has chosen to create an environment that supports individual initiatives and ingenuity. For the first time in a generation, we stand today, with our destiny, truly in our own hands. Before each one of us, is the opportunity to choose and follow, the path to future prosperity. Each Zambian has the choice, to realise their fullest potential by applying their God-given talents and capabilities.
156. Mr. Speaker, by listening to, and learning from the views, experiences and achievements of others, whether this be, in the important area of constitutional reform, economic excellence, or indeed, how best to marshal our mineral wealth, together, we choose to build a strong and prosperous One Zambia One Nation.
157. Mr. Speaker, I beg to move.
Labels: 2008 BUDGET, MINING CONTRACTS, TAXATION, VAT, WINDFALL TAX
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Magande revises income tax
By Post Reporters
Saturday January 26, 2008 [03:00] P
FINANCE and national planning minister, Ng'andu Magande yesterday unveiled a K13.76 trillion budget for the year 2008 under the theme, 'Unlocking Resources for Economic Empowerment and Wealth Creation' aimed at engaging Zambians in productive activities. The budget also proposes new tax measures. Under customs and excise duties, Magande proposed to
reduce value added tax (VAT) from 17.5 per cent to 16 per cent, as a wealth creation measure that would result in consumers having K21.6 billion that the government would forego in revenues.
Magande also proposed to revise Pay As You Earn (PAYE) by increasing the non-taxable monthly threshold income from K500,000 to K600,000 while those getting over K4 million per month would be paying 35 per cent instead of the previous 30 per cent effective April 1, 2008.
Magande has also proposed a windfall tax that would be triggered at different price levels for base metals including copper, on the international market and government estimates to raise US$415 million this year.
He further proposed that new tax measures for the mining sector would include corporate tax at 30 per cent, mineral royalty at three per cent and a variable profit of up to 15 per cent on taxable income, which is above eight per cent, would be introduced.
Presenting the 2008 national budget to the National Assembly, Magande said this year's budget represents 26.7 per cent of the Gross Domestic Product (GDP) estimated at K51.55 trillion for 2008.
He said of the total budget, K9.828 trillion or 71.4 per cent would be financed by domestic revenues while K2.278 trillion or 16.6 per cent would be grants from donors and the balance of 12 per cent is the deficit of K1.654 trillion or 3.2 per cent of GDP that would be financed by domestic borrowing of K618.8 billion or 1.2 per cent of GDP and external financing of K1.035 trillion or two per cent of GDP.
Magande said the general public services, education and health functions would remain on top of the government's priorities in 2008.
"The general public services has been allocated K4.514 trillion while education functions will get K2.11 trillion with the health sector getting K1.58 trillion and the defence sector will get K981 billion with the public order and safety functions getting K581 billion," he said.
He explained that tax measures to be introduced in the mining sector would contribute revenues estimated at US$415 million about K1.56 trillion in 2008.
Magande said the government's macroeconomic objectives were to achieve real Gross Domestic Product (GDP) growth of at least seven per cent, bringing down end-year inflation to more than seven per cent, limit domestic borrowing to 1.2 per cent of GDP and maintain the coverage of gross international reserves at no less than 3.6 months of import cover.
"Mr. Speaker, in 2008, the government proposes to spend a total of K13.76 trillion or 26.7 per cent of the GDP estimated at K51.55 trillion. Of this amount, K9.82 trillion or 71.4 per cent will be financed by domestic revenues while K2.27 trillion or 16.6 per cent will be grants from our cooperating partners," Magande said. "The balance of 12 per cent is the deficit of K1.65 billion or 3.2 per cent of the GDP. This will be financed by domestic borrowing of K618.8 billion or 1.2 per cent of GDP and external financing of K1.03 trillion or two per cent of GDP."
Magande said there had been an understandable concern that the tax burden was high and the government was mindful of the burden that workers faced especially those in the lower income group.
"I propose to revise the PAYE by increasing the non-taxable monthly threshold income from K500, 000 to K600, 000," he said.
Under the existing system monthly income up to K500, 000 is not taxed, while monthly incomes in the range of K500, 000 to K1.2million pay 25 per cent and those earning between K1.2million and K5.2 million pay 30 per cent while those earning over K5.2 million pay 35 per cent.
But in the proposed system, those earning below K600, 000 will not pay tax, and those getting above K600, 001 and K1, 235, 000 per month will be paying 25 per cent and those earning between K1, 235, 001 and K4 million would have to pay 30 per cent.
Unlike in the current system where those earning above K5.2 million pay 35 per cent tax, the new system will hit hard on those earning above K4 million, who will now be paying 35 per cent.
"This measure will give tax relief to workers in formal employment earning below K4.5 million per month. The measure will result in a revenue loss of K64.8 billion, which will go in the pockets of the workers," Magande said.
"Mr. Speaker, last year, this August House approved the proposal to increase the tax credit applicable to persons who are differently-abled from K36, 000 per annum to K144, 000 per annum. The government believes that this increase was insufficient, I therefore propose an additional increase so that the threshold will now be K600,000 per annum."
Magande further proposed to increase the allowable deduction for any employer who employs a differently-abled person from K500, 000 per annum to K1 million per annum for each such person employed, effective April 1, 2008.
He observed that the current interest paid on mortgage for residential property is not tax deductable and the government fully recognises the aspiration of most families to construct or purchase their own houses.
"I, therefore, propose to allow mortgage interest to be deducted for tax purposes to any Zambian individual who obtains a mortgage for residential property," Magande said. "It is envisaged that this concession will encourage home ownership. I also propose to increase the low cost housing unit capital expenditure limit for tax purposes from K2 million and K10 million to K20 million. This is meant to encourage employers to build decent housing units for their employees."
Magande proposed to reduce the withholding tax applicable from 25 per cent to 15 per cent in an effort to encourage savings and streamline the collection of withholding tax on interest earned on savings and deposit accounts.
In order to encourage local value addition, Magande proposed an export levy of 15 per cent on export of copper concentrates and cotton seed effective last night.
"This is in recognition of the availability of local capacity to process these products. This measure will result in an estimated revenue gain of K148.7 billion," he said.
He also gave further concessions to the music industry by reducing duty on musical instruments and art equipment falling under tariff heading 32, 92, and 96 from 15 per cent to zero and those under heading 85 from 15 per cent to five per cent.
On VAT, Magande said the issue of the 17.5 per cent standard rate of the VAT was a matter on which he had received numerous representation for many years and had always promised that he would respond when the economic conditions were appropriate.
"As part of government's 2008 theme, which is 'Unlocking Resources for Economic Empowerment and Wealth Creation', I propose to reduce the Value Added Tax standard rate from 17.5 per cent to 16 per cent. This is a wealth creating measure that will give the consumers K21.6 billion which the government will forego in revenues.
This measure will take effect on 1 April, 2008," Magande said. "Mr. Speaker, infant formula is a major nutritional supplement for babies. Given that infant formula attracts VAT, it makes the product unaffordable to many families. I, therefore, propose to exempt infant formula for VAT purposes. The measure will result in a revenue loss of K2.1 billion."
He also lifted the waiver on visa fees under tour packages.
"This will level the playing field for all tourists visiting the country. In addition, I propose to increase the visa fees by 100 per cent. The government will raise an estimated amount of K35.4 billion from this measure," he said.
On the changes to the mining fiscal and regulatory regime, Magande said effective April 1, 2008, the new fiscal regime for the mining sector would include: "the corporate tax rate will be 30 per cent, mineral royalty rate on base metals will be three per cent of the gross value, withholding tax on interest, royalties, management fees and payments to affiliates or subcontractors in the mining sector will be at the rate of 15 per cent, withholding tax on dividends will be at zero per cent, a variable profit tax of up to 15 per cent on taxable income which is above eight per cent of the gross income, will be introduced."
He added that a windfall tax would be introduced to be triggered at different price levels for different base metals.
"For copper, the windfall tax shall be 25 per cent at the copper price of US$2.5 per pound but below US$3 per pound, 50 per cent at price for the next 50 cents increase in price and 75 per cent for price above US$3.5 per pound," Magande said.
"Hedging as a risk management mechanism shall be treated as a separate activity from mining."
He said capital allowance, that is a depreciation of capital equipment, shall be reduced from 100 per cent to 25 per cent per year.
"A reference price, which shall be the deemed arm lengthy price shall be introduced for the purpose of assessing mineral royalties and any transaction for the sale of base metals, gemstones or precious metals between related or associated parties.
The reference price shall be the price tenable at the London Metal exchange, Metal Bulletin or any other commodity exchange market recognised by the Commissioner General," Magande said.
Magande said capital expenditures on new projects shall be ring-fenced and only become deductable when the projects start production.
"Mr Speaker, these measures are competitive, reasonable and balanced. The expected additional revenues, in 2008, as a result of these new measures are estimated at US $ 415 million about K1.56 trillion," he said.
He said the Citizens' Economic Empowerment Fund would have over K120 billion.
"Furthermore, retired public workers will receive a total of K269 billion in terminal benefits," said Magande.
Labels: 2008 BUDGET, MAGANDE, MINING AGREEMENTS, WINDFALL TAX
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Base your noble deeds on noble sentiments
By Editor
Saturday January 26, 2008 [03:00]
It will be very difficult for anyone to believe Vice-President Rupiah Banda's attempt to explain why the drainage in Kanyama is only being cleared at a time of a parliamentary by-election campaign. Yes, it is a good thing to clear drainage in Kanyama. This is how things should be. But Kanyama is not the only affected compound in Lusaka. There are many other areas that are equally flooded.
Why are they not being treated in the same way as Kanyama? Or why didn’t the exercise of unblocking drainage start elsewhere other than in Kanyama?
It is clear that what the MMD government is doing in Kanyama does not stem from noble sentiments or ideas. They are doing so out of a desire to win the support and votes of the people of Kanyama in next month’s parliamentary by-elections.
It is sad when human beings draw away from the honest goals they proclaim to be seeking and let themselves be influenced by the desire for power. What the MMD government is doing in Kanyama is to destroy the values of honesty, accountability and transparency which it has been advocating. What is happening in Kanyama amounts to corruption, to fraud.
And Vice-President Banda should realise that they are making a big mistake by failing to see the consequences of what they are doing in Kanyama and that they are not doing the right thing to reach the goals and purposes they have been proclaiming – which, of course, were necessary and legitimate.
What they are trying to do in Kanyama is to manipulate public opinion and influence the people’s thinking. This is not the way to promote democracy. What the MMD government is doing in Kanyama is to prostitute the electoral process and falsify the will and interests of the people so that they win the by-election. This is fraudulent and treacherous politicking. They are trying to mislead the ignorant into supporting them.
What this teaches us is that the exercise of power must be the constant practice of self-limitation and modesty. It may be very difficult to legally challenge the MMD for electoral fraud and corruption over practices of this nature.
But we know that what they are doing is not noble, does not arise from noble sentiments, it is simply a desire to hoodwink the people so that they can vote for them. But to deceive the people, to delude them with false illusions can only result in the worst consequences.
It is very important that whatever elections we have should be conducted in the most fair way. Elections are very important and key to the progress of our country because they are the central institutions of democratic governance. We say this because in a democracy, the authority of the government derives solely from the consent of the governed.
And the principal mechanism for translating that consent into governmental authority is the holding of free and fair elections. We accept that the MMD, as the party in power, may enjoy the advantage of incumbency, but the rules and conduct of election contest must be fair.
This is the only way citizens can be confident that the government does, indeed, rest upon their consent. If those in power perceive elections as nothing more than a forum which they can manipulate to keep their hold on power, then we will not achieve much in our endeavours to govern ourselves in a manner that will serve our aspirations for personal freedom, economic opportunity and social justice.
What the MMD government is doing in Kanyama brings into question the fight against corruption. There is no way they can manage to call others to virtues which they themselves do not make an effort to practice.
We can only call on the people of Kanyama on that day – the day of the parliamentary by-election – to vote wisely and only for the person who is known for his or her honesty, ability, dedication, and concern for the welfare of all the people.
Let all those who will vote in the Kanyama by-election be guided by noble values and ignore those who are trying to manipulate them for their votes. We shouldn’t forget that by-elections like this one are a very important exercise for promoting justice, development and community among all. We should regard elections as a way of building up society for the common good.
It is therefore important that those who engage in electoral practices that appear to be corrupt should be repudiated and not voted for.
We would like the MMD government to simultaneously extend the drainage unblocking exercise they are carrying out in Kanyama to other compounds of Lusaka and the country at large. If this is not done, it will be very difficult for them to convince anyone that what they are doing in Kanyama although necessary is not based on evil and criminal intentions of sentiments – to deceive the people of Kanyama and influence the way they will vote in next month’s parliamentary by-election.
Labels: BY-ELECTIONS, CORRUPTION, FLOODS, ROADS, RUPIAH BANDA
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Kanyama roads rehabilitation is a high degree of deception, says HH
By Brighton Phiri and Mutuna Chanda
Saturday January 26, 2008 [03:00]
REHABILITATION of the road network in Kanyama is a high degree of deception, opposition United Party for National Development (UPND) president Hakainde Hichilema has charged. But Vice-President Rupiah Banda has defended the government's clearing of drainage in Kanyama area, saying it was not prompted by the forthcoming by-elections. Commenting on the on-going rehabilitation works on the road network in Kanyama compound, Hichilema warned that what was happening in Kenya could occur in Zambia if electoral malpractices continued.
"What is happening in Kanyama is high degree of deception. Kanyama is a disaster due to lack of sanitation, it is not fit for human habitation and yet our people are forced to live under such conditions," Hichilema said.
"Look at Kanyama Clinic, it is a sorry sight. Our women queue for hours for water. Human waste has mixed with the floods and that is where our people walk through. To go to Kanyama and start grading roads now is an insult for our people."
Hichilema urged Kanyama residents to avoid falling prey to the MMD government's deception.
He said there was no justification for the government to undertake rehabilitation works in areas where there were elections.
And some Kanyama residents described the works in Kanyama as a ploy by the ruling party and government to win their support during the forthcoming by-election set for February 21.
A check by The Post found a ZNS crane registration number ZNS 3265 clearing the blocked drainage system while some Lusaka City Council trucks were busy collecting refuse from the compound.
A resident, Elina Zulu, said as much as the residents appreciated the development, it was wrong for the government to blackmail the people over the next election.
"We are not blind, we are seeing these things and we shall vote accordingly," Elina said.
Simon Munthali wondered why the equipment was brought into Kanyama after President Mwanawasa's declaration that he was ready to campaign for three days in Kanyama.
Serena Chinyama said it was wrong for government to assist its people only when they had lost their beloved member of parliament.
"Is it fair for this rehabilitation to come upon the death of our former member of parliament?" she asked.
But Lusaka Mayor Stephen Chilatu said the road rehabilitation works in Kanyama had nothing to do with the by-elections in the area.
When asked why the LCC had taken long to move into the compound when the floods rocked the area during the second week of December last year, Chilatu said:
"Our residents must appreciate that we are hampered with lack of resources and we only moved into Kanyama after approving our budget recently."
"We are in Kanyama because we owe to the residents and not out of the forthcoming by-election," he said.
Chilatu said what must be realised is that Kanyama is prone to cholera and it will not be helpful to wait until the elections are over.
"As council we have no direct interest in the forthcoming election," said Chilatu.
And Vice-President Banda in Parliament on Thursday denied suggestions that the government was clearing the drainages in Kanyama because of the by-elections scheduled for next month.
"Plans to drain Lusaka have been made and the army is working with local authorities in this effort," Banda said.
The Post on the front page of its Thursday edition carried a picture showing a Zambia National Service excavator working on one of the drainages in Kanyama compound.
And Vice-President Banda said that government had released K14 billion for relief efforts to flood victims in the country.
Debating President Mwanawasa's speech during the opening of the second session of the Tenth National Assembly, Vice-President Banda said that more money would be needed to help people affected by floods.
"The floods of 2007/2008 are a result of rainfall way above normal, especially in the Southern Province where more than twice of normal rains have been experienced," Banda said. "As of today (Thursday) 3,337 families have been affected and have had to be helped in various ways."
He said some of the families that had been affected by floods were staying in camps in which the government with the help of partners had supported while other families were staying with their extended families.
"The government has provided 15,000 metric tonnes of maize in relief to those who had been affected by the floods," Banda said.
Labels: FLOODS, HAKAINDE HICHILEMA, LCC, LUSAKA, ROADS, UPND
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Differences between govt, NGOs will not uplift Zambians' living standa
By Brighton Phiri
Saturday January 26, 2008 [03:00]
PRESIDENT Mwanawasa yesterday said differences between government and Non-Governmental Organisations (NGOs) would not uplift the living standards of Zambians. And President Mwanawasa has asked Israel and Palestine to find a lasting solution to their conflict. Meanwhile, new Norwegian Ambassador to Zambia Tore Gjos commended President Mwanawasa and the government for introducing a new tax regime for the mining sector.
Speaking during presentation of credentials by new ambassadors from Israeli and Norway, and High Commissioners of Cyprus and South Africa at State House, President Mwanawasa expressed determination to ensure that NGOs and the government worked together to improve the living standards of people instead of opposing and criticising each other.
"I know that Norway has a vibrant and active civil society participation in national matters. I believe that our two countries could work together in this area to encourage NGOs to contribute to the well-being and freedom of our citizens," President Mwanawasa told Ambassador Gjos.
Ambassador Gjos said Norway was encouraged with the government's intention to introduce a new fiscal and regulatory regime in order to bring about an equitable distribution of the mineral wealth.
He said his country was willing to assist Zambia in setting up a regulatory framework for the possible exploration of oil and gas.
Ambassador Gjos assured President Mwanawasa that his government was committed to scaling up its support on climate issues in the Southern Africa Development Community (SADC) region.
On Israeli-Palestinian conflict, President Mwanawasa who is SADC chairperson said Zambia remained concerned about the apparent lack of a lasting solution to the unending Israeli and Palestinian conflict.
"Zambia maintains cordial relations with both Israel and Palestine and has continuously called on both sides to sit down and agree on a lasting solution so that Israel will, once again, be associated with the biblical prophecy, as the land of milk and honey and not the conflict and violence suffered by both the Jewish and Palestinian people and that the Palestinians may also realise their statehood," President Mwanawasa said.
President Mwanawasa expressed hope that the recently convened Middle East peace conference would give impact and reason for all the concerned parties to re-start negotiations with the sole purpose of securing a final peaceful solution to the conflict.
He asked Israeli to assist Zambia with the technologies of conserving its water, which was in abundance in form of floods during the rain season.
New Israeli ambassador to Zambia Jacob Keidar assured President Mwanawasa that he would focus on enhancing the existing bilateral co-operation between the two countries.
New Cyprus High Commissioner to Zambia Vassos Chamberlen commended Zambia for its support to his government's effort to reunite the island.
"Despite the genuine efforts of the government of Cyprus to reach a viable and acceptable solution of the Cyprus issue by both sides, in the frame work of bi-zonal, bi-communal federation, Turkey continues to remain intransigent and reluctant to resume negotiations for a comprehensive settlement," High Commissioner Chamberlen said.
"It is obvious that Turkey's objective in Cyprus has never been the reunification, but the partition of the island. The illegal presence of 40,000 Turkish troops in Cyprus and the calls by Turkey to revise the Security Council Resolutions on Cyprus and to upgrade the illegal regime of the occupied part of the island, provide a clear evidence that this objective continues to be in the focus of Ankara's militaristic policy. A policy, which is responsible for the non-solution of the issue."
President Mwanawasa said Zambia would like to see the island of Cyprus reunited on the basis of the relevant resolutions of the UN guided by accepted norms of international law.
"As a peace loving nation, Zambia will stand by you in your peaceful engagement with Turkey until an amicable resolution to this long time conflict is found. I am confident that the differences between Turkey and Cyprus could be resolved through dialogue," President Mwanawasa said.
President Mwanawasa commended South Africa for agreeing to support Zambia's candidature through Inonge Mbikusita-Lewanika for the position of chairperson of the African Union (AU) Commission, during the election scheduled for next week at the AU headquarters.
New South Africa High Commissioner Moses Mabokela Chikane reaffirmed his country's support for Zambia's candidature.
He said South Africans owe it to Zambians for supporting their liberation struggle.
"You clothed, kept and fed us. We cherish your support," said Chikane.
Labels: MWANAWASA, NGOs
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Dr Puma expresses concern over MPs' ignorance
By Mwala Kalaluka
Saturday January 26, 2008 [03:00]
HEALTH deputy minister Dr Lwipa Puma on Wednesday said he was bewildered by the high levels of poverty of knowledge among some parliamentarians. And Roan PF member of parliament Chishimba Kambwili was on the same day restrained from uttering side comments against Speaker Amusaa Mwanamwambwa after he was denied an opportunity to raise a point of order against Dr Puma’s statement.
During debate on President Levy Mwanawasa’s address at the opening of the second session of the Tenth National Assembly, Dr Puma said he was bewildered that Kambwili, in one of his debates in the House, complained that he could not find choloroquine in the pharmacy of one of the hospitals in Luanshya.
“Mr. Speaker, I did not understand that the level of poverty of knowledge is so high,” Dr Puma said as some opposition parliamentarians heckled him.
“I can’t believe that four years after withdrawing choloroquine from the market, they still go to a clinic and ask about choloroquine.”
The government has replaced choloroquine with coartem as the first line of defence in the fight against malaria.
He urged members of parliament to always consult managers of hospitals and clinics in their constituencies before making statements on the issue of drug shortages in health institutions in the House.
“Things have changed,” said Dr Puma.
But Kambwili, who seemed uncomfortable during Dr Puma’s debate, tried to attract Speaker Mwanamwambwa’s attention by shouting “point of order, point of order” on top of his voice.
Speaker Mwanamwambwa however, ignored Kambwili’s calls for a point of order and allowed Dr Puma to continue his debate.
As he took his seat next to Lusaka Central PF member of parliament Guy Scott, Kambwili was heard grumbling about parliamentary standards that do not accommodate points of order, but Scott discouraged him from issuing sideline comments against Speaker Mwanamwambwa’s decision.
Speaker Mwanamwambwa has said before that he will only allow serious points of order to avoid the House being placed in unnecessary delays in the execution of its core business.
Labels: LWIPI PUMA, MPs
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Zambia needs other sources of power, says Seshemani
By Kabanda Chulu
Saturday January 26, 2008 [03:00]
ZAMBIA Chambers of Commerce and Industry (ZACCI) chairman Hanson Sindowe has said the country risks losing the economic gains recorded if new electricity generation plants are not developed to meet the current required demand. And University of Zambia Economics lecturer Professor Venkatesh Seshamani has said the country should look for alternative and cheaper sources of power such as nuclear energy. Sindowe said there was need to urgently attract investment in the sector in order to sustain the economic growth being recorded.
“Our immediate concern which requires much attention is that if Zambia does not move fast enough to have new power generation plants to meet required demand, the country risks to lose all the economic gains she has recorded during the past few years,” he said.
Sindowe, who is also Copperbelt Energy Corporation executive chairman, said the company’s long term plan was to enter into partnership with other entities in power generation operations.
“We are talking to various entities that we want to partner with for the purpose of developing power generation projects but it is too early to disclose any information since discussions are underway, but participating in electricity generation is part of our long-term plans,” he said.
And Prof Seshamani said uranium mining provided the prospects for a long-term solution in terms of an alternative and cheaper source of energy for Zambia.
“The Lumwana copper mines are known to have significant deposits of uranium that are mixed with the copper deposits. So along with the mining of copper, uranium can also be mined. Indeed, Zambia is planning to mine and export uranium which would bring high returns to the country especially since the international price of uranium has risen nearly ten-fold over the past decade,” said Prof Seshamani.
“But Zambia must not be content with mining and exporting uranium. She must see how the uranium can be used within the country itself to provide nuclear energy which would be cleaner, enduring and economical in the long-run.”
And Lusaka businessman Mark O’Donnell said the country should focus on attracting more investments in the power sector as a means of mitigating electricity problems.
“We need to see more investment in electrical power generation since dam sites have been known for many decades, yet the last time we built a dam was in the 1970’s. There should be no further delay in investing in more power generation.
There is an abundance of private capital in the world and to mobilise some of this to invest in electrical power generation is not a huge challenge, but why do we fear using this foreign capital?” O’Donnell asked.
Labels: ENERGY, HANSON SINDOWE, VENKATESH SESHAMANI, ZACCI
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