2009 budget won’t reduce poverty, says Magande
2009 budget won’t reduce poverty, says MagandeWritten by y Chibaula Silwamba
Monday, February 02, 2009 3:24:54 PM
FORMER finance minister Ng'andu Magande has said this year's budget will not reduce poverty. And Magande said the government seems to be scared of mining investors.
Analysing finance minister Situmbeko Musokotwane's K15.27 trillion national budget presented to Parliament on Friday, Magande said he did not expect it to reduce poverty among Zambians living below the poverty datum line.
“For the government to have an increased budget to over K15 trillion and tell us that we are only expecting a growth of five per cent, I don't understand. At five per cent we can't manage to reduce poverty. I can't see it, especially now, that we are projecting a GDP [Gross Domestic Product] growth of five per cent,” said Magande in an interview on Saturday in Lusaka.
“The last five years, as you have seen, we have been growing at between five and six per cent. The average was five point something. Last year we had 6.3 per cent and then this year we are projecting five per cent. Poverty over the last four years only came down from 73 per cent to 64 per cent, so you can see the homework that we have. We should be aiming for over seven per cent growth and what that means is that when money comes our way must go to production.”
Magande said the Citizens Economic Empowerment Commission (CEEC) should ensure that the money it disbursed was used on production.
“I wish I knew also that the Citizens Economic Empowerment was putting money now in production. But if again we will end up like these other schemes where people get money and grow 10 chickens, then we will not achieve anything,” Magande said. “I think we have learnt lessons in the past and I hope the Citizens Economic Empowerment Commission is more careful this time.”
Magande, who is also MMD Chilanga member of parliament, said estimates in the budget were higher than one would have expected.
“I don't know, K15.27 trillion from K13 trillion last year, it means there is revenue somewhere. So it is now to know how much that money has been distributed, the additional K2 trillion plus. Where has it been put? It would seem that is a thing which we have to wait until we see the Yellow Book. Right now, I don't know those figures,” Magande said.
On mines and minerals taxes, Magande wondered why the government seemed scared of mining companies and adjusted taxes in fear.
“In the areas of mining, the minister says he has dropped the windfall tax. Even if he didn't drop the windfall tax, by the mere fact that the price of copper has not reached the trigger point in the windfall tax formula, where they pay windfall tax, they wouldn't pay anything. I don't even know why he had to spend even his pen and his breath to say ‘I am dropping windfall tax’ because everybody knows the formula has a trigger price,” Magande said.
“He [Musokotwane] said ‘I have dropped this’ but he didn't tell us how much revenue he is going to lose. Then he says ‘I will maintain the variable tax’, and again he didn't tell us how he is going to raise.”
Magande said he had difficulties understanding why the mining companies were complaining so much about losses when in fact costs of inputs in production had gone down.
“Fuel is one of their biggest inputs, ordinary oil the price has come down by US $100 per barrel, which is about 60 to 70 per cent down. How has that affected the profitability of the mines that now we seem to be so scared, we are sympathetic to them? Some of them are closing and going because now mining has become unprofitable. How?” Magande asked.
“We still have contractors complaining that now they have to wait for two or three months to be paid. People on the Copperbelt, be it engineers or those people who go underground to dig, all of them are complaining about low salaries. So who is getting this money being made out of the mining industry? And if it is being taken, how much of it is being taken?”
Magande observed that copper production tonnage had increased last year and was expected to increase further this year and next year but it was strange that Zambians were not benefiting.
“It is interesting that copper production in tonnages has increased this year. This is copper being taken out of Zambia and next year, I am sure, because of the investment in mining sector over the last two years, they might be producing even much more,” Magande said.
“Copper is going and people are trying to say, 'while we are digging your copper and taking your copper away, we can't pay you anything.' At the time prices of copper will rise, what are we going to sell to earn money for Zambia? Those are some of the questions that some of us ask.”
Magande said he did not see the serious impact of the global credit crunch on Zambia, especially with mining investors.
“These investors who are in the mines now borrowed in the last two, three years and they brought the equipment. We saw the euphoria when that big equipment was brought into the country. That equipment was already paid for but on a loan,” Magande said.
“So why does the mine now which is already operating on equipment that they have already bought, why do they need to go to the bank again to borrow money? For what?”
Magande said the increase in the import last year was mostly because of the mining equipment.
“So when people say the world credit crunch is going to affect our investors, in what way is it going to affect them? What they should do is to use that equipment and produce, and then operate from their recurrent revenue and that is what they are doing,” Magande said. “They are mining and taking our copper and getting money but they are saying 'there is a problem because there is a credit crunch.' What do they need credit for?”
He said for him who sees what is happening in the global and Zambian economy, the credit crunch had not come to Zambia.
“…and that is why the minister has interpreted that by increasing the budget by K2 trillion. Where did he get the revenue? It is from a growing economy,” Magande said.
On the agriculture sector, Magande said he hoped the money allocated to agriculture would be used for food production unlike what had been happening in the past.
“It's true the budget is a repeat of what has been said before. We are talking about agriculture! Agriculture! Until we find the right formula to use the land, the water which we have in abundance, we will still continue talking of FRA [Food Reserve Agency] and buying maize which we don't even know whether it will be produced or not,” he said. “I think it is important to fund the agriculture extension service in agriculture to be able to advise the farmers, be able to even give correct information on how much we are producing.”
Magande said the agricultural sector has to be reorganised.
“I think last year, the information on how much maize we had produced was chaotic. You can't have people telling you that we have a surplus; you export, the next mealie meal prices are going up by 100 per cent. Something is just wrong. It means agriculture has to be reorganised to give correct information,” Magande said.
“But of course the minister says now he has increased the amount to over K1 trillion from about K800 billion. If that money is just going to subsistence allowance for an officer who travels from here to Kazungula to look at the impact of diseases and spend five nights which gives him K2 million, that is not going to move the agriculture sector.”
Magande said he would carefully read the Yellow Book to see where the money had been allocated.
“We need to reorganise certain ways of doing things and I think that is why looking at the Yellow Book one can see where money has gone. If money has gone in running the government, the same way as before, we won't be achieving the objectives,” Magande said.
On social sectors, Magande observed that a substantial allocation had gone to education and health.
“But I always say that, yes education is a very important infrastructure but it is not like a road because if you build a road, within three days somebody will use it. Now we are putting money into all these schools but the people that are going to use these are only going to be useful in 20 years time and that is what I think Zambians must understand,” Magande said. “The two social services - education and health - yes they have an economic value, but their time lag is long.”
Magande said that while Musokotwane had up-scaled investment in education, he was so pessimistic that this year the economy would be minus 1.3 per cent compared to last year in growth.
“That is the complication that people have to understand. Yes they are putting money in education but why should we get a five per cent growth of the economy because some of the infrastructure in which we are putting money now has a long period to bring out the results,” Magande said.
“Now, if that is so, it simply means if we have to reduce the poverty of the already grown-up people because those are the ones we are talking about poverty. Then it means we have to find growth from elsewhere, not from the social services.”
Magande said people who are grown up now must be productive.
“If they are not productive then we will continue to put money in education and until these people get out of colleges with their degrees in technology, in computers or agriculture, we will not change this problem of poverty,” he said.
However, Magande commended Musokotwane for continuing with the programmes under the Fifth National Development Plan (FNDP).
“Some of these programmes have already been done such as energy, the minister mentioned Kariba North, Itezhi Tezhi and Kafue Gorge. Those programmes should continue,” Magande said.
“He mentioned road infrastructure. The equipment is there which came last year and President Rupiah Banda sent it out to the rural areas but what we are hearing is that some of it was abandoned under trees and it is rotting or it's being vandalised.”
Magande called for effective implementation of developmental projects.
“We are very weak at implementation and even staff at the Ministry of Finance are frustrated because of failure to implement developmental programmes,” said Magande.
Labels: 2009 BUDGET, MAGANDE, YELLOW BOOK
posted by MrK @ 3:25 PM
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