Hichilema rubbishes first PF budget, says there is no break from past
November 16, 2011 | Filed under: Statements | Posted by: editor
1.0 General Overview
Many people were looking forward to the first national budget presented by the Patriotic Front (PF) Government. The PF made a lot of election promises which many people expected would be fulfilled in the 2012 national budget.
The overall picture emerging from the budget presented by Finance Minister, Alexander Chikwanda is that the budget did not address the key concerns of the Zambian people.
2.0 Key Economic Policies any people were looking forward to a significant change in economic policies.
An examination of the fiscal and monetary policies outlined in the budget shows that there is no real departure from the past.
Gross Domestic Product (GDP), inflation, exchange rate, debt taxation, interest rate, policies and targets have largely remained the same as in the past. For example, the PF’s projected GDP growth rate of 7% per annum is too small and inadequate to provide the type of impact needed to create employment, reduce poverty, lower inflation and improve people’s standard of living.
What was needed was a GDP growth rate of more than 10%.
3.0 Taxation of the Mining Sector
Many people were demanding that the Zambian people should benefit from the country’s mineral wealth. They were expecting the PF Government to adequately tax the Mining Sector to generate financial resources in order to provide better roads, schools, hospitals and other infrastructure. The people were calling for the re-introduction of windfall tax on copper revenue. With copper prices remaining above US$7,000 per tonne, the mines are still gaining unexpected income which is above the planned threshold of US$2,500 to US$3,000 per tonne to make profit. The PF campaigned on the platform of re-introducing the windfall tax. What has changed?
3.1 The people of Zambia deserve to benefit from windfall tax gains
in high copper prices in the same way that the owners of the mines
are reaping supper normal profits. If the PF Government have been
cheated into believing that they will tax the profit of the mining companies to make revenue, they will be in for a rude shock as the miner will continue to declare huge losses for a long time to come due to bad practices by multinational companies such as international transfer pricing, sophisticated taxation tactics and inflated production and operational costs which this PF Government has no capacity to monitor and control.
While the increase in mineral royalty from 3% to 6% is noted, it is
insufficient to raise the amount of revenue expected from the mining
sector. Mineral royalty itself is treated as an expense rather than
a tax. It will still be deducted from total mining revenue for tax
purposes. The net revenue gain by the government will be minimal.
3.2 Furthermore, export duty of 15% on copper and cobalt concentrates to encourage value addition should have remained in place. Its intention has not had the desired effect so far. Rather than reducing, it should have remained while netting in other semi processed minerals ores at 10% or 15%. We need to encourage value addition as a way of encouraging employment.
4.0 Agriculture
The PF government has said agriculture is one of the core sectors, however, a close look at the budget indicates that albeit the said increase over last year’s budget the total allocation in comparative terms to the budget has in fact decreased. The budget allocation for 2012 is only 5.9% of the budget. This is way below the minimum of 10% required by the Abujah protocol. Hence missing the opportunity to meaningfully contribute to poverty alleviation of the majority of our people. A budget that claims to be pro-poor can ill afford to inject only 6% of its budget to agriculture. The PF government should match its words with action.
5.0 Education
Net recruitment of 5,000 teachers falls short of the requirement projected by education authorities to be around14,000. This gives a shortfall of approximately 9000. The teacher to pupil ratio will still remain unacceptably high.
6.0 Bank Corporate Tax
Reduced from 40% to 35% which is intended to increase liquidity of banks and therefore ability to lend out at lower rates is noted. However, unless strictly monitored by Bank of Zambia, this increased liquidity could be used to buy government bonds which seem to be more attractive and secure for banks. If this happens, it will squeeze out the money on the market and hence negate the intended benefits.
7.0 Money in the People’s Pocket
7.1 Many people were looking forward to the national budget to put money in their pockets. Among the majority of the people who voted for the PF were the unemployed people, street vendors, marketers, bus conductors and drivers, taxi drivers, carpenters and other people in the informed sector.
An examination of the national budget shows that there is no money provided for them for their pockets.
7.2 To put money in the pockets of unemployed people, there was need to employ them so that they start earning salaries. There was nothing specified in the budget on new employment levels and targets. As things stand now, our children graduating from high schools, colleges and universities have no jobs on the table.
Put money in the pockets of street vendors, marketers, bus and taxi drivers and other people in the informal sector, there was need to provide loans and other business services to them to start or strengthen their businesses. The PF Government was silent on the matter of assistance to these suffering people. How are they going to have money in their pockets?
7.3 We acknowledge that a small number of people in formal employment will get some tax relief through the increment in the PAYE threshold from K1million to K2 million per month.
First of all, this is inadequate because it falls short of the basic needs, bread basket of over K3 million for a family of six as established by the Jesuit
Centre for Theological Reflections (JCTR) surveys.
The tax-free income should have been above K3 million per month.
Secondly, the tax relief is limited in scope as it provides for employees in the formal sector only who are about 500,000 out of 13 million people.
In order to put money in workers pockets, there is need to increase
their salaries apart from giving them a tax relief.
Public service workers such as Teachers, Nurses, Doctors and Policemen are poorly paid. There is need to review their salaries and other conditions of service. The Minister was silent on the matter.
8.0 New Constitution
The Zambian people are expecting a new constitution which the PF Government promised to deliver in ninety (90) days. In order to have a new constitution, there is need for a referendum, which is basically a general election for people to vote for their new constitution.
It is shocking that the 2012 national budget has no money for a Referendum and the Minister was conspicuously quite over the issue of the constitution and money need to effect it.
9.0 Local Government
In order to enhance decentralisation, more money should be channelled to local authorities. A lot of MPs have been calling for an increase in CDF as a strategy for taking power to the people.
CDF is the only government fund that directly impacts positively on the developmental needs of the people. In the 2012 budget, CDF has only marginally been increased from K720 million to K800 million per year per constituency contrary to the K5 billion MPs were demanding for. Why does government want to centralize funding for development projects? Our suspicion is that the PF government wants to use central government funds as a carrot for mobilising support for the PF government.
10.0 Conclusion
The 2012 National Budget presented by the PF Government has fallen short of people’s expectations.
Being the first budget by the PF government, it should have addressed the major issues confronting the people of Zambia. These issues are unemployment, low incomes for people in rural areas mainly in the agriculture sector, poor salaries and conditions of service for workers in the formal sector, lack benefits from the mining sector for theZambia people and generally poverty affecting the majority of Zambians.
Simply put, the Zambian people were duped into voting for the PF based on false promises. The broken promises are too many. Zambians are now wondering whether or not they voted wisely. They are in a state of disbelief.
It is now becoming a situation where people are from a state of “Don’t Kubeba” to “Don”t Kudabwa”.
Thank you very much.
Hakainde Hichilema
PRESIDENT (UPND)
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