(SUNDAY MAIL ZW) State, banks meet over 99-year leases
Sunday, 19 January 2014 00:00
Itai Mazire
The Government has begun refining the 99-year lease agreements issued to beneficiaries of the land reform programme to enable the farmers to access funding from financial institutions.
Under the present set-up, the beneficiaries cannot secure bank loans for production as the documents cannot be used as collateral.
It is understood the Ministry of Lands and Rural Resettlement is already working on a new framework which will soon be presented to Cabinet for scrutiny. Ministry officials are also expected to meet Bankers’ Association of Zimbabwe (BAZ) representatives this week to discuss the proposals.
In an interview last week, the Minister of Lands and Rural Resettlement, Dr Douglas Mombeshora, said authorities want to ensure farmers secure loans before the next winter and summer cropping seasons.
“We noted in the media that while responding to criticism from legislators during a post-budget seminar last week, the BAZ president, Mr George Guvamatanga, said money held by banks belonged to depositors and it would not be prudent for them to lend it to farmers based on the 99-year lease.
“As a ministry, we immediately wrote to Mr Guvamatanga on Wednesday so that we could meet and craft an agreeable document that would see banks give farmers loans since agriculture is a key driver of the economy.
“After noting that there was no response from BAZ since then, we have since communicated with them through the ministry’s permanent secretary that we meet this week. “The whole process involves sitting with them and coming up with a security-based document that will see the farmer go to the bank and secure funding for his or her farming activities.”
Dr Mombeshora said there was need for banks and farmers to collaborate as agriculture underpins the country’s economy.
“It is not about us, as Government, giving farmers title deeds so that they secure loans from financial institutions. The matter is about us, as a ministry and BAZ, meeting to come up with a document that will see farmers get funding.
“We understand their position that some farmers will default on loan repayment, but there is now need for them (banks) to understand that Zimbabwe is an agro-based economy that also needs support from financial institutions.
“The ministry is working on the modalities for a security-based lease document that will give banks trust and at the same time see farmers benefiting. BAZ has since indicated that they are willing to accept proposals with regards to farmers securing loans.
“It is a matter of giving banks security, and this security will be in the lease agreements. Government will not give farmers title deeds since this was rejected during the constitutional referendum. We need to deal with this stalemate between farmers and banks.”
Zimbabwe Farmers’ Union second vice-resident Mr Berean Mukwende said the initiative would help address the farmers’ plight. He said Government should ensure refining the lease agreements was mutually beneficial.
“Communal farmers form the majority which is really suffering because they are not accessing any loans from banks. There is need for banks to trust farmers. The farmers should also be able to pay back loans on time. “We are depositors in these banks, hence there is need for them to allow us to secure loans like any other individual in Zimbabwe.”
Last week, legislators attending a post-budget seminar in Harare raised concern over farmers’ failure to secure bank funding. They argued that the situation continued to inhibit production.
Responding to the complaints, Mr Guvamatanga said BAZ was open to discuss the matter with stakeholders with a view to finding solutions.
“At the end of the day, banks will take their money where they are likely to be paid back, where there are proper structures. Unfortunately, the proper structures at the moment are only in tobacco,” he said.
Labels: 2008 BUDGET, LAND RIGHTS
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'Govt hasn't approved budget proposals for most councils'
By Namakau Nalumango
Friday June 06, 2008 [04:00]
LoCAL government minister Sylvia Masebo yesterday said the government has not approved most of this year’s budgets for the councils countrywide because their proposals were unrealistic and unattainable. Announcing the 2008 councils’ annual estimates of income and expenditure, Masebo said budgets for Lusaka, Ndola and Kitwe city councils were not approved, among others.
However, Masebo said budgets of all the municipal councils were approved but with amendments. These included Mongu, Mufulira, Chililabombwe, Chingola, Mansa, Mbala, Chipata, Solwezi, Kabwe, Kasama, Luanshya, Choma, Mazabuka and Kalulushi.
She said of the 54 rural councils, only 51 councils’ budgets had been approved across the country but with some amendments.
“We have, however, rejected the 2008 budgets for three councils in North-Western Province, namely; Mwinilunga, Mufumbwe and Kasempa district councils because the budgets were not prepared according to the local government standards. The budgets were also found to be unrealistic and unattainable,” she said.
Masebo said the councils whose budgets were approved with amendments or not approved had made proposals for improved salaries and conditions of service without taking into account their capacity to pay the proposed salaries and allowances. She said in certain cases, the proposed increments were meant to benefit senior officers than the ordinary workers. She said there would be no salary increment and any improvement of conditions of service this year because councils have to first clear the backlog of salary arrears and other outstanding statutory obligations and suppliers of goods and services. Masebo said it was not government’s responsibility to clear such debts.
She said, however, it was important to note that in the approved budgets, the issue of proposed salary increments and improved conditions of service had been considered on council-by-council basis based on last year’s budget performance. She said negotiations for improved salaries and conditions of service for unionised and non-unionised staff should be within the council’s capacity to pay and also provide services to communities where the revenue comes from.
Masebo also said most councils had proposed sharp increases in fees and charges without taking into account the local communities’ ability to pay. She said that property tax was the major source of revenue for the councils. However, Masebo said it had since been observed that some councils were basing their budgets in anticipation of a valuation roll which had not yet been approved.
“For these councils, we removed this component as it was not within the provisions of the law. Until the roll is approved, it must not be effected,” Masebo said. “This will also apply to personal levy. As councils, they need to know how many people are in their districts and are eligible to pay personal levy and have a register in place for follow ups.”
She urged all councils to strengthen their revenue collection capacity because at the moment, the collection efficiency of revenue was very low almost in all councils.
“They seem to be good only at overcharging their communities without corresponding service delivery,” she said.
Masebo said in preparing their budgets, councils were directed to adhere to guidelines which included realistic sources of revenue, payments of statutory obligations such as ZRA income taxes and LASF/NAPSA pension contributions. The councils were also expected to ensure that 40 per cent of their total budgets went towards provision of services.
Masebo said the budgets were delayed because it was in national interest that they were scrutinised to ensure legal compliance and that only budgets with a vision to carry out service delivery were approved because it is only such budgets that the government can use to foster development and service provision to the local communities.
Masebo said a careful scrutiny of all budgets revealed that Southern Province met all the budget guidelines with Mazabuka Municipal Council’s budget being approved without any amendments while North-Western, Luapula and Northern provinces ranked lowest in terms of meeting the guidelines.
Masebo said the government through her ministry had produced a standard template for fees and charges to be applied by all 72 councils although in some cases sources of revenue based on levies, fees and charges would be council-based and would be approved as such. She said any revenue outside this template must be in consultation with her ministry in order to rationalise or standardise revenue sources and also to protect the community from paying various license fees and charges which are exorbitant or a nuisance.
Masebo said the government has noted with satisfaction that most councils were now generating more revenue from rates. She said for this reason, the government would financially support selected councils to update their valuation rolls this year and funding for selected services such as water and sanitation and markets constructions. Masebo said four city councils would also be assisted to pay off outstanding retirees benefits.
She also warned councils against failure to produce monthly receipts and payments saying that was an offence which could result in forfeiture of grants by the offending councils. Masebo further warned provincial local government officers against underperforming. She said even some budgets which were poorly done could have been detected if officers involved were more effective in their duties.
Labels: 2008 BUDGET, COUNCILS, LOCAL GOVERNMENT, SYLVIA MASEBO
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Levy authorised disbursement of 2008 budget, says Chibiliti
By Chiwoyu Sinyangwe
Thursday April 17, 2008 [04:00]
PRESIDENT Mwanawasa on April 1, 2008 signed the general warrant authorising the treasury to start disbursing the 2008 national budget, Secretary to the Treasury Evans Chibiliti has said. And Chibiliti also said his office was in the process of appointing controlling officers for this year’s budget.
“The budget was approved a couple of weeks ago and I have received the general warrant from the President, and so the disbursement of this year’s budget has started,” said Chibiliti in an interview.
Chibiliti also expressed optimism that the year’s budget would be expended better than last year’s.
He expressed confidence government programmes and projects would be implemented as early as possible.
Last year, Chibiliti revealed that about K900 billion of the budgeted money in the 2007 Budget was not spent.
The Secretary to the Treasury attributed the slow budget implementation to what he called structural deficiencies which shortened the implementation cycle.
And Chibiliti also said he would soon be appointing controlling officers.
“We will be advising the controlling officers on the public finance Act so that this year we receive less criticism,” he said.
The government’s failure to spend the money received a lot criticism from a number of stakeholders who said there was no justification for the Treasury not to disburse such a huge amount of money when the government had failed to attend to a number of obligations.
Labels: 2008 BUDGET, EVANS CHIBILITI, MWANAWASA
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Magande pledges to release budgetary allocations on time
By Lambwe Kachali
Saturday March 22, 2008 [12:00]
FINANCE minister Ng’andu Magande has pledged to release budgetary allocations to all ministries and spending agencies on time in order to accelerate implementation of economic projects. But Kabwata Patriotic Front member of parliament Given Lubinda said it was disheartening that Magande had continued to use the contingency fund to balance the budget.
Parliament on Thursday approved the 2008 national budget with a caution to ensure transparency, accountability as well as reduction on over expenditure is seriously taken into account.
Magande said the ministry was conducting continuous analysis to reduce borrowing.
He said the government was working on mechanisms to harmonise debt service for both internal and external.
Magande said with regards to this year’s budget theme of “Unlocking Resources”, it would be prudent that Zambians benefited from such resources.
He said the major task ahead of the country was budget implementation and realisation of its expenditure.
Magande urged members of parliament to support the budget and that those attending the National Constitution Conference (NCC) should read the budget provision and ensure that resources were spent efficiently and effectively.
He further said that the government would continue with its tax agenda, besides improving the budget execution. But Lubinda said although the budget had passed with least amendments, there were a lot of underhand methods.
Lubinda said Magande was using the money allocated for unseen circumstances (contingency fund) to balance the budget.
“Mr Speaker, this House allocated K12 billion as contingency fund but Hon Magande came to this House again and sought K90 billion as supplementary expenditure, and yet this K12 billion was not used. The same happened last year where K25 billion was allocated as contingency fund but Magande mobilised K41 billion for the floods disaster instead of using the required vote,” Lubinda said. “Sir, what is the use of contingency vote? What is the major purpose for allocating this money?”
Meanwhile, Bweengwa member of parliament Highvie Hamududu advised Magande to use the contingency vote to create structural mechanisms to deal with floods.
Parliament adjourned sine die after approving the budget and passing the appropriation Bill.
Labels: 2008 BUDGET, GIVEN LUBINDA, MAGANDE
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Parliament urges govt to increase tax threshold
By Mutuna Chanda
Friday March 07, 2008 [03:00]
THE Parliamentary Committee on Estimates has described as inconceivable government’s proposal of K600,000 as tax threshold and proposed to have it increased to K1 million. And chairperson of the committee Godfrey Beene has expressed concern over the use of the anticipated income from the mining sector after the new tax regime is effected.
Presenting the committee’s report on the proposed Income Tax Amendment Bill of 2008 in which finance minister Ng’andu Magande proposed to increase the tax-free threshold on employees’ incomes from K500,000 to K600,000 and the new mining taxes in Parliament on Wednesday, Beene said the government seemed not to have a criteria on which to base the minimum taxable amount of workers’ incomes.
“Research Mr Speaker, shows that the essential food basket for a family of six in Lusaka currently stands at K1,835,300,” Beene said. “Your committee urges government to move an amendment so as to increase the threshold to at least K1 million.”
But Magande said while many people had advocated a higher increase in the tax threshold, this could not be achieved in a single year.
And Beene urged the government to consult stakeholders including members of parliament over the utilisation of the revenue from the mines.
“Mr Speaker while commending government for this initiative, your committee is concerned about the utilisation of the anticipated income from the mining sector especially that it is not provided for in the 2008 budget,” Beene said.
He however said the new tax regime on the mines should be implemented immediately.
And when the Value Added Tax (VAT) Bill came up for second reading, Beene recommended that the VAT rate be reduced to 14 per cent instead of the proposed 16 per cent.
The government in this year’s budget reduced Value Added Tax rate from 17.5 per cent to 16 per cent.
But Beene said reducing the VAT rate further to 14 per cent would discourage tax evasion, especially at border entry points.
The Customs and Excise Amendment Bill also came up for second reading.
All the three bills passed the second reading and come up today at committee stage.
Labels: 2008 BUDGET, INCOME TAX AMENDMENT BILL 2008, WINDFALL TAX
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Budget cut threatens small-scale farmers
By Bright Mukwasa
Monday February 25, 2008 [03:00]
NIRAS managing director Twisema Muyoya has said small-scale farmers will be hardest hit by government’s decision to reduce budgetary allocation to the agriculture sector this year. In an interview during the launch of Niras Scanagri Zambia, Muyoya said small-scale farmers would have to seek donor support for the sustainability of their programmes.
In this year’s budget, finance minister Ng’andu Magande announced a reduced allocation to agriculture from 8.8 per cent last year to 6.6 per cent.
“Definitely this year’s reduction in the budget in the budget allocation would put pressure on the sector, as you know there are small-scale farmers who are partly supported by the government but since this means reduced support, they would panic looking for donor support in order for them sustain their programmes,” Muyoya said.
Muyoya also called on the government to efficiently utilise the unspent money in last year’s budget allocation to the agriculture sector in order to cushion the pressure on small-scale farmers.
Last year, the government failed to spend about K900 billion of the budgeted money.
Muyoya also disclosed that with the support of the Finnish government, his organisation had embarked on a 10 million euro agricultural programme in Luapula Province.
Labels: 2008 BUDGET, FARMERS
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Ministry of Foreign affairs fails to account for K3.6bn
By Chibaula Silwamba
Tuesday February 19, 2008 [03:00]
THE Ministry of Foreign Affairs recorded financial irregularities totaling about K3.6 billion, most of which was abused by missions abroad. And the Auditor General’s report has revealed that the National Assembly contracted a company to install a digital security system without following tender procedure.
Auditor General Anna Chifungula’s report for the financial year ended December 31, 2006, indicated that the Ministry of Foreign Affair’s financial irregularities included about K1 billion unsupported payments, K795 million unretired imprest, K238 million unaccounted for stores, K959.7 overpayment and about K100 million was misapplied.
According to officials from the Auditor General’s office, misappropriation of funds refers to the theft or use of public funds for personal gain while, misapplication is use of funds on unintended projects and unretired imprest is when someone fails to submit receipts after using the money.
The Auditor General’s report stated that during the period under review, the Ministry of Foreign Affairs purchased a fridge, a microwave oven and an electric stove at a total cost of about K13.6 million for the deputy minister’s official residence.
“It was observed, however, that the former deputy minister went away with the items. In this regard, the ministry wrote to the former deputy minister on the matter, who in turn paid an amount of K5,000,000 in August 2007 towards the cost of the items leaving a balance of K8,690,000,” read the report. “There were no receipts and disposal details in respect of store items costing K75,383,500 procured during the period under review contrary to public stores.”
The report further stated that imprest totalling about K615.5 million involving 115 transactions had not been retired as of March 2007 contrary to Financial Regulation number 96(1).
“An amount of K5 million paid to an officer in December 2005 had not been recovered as of August 2007 and the officer had since been dismissed from the civil service and his terminal benefits were paid in full,” the report stated.
“Fourteen cheques in respect of third party payments amounting to K284,438,642 prepared during the period under review had not been collected by the recipient institutions as of November 2007.”
The report also named most embassies and High Commissions for failing to account for public funds and other resources.
At the Zambian mission in Lubumbashi in Democratic Republic of Congo (DRC), the report revealed that due to constant power failures in the area where the residence for the consular general is situated, the mission in February 2007 requested for authority to purchase a 5.5KVA diesel electricity generator which was granted.
“In this regard an amount of US $2,606 (K8,790,058) was paid to a local supplier and the generator was delivered. A physical inspection of the generator and an inquiry made in March 2007 into its effectiveness revealed that it was inadequate in that it could not generate enough power. The decision of the mission to buy the 5.5KVA generator amounted to wasteful expenditure,” the report noted. “The mission had a locally engaged staff establishment of 11.
A review of records and a physical count of locally engaged staff, however, revealed that the mission had employed 19 local staff, eight over the approved establishment without authority. In this regard, the mission incurred unauthorised expenditure of US $24,410 (K113,716,679) in respect of the eight local staff irregularly engaged.”
The report further stated that US $33,265 (K154,968,674) was recovered from 23 mission staff during the period from January 2005 to March 2007 but documentary evidence was produced to show that the money was either receipted or banked.
“Although the mission accountant explained that the cash recovered from salary advances was used at source, no expenditure details were made available for audit. In addition, it is not clear why advances were recovered in cash when this could be done at computation,” the report stated.
“The mission has seven properties comprising the chancery, the residence and five other houses. However, title deeds were not made available for audit scrutiny. It was further observed that the properties had not been insured as of March 2007 contrary to Foreign Service Regulation number 99.”
The report stated that a physical inspection of the properties carried out in April 2007 revealed that with the exception of a house at 25, Biayi Avenue, the properties were in a general state of disrepair and needed attention.
“In this regard, the third secretary – accounts who was occupying the house at 1332, Kapenda Avenue abandoned the house in November 2005. As of April 2007, the house had not been rehabilitated and the Mission had spent amounts totalling US $27,000 (K125,782,480) in rentals for the officer,” the report stated.
In Kinshasa, during the period January 2005 to February 2007 a total amount of US $15,771 (K73,470,944) was collected as revenue out of which US $1,004 (K4,677,245) was utilised by the mission without treasury authority contrary to established procedures.
“In November 2004, the mission entered into a one year lease agreement for the rent of a house for the Consular for which a security deposit of US $10,500 (K48,915,409) was paid.
It was however observed that when the Consular vacated the house in October 2006, the Mission did not recover the security deposit. As of April 2007, the security deposit had not been recovered,” the report stated.
“It was observed that the Chancery building is located in the town centre along a street leading to the centre market thereby making the offices very unsecured in times of civil unrest. It was further noted that the street also experiences flooding during the rainy season.”
The report also disclosed that in August 2005, the mission in Lilongwe (Malawi) decided to construct a wall fence around the Chancery in order to enhance security.
“The initial plan was to construct a solid wall fence around the Chancery. In this regard, a design of a solid wall fence was made and a bill of quantities totaling Malawi Kwacha MK2,565,407.50 (K89,789,2450) was prepared based on this design. When the mission sought for permission from the Lilongwe City Assembly to build the fence, the Assembly did not approve the design,” the report stated.
“Consequently, the design was changed to a palisade type. It was observed that instead of preparing a new bill of quantities for the palisade fence, the contractor used the bill of quantities for the solid wall type and included an additional cost for steel works without a corresponding reduction on the cost of the brickwork.
This increased the cost of the steel works from the initial MK98,027.50 (K2,940,825) to MK1, 111,256.05 (K33,337,681.50) but did not reduce the cost of the brick work pegged at MK877, 975.00 (K26,33,9,250). It is evident from the above that the Mission did not exercise due care and diligence to ensure that the works were properly costed prior to awarding the contract.”
The report revealed that in October 2003, the mission engaged a contractor to rehabilitate the roof of the Ambassador’s official residence at a contract price of US $19,945.98 (K89,7546,910) for a duration of sixty (60) days from the date of commencement.
“It was however observed that the Mission paid the contractor amounts totaling US $27,709.84 (K124,694,280) resulting in an overpayment of US $7,764.86 (K34,941,870),” the report revealed. “A physical inspection of the residence carried out in October 2006 revealed that the ceiling boards were falling out of place.”
The report further stated that the Kabula Hill House in Blantyre was dilapidated because it had not been maintained for a long time.
“This state of affairs resulted in the house fetching as little as MK14,850 (K396,000) in monthly rentals in an area where houses fetch as much as MK228,000 (K6,000,000) per month resulting in government losing revenue,” the report stated.
The report disclosed that the Mission in London (UK) had irregularly paid the High Commissioner and the first secretary- protocol amounts totaling US $20,493.81 (K72, 529,953) as air time allowances.
“It was however observed that the High Commissioner was paid US $11,826.87 (K40,985,095) in excess of his entitlement while the First Secretary Protocol, who was not entitled was paid US $7,466.94 (K27,189,146),” the report stated.
“The mission engaged 16 local staff against an approved establishment of 11 resulting in an excess of five staff contrary to Foreign Service Regulations and condition of service for 2004. In this regard an excess of Pound 89,808 (K608, 032,333) was paid as personal emoluments in 2006.”
The report further stated that the mission had outstanding bills totaling
£316,868.31 (K2,471,572,818) out of which £276,379.85 (K2,155,762,830) was paid leaving a balance of £40,488.46 (K315,809,988) outstanding.
“A total amount of US $190,368.83 (K694,601,764) was paid as rentals between January and December 2006 exceeding the Mission staff entitlements by US $38,218.92 (K133,766,220). As of October 2007, only US $1,000 had been recovered leaving a balance of US $37,218.92 (K130,266,220),” the report stated.
“Contrary to the terms and conditions of service which stipulate that an officer shall not obtain an advance while one is running, five officers were paid subsequent advances in amounts totalling £65,981.15 (K527,633,043) while previous advances were still outstanding.”
The report stated that in 2006 the mission engaged a contractor to rehabilitate the Chancery building at the contract price of £225,690 (K1,309,938,614).
“It was however observed that no formal (written) contract was entered into with the contractor,” it stated.
The report revealed that the mission owns four properties namely 2 Palace Gate, Kensington W8 5NG, 17 Courtenay Avenue, Highgate N6, 13 Fostcote, Hendon NW4 and 12 Chelmsford, Wilesden Green but they were developing cracks and required urgent rehabilitation.
The report also disclosed that the mission in Egypt delayed to bank revenue collections totalling about K5 million ranging from five to 16 days.
“A total amount of US $15,271 (K53,295,790) involving six transactions was paid to five officers as salary advances during the period from June 1989 to August 2000 but had not been recovered as of February 2007 contrary to the terms and conditions of Service of the Civil Service,” the report.
“There were no receipt and disposal details in respect of stores items costing US$7,690 (K26,838,100) procured during the financial year ended 31 December 2005. Although in her response dated 19th November 2007, the Controlling Officer stated that the items were eventually recorded as required, no documentary evidence was provided.”
The report indicated that according to Foreign Service Regulations and Conditions of Service for 2004, in the absence of an official residence, the Mission was obliged to pay for the Ambassador’s rentals up to US $4,000 (K13,960,000) per month.
“However, contrary to the regulations, the Mission paid up to US $4,650 (K16,228,500) for the Ambassador’s accommodation for the period from January 2004 to August 2006.
Consequently, an amount of US $132,900 (K463,821,000) was paid resulting in an overpayment of US $16,900 (K58,981,000),” the report stated.
“In August 2005 the mission entered into a lease agreement for the rental of House No. 188, El Nile Street, Agouza, Giza, sixth floor, Second Apartment as the Ambassador’s residence at the monthly rental of US $4,500 (K15,705,000).
According to the agreement, the house was to be ready for occupation by 1st September 2005 after renovations.
In this regard, an amount of US $9,000 (K31,410,000) was paid to the landlord on 16th August 2005 (being one month rental deposit and one month security deposit). It was, however, observed that on 1st September 2005 the house was not ready for occupation.
Consequently, the lease was terminated and the mission claimed a refund of US $9,000 (K31,410,000). As of February 2007, the mission had not obtained the refund from the landlord.”
The report revealed that during the period from May 2002 and May 2004, the mission leased out part of the Chancery to eight tenants at an average rent of US $1,270 (K5,715,000).
“A review of the lease agreements and receipts revealed that although the tenants were still occupying the premises, the tenancy agreements had expired and had not been renewed.
It was also noted that as of December 2006, three tenants had rent arrears totaling US $5,935 (K26, 707,500),” the audit report stated. “In May 2002, the mission sold two motor vehicles, a Leyland truck and a Mercedes Benz Car at a total of US $18,000 (K81 million). In this regard an amount of US $14,250 (K64,125,000) was received from the buyer between May 2002 and December 2005 leaving a balance of US $3,750 (K16,875,000).
However, as of October 2006, the balance had not been received.”
It stated that there were no receipt and disposal details in respect of stores items costing US$4,781 (K21, 514,500) procured during the period from February to August
2005.
It further stated that the mission had employed 22 local staff as a result, the mission irregularly paid wages amounting to US$ 11,225.25 (K50, 980,278) between January and December 2005 on the extra seven staff engaged without authority.
The audit report also stated that at the embassy in Moscow (Russia) about K4.3 million were transferred in June 2005 from the revenue account to the operations account without Treasury authority.
“As of July 2007, the revenue had not been reimbursed,” the report noted. “Contrary to Financial Regulation No.128, visa fee collections totaling US$4,515 (K18, 511,500) for the period from November 2006 to June 2007 though banked were not entered in the general revenue cashbook.”
The report further stated that a cash count carried out on June 29, 2007, revealed a cash shortage of K15,407,800 (US$3,758).
“Further enquiries revealed that the money had been irregularly paid to the children of a senior government official who were stranded in Russia. As of July 2007, the money had not been reimbursed,” it stated.
“Contrary to Financial Regulation No. 45(1), cash payments totaling US$498,860 (K2, 045,326,000), were not vouched in that accounts Form two: wages payment voucher, accounts Form five: general payment voucher and accounting form 44: claim and payment voucher were not used.”
The report observed that the Mission had stopped preparing and sending monthly returns to the ministry of foreign affairs headquarters since January 2006.
“Out of the total payments of US$498,860 (K2,045,326,000) made during the period under review only a total of US$219,671.08 (K900,651,428) was supported by expenditure receipts leaving a balance of US$279,188.92
(K1,144,674,572) unaccounted for,” it revealed.
“Between February and September 2006 the Mission irregularly paid $4,228.54 (K14,691,083) for graduation parties for government sponsored students who were graduating from Universities. There were no receipt and disposal details in respect of stores items and fuel costing K59,468,315 (US$ 16,923) purchased during the period.”
It noted that the inventory for the Chancery and the Ambassador’s residence had not been updated since October 1999 as such furniture purchased in the last seven years had not been recorded making it not possible to account for the furniture.
“Imprest in amounts totaling US $7,600 (K25,371,100) issued to various officers had not been retired as of July 2007,” it stated.
Records at the mission in Addis-Ababa in Ethiopia indicated that in 1965 and 1971 the embassy procured a chancery situated at Nifas Silk Ketema, Woreda 23 Kebale 12 and the Ambassador’s residence Nifas silk Lafto woreda 23 Kebele 10 at costs of US$3,400 (K15,300,000) and US$13,428.71 (K60,430,500) respectively.
“However, as of February 2007 the titles of the two properties had not passed to the Zambian government.
In June 2006, the Mission was allocated 2,000 square metres of land situated at Bole Sub City Worda 17 Kebele 23 for which title was issued,” the report observed. “The plot was to be developed within 18 months effective June 2006.
However, as of February 2007 no development had taken place and the mission risks forfeiting the plot.”
The report further indicated that a about K11.9 million was paid to 15 officers as salary advances for the period from June 1989 to June 2003 but had not been recovered as of September 2007.
“Imprest in amounts totaling K29,079,690 involving six transactions issued to four (4) officers during the period from 1997 to 2004 had not been retired as of September 2007,” the report stated.
Labels: 2008 BUDGET, ANNA CHIFUNGULA, AUDITOR GENERAL, MINISTRY OF FOREIGN AFFAIRS
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‘No turning back on taxes’
By JERRY MUNTHALI
PRESIDENT Mwanawasa says the interests of Zambians will remain paramount in the dispute mining companies have raised over the revised mining tax regime because citizens are merely asking for a fair share of their own wealth. Dr Mwanawasa said this yesterday at Lusaka International Airport on his arrival from Madagascar. Dr Mwanawasa was concerned that the mining companies were criticising Government for asking for a fair share of the country’s resources when the people who voted Government into power have welcomed the new taxes.
“At the beginning of my administration, I said where there is conflict between the people of Zambia and something else, the interests of Zambians will be paramount,” President Mwanawasa said. “I am unable to understand how they can criticise us when we are asking for a fair share of our resources.”
The President said his was a listening Government and he was, therefore, inviting the mining companies to meet the Minister of Finance and National Planning, Ng’andu Magande, and Minister of Mines and Minerals Development, Kalombo Mwansa, to discuss the matter.
“Mining companies should be prepared to show that Zambia’s rate of taxation was higher than the other countries in the world,” he said.
“We are a listening Government. Instead of shouting on the hill, I invite them to see the Minister of Finance and the Minister of Mines. Let them come prepared; let them show that our rate of taxation is higher. Some countries have taxation as high as 51 per cent, 47 per cent, while we are at 31 per cent.”
The President was concerned that the mining companies were using Zambians to complain on their behalf when they were reluctant to give them jobs, claiming they were incapable.
“When we say give jobs to Zambians, they say they are incapable; when they have to fight battles, they use Zambians to fight the lot.
They might be happy now with the salaries they are getting, what of the majority Zambians? Is it wrong for Zambians to ask for more so that we can improve the living conditions for all Zambians?” he asked.
Meanwhile, KASUBA MULENGA reports that a parliamentary watchdog committee has urged Government to relentlessly pursue the new mining tax regime so that Zambians benefit.
Presenting the final report on the 2008 estimates of revenue and expenditure, chairperson of the expanded committee on estimates, Godfrey Beene, told the House that the equitable sharing of benefits between mining companies and Zambians was an immediate imperative.
“In this vein, your committee wishes to strongly urge the House to support the new legislation that will provide for the new mining tax regime,” he said.
Mr Beene, who is Itezhi Tezhi member of Parliament, said there should be a clear and transparent mechanism for the utilisation of funds that will be raised from the new tax measures.
He said Parliament, as the people’s representative, should play a prominent role in decision-making as regards the usage of the resources.
Mr Beene told the House that several stakeholders who appeared before his committee supported the new mining tax regime on grounds that it will benefit many Zambians.
And Mr Beene said since the Central Statistical Office indicated that the basic food basket costs were between K700,000 and K1.5 million, the tax exemption threshold should be raised to at least K700,000 from the proposed K600,000.
The committee also recommended that Government should look into the high cost of doing business in the country because this entailed that Zambian products were expensive, yet not competitive.
Some stakeholders that appeared before the committee said it was a costly venture to doing business in Zambia mainly as a result of the high cost of finance, fuel and poor infrastructure.
Mr Beene said his committee was concerned about the small number of citizens contributing to national revenues. It, therefore, recommended a widened tax base.
The committee also recommended that due to the continued energy problems the country was facing, Government should find alternative sources of the resource, such as coal.
Stakeholders were also concerned about the reduction in the budgetary allocation to the agricultural sector from 8.8 per cent last year to 5.8 per cent this financial year.
Mr Beene said Government should increase the budgetary allocation to the important sector, especially under the fertiliser support programme.
And Minister of Finance and National Planning, Ng’andu Magande, said the ministry appeared before the committee three times so that issues raised in the budget could be clearly explained. Mr Magande appealed to the House to support this year’s budget.
He said Government’s objective was to continue providing tax relief although it could only do this systematically as the economy improved.
Labels: 2008 BUDGET, GODFREY BEENE, MWANAWASA, WINDFALL TAX
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Brook no nonsense from the mines
By Editor
Wednesday February 13, 2008 [03:00]
We make a clarion call to all Zambians to rally behind the government and actively support its taxes on the mines. The changes the government has made to the mining taxes are very modest and it is very surprising that the transnational corporations running these mines want to make a big issue out of this move.
It is very clear that those who come to mine our minerals and sell them abroad for gigantic profits are not cooperating or development partners of ours.
They are fortune seekers who have come with no other intention but to rape our nation. The behaviour of these corporations doesn’t seem to have changed in any way from that of the British South African Company that started mining activities in this territory in the early 1900s. They still want to have everything their way and to enrich themselves totally at our own expense. This cannot continue; things have to change.
It is sad that mining companies come here and want to dictate everything, from taxes to labour laws and so on and so forth. These are things they can’t do in their home countries. But the world is changing, and they shouldn’t think what is happening in Venezuela and other Latin American countries will not happen here. There is a new global awakening. We haven’t yet fully caught up with it but this awareness is coming. They can’t continue to blackmail our government whenever it wants to do something that is in the interest of the people and the country.
No one can deny that Zambia has not gotten a good deal from the transnational mining corporations that are exploiting or have exploited its natural resources. What this country is getting in terms of mineral royalties and other taxes from the mining industry is too low to have any meaningful impact on this economy. It doesn’t matter how the mineral prices move internationally, the benefits to this country have continued to remain low.
Well, one can argue that the benefits from the mining industry should not only be seen in terms of taxes and royalties but also in the numbers of jobs being created and maintained. No one can dispute that there is some employment being created and other secondary benefits being generated.
We even have some Zambians being employed to help these mining companies thoroughly exploit us. We don’t know how much they are paid to do that, but they are paid something – probably not less than the biblical 30 pieces of silver.
But let's look at the extent of these benefits in relation to the total earnings of these corporations. An honest assessment will reveal that what is paid to our people as wages and salaries is an insignificant portion of these corporations' total earnings, leaving huge profits for themselves. We should consider ourselves very lucky to have all these mineral resources in our country. But as it often happens, it is not what one has that separates him from the other but what one does with what he has.
The curse of being born with a copper spoon is the most common explanation of Zambia's poor economic development. We believe that this curse is just a big hoax to wish away a more serious analysis of the reasons for Zambia's poor economic management. We could go as far as to argue that the fact that Zambia is endowed with copper resources is a big asset that the country could have used to develop not only the mining industry but also the other sectors of the economy. What has eluded our planners are sound mining and mineral development policies. Having rich minerals can never be a curse.
If one doesn't appreciate being endowed with rich minerals what does one really want from nature: dollars to be dropping from the skies like rain? The Russians have built a very interesting legend to describe their mineral rich Siberian region. The legend goes something like this: after creating the world in seven days, God began to hide some mineral troves fairly all over the world and after he was done, he remained with a handful of minerals which he cast all over Siberia.
From a mineralogical point of view, Zambia qualifies to be called a highly metallurgenic country. However, the scandal lies in our country's failure to beneficially exploit its mineral potential to the full. The great majority of our country's mineral resources remain less known, unexploited and without an adequate policy framework for their exploitation. And this has helped trans-national corporations have a field day in their dealings with us. There are many reasons things have turned out this way.
These range from ignorance to corruption and bureaucratic ineptitude that has given the large mining companies inordinate influence on our country's mineral development policies. The trans-national corporations get what they want and not what we want to give them. As far as ignorance is concerned, this is only true in the sense that those that know the potential and what can be gotten out of our minerals for the benefit of our people are not in a position to influence development. Conversely, those that could influence development often do not care to know. In other words, they are very strong filters between the geological survey, the policy makers and business community.
There's no serious analysis of what our mining industry is doing. Bureaucratic ineptitude in the mineral sector is very real. A lot of people who have to make policies regarding the mining industry are very ignorant of the dynamics of this industry. Most of the policies are designed to favour large trans-national corporations, and from the history of Zambia, we know why the industry was designed in such away.
What our policy makers have failed to grasp is the basic fact that what may be good for KCM, in its international corporate strategy, is not necessarily good for us. There's no need for us to waste these minerals by allowing trans-national corporations to continue mining when there are no meaningful benefits accruing to the country. These are wasting assets and they will not be there for future generations if they are exhausted senselessly now. This in itself means that whatever mineral resource comes out of our soil should not only be for the benefit or convenience of the current generation but also the future generations.
Therefore, if it is not beneficial to mine any mineral let's not waste that resource, let's leave it for the future Zambians who may be more wiser than us so that they can make best use of them. If we are getting nothing or very little from the current mining activities, there is no point in continuing to mine. Doing so is robbing the future generations of the resources they will need to survive in what increasingly appears to be a very difficult and complicated future world. We shouldn't forget that the future is not built in the future, it is built on today's threshold.
The future our children will have will depend much on what we ourselves are doing today. What we are trying to say is that let's not give away for nothing the minerals of this country; if there are no meaningful benefits accruing to the country from mining, let's stop it until we are able to do it in a beneficial way. If we continue on this path of wasting, of giving away for nothing to trans-national corporations, future generations will put us on trial. Let's review everything we are doing in the mining sector and ensure that everything benefits the nation.
It is good that our government is starting to wake up and do that which needs to be done to ensure that our people benefit from the natural resources of their country. And on this score, the government deserves the support of all; the support of the unions, the entire civil society and of all our politicians. These taxes, which are very modest in our view, should not be reduced in any way.
The government should continue to have the power to set and collect taxes as it deems fit. The government should treat the mining corporations like all other businesses operating in the country and should brook no nonsense from them. Those who want to go can go. They certainly can be replaced.
Labels: 2008 BUDGET, WINDFALL TAX
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Improve budget execution - Kanganja
By ANGELA CHISHIMBA
SECRETARY to the Cabinet, Joshua Kanganja, has directed permanent secretaries to improve the execution of national budgets. And Secretary to the Treasury, Evans Chibiliti, has called upon permanent secretaries to start planning for procurement and tendering processes so that the implementation of projects could start as soon as the budget was approved by Parliament.
Dr Kanganja noted that Zambians expected services to be delivered and were in a hurry to see the country develop and move forward. He said this yesterday in Lusaka in a speech read on his behalf by his deputy, Likolo Ndalamei, during the official opening of a workshop for permanent secretaries on Treasury and Financial Management.
“I expect to see a major improvement this year in terms of budget execution, treasury and financial management. At the end of this year, we should receive a positive report that resources released have been properly spent and results achieved,” Dr Kanganja said.
He directed the Ministry of Finance and National Planning to start rating ministries, departments, provinces and spending agencies in treasury financial management and budget execution.
Dr Kanganja said the reports would be examined at the end of each year so that departments which performed poorly would be known and appropriate action taken.
“I therefore call upon all the implementing agencies to quickly put their respective houses in order and ensure that there is effective supervision,” he said.
Dr Kanganja said permanent secretaries should also take appropriate action including disciplinary measures against supervisors who certified shoddy civil work.
He said budget execution remained a major concern of many Zambians and government leaders.
He also said misapplication and misappropriation of funds had continued in spending agencies as attested by the Auditor General’s reports.
Dr Kanganja said there was need to review and examine whether contractors had the required capacities and competencies to effectively execute developmental programmes.
“The budget pronouncements are noble.
However, the real issue is whether implementation will take place in a manner that will achieve positive results and meaningful change to the lives of our people,” he said.
And Mr Chibiliti said government decided to hold the workshop before the approval of the national budget to plan its execution.
He said the treasury was concerned about the poor cash planning in ministries.
He said a number of ministries were still unsure that the Ministry of Finance and National Planning would fund them when they requested for resources at the time they were ready for spending.
Mr Chibiliti said as a result, the ministries made financial requests in advance which however remained unutilised until later.
He said requesting for resources in advance caused unnecessary accumulation of cash balances in commercial banks.
Mr Chibiliti called upon permanent secretaries to prepare budget execution profiles aligned to procurement plans.
He also said the use of electronic cash transfer should be accelerated this year in settling payments.
Mr Chibiliti said those with business contracts with government should be paid through the electronic cash transfer system for amounts exceeding K20 million.
He also said government was concerned about poor performance in many of the civil contracts awarded by the government.
Mr Chibiliti said government would review the way performance bonds for civil works were being given, including that of advance payments to contractors.
He said permanent secretaries should agree on whether it would be better for contractors to fund their works and get paid after they completed the job.
The workshop would come up with resolutions on how to prepare for the implementation of the 2008 budget programmes.
Labels: 2008 BUDGET, JOSHUA KANGANJA
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‘Mines Should pay more’
By NKOLE CHITALA
ECONOMIC consultant, Bob Sichinga, says mining companies must contribute a lot more than the anticipated K1,660 billion (US$415 million) indicated in the national budget. Mr Sichinga noted that the estimated income from the mining sector fell far short against a turnover estimated at K18,800 billion. He said tax contribution from the source would represent
a paltry 9.6 per cent effective tax rate.
“Mining companies must contribute a lot more than indicated in the budget measures at US$415 million equivalent to K1,660 billion. The estimated income still falls far short against a turnover estimated at K18,800 billion,” he said.
Mr Sichinga was speaking during the Zambia Institute of Chartered Accountants (ZICA), Chartered Institute of Management Accountants (CIMA) and Association of Chartered Certified Accountants (ACCA) post 2008 National Budget Tax Review workshop in Lusaka recently.
Zambia Revenue Authority (ZRA) commissioner-general, Chriticles Mwansa reiterated that it expects to collect US$415million from the mining sector this year.
“This money is what would be earned from the new tax system, we have been collecting tax from the mines, but we are expected to collect US$415 million from the measures that were announced,” Mr Mwansa said.
He also said that small-scale miners were not left out in the new tax system.
He said he was certain that with small-scale mining companies making concentrates, this would result into positive effect to the national economy.
Mr Mwansa said the organisation was also working closely with the registrar of companies, National Authority Pension Scheme Authority and local councils on capturing information on companies and individuals that should pay tax.
Zambia Chamber of Commerce Trade and Industry (ZACCI) commended Government at the workshop for allowing mortgage interest to be deductable for tax purposes saying the move would encourage home ownership.
Chief executive officer, Justin Chisulo, said ZACCI welcomed the positive measures on percentage on savings and Withholding Tax, trailers, export levies, books, infant formula, reduction in value added tax rate, Pay As You Earn, domestic and external debt payments and import cover of 3.6 months.
Meanwhile the Zambia Association of Manufacturers (ZAM) expressed disappointment over national budget.
The association said most of the budget proposals submitted to Ministry of Finance and National Planning were not considered.
ZAM president, Dev Babbar said there was need for Government to reduce the cost of production and doing business in the country.
Mr Babbar cited the proposal on duty reduction on raw materials, forestry equipment, shoe manufacturing materials, paints, among others as some of the submissions that were not considered.
Labels: 2008 BUDGET, CHRITICLES MWANSA, ROBERT SICHINGA, WINDFALL TAX
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UNZA budget allocation disappoints Prof Simukanga
By Patson Chilemba
Wednesday February 06, 2008 [03:00]
UNIVERSITY of Zambia (UNZA) vice-chancellor Professor Stephen Simukanga has said the university may opt to increase school fees if government does not reverse the K74 billion allocation in the 2008 budget. Commenting on the allocation to UNZA, Prof Simukanga said he was disappointed with government’s allocation to the country’s highest institution of learning.
“We are equally concerned because this is not even enough for our net. For instance, the net pay for this month is K8 billion. So we have to find about K2 billion to subsidise,” Prof Simukanga said. “That’s why you find that our outstanding bills stand at K250 billion. K120 billion is for ZRA (Zambia Revenue Authority). The rest is for the retirees and contractual obligations.”
Prof Simukanga said he agreed with finance deputy minister Jonas Shakafuswa that UNZA be turned into an autonomous institution so that it could charge ‘cost reflective fees’.
He said running a public university was very difficult.
“Although there is this issue that usually when the budget is out, it’s unlikely to make changes, for me an option would be to increase the fees,” he said.
On University of Zambia Lecturers and Researchers Union (UNZALARU) president Evans Lampi’s statement that there would be trouble at the campus if the K74 billion is not reversed, Prof Simukanga said management was equally disappointed with the funding.
“But my appeal is that let’s sit down and look at the issue together and if it means increasing the fees, then we can do that,” he said.
However, Prof Simukanga said UNZA management had raised the issue with the Ministry of Education and hoped that something positive would come up.
Labels: 2008 BUDGET, STEPHEN SIMUKANGA, UNZA
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2008 budget
By Kazhila Chinsembu,Windhoek
Wednesday January 30, 2008 [03:00]
I have just finished reading the 2008 Budget speech that hopes to unlock more fattening resources for the political hosts in government and their ectoparasites. Under education, the speech does not mention the University of Zambia, yet we all know how deplorable the infrastructure at UNZA is. And hopefully, the government will this year pay UNZA retirees their terminal benefits which they have been owed for 5 years now.
With the looming electricity crisis, coupled with the anticipated impacts of climate change (natural disasters like floods and drought), the 2008 budget has no specific allocations that answer to the high levels of preparedness required to mitigate these threats. But that is budgeting the Zambian style, a country where the biggest disaster is the government, whose policies have hiked rural poverty to 80 per cent.
http://www.postzambia.com/post-read_article.php?articleId=36896
VAT
By Dereck Fee
Wednesday January 30, 2008 [03:00]
On your front page of the Sunday Post I was quoted as condemning the reduction in VAT in the minister of finance's Budget. During a lengthy interview, I praised the minister for a very balanced budget and one which will contribute to the economic growth in Zambia.
I expressed surprise at the reduction in VAT while stating that in the European Union VAT is an internal part of the fiscal system which is usually not reduced.
http://www.postzambia.com/post-read_article.php?articleId=36897
One Zambia, One nation
By Concerned citizen
Wednesday January 30, 2008 [03:00]
I wish to say something about to the story you carried on January 21, concerning Saki's comment on the slogan One Zambia, One Nation. I wish to agree with him in his observation, but I beg to look at it from a different perspective.
Recently, there was a publication of names of newly-recruited teachers in all the nine provinces of Zambia, and I was quite disturbed with the criterion used, which does not promote the unity we all desire to have. I noticed that the deployment had not at all promoted the One Zambia adage, as it was clear that those from Eastern, Western, Northern, Luapula and Southern provinces were being posted back to their provinces.
In my view, the Kaunda era did better on this one and in a way it helped to promote the spirit of unity, as Tongas could be sent to Eastern, Easterners to Tongaland, Bembas to Ngoniland or Loziland and vice-versa. Now with the current trend, we will one day lose the unity we seem to have. Thus, change must start with the government policies on deploying its employees in the interest of service and national unity. Saki's obsevation goes beyond politics and let us consider it seriously.
Labels: 2008 BUDGET, DEREK FEE, VAT
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Lumwana seeks clarification
By Times Reporter
LUMWANA Mining Company (LMC) is seeking clarification from the Government on whether changes to the mining fiscal and regulatory regime in the 2008 Budget will affect the development agreement signed two years ago. Lumwana managing director, Harry Michael said in Solwezi that his firm wanted to clarify whether the measures would affect the development agreement.
“If the development agreement is intact, then we can continue with our obligations,” said Mr Michael, who is one of the vice-presidents at Equinox Minerals, developers of the project.
“We are reviewing our perimeters to see if LMC are affected by the changes, we won’t be haste as we wait for confirmations on whether the changes include Lumwana,” he said.
Mr Michael said Lumwana and the 12 international banking institutions lending to the US $762 million project, which on completion would become Africa’s largest single copper mine, were doing separate internal financial revaluations on the changes.
“We and the international banks lending to the project are doing internal financial revaluations, and in the meantime we are just seeking clarifications from the Government if changes would affect Lumwana,” he said.
He said with shareholders having used up their money, the project, scheduled for commissioning mid this year, was now depending on the international banks, which were spending $1.5 million per day.
Finance Minister and National Planning Minister, Ng’andu Magande announced last Friday when he presented the 2008 Budget in Parliament the introduction of 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.
The move, among others, has seen the Government raise mineral royalty tax to three per cent, peg corporate tax at 30 per cent and introduce windfall taxes to be triggered at different price levels.
Labels: 2008 BUDGET, DEVELOPMENT AGREEMENTS, EQUINOX, LUMWANA MINING COMPANY, MINING CONTRACTS
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Fundanga, Milupi profiles inspirational
By David Chisenga, Lusaka
Tuesday January 29, 2008 [03:00]
Your recent profiles of Luena independent MP Charles Milupi and BoZ Governor Caleb Fundanga are truly inspirational. Reading through their respective backgrounds, one gets a sense that these men are truly gifted, genuine, selfless, caring and committed sons of our land. Their intellect and rationale is also way above average. I wish we had more great minds like these in our political and governance setup.
The only sad thing is that our political system as it stands today makes it very difficult for honest, rational and hardworking men/women to reach top leadership. Instead, rhetoric, corruption, nepotism and tribal prejudice seem to be a sure way to make it to the top.
Fellow Zambians, let's all come together and demand greater accountability from our leaders and change the 'cadre thug' mentality that characterises our politics today.
We collectively have the power to change and with a common will, nothing will stand in our way. Neither Milupi nor Fundanga is my tribesman (and that's immaterial) but they definitely have the credentials to play a leading role in the future of our country.
I like it when Milupi illustrates the fact that you don't have to be the president to make a meaningful contribution to the nation. These men will surely be invaluable assets to us in whatever capacity they serve in the near future.
I wish the two gentlemen good health; and to Amos Malupenga at The Post, please keep up the good work of profiling Zambia's high-calibre men/women. We really appreciate the great insight and inspiration we derive from reading their stories.
In future, I'd be interested to read profiles on other accomplished individuals like Willa Mung’omba, George Sokota, Lombe Chibesakunda (assuming you haven't already done so).
http://www.postzambia.com/post-read_article.php?articleId=36855
Magande's budget
By Mwewa Yamba
Tuesday January 29, 2008 [03:00]
There is a lot of anxiety whenever the national budget is presented by the Minister of Finance, and over time the public is never convincingly told how the previous budget was implemented.
We are good at announcing figures but very poor at implementing the budget except for programmes that are meant to suit and benefit politicians.
When one looks at the social sector; education and health sectors, one sees serious neglect on the part of the government. How many schools and health centres does the government build or renovate to match the population increase each year?
What about human resource development? Of course politicians and the government leaders will tell lies over such as they do not care to know what actually prevails on the ground. Is the government not ashamed that the roads are damaged due to neglect?
Why do we even want to appear on television giving unrealistic statements as though we care? Indeed, a budget whose implementation is defective is not worth the publicity it is given during presentation.
http://www.postzambia.com/post-read_article.php?articleId=36856
HH's timely warning
By Chali Chewe
Tuesday January 29, 2008 [03:00]
The letter by Jensen from Germany (The Post 27/01/ 08) condeming HH's timely warning about the Kanyama roads rehabilitation cannot go unchallenged. Perhaps our dear Jensen has been away too long in Germany or has been consumed by the European standards of living.
I am neither HH's spokesman nor a UPND sympathiser, but HH's warning and likening the conduct of the MMD government's rampant attempts at corrupting voters during by-elections to the Kenyan scenario cannot be ignored and I believe this is what a responsible opposition leader ought to be saying to the government and alerting people about.
We must learn from the mistakes around us. The Kenya situation is a sad one and I do not think HH, by saying what he said, was longing for what is happening there to happen in Zambia.
On the contrary, I found the statement to be a reminder to all of us that we should not be taking things for granted. If Kenyan politicians had taken the trouble to learn from the situation in Sierra Leone, Liberia or Ivory Coast, they would have avoided this senseless bloodbath currently afflicting their nation. Herein lies HH's message.
I do not believe HH, with his investments and roots in Zambia and the wealth that mother Zambia has endowed him with, would wish for all that to be wiped away.
He could have easily taken residence in a foreign country like Jensen but he has stuck in here with us and we are the ones seeing the deception and experiencing the crookedness of the ruling party, especially during by-elections like the one about to take place in Kanyama.
It is so annoying, Jensen, for those in power to think of citizens as fools and people who cannot reason and hence can easily be bought.
I am sure the Kenyans did not wish to be where they are now, but perhaps nobody took the trouble to remind them of the consequences of tolerating vote buying and rigging. By the way, Kanyama is not the only place with bad roads and flooding.
In terms of flooding, the southern region is worse than Lusaka and most roads in compounds are in a terrible state. Why the concentration in an area where there will soon be a by-election? Much as it also requires attention, one need not be a political scientist to deduce the sudden interest to quickly fix the shared problems of Kanyama.
Only a person who is not living in this country and is detached from the realities on the ground can describe HH’s statement as careless and saddening as Jensen judged it. I am just a simple Zambian voter with no affiliation to any party, but I would say hats off to HH. Indeed we do not want to end up like Kenya.
http://www.postzambia.com/post-read_article.php?articleId=36854
Chief Zombe's interest in Maureen's presidency
By Jenkins Chisoni, Glasgow
Tuesday January 29, 2008 [03:00]
The debate whether first lady Maureen Mwanawasa should contest the MMD presidency and eventually the Republican presidency in 2011 has become very interesting, more so when we start witnessing royal establishments taking sides on the subject.
In all fairness to the first lady, I wish to acknowledge the position of Paramount Chief Chitimukulu and MMD deputy secretary Kande that the debate should not arise at all in the absence of the first lady's personal declaration of interest to run for presidency.
I am a supporter of the idea of a female president (especially after having had the experience of a male president like Chiluba) but not just for the sake of having a woman at plot one.
I can understand the excitement of MMD party cadre Chibombamilimo in suggesting Maureen for MMD presidency, but I cannot fathom the interest of His Royal Highness Chief Zombe and the royal establishments of the Mambwe and Lungu's interest in Maureen only, given the fact that Zambia has so many eligible female leaders, some of whom have vast experience in understanding local and international issues.
My apologies to the Royal Highnesses if they are already MMD sympathisers as they have the right to talk about leaders for their party only. But if they are not MMD, then I suggest they should remain neutral and be able to look at other female leaders in all the political parties in the country.
Let us wait for Maureen's say on the matter and those of other women who may be interested in leading our country before the debate can really start.
Labels: 2008 BUDGET, CALEB FUNDANGA, CHARLES MILUPI
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Good on mining taxation, but the rest is rhetoric
By Editor
Monday January 28, 2008 [03:00]
Ng’andu Peter Magande, last Friday presented his 2008 budget speech amid the usual pomp and ceremony. To start with, let us look back to last year. The 2007 budget theme was “From Stability to Improved Service Delivery”. To be candid, we are not at all sure if there was any significant improvement in any service delivery for the common man.
The annual budget themes, as sad as it may be, have become mere titles with little significance on either intent or delivery. Every document needs a title, so this year’s budget is titled: “Unlocking Resources for Economic Empowerment and Wealth Creation”.
As we go into the analysis of the 2008 budget, it is important to bear in mind that the legal framework for the fiscal or budget management is derived from the 1996 Republican Constitution. Civil society knows, but the government it seems does not, that there is an urgent need for constitutional reform on budget and fiscal matters.
In the year 2000, the Parliamentary Committee on Estimates tabled a constructive report on the required budget reform in Zambia. This report, like many others unanimously adopted by Parliament, still sits on the shelf without any intention to implement.
Why then, does Parliament every year go through the process of discussing and adopting Parliamentary Committee reports? Parliament alone has the constitutional authority to impose or alter taxation (Article 114(1), and to appropriate money (Article 117).
Although the Constitution does not limit the power of Parliament to amend the budget, the legislature adheres to precedence “reductions only” rule. Parliament has effectively functioned as a “rubberstamp” in budgetary matters, and currently, there is no value added, while the Public Accounts Committee is toothless.
Other than the budget speech and the economic report, there is no supplementary analysis provided with the budget. We hope that the members of the National Constitutional Conference will examine all the Parliamentary Reports on budget reform, among many other issues and seriously look into these issues when they recommend the draft constitution.
Legal and constitutional provisions should be made for the formal engagement of Parliament with policy framework that underlines budget planning well in advance of budget presentation.
This could take the form of budget policy statements presented to Parliament prior to the tabling of the budget. Only if members of Parliament are informed about ministry, departments and other policies, and how they are reflected in the budget, will they be able to assess independently whether the budget is indeed congruent with government’s stated policies. If Parliament were able to undertake shifts between votes through the amendment process, ministries and departments would be forced to justify their spending plans publicly and transparently.
The Ministry of Finance should also table cash releases figures for each subhead on a monthly basis, based on projections of actual disbursements against the approved estimates.
The new constitution is not only about presidential powers, Bill of Rights, but equally about all facets that govern the daily lives of our people, which importantly includes the way government is tasked to manage fiscal affairs through the budget process.
In analysing the 1,558 pages of the budget “Yellow Book” which carries the scanty details of the budget, what strikes us as most obvious is that it is more of the same - full consumption of our own money and mostly development with donors and loan money. Most of the social and capital projects are funded by donors and most of our own resources are spent on consumption.
Had it not been for donors and others, most of the major development and infrastructure projects and programmes of the ministries of health, education, works and supply (roads, bridges), local government, public sector reform, private sector development, agriculture, the new stadium, among other projects and programmes would not have been funded from our resources. So, where does the money go?
The total budget in 2008, including donor support, amounts to K13.761 trillion, of which K12, 525,329,778,454 is for personal and non-personal emolument programmes and K1,236,071,115, 984 for constitutional and statutory expenditures (such as paying foreign and local debts).
During 2007, both the Minister of Finance and the Secretary to the Treasury showed serious concern about budget implementation, in particular unspent balances on capital projects. Yet, the budget speech or the budget “Yellow Book” makes no mention as to what is being done or will be done to improve budget implementation.
We begin our analysis with the revenue side. Income tax, excluding mineral royalty tax is projected from K3,764,732,290,339 in 2007 to K4,081,380,000,000 in 2008. Mineral royalty tax is projected from K67,503,453,250 in 2007 to K72, 000,000,000.
The good news is that the mines are now going to be taxed in a variety of areas and in a manner that brings substantial revenue.
However, in public interest it would be good if the Minister of Finance could also give us the downside - what if the price of copper is below $2.50/lb? What would be the projected revenue for the government?
The allocation of K50 billion for financing the Citizens Economic Empowerment programme is also a good beginning. However, no one knows how this will work. And whether this will help create equity in companies for a large number of workers or a few select citizens is yet to be seen.
We do not want to see empowerment for the elite few. The devil is always in the detail, which details unfortunately are not spelt out in any budget document.
On expenditure, it all begins with the official opening of Parliament which costs the taxpayers K352 million in 2008. In addition, the budget sittings (from January to March) alone will cost the taxpayer K7,835,630,600 and K8,367,917,099 for sittings during the rest of 2008.
Most of the expenses for sittings are allowances for members of parliament. The 20 oversight parliamentary committees have been allocated K7,452,802,000 and another K8,309,247,750 for running of the Parliamentary Constituency offices.
This is now all possible, because the taxpayers in 2007 financed K19,488,047,502 to purchase motor vehicles for all members of parliament.
State House spent just over K5 billion in 2007 for transport management and have again been allocated K6 billion in 2008. This certainly is not justifiable.
What does State House, and the rest of government, do with all these motor vehicles they purchase every year? An average citizen who buys a vehicle keeps it for at least a few years, but in government there is no end to buying vehicles.
Is that development? In 2007 the Ministry of Works and Supply spent over K18 billion on buying VIP vehicles and this year another K2 billion has been allocated. Obviously the priorities are with VIP vehicles!
What is government up to? Rehabilitation of the Lusaka Independence Stadium has been allocated K28 billion. Under Cabinet Office, public affairs and summit meetings gobbled up K65 billion in 2007, and in 2008 K42 billion is allocated
A total of about K6 billion was sent for the Salaries Commission of Inquiry, whose findings are unknown as of now. Perhaps the Civil Servants and Allied Workers Union need to have a look at this before they conclude any negotiations.
In 2007 the Ministry of Home Affairs spent K21 billion to purchase motor vehicles for Zambia Police and in 2008 have been allocated another K17 billion for more motor vehicles.
The Ministry of Foreign Affairs is opening up a new embassy in Kuala Lumpur, Malaysia when all our existing missions are already badly funded and most of the buildings are an eyesore and embarrassment to Zambia. Instead of maintaining our missions, the Ministry of Foreign Affairs thought it prudent to spend K2.1 billion in 2007 for lobbying, we assume for our candidate Inonge Lewanika at the African Union. This is a very weird choice of priorities. The Ministry of Finance has allocated K5 billion for the Financial Sector Development Plan (presumably for meetings and sitting allowances) and K58 billion for “other financial restructuring” - whatever that means.
After being allocated K15 billion in 2007, the Zambia National Building Society get a further K9 billion in 2008. There is a need for a full explanation as to why the government is pouring billions into the building society? Is it technically bankrupt?
Why is the regulator of banks, the Bank of Zambia quiet on the issue of the Zambia National Building Society? Zambia Wildlife Authority (ZAWA) is also allocated K23 billion for re-capitalisation, and donors are giving an additional K13 billion funding.
So what has ZAWA been doing with the money it makes from fees and other charges? Under the Ministry of Finance, the Finance and Management Accounting department were allocated just over K1 billion for office administration in 2007 but instead spent over K7 billion and this year have allocated themselves K748 million.
Why such disparities? Under the Human Resources department of the Ministry of Finance, K12.8 billion was spent for inducement allowances and this year have allocated K14.5 billion.
Why are some selected few at the Ministry of Finance better paid than the rest? The Ministry of Justice spent over K5 billion on office administration in 2007 and in 2008 has allocated itself K1.7 billion.
The National Constitutional reforms and NCC spent K165 billion in 2007 and another K288 billion has been allocated for use in 2008. By the time this exercise is completed, Zambia is going to have one of the most expensive constitutions!
In 2007, K30 billion was allocated for the Youth Empowerment Fund. This year there is nothing. This tells us that either the money was not released on time, or the money has not been allocated for such projects. Why? We need an answer.
The Ministry of Defence headquarters in 2007 was allocated K2.67 billion for office administration, but instead spent K16.66 billion and this year have been allocated K2.7 billion. If it was for the Joint Permanent Operations, then in 2007 they had spent K12.6 billion on that, instead of the budgeted K100 million.
At Zambia Airforce, K1.7 billion was budgeted for office administration in 2007, but instead they spent K11.7 billion and this year they have been allocated K2.55 billion. Zambia Army, in 2007 was allocated K90 million for office administration but instead spent K10 billion, and this year it has been allocated K176 million. The Zambia National Service in 2007 was allocated K309 million for office administration, but instead they used K6.3 billion and this year they are allocated K498 million. There is something really fishy about all these “office administration” expenditures.
The Zambia Intelligence Service was allocated K186 billion in 2007 and this year they get K209 billion. Why on earth do they get so much money? Compare that to students’ loans awards at UNZA of K28 billion and K11.5 billion for CBU in 2008.
Clearly, there are so many such instances in the Yellow Book that require full explanation, and it is obvious to us that this is not how one unlocks resources for economic empowerment and wealth creation.
And what would be the explanation here? The answer is simple. The budget has done nothing to look at industrial input tariffs for our industry; instead government tinkered around with dyestuff and musical instruments. One cannot develop a textile industry by tweaking dyestuff tariffs!
All that sweet talk from the Minister of Commerce, Trade and Industry on industrialisation and private sector development has been simply sweet talk. One cannot charm and sweet talk, without delivering on something tangible. This is not how we are going to industrialise and maintain export competitiveness of our local industry.
Poverty reduction programmes (PRPs), as in the past, feature prominently across all ministries. However, it is highly questionable if programmes such as field trips, purchase of vehicles, personal emoluments, monitoring and evaluation, office administration, drawing up policy documents among other absurdly defined programmes can under any stretch of imagination be regarded as poverty reduction programmes.
And this is where the budget falls apart. PRP programmes should be such that they assist the poor to improve their lives and help create sustainable wealth and provide the much-needed social services. Looking at all this consumption, office administration expenditure, among others, it is no wonder that over 70 per cent of the people of Zambia still live on less than a dollar a day.
We hope that all members of parliament and civil society organisations will take time to scrutinise the Yellow Book so that they can help influence the much-needed amendments to the 2008 lopsided budget allocations.
Labels: 2008 BUDGET, DEVELOPMENT AGREEMENTS, MINING CONTRACTS, TAXATION
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2008 budget is not pro-poor, says Saki
By Mwala Kalaluka
Monday January 28, 2008 [03:00]
United Liberal Party (ULP) president Sakwiba Sikota has said the 2008 budget is not pro-poor because it does not give hope to people that are eligible for social protection. In an interview immediately after the presentation of this year’s budget at Parliament last Friday, Sikota who is also Livingstone member of parliament said while there was some form of tax relief to the low income earners in the budget, the budget does not encompass the plight of the vulnerable people in rural and urban areas
He said there was need for the government to consider scaling out the social protection scheme through the formulation of a universal cash transfer scheme in order to cater for the 10 per cent of the population that are not able to fend for themselves.
“In terms of actual monies, which are going to be used in terms of social protection, I wish finance minister Ng’andu Magande he had given a better break down. It would appear that most of it is going to go in the traditional areas.
There are things such as the cash transfer scheme which I think is very important for the bottom 10 per cent in our society,” Sikota said. “These are the ones that have been forgotten in this budget.”
He said in order to make that into a universal scheme, it would cost only in the region of about K122 billion. “Sadly, I do not see the ‘One Zambia, One Nation’ motto being realised in this budget,” Sikota said.
“There are certain people who seem to be left out of the mainstream of our economy, of our society and this budget has done nothing to bridge that gap.”
He said the gap between the haves and have-nots must be bridged to reduce the loss of vital installations through vandalism.
“It is very shortsighted for the minister and the government to not look at those aspects,” Sikota said.
He also said the threshold for non-taxable pay, which has been moved from K500,000 to K600, 000, is equally very minimal.
When you consider that this is over a year and it is going into so many thousands of workers, it is in fact very little for the individual.
On the reduced Valued Added Tax (VAT), Sikota said they expected a further reduction of the tax to about 15 per cent from 17.5 per cent and not the 16 per cent which was announced.
Labels: 2008 BUDGET, POVERTY, SAKWIBA SIKOTA, ULP
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INDO Bank hails govt over 'good' budget
By Ntalasha Mutale
Monday January 28, 2008 [03:00]
INDO Zambia Bank executive director Cyril Patro has commended the government for presenting a good budget this year saying it would improve the conditions of people in Zambia. And community development minister, Catherine Namugala, said there was need for the government to promote non-residential care for the aged and orphans.
Visiting Cheshire Homes in Chawama on Saturday, Patro said the budget this year was the greatest achievement that Zambia has made to improve the economy and the social sector.
“It is very satisfying to see the level of progress in Zambia. We as Indo- Zambia Bank want to assure the government of our willingness to continue partnering and supporting the government’s initiatives in uplifting the economy,” Patro said.
Patro also said government’s aim of uplifting the under-privileged and the vulnerable was yielding positive results and had presented greater impetus for the bank to come forward and partner with it.
The bank undertook an eye camp worth K20 million at Cheshire Homes for the aged and orphans, and donated groceries worth K10 million.
And Numugala said there was need for the government to promote non-residential care for the aged as most of them could not move to special homes because of the extended families they had to look after.
“Fifty per cent of the vulnerable children were being taken care of by grandparents who do not even have the capacity to feed them properly or take them to school,” Namugala said. “There is need to help them from their homes.”
She commended Indo for the eye camp and said it would enable the aged at the home access modern facilities and spectacles.
Labels: 2008 BUDGET, INDO ZAMBIA BANK
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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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