Draft policy on budgeting will raise transparency - Chikwanda
By Chiwoyu Sinyangwe
Sat 29 June 2013, 14:00 CAT
FINANCE minister Alexander Chikwanda on Thursday launched the consultative process on the planning and budget policy to lay the foundation for the enactment of the planning and budgeting bill.
With the planning and budget policy and ensuing act, according to Chikwanda, resources would be allocated and appropriated in line with projects and programmes contained in national development plans as a matter of priority.
Chikwanda said over the years, the planning and budgeting processes had lacked a comprehensive and well-articulated guide, resulting in fragmentation of the key facets of planning, budgeting, including monitoring and evaluation mechanisms.
"The draft policy also spells out mechanisms for ensuring that the programmes and projects are thoroughly assessed through a comprehensive appraisal system and effectively monitored so as to yield the intended results," Chikwanda said.
"The draft policy will also enhance transparency, accountability and provide a basis for evidence-based decision making process. It further stipulates the roles and responsibilities including procedures required in developing national plans and how they will be financed and interface with annual budgets and Medium Term Expenditure Frameworks and other policies and operational tools."
Chikwanda said the PF government desired to ensure that national plans and programmes were rooted in people's aspirations.
"To this effect, the draft policy which I am flagging off today for broader consultations provides for more enhanced system of engagement with the people and streamlines their participation mechanisms at all levels, including the grassroots," said Chikwanda. "The role of the National Assembly which is a link between the people and the executive and is also a critical oversight institution in the planning, budgeting, implementation, monitoring and evaluation processes, has also been stipulated in the document. Other institutional mechanisms aimed at cementing the participation of citizens through structured organisations for both government and non-government actors have been recognized and are being proposed to be strengthened.
Labels: 2013 BUDGET (ZM), ALEXANDER CHIKWANDA
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CSO rues Zambia’s ‘missed chance’ on windfall tax
November 7, 2012 | Filed underBusiness | Posted by chandamm
By Kennedy Mupeseni
THE Consumer Unity Trust Society (CUTS) says it is saddened by Government’s failure to include the windfall tax on minerals in the 2013 national Budget.
CUTS programmes officer Tommy Singongi said Zambia could have benefitted greatly had windfall tax been re-introduced.
He said the country had lost another opportunity to get benefits from minerals because of Government’s failure to re-introduce windfall tax.
Mr Singongi said the civil society in Zambia expected the windfall tax to be included in the 2013 Budget.
“The country has lost another opportunity to get benefits from the country’s endowments.
“Introducing windfall tax is the only way the Government can get revenue instead of ordinary citizens subsidising the mines,” Mr Singongi said.
The Government scrapped off the 25 per cent windfall tax in 2009 following complaints from mine owners in the country that it raised production costs and discouraged investment.
But Mr Singongi said copper and other minerals were wasting assets, hence the reason for demanding for more revenue from it which the Government could plough into the economy.
The civil society organisations (CSO) in the country had earlier this year proposed to the Government the re-introduction of windfall tax for mining companies in the 2013 Budget.
The CSOs argued that there was need for equitable benefits from “super normal” profits enjoyed by the mining companies during periods of high copper and cobalt prices.
This was contained in joint submissions on tax and non-tax proposals for the 2013 national Budget to the Ministry of Finance.
Mr Singongi, however, said all hope was not lost because the Government could still re-negotiate with the mine owners in the country the windfall tax.
Labels: 2013 BUDGET (ZM), CUTS, TOMMY SINGONGI, WINDFALL TAX
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COMMENT - The problem with the MMD is that if you have no policies that appeal to the people of the country, once in opposition you can only oppose for the sake of opposing. It would almost make you doubt that parliamentary politics is the right system for national development.
Don't oppose a budget that deserves support
By The Post
Thu 18 Oct. 2012, 12:20 CAT
Generally, the opposition has the constitutional right to oppose anything and everything that the government party tables in Parliament. However, behaving in such a manner will be unreasonable, politically and otherwise, for the opposition. It would actually be irresponsible for the opposition to behave in such a manner. We don't think this is what those who voted for them during the last elections would like to see them do.
It is possible for the opposition to stick to its rights and behave irresponsibly. But there is a political cost to all irresponsible behaviour.
What the Zambian people want is not a sterile contest or unending mock engagements between the opposition and the ruling party in Parliament or outside Parliament.
What Nevers Mumba and other opposition leaders should always bear in mind is that the Zambian people are not fighting for any individual politician's ego, for ideas, for the things in one's head. They are fighting to win material benefits, to live better and in peace, to see their lives go forward, to guarantee the future of their children.
If a politician is seen by the people to be standing in their way to winning material benefits, to living better and in peace, to seeing their lives go forward, and to guaranteeing the future of their children, they will withdraw their support for him.
Let us not forget what happened in Malawi a few years ago during Mbingu wa Mutharika's first term of office as president. The opposition, which was in the majority and under the control of Bakili Muluzi, withdrew its support from wa Mutharika and took it upon itself to shoot down everything he took to Parliament for approval, including the national budget. For five years, wa Mutharika ran government without being able to pass any laws in Parliament.
The opposition frustrated everything he was trying to do. But he governed. However, at the next elections, the people of Malawi sorted out the opposition and voted for wa Mutharika and his parliamentary candidates overwhelmingly, giving him an absolute majority in Parliament.
If the intention of Nevers is to simply frustrate everything, no matter how good it is, that the Patriotic Front government takes to Parliament, he will make a fool of himself and he will be very sorry in the end because the loser will be him and not those in government.
Representatives of the people are not supposed to behave in that way. The votes that the Zambian people gave to the opposition parliamentary candidates were not given to them for personal use, glory, ego or ambition. They were given to them to be used to advance the common good.
And those elected to Parliament and other representative bodies should exercise stewardship and uphold the common good. A person elected to Parliament must remember that he or she is simply a servant or steward entrusted to offer humble service to others, as opposed to owning power or the people he or she is serving. They should therefore be accountable to the people who voted for them; they should work for the common good.
As we have repeatedly pointed out, the common good is the reason for the existence of political, social and economic institutions. It enables people to express commitment and concern for each other as well as attain the fullness of love.
Common good calls upon all politicians, all members of parliament and indeed all persons to contribute and commit themselves responsibly to building a peaceful and just society for all.
The best way for Nevers and all the members of parliament of his party to fulfil their obligations of justice and love for our people is to contribute to the common good. The political power they possess, the seats of Parliament they hold must have as their aim the achievement of the common good. The whole purpose or reason for the existence of these parliamentary seats that some of the MMD politicians hold today is the realisation of the common good.
In a democracy where members of parliament are chosen by the people and for the people, such members of parliament should view themselves as being representatives of the people and not necessarily of the presidents of their political parties. Our members of parliament should listen to the people, respect the people and work for the welfare of all the people instead of just trying to satisfy the egos or political ambitions of their party presidents.
They should devote themselves to the welfare of all. Their authority as members of parliament will be exercised legitimately if it is committed to the common good of society and not to the narrow and selfish political interests of their party presidents. Let our members of parliament exercise their authority with care.
Politics should be honest and responsible. This is so because it is an effective way of serving others and working for the integral development of one's country. And political authority, at whatever level, must be exercised within the limits of the moral order. The proper role of members of parliament is to serve the people.
And overall, the Zambian people should be concerned with the way their members of parliament represent them and conduct themselves when it comes to important national issues. If they fall short of their expectations, they should sort them out at the next elections. And this is why elections are very important.
Let's create a civic order in which duties are ever more diligently and more effectively observed.
There are better and more legitimate ways which Nevers and the opposition can use to unseat the Patriotic Front government at the next elections. But whatever they do, in their quest for power, it would be unwise for them to try and remove the Patriotic Front from office on the back of national failure.
There will always be sufficient grounds without that to argue for their removal at the next elections. If they want to be seen to be responsible politicians, they should behave in a patriotic manner and wish to see their country succeed in its economic and social endeavours regardless of who is running government. With or without them in government, they should work to see Zambia move forward. We should not see them gloat over national reverses. We should see them wish the economy of our country well.
Trying to use their number in Parliament to shoot down a budget that everyone sees as being reasonable or good for the country will backfire on Nevers and his members of parliament. Let them oppose what deserves to be opposed and support that which deserves to be supported. If they reverse this, they will soon find themselves in political problems; they will lose the respect and support of the people. Don't oppose a budget that deserves support!
Labels: 2013 BUDGET (ZM), OPPOSITION
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Emoluments to gobble 50% of 2013 budget
By Kabanda Chulu
Thu 18 Oct. 2012, 14:00 CAT
ALMOST half of the K32.2 trillion 2013 national budget announced last Friday by finance minister Alexander Chikwanda will go towards personal emoluments, wages and salaries.
K10.5 trillion would be spent on personal emoluments as compared to K8.06 trillion that was spent in 2012 while non-personal emoluments would account for K18.5 trillion compared to K15.8 trillion with constitutional and statutory expenditure getting K3.1 trillion as compared to K3.7 trillion spent in 2012.
According to estimates of revenue and expenditure contained in the Yellow Book, Office of the President at State House would get K38.5 billion (K34.5 billion-2012) of which K12.2 billion will cater for personal emoluments while K300 million is for general operations at State House golf course with K155.7 million planned for management of State House wild animals.
Cabinet Office (Office of the President) has been allocated K126.8 billion from the 2012 figure of K114.6 billion and K12 billion will be spent on salaries while K1.5 billion as support services to the first lady.
Office of the Vice-President will get K20.5 billion from the 2012 amount of K15.7 billion and K2 billion will be spent on salaries and K1 billion on management and operations of Government House.
The National Assembly has been allocated K323 billion from last year's amount of K256.6 billion with K222.8 billion going towards salaries while the Electoral Commission of Zambia has been allocated K56.9 billion from the 2012 figure of K48.8 billion and K33.9 billion to be spent on salaries.
K4 billion has been allocated for by-elections and another K4 billion for delimitation of constituency and ward boundaries' with K395.2 million for observing of elections but there is no allocation for continuous voter registration.
However, there is no allocation for rehabilitation and upgrading of the Government Printing Department to meet standards required by the Electoral Commission for local printing of ballot papers.
The office of the Auditor General has been allocated K85 billion from the 2012 figure of K77.7 billion and K14.7 billion of this would be spent on salaries while the Drug Enforcement Commission has been allocated K41.4 billion from the 2012 figure of K29.9 billion with K25.6 billion to be spent on salaries.
The Anti-Corruption Commission will be given K58.8 billion from the 2012 figure of K60.1 billion and K5.6 billion will be spent on salaries and K240.6 million on quarterly stakeholder meetings while K5.6 billion will be spent on general administration including operations for the institution.
The office of the former first president would get K2.1 billion with K782.7 million going towards salaries and wages while the office of the fourth president (Rupiah Banda) would get K2.3 billion with K753.4 million going towards salaries and K422 million on rentals while K400 million would be used to purchase motor vehicles.
The Ministry of Tourism and Arts under the tourism development department has been allocated K15 billion towards hosting the 2013 United Nations World Tourism Organisation (UNWTO) general assembly while K150 million has been allocated for the national traditional food festival under the same forum.
Labels: 2013 BUDGET (ZM), ALEXANDER CHIKWANDA, CIVIL SERVANTS, SALARIES
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Govt will reduce personal tax every year, says Sampa
By Henry Sinyangwe
Thu 18 Oct. 2012, 11:59 CAT
THE PF government has an agony of reducing personal tax every year, says finance deputy minister Miles Sampa. And Sampa says the government is strengthening checks to curb cheating among foreign mining firms operating in the country.
During the KPMG post - 2013 budget discussion breakfast yesterday at Radisson Blu HoteloH, Sampa said the government would continue lowering taxes to ensure more money in line with the PF's campaign slogan of more money in people's pockets.
"The agony that the PF government has found itself in is immediately taking over power and having to lower the taxes," Sampa. "We found the tax threshold at 800, 000, raised it to K2 million and now it is at K2.2 million and we will continue doing this every year until we are satisfied with the threshold," Sampa said.
And Sampa said that government was setting up mechanisms that would enable the country benefit more from the mines. He said the PF's focus was to continue maximising collection of revenue from the mines rather than increasing taxes.
"Windfall tax which some people are calling for is not the only source of income from the mines… We will closely monitor the mines in terms of them repatriating their profits," Sampa said.
"That is still on the drawing table and we are in a consultative process with all the players, the mines and all the interested parties and looking through the legal implications and otherwise."
Labels: 2013 BUDGET (ZM), MILES SAMPA, TAXATION, WINDFALL TAX
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Govt will reduce personal tax every year, says Sampa
By Henry Sinyangwe
Thu 18 Oct. 2012, 11:59 CAT
THE PF government has an agony of reducing personal tax every year, says finance deputy minister Miles Sampa. And Sampa says the government is strengthening checks to curb cheating among foreign mining firms operating in the country.
During the KPMG post - 2013 budget discussion breakfast yesterday at Radisson Blu HoteloH, Sampa said the government would continue lowering taxes to ensure more money in line with the PF's campaign slogan of more money in people's pockets.
"The agony that the PF government has found itself in is immediately taking over power and having to lower the taxes," Sampa. "We found the tax threshold at 800, 000, raised it to K2 million and now it is at K2.2 million and we will continue doing this every year until we are satisfied with the threshold," Sampa said.
And Sampa said that government was setting up mechanisms that would enable the country benefit more from the mines. He said the PF's focus was to continue maximising collection of revenue from the mines rather than increasing taxes.
"Windfall tax which some people are calling for is not the only source of income from the mines… We will closely monitor the mines in terms of them repatriating their profits," Sampa said.
"That is still on the drawing table and we are in a consultative process with all the players, the mines and all the interested parties and looking through the legal implications and otherwise."
Labels: 2013 BUDGET (ZM), MILES SAMPA, TAXATION, WINDFALL TAX
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Nevers out to frustrate 2013 budget
By David Chongo in Solwezi
Tue 16 Oct. 2012, 14:00 CAT
NEVERS Mumba has threatened to use opposition members of parliament to shoot down the PF's 2013 budget to punish President Michael Sata for 'poaching' MMD law-makers into the PF government.
Mumba accused President Sata of "stubbornly" poaching desperate MMD members of parliament for "basic jobs" of deputy minister.
"All PF wants is to hit 106 seats and they will continue. He (President Sata) needs 106 members of parliament or votes in order to unilaterally change the Constitution or not change it. What he doesn't want is to pass 50+1. So he is going to continue to do this.
But as a party, we have made a decision that those who want to continue getting jobs from the PF at some point there are going to be repercussions," Mumba said during an interview with Solwezi TV last week. "For the PF and the President, I want to send a very strong message; if the President continues to be stubborn and continues to abuse the democratic process of our country, we have enough numbers not to pass this budget.
And if we don't pass the budget, the government crumbles. And he must understand we are not just in that Parliament as stooges; we are there representing the Zambian people with full powers to stop any bill, including the budgetary bill.
And if that happens, if he tempts us that far and we decide this week that we are not going to pass this budget until he stops poaching members of parliament...because we don't wanna go all the way of stopping the budget. It is within our power to do that."
On President Sata's fight against corruption, Mumba said it was good to instil fear in people that if "you touch anything that belongs to government, there is an eye watching you".
"To that degree, I think that must continue. And I think that to just instil that fear is probably working out for some people but it's not genuine," Mumba said.
"And the issue that is happening in the PF where the Minister of Defence and the Minister of Justice have been accused of kickbacks in businesses that involve their offices and investor companies is going to prove to us that Mr Sata is really going to fight corruption in a genuine way or this corruption is about attacking MMD and depleting the fortunes of the Movement for Multi-Party Democracy.
So the way he is going to handle this case is going to open our eyes to see whether he really means business or not."
On the 'alliance' with UPND, Mumba said MMD did not have a memorandum of understanding with the former but that they were cooperating in order to strategise a framework on how to work together.
"Our goal is to realise an alliance that works together on behalf of the Zambian people. I think the Zambian people have realised that by voting in PF they made a terrible mistake; and the Zambians are saying to us as the opposition, 'don't be selfish. If there is anything you can do to get together, please do that'.
And so we are listening to the Zambians. Both UPND president Hakainde Hichilema and myself are talking before we could answer this call from the Zambian people. So it's an active debate that is going on between our teams."
Labels: 2013 BUDGET (ZM), NEVERS MUMBA
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2013 budget has reinforced investor confidence - Babb
By Gift Chanda
Mon 15 Oct. 2012, 14:00 CAT
THE 2013 budget has reinforced investor confidence in Zambia, says a senior Standard Bank official.
Analysing Zambia's 2013 national budget, Yvett Babb, Standard Bank Africa researcher, said there has been a lot of speculation on whether the PF government may introduce new revenue measures that may be detrimental to the mining sector but that that has not been the case in the 2013 national budget.
Finance minister Alexander Chikwanda presented a K32.2 trillion budget for 2013 on Friday, raising spending to fund infrastructure and underscoring the government's commitment to creating jobs for majority youths who propelled the PF to power last year.
Chikwanda said spending would rise slightly to 26.6 per cent of GDP from 26.5 per cent in 2012, although the budget deficit would remain unchanged at 4.3 per cent of GDP.
"We know that they Zambia went through a period where they had windfall taxes on the price of copper and there were suggestions under the previous election campaigns that the PF government may seek to reintroduce that but they have been adamant since they came to office that they would not do so," she said on a CNBC Africa special programme on Friday shortly after Chikwanda presented next year's budget.
"There are however continued concerns that the mining sector is not contributing enough to the budget, but we have not seen significant revenue measures that may be detrimental to the mining sector which I think is another positive thing."
Babb said despite being under pressure to create jobs promised to youths who propelled the party to office last year, the PF government did not fall into the trap of introducing new revenue measures that would be less favourable to foreign investors.
She said the PF government's first wholly-developed budget was very much in line with the party's vision of creating more jobs in key sectors such as agriculture, manufacturing and tourism.
"…the positive thing that we have seen from this budget is that they have maintained the budget deficit at fairly suitable and prudent levels at 4.1 per cent of GDP. We have seen they have increased allocation to infrastructure development specifically transport and energy infrastructure and we have seen that they have maintained the levels of recurrent expenditure," she said.
"What we will need to understand further are details regarding the amount of money being allocated to the subsidies. That amount has obviously exceeded previous budget expectations. We have also seen that public expenditure on wages has exceeded budget expectation but again we are keen to see whether this budget has accommodated this increase."
Asked whether Zambia was on the right track in terms of achieving sustainable development, Babb emphasised that job creation and poverty reduction would be crucial for the country in the medium term.
"In the last budget they government did give some direct revenue measures in terms of increasing the tax band for personal income tax therefore allowing for declining in obligation by small and lower earning individuals.
They reduced the VAT on a number of commodities; these all can be seen as supporting lower income individuals in the broader economy but of course the overall question to generate jobs will be key over the medium term and whether this government is going to be successful in terms of addressing the levels of poverty," Babb said.
And secretary to the treasury Dr Fredson Yamba said the 2013 national budget addressed the social agenda President Michael Sata had put forward for the country.
He said significant amounts had been allocated to pressing needs in the health, education and local government sectors.
Yamba further said the government planned to finance the budget deficit of 4.3 per cent of GDP, through domestic and external borrowing.
He said the government had already done a debt sustainability analysis and was sure that the country was in a position to finance that deficit.
Yamba further said the government consulted extensively with stakeholders regarding new tax measures in the budget.
In terms of the breakdown of expenditure of the Eurobond, Yamba said about US$255 million would be spent on capital projects in hydro energy transmission and distribution.
He said the government was going to inject US$430 million in road and rail transport infrastructure.
"The other amounts will go to human capital and access to finance. In this particular aspect we want to look at the rehabilitation of central hospitals, that is three of our referral hospitals because we would like to ensure that we have these hospitals up and running with the right diagnostic equipment.
So we are going to put in US$29 million and access to finance which is one of the major constraints for small and medium business will have US$20 million. Basically that is how the Eurobond will be used but other expenditures, US$1.4 million are fees and transaction cost. We also have a discount premium of US$14.6 million."
Labels: 2013 BUDGET (ZM), ALEXANDER CHIKWANDA, PF, YVETT BABB
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COMMENT - This is the 2013 budget, with the table included.
Zambia's 2013 budget in full
By Finance minister Alexander Chikwanda
Sun 14 Oct. 2012, 15:00 CAT
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 2013 to 31st December 2013 presented to the National Assembly in October 2012.
2. Sir, I am the bearer of a message from His Excellency the President recommending favourable consideration of the motion that I now lay on the Table.
3. Mr. Speaker, the Patriotic Front Government is dedicated to the veritable advancement of social justice for all. This requires a complete change of our mind-sets and priorities, both as individuals and as a nation. It also requires a structural transformation of our economy by developing a healthy and well educated labour force, developing and maintaining an efficient infrastructure and exploiting our abundant natural resources and entrepreneurial opportunities to deliver a vibrant and sustainable economy that raises the quality of life for all.
4. Mr. Speaker, with this vision in mind, my task today is to propose a budget for 2013 that will set Zambia on this trajectory to sustainable and inclusive growth, with the focus on expanding opportunities for all and ensuring the equitable distribution of the tangible benefits of development. The journey will certainly not be easy or uncontested with difficult challenges requiring tough choices. These challenges are not insurmountable if we work harder to anchor prosperity and build a solid foundation for posterity.
5. Sir, when we came into office just over a year ago, we promised to transform our country by adopting a more people-centred development agenda and, by so doing, deliver more money in people's pockets. Let me state without reservation and ambiguity that we are determined to deliver on this commitment. In this regard, the theme for next year's budget is "Delivering Inclusive Development and Social Justice".
6. Sir, I wish to stress that this will not be achieved simply by promoting handouts. Our fundamental approach is to build a self-reliant people able to sustainably generate money for their own pockets. Mr. Speaker, this is the surest way of sustainably defeating poverty and delivering the inalienable rights of liberty and social justice for all our people.
7. Mr. Speaker, my address today is divided in four parts. In the first part, I discuss global and domestic economic developments in 2012 and the outlook for 2013. In Part 2, I provide this Government's policy objectives for 2013. In Part 3, I present the 2013 Budget, and conclude my Address in Part 4.
PART I
OVERVIEW OF THE GLOBAL AND DOMESTIC ECONOMY
8. Mr. Speaker, global growth in 2012 has been uneven and weak. This is attributable to the turbulence in the Eurozone, lethargic growth in the United States, and a slowdown in the major emerging markets such as China, India and Brazil. Sir, sluggish growth in the world economy depressed prices for copper, our major export, while oil and food prices were generally higher.
9. Sir, growth in Sub-Saharan Africa has been relatively favourable, partly due to increased trade and investment flows between Africa and key emerging economies and the relative insulation of the region from external financial shocks.
10. Mr. Speaker, despite unfavourable global economic conditions, the domestic economy has been resilient in 2012 with Gross Domestic Product (GDP) growth estimated at just over 7 percent.
11. Sir, over the last nine months, overall budget performance has been satisfactory, with domestic revenues and direct budget support being 5.5 percent above target. Total domestically financed expenditure was 6 percent lower than programmed, due to low absorption capacity mainly in the road sector. The overall deficit is projected not to exceed the target of 4.3 percent of GDP set for 2012.
12. Sir, monetary policy implementation was generally appropriate. As at end September, 2012 inflation was 6.6 percent while money supply growth was 6.3, both of which were in line with the end year targets. Interest rates, however, remained high despite the Bank of Zambia lowering very significantly the statutory and core liquid asset ratios, and introducing the Policy Rate. Sir, these high interest rates continue to impose unsalutary effects on the economy.
13. Mr. Speaker, in 2012, Government made it mandatory, through a statutory instrument, for all domestic transactions to be effected in Kwacha, Zambia's legal tender. I am glad to report that there has been wide-spread acceptance of this measure which has contributed to the stability of the Kwacha.
14. Mr. Speaker, another important policy decision in 2012 was the rebasing of the Kwacha. The rebased currency will simplify financial transactions and will become legal
tender from 1st January, 2013. I will soon table before this House, the Redenomination of Currency Bill to give effect to this policy decision. I urge all stakeholders in this process to adequately prepare for the transition to use the rebased currency.
15. Sir, the overall condition and performance of the financial sector was satisfactory as at end-September 2012. There was an improvement in the banking sector's aggregate capital adequacy and earnings performance, whilst asset quality and liquidity conditions remained stable. Non-bank financial institutions also continued to be stable and registered growth.
16. Mr. Speaker, Zambia is expected to record a merchandise trade surplus of US$960 million this year. Overall export earnings are projected to rise marginally due to significantly higher non-traditional export earnings, more than compensating for lower copper volumes and prices. Non-traditional exports are projected to rise by over 50 percent to US$2.5 billion in 2012 from US$1.6 billion in 2011, with higher exports of maize, electricity, cotton, fresh flowers, burley tobacco and gemstones contributing to this increase.
17. Mr. Speaker, gross international reserves rose to US $2.6 billion as at end-September 2012 from US $2.3 billion at end-December 2011, representing 3.5 months of import cover.
18. Mr. Speaker, I am pleased to report that we successfully issued an inaugural 10 year bond of US $750 million at the most favourable price ever secured in Sub-Saharan Africa for a first issue. Sir, this reflects the high confidence the international investor community has for Zambia as a safe and preferred place to invest. The House will be pleased to know that the bond order book climaxed at US$11.9 billion and only prudence and capacity considerations determined the US$750 million cap.
19. Sir, as at end-September 2012, our external debt stock, including the proceeds from the bond, stood at US $2.47 billion, from US $1.56 billion in 2011. The stock of domestic debt, including domestic arrears, increased by 8 per cent to K13.7 trillion as at end-August 2012, from K12.7 trillion at end-August 2011. I wish to assure the nation that both our external and domestic debt stocks remain within sustainable levels.
PART II
MACROECONOMIC OBJECTIVES, POLICIES AND STRATEGIES FOR 2013 AND THE MEDIUM TERM
20. Mr. Speaker, the Government fully appreciates the myriad needs of our people. They require decent work that provides sufficient income to support and feed their families. They require a well staffed and adequately equipped health care and educational system, and training opportunities that will empower the youth with the skills needed for the 21st century. They need improved access to clean water, good sanitation, decent housing and food security in their communities. They also desire a more responsive government that allows for more decision making within their local communities
21. Sir, it is our responsibility, as a people-centred Government, to foster conditions that will promote accelerated delivery on these real and noble aspirations.
22. To achieve these aspirations, Government will ensure that the economy continues its strong performance, but does so by following a more inclusive path where the benefits of growth are more equitably shared. In this light, the macroeconomic objectives for 2013 are to:
a) achieve real GDP growth of above 7.0 percent;
b) attain end-year inflation of no more than 6.0 percent;
c) achieve domestic revenue of at least 20 percent of GDP;
d) limit the overall fiscal deficit to 4.3 percent of GDP, of which domestic borrowing will be 1.5 percent;
e) maintain gross international reserves of at least four months of import cover; and
f) create at least 200,000 decent jobs.
Strategy for Growth and Job Creation
23. Mr. Speaker, in direct response to high unemployment, low incomes and consequent high poverty levels among our people, it is the intention of this action-oriented Government, within its first term of office, to significantly transform Zambia's economy, by focusing on sectors with high employment creation potential.
24. In this regard, Government has formulated a National Strategy for Industrialization and Job Creation, which prioritizes four major areas namely: agriculture; tourism; manufacturing and infrastructure development. I will now briefly highlight the medium term policies and strategies which Government will implement over the next five years.
Agriculture and Forestry
25. Mr. Speaker, agriculture is the life blood for the majority of our people and its development is not merely an aspiration, but an imperative. This Government will boost crop and livestock production, and strengthen agriculture's forward and backward linkages to other sectors of the domestic economy, so as to exploit its full development potential.
26. To boost and diversify crop production, Government will expand the scope of the Farmer Input Support Programme to include and cover other crops such as soya, cotton, sunflower, and rice. It will also mainstream the electronic voucher system from 2013 to strengthen the private sector's role in supplying agricultural inputs. Sir, we will scale up investment in extension services, irrigation, training institutions and research and development in order to improve crop yields. Government will further invest in roads, power and storage facilities in order to improve small-holder farmers' access to markets.
27. Mr. Speaker, backward linkages will be promoted by increasing local production of key agriculture inputs such as fertilizers, seeds and pesticides. The Government will promote forward linkages by putting in place appropriate policies and incentives to encourage local value addition to crops and livestock products.
28. To boost the livestock sub-sector, Government will enhance livestock restocking; scale up animal disease research and development; and implement disease free zones.
29. Mr. Speaker, to create fiscal space to finance these core agriculture sector programmes, Government will restrict the operations of the Food Reserve Agency to managing the nation's strategic food reserve. Government will also ensure policy consistency with respect to crop marketing and exports that enables us to take advantage of regional export opportunities.
30. Sir, to re-energize the forestry sector Government will review and improve forest management systems; introduce forestry extension services; provide tree seedlings and enhance private sector participation in the sector.
31. Mr. Speaker, the agriculture and forestry policies and strategies I have outlined above are expected to provide the bulk of new employment opportunities, with about 550,000 new jobs targeted over the next five years.
Tourism
32. Mr. Speaker, His Excellency the President attaches great importance to tourism and in order to enhance its profile, he created the new Ministry of Tourism and Arts. Further, to raise the nation's visibility as a preferred tourism destination, we successfully bid, with Zimbabwe, to host the 2013 United Nations World Tourism Organisation Conference.
33. Sir, tourism is beset by a number of constraints which include uncompetitive tourism products characterized by high cost of rooms and consumables and poor access to tourism sites. This has led Zambia to have a low number of tourists per annum relative to our regional peers.
34. Mr. Speaker, our goal is to promote product diversification, invest more in tourism infrastructure, streamline licensing procedures and also enhance capacity in the hospitality industry. This will increase the number of international and domestic tourists and raise both the average length of stay and the average expenditure per tourist per day.
35. Sir, tourism is pivotal to the PF Government's platform to create gainful employment for Zambians. In this regard, the Government aims to facilitate the creation of approximately 300,000 jobs in the tourism sector over the next five years.
Manufacturing
36. Mr. Speaker, the constraints faced by the manufacturing sector include weak forward and backward linkages; underutilization of available capacity; the narrow range of products; the high cost of production; limited access to long term financing; low skill levels and generally outdated technology.
37. Sir, the strategic focus in manufacturing will be to promote products that can be competitively exported or successfully substituted for manufactured imports. We intend to promote and facilitate value addition to locally available raw materials by putting in place appropriate industrial infrastructure for small and medium scale enterprises, particularly in rural areas as well as promoting foreign direct investment in the Multi Facility Economic Zones. We will also tailor the investment incentives to entrepreneurs that invest in value addition ventures and promote employment. I will announce later this afternoon, specific measures in relation to fiscal incentives for the manufacturing sector to encourage local value addition and employment creation.
38. Further, medium to long term financing will be provided for micro, small and medium entrepreneurs through the banking sector.
39. Sir, we envisage that through this concerted and coordinated intervention in the sector, approximately 90,000 jobs will be generated over the next five years.
Infrastructure Development
40. Mr. Speaker, our ability to favourably compete in the global economy is severely hampered by inadequate economic infrastructure particularly roads, rail and power generation capacity. Consequently the cost of doing business is high and limits the scope for our productive sectors to grow and create employment. To address this, the PF Government is committed to investing heavily in Zambia's economic infrastructure, hence our successful entry in the international capital market to raise development finance for this purpose.
Transport Infrastructure
41. Mr. Speaker, in September of this year, His Excellency the President launched the Link Zambia 8000 Project. The project will extend the classified and paved road networks in the country. The aim is to link all provincial capitals and open up the country to investment, particularly in rural areas to enhance accessibility to markets.
42. Sir, the Government has planned to pave about 2,000 kilometres of township roads using labour-intensive paving block and cobblestone technology. This environmentally friendly and labour intensive technology will be piloted in 15 sites across the ten provinces, creating over 20,000 jobs.
43. Mr. Speaker, rail is one of the most efficient forms of transporting bulk and time sensitive commodities such as copper. Over the last decade, lack of re-capitalization, and general neglect of the rail network has resulted in dilapidated rail stock and unreliable service. Consequently, low volumes of merchandise are being transported by rail with traffic being diverted to an already over-burdened road network, which raises the cost of road maintenance and rehabilitation. It is in this context that Government made a decision to terminate the Concession Agreement for the Railway Systems of Zambia.
44. Sir, in order to revamp the rail transport system, Government intends to make significant resources injections in this sector, with the aim of leveraging further support from the private sector.
Energy Infrastructure
45. Mr. Speaker, reliable supplies of energy such as electricity and petroleum products are key in driving the wheels of commerce and industry. Honourable Members of this House are aware of the challenges in this sector which include frequent disruptions of power supply.
46. Sir, the Government will partner with the private sector in order to increase installed generation capacity, improve the transmission and distribution infrastructure, and expand rural access to electricity. To this end, the Government is working with strategic partners to develop the Itezhi-Tezhi and Kafue Gorge lower power stations and complete the extension of the Kariba North Bank Power Station, amongst other projects.
47. Mr. Speaker, with regard to the petroleum sub-sector, Government will continue constructing fuel depots across the country. The Government will also continue to promote private sector investment in the use of renewable energy and alternative sources of energy such as solar, bio-mass, geo-thermal and wind.
48. Sir, our aim is to generate at least 90,000 direct jobs in the energy sector.
49. Mr. Speaker, the revenue and expenditure measures that I will outline later in my address, will clearly demonstrate actions the PF Government is taking to achieve the objectives for the priority sectors I have outlined.
Social Sector Policies
50. Mr. Speaker, the ultimate goal of the Government's economic growth and development strategy is to improve the quality of life of all Zambians. We attach the highest priority to education, health, housing and water and sanitation, as the most strategic areas for eradication of poverty and entrenchment of development. Sir, by focusing on education, health, housing and water and sanitation, we are taking a preventive, rather than a curative approach to the many socio-economic ills that besiege our society.
51. Sir, in education, the focus will be on expanding access to high school and tertiary education and improving quality at all levels. Further, the Government will scale up youth development programmes with the focus on skills development through the construction and rehabilitation of TEVET institutions.
52. Sir, efforts in the health sector will be on improving service delivery, particularly in rural areas. In addition, Government will scale up the provision of essential drugs and medical equipment and other supplies. We will embark on an ambitious programme of upgrading all hospitals starting with the three referral hospitals - University Teaching Hospital and the Central Hospitals in Ndola and Kitwe.
53. In the area of water and sanitation, Mr. Speaker, the strategic focus will be on efficient provision of reliable and safe water and sanitation services in both rural and urban areas. This will be done through the rehabilitation and construction of boreholes in rural areas. In urban areas, development and rehabilitation of water supply and sanitation infrastructure will be up-scaled. The Government will also strengthen the capacity of water utility companies and other institutions in water and solid waste management.
54. Over the medium term, Government will facilitate the construction of low cost housing in order to narrow the current housing deficit. In addition, Government will construct institutional houses particularly in the education and health sectors.
Monetary and Financial Policies
55. Mr. Speaker, our aim in 2013 is to maintain low inflation of not more than 6.0 percent. In this regard, the Bank of Zambia will regularly review the performance of the Policy Rate and continue to use market-based instruments. In the foreign exchange market, the Government will maintain a flexible exchange rate regime and the Bank of Zambia will only intervene to smoothen short term volatility and continue to build reserves.
56. Mr. Speaker, in January 2013, the Bank of Zambia will effect the new minimum nominal capital requirement from the current K12 billion to K104 billion for locally owned banks and to K520 billion for foreign owned banks. This will promote stability of the financial sector and enhance commercial banks' capacity for lending to the private sector.
57. Sir, the level of financial sector intermediation is still low, with only 37.0 percent of the bankable population having access to banking services. The lending-savings rate spread remains wide and our private sector lending to GDP ratio is low relative to regional averages. In view of this, I will bring to this august House a Bill aimed at strengthening corporate governance in the sector, and enhancing both competition and consumer protection.
Debt and Aid Policy
58. Mr. Speaker, with Zambia becoming a lower middle income country, access to grants and concessional loans will decline. While we will continue to engage our Cooperating Partners in sourcing concessional loans and grants, Government will increasingly need to resort to non-concessional loans to supplement domestic resources to finance development.
59. Sir, we remain mindful of our inescapable duty to never again burden future generations with unsustainable debts. In this regard, we will institutionalise a rigorous appraisal system for screening investment projects in order to ensure that borrowed funds are only applied to infrastructure projects that directly and demonstrably contribute to the nation's economic growth. We will also promote transparency by conducting regular debt sustainability analyses.
Mining Sector Regulation
61. Mr. Speaker, it must be noted and acknowledged that apart from generating employment both directly and indirectly, and tax revenues, the mining sector generates about three-quarters of Zambia's export earnings. Sir, the current problems in the management of our mineral resources include the lack of systems to monitor and account for what is produced and exported. This lack of oversight adversely affects our domestic resource mobilization efforts and development planning.
62. It is an immediate economic imperative for Zambia to put in place systems and institutions of governance to reverse this trend. Mr. Speaker, in 2013 Government will decisively address this matter through adequately resourcing and equipping the Ministry of Mines, Energy and Water Development to enable it assess the nature, quality and quantity of minerals being mined and exported.
63. To further augment these efforts, I will present to this House a Bill to strengthen penal sanctions for false reporting of mineral production and export information. This entails that all mineral exports and proceeds will be strictly monitored through an integrated framework.
Tax Policy Reforms
64. Mr. Speaker, major tax reforms were undertaken in 1992 which resulted in the creation of the Zambia Revenue Authority and the introduction of a broad-based consumption tax, Value Added Tax, among others. Over the last two decades we have not effectively built on these reforms. This has partly resulted in a declining tax to GDP ratio due to a proliferation of inefficient tax incentives and an increasingly non- performing VAT system.
65. Sir, in 2013 the Government will undertake a holistic tax reform, focusing on the following:
a) diagnostic review of the entire tax system;
b) simplification of the tax system for small and medium enterprises;
c) review of the tax incentives to promote equity and buoyancy; and
d) continue modernizing tax administration.
Public Financial Management Policies
66. Mr. Speaker, as a responsible Government, we are committed to ensuring the optimal, transparent and accountable use of the limited public resources at our disposal. With the expiry of the Public Expenditure and Financial Accountability (PEMFA) reform program in December 2012, Government is currently designing a new framework.
67. One critical area in the new framework is public procurement reforms. From January 2013, the Zambia Public Procurement Authority will no longer undertake procurement on behalf of procuring entities. Its role will now be that of oversight and regulating public procurement.
68. Mr. Speaker, the use of direct bidding or single sourcing will, however, require approval by the Zambia Public Procurement Authority until full decentralization is complete. All public institutions are directed to abide by the procurement laws and follow laid down procedures.
Decentralization Policy
69. Mr. Speaker, the devolution of power to democratically accountable councils remains a central goal of this administration, which is committed to the full participation of all Zambians in the design and implementation of their governance and development programmes.
70. To demonstrate this commitment, Government will fiscally empower councils from 2013 by initiating revenue sharing arrangements, and beginning to assist them to dismantle their debts and their outstanding contractual and statutory obligations. I will give more details of these arrangements later. Further, His Excellency the President has created new districts, and will create more, to form additional hubs for bringing Government and development closer to the people.
PART III THE 2013 BUDGET
71. Mr. Speaker, the budget for 2013 is formulated against the backdrop of significant challenges in both the global and domestic economies. Apart from ensuring resilience of the economy against external shocks, the major challenge is to address the huge backlog of development arrears and the structural deformities and imbalances in our national budget.
72. Sir, it is as unacceptable as it is unsustainable that in much of the post-independence era recurrent expenditure has eclipsed the development budget. Steps have been taken in the recent past to remedy the situation and a major aim of the 2013 Budget is to further reorient the budget towards increasingly enhanced capital expenditure in a wider scope of sectors.
73. Mr. Speaker, these intractable structural imbalances in the budget cannot be remedied at the stroke of the pen. There is, however, a compelling need for us to embark on bold and relentless steps to remove the various hindrances to accelerated and inclusive growth. The Budget for 2013 that I now propose to this august House, will be the beginning of these bold steps that give practical effect to our efforts to achieve fully inclusive growth.
74. Mr. Speaker, the allocation of resources in the 2013 Budget has been informed by the policy priorities and objectives of this administration. The major areas of health, education and skills training, agriculture and local government have been prioritized alongside sectors with high employment generation potential, that is, tourism, infrastructure development and manufacturing.
75. Sir, in 2013, Government proposes to spend K32.2 trillion, which is 26.6 percent of GDP. A total of K24.7 trillion or 76.8 percent of this expenditure will be financed by raising domestic revenues, a further K1.5 trillion or 4.6 percent will be financed from grants from our Cooperating Partners, while the balance of K5.9 trillion or 18.4 percent will be raised by external and domestic borrowing
2013 EXPENDITURE ALLOCATIONS
76. Sir, in line with the sector policies outlined in Part II, I now discuss the supporting expenditure allocations by functions of the Government.
Economic Affairs
77. Mr. Speaker, in line with Government's development agenda, substantial resources have been allocated for economic affairs programmes. The outlay has been increased from the 2012 allocation of K8.1 trillion to K8.9 trillion, with the bulk of the allocation going to agriculture, energy and transport.
78. Sir, as I have already stated, the agriculture sector is expected to contribute over half of the new employment opportunities over the next five years. I have therefore allocated K1.9 trillion to this sector. Of this amount K1.1 trillion has been provided for core agriculture programmes including those aimed at promoting the sector's diversification and cater for livestock, fisheries, crops and irrigation development. I have also allocated K500.0 billion to the reformed Farmer Input Support Programme, which by mainstreaming the e-voucher system, will also promote crop diversification. I have also set aside funds to recruit 900 additional extension officers.
79. In line with the policy for the Food Reserve Agency to focus on maintaining the national strategic food reserve, I have allocated K300.0 billion for the 2012/2013 marketing season.
80. Mr. Speaker, this Government promised to improve the quality of our economic infrastructure including our road network. As a demonstration of our commitment to develop an efficient and modern road network, I propose to spend K3.4 trillion in 2013. This will facilitate work on at least 1,500 km of our roads. While on-going projects will be continued, the focus for new roads will be on roads identified in the Link Zambia 8000 Programme.
81. Mr. Speaker, in order to divert heavy traffic from road to rail, and thereby reduce future road maintenance costs and lower the cost of doing business, the Government will work on improving the efficiency of the railway system. Government has mobilized K642.6 billion to recapitalize the rail network.
82. Sir, I alluded to the challenges in the energy sector and the grave risks that power shortages pose to our economic development. I have thus allocated K1.4 trillion to this sector out of which K984.3 billion has been provided for electricity generation, transmission and distribution infrastructure. A total of K336.3 billion has been set aside for the rural electrification programme.
83. With regard to the tourism sector, I have provided K32.3 billion for tourism marketing and promotion, with particular focus on the UNWTO conference that will be held in Livingstone in August 2013. In support of the hosting of the UNWTO, I will later propose tax concessions in my revenue measures.
Education
84. Mr. Speaker, I propose that a total of K5.6 trillion be spent in 2013 for the purpose of providing quality education and skills training to our children and the youth. This represents a 15.8 percent increase over the 2012 allocation.
85. Sir, it is this Government's intention to revamp secondary and tertiary education so as to significantly improve the progression rate of pupils that are being produced from our primary schools. I have, therefore, allocated K393.3 billion in 2013 for the development of secondary school infrastructure across the country. A further K475.1 billion has been earmarked for operations and expansion of infrastructure in universities, colleges and trades training institutes.
86. Sir, I have also allocated sufficient resources to facilitate the net recruitment of not fewer than 5,000 teachers.
87. In addition to the funds allocated to the trades training institutes for skills training, I have allocated an additional K50 billion to empower unemployed and vulnerable youth with vocational skills.
Health
88. Mr. Speaker, with regard to health, I have proposed an allocation of K3.6 trillion or 11.3 percent of the 2013 Budget. This represents an increase of K1.0 trillion or 40.7 percent over the 2012 allocation.
89. Sir, a notable allocation in the sector is the K594.1 billion for drugs and medical supplies an increase of 112.3 percent over the 2012 allocation. In addition, K110.8 billion has been provided for the procurement of varied medical equipment.
90. Mr. Speaker, in addition to the K186.1 billion that has been set aside for infrastructure development in the health sector, a further K204 billion has been provided for the University Teaching Hospital and the Central Hospitals in Kitwe and Ndola.
91. Sir, I have also allocated sufficient resources to facilitate the net recruitment of not fewer than 2,000 front line medical personnel.
General Public Services
92. Mr. Speaker, for General Public Services, a provision of K8.4 trillion or 26.2 percent of the budget has been made. Out of this amount, I have allocated K2.5 trillion to service domestic and external debt.
93. Sir, in order to fiscally empower local government ahead of sector devolution, grants to councils have been restructured and increased. Further, revenue sharing arrangements have been introduced. In this regard, the allocation for council grants has increased to K498.6 billion in 2013 from K257.1 billion in 2012 which is an increment of 93.9 percent. An increased proportion of the grants to councils has been allocated to the restructuring grant to assist councils dismantle their debts and outstanding statutory and contractual obligations.
94. A further K204.0 billion has been set aside to commence the construction of infrastructure for other Government departments in the newly created districts and provincial capitals.
95. Sir, other provisions include K200.0 billion for compensation and awards for payment of litigation cases ruled against the Government. A further K20.0 billion has been provided for the constitution making process in 2013.
Public Order and Safety
96. Mr. Speaker, the Government proposes to spend K1.3 trillion or 4.2 percent of the budget on Public Order and Safety. To support the fight against corruption I have increased the allocation to the Anti Corruption and Drug Enforcement Commissions by 11.2 percent to over K100 billion.
97. The Government will also continue to strengthen the Zambia Police Service by recruiting and modernising their operations. In addition to the K30 billion allocated for the modernisation of the Service, I have also made sufficient provisions for the net recruitment of 800 police officers.
98. Further, K76.3 billion has been allocated for infrastructure development for the Judiciary, Ministry of Home Affairs and the Drug Enforcement Commission. These amounts will primarily go towards the construction of court buildings, prisons and border infrastructure.
Housing and Community Amenities
99. Mr. Speaker, in order to tangibly improve the quality of life of our people, I have allocated a total of K1 trillion to invest in housing and community amenities. Within this allocation, K783.8 billion will be used to enhance access to safe water and good sanitation for our people.
100. Sir, this includes the drilling of over 2,500 boreholes countrywide under the National Rural Water Supply and Sanitation Programme. The balance of the funds will be used to invest in other housing and community amenities including the construction of low cost housing for the less privileged.
Social Protection
101. Mr. Speaker, a total of K892.2 billion has been allocated for social protection programmes. Of this amount, K616.9 billion has been provided for the Public Service Pension Fund. In addition, K83.1 billion has been provided for various social safety nets which include the Public Welfare Assistance Scheme and social cash transfers.
REVENUE ESTIMATES AND FINANCING
102. Mr. Speaker, to support the expenditure I have outlined above, Government expects to raise a total of K32.2 trillion in revenues and financing. Domestic revenues will account for 76.8 percent, support from Cooperating Partners will account for 4.7 percent and domestic and foreign financing will account for 18.4 percent.
108. Mr. Speaker, to further enhance the take-home pay of employees, I propose to increase by 64.5 percent, the tax deduction for pension contributions, to K255,000 per month.
109. Sir, as a result of these two measures, an additional K257.3 billion will be put in the pockets of our industrious workers.
110. Sir, as a clear demonstration of our commitment to restore a culture of savings and investment, I propose to remove tax on interest earned by individuals from savings and deposit accounts. In the same spirit, I further propose to abolish the medical levy which is currently charged on interest earned on savings and deposit accounts, treasury bills, government bonds and other similar financial instruments.
111. The total revenue impact of these two measures is a loss of K40.6 billion.
112. Mr. Speaker, in order to compensate for the revenue loss arising from the above measures, I propose to introduce property transfer tax at the rate of 10 percent on the sale or transfer of a mining right. I also propose to reduce to 25 percent from 100 percent the capital expenditure deduction rate, applicable in the mining sector, and further provide that capital expenditure will only be claimed for deduction from the year the capital asset is brought into use in the business.
113. Sir, I also propose to apply transfer pricing rules to interest payments made by mining companies. This is meant to ensure that interest payments are not only subject to thin capitalisation rules but also transfer pricing rules, where the rate on interest between related or associated parties is not at arm's length.
114. In addition, I propose to increase the withholding tax rate on payments to non-residents for management or consultancy fees and royalties to 20 percent from the current 15 percent.
115. Sir these measures will generate a total of K265.7 billion.
116. Mr. Speaker, to promote efficiency in tax administration and reduce the cost of tax compliance for micro, small and medium enterprises, I propose to increase the threshold under which businesses are required to pay taxes on a turnover basis to K800 million from the current K200 million annual turnover.
117. As a result of improved efficiency in tax administration, in this regard, Government will save a total of K2.6 billion.
VALUE ADDED TAX
118. Mr. Speaker, I propose to zero-rate bread and wheat for Value Added Tax purposes. This is in order to reduce the cost of living for families as well as to promote domestic production of wheat and wheat products and enhance competitiveness.
119. Sir, this measure will result in a loss of more than K100 billion.
120. Sir, in tandem with the measure to promote efficiency in tax administration and reduce the cost of tax compliance for micro, small and medium enterprises, I propose to increase the Value Added Tax registration threshold to K800 million per annum from the current K200 million. Sir, businesses below this new threshold that have the capacity to meet the necessary accounting requirements for VAT registered suppliers, have an option to apply for voluntary registration.
121. As a result of improved efficiency in tax administration from this measure, Government will save a total of K164.6 billion.
122. Mr. Speaker, polymer granules, plastic and liquid polymers, jute bags and synthetic woven bags are currently exempt from VAT. This makes the production of synthetic bags and other plastic articles uncompetitive, as producers of these items are not able to claim input VAT suffered in the production process. Sir, I propose to standard rate plastic polymer
granules and liquid polymers, synthetic woven bags and block bottom woven bags.
123. Sir, the effect of this measure will be a gain of K59.6 billion
124. Sir, I have proposed to reduce the validity period within which a tax invoice can be used to make a VAT claim from the current twelve months to six months, in order to streamline tax administration and reduce the risk of tax fraud.
CUSTOMS AND EXCISE
125. Mr. Speaker, regarding measures on customs and excise policy, I seek to address matters relating to:
a) reducing the cost of doing business;
b) supporting local value addition initiatives and promoting the manufacturing sector;
c) promoting inclusive growth and development through employment creation; and
d) fostering growth of the tourism sector.
126. Mr. Speaker, despite the stable and rapidly growing economy, the cost of doing business in Zambia remains prohibitively high. This holds-back the entrepreneurial potential of our people and is counter-productive to investment, employment creation and poverty reduction.
127. Mr. Speaker, in order to reduce the cost of doing business and make capital equipment more affordable, I propose to remove customs duty on a wide range of mechanical and electrical machines and machine tools. These include, among others, engines of all types, cranes of all types, conveyor belts, machines for cutting, grinding, polishing, drilling and welding, vacuum and liquid pumps and sprayers of all types.
128. Sir, to promote information and communication technology, I propose to remove customs duty on automatic data processing machines; magnetic or optical readers, and machines for transcribing and processing data.
129. Mr. Speaker, in view of the challenges we face in the supply of electrical power, I also propose to remove customs duty on wind powered engines, gas stoves and electrical capacitors.
130. Sir, in order to support private sector participation in the provision of cost effective quality health and veterinary care, I also propose to remove duty on the following equipment:
a) cameras specially designed for medical or surgical examination of internal organs;
b) electro-cardiographs;
c) ultrasonic scanning and magnetic resonance imaging apparatus;
d) dental drill engines, dentures, bone reconstruction cement; and
e) instruments and appliances used in dental science.
131. Mr. Speaker, I have noted with satisfaction the number of companies that are involved in the manufacture of various aerated non-alcoholic beverages and packed drinking water. However, the current 10 percent excise duty on these drinks has had the effect of constraining the industry's growth potential. I therefore propose to remove the excise duty on carbonated drinks and packed water.
132. With this measure, I expect that these drinks will become more affordable for Zambians. This will spur the growth in the beverage sector, contribute to the creation of opportunities for forward and backward linkages in the economy, as well as promote employment.
133. Mr. Speaker, in order to promote public and private sector investment in rail transport, reduce the cost of doing business for industries transporting bulky products, and reduce future road maintenance costs, I propose to remove customs duty on locomotives and carriages, and rail traffic control equipment.
134. Sir, to encourage rural based tourism and the fishing industry, and make water transport safer and more accessible, I propose to remove duty on refrigerated fishing vessels, canoes, cruise and ferry boats, dredgers, pontoons and other water vessels.
135. Mr. Speaker, the use of motor cycles is critical to improving access, especially over the rugged terrain in rural areas. Similarly, the availability of ambulances is vital not only with regard to transporting rural patients to referral health facilities, but also enhancing access to mobile health care country wide. Therefore, I propose to remove customs duty on both motor cycles and ambulances.
136. Sir, in order to support the differently-abled, I propose to remove duty on devices and imported modified motor vehicles as provided for in the Persons with Disabilities Act. No. 6 of 2012.
137. Mr. Speaker, our PF manifesto alludes to the importance of sport in shaping the fabric of life through recreation and healthy living. In order to encourage private sector participation in sports development, I propose to suspend duty on equipment used for physical exercise, gymnastics, athletics and other sports. Sir, I am however, confident that with time the domestic economy will develop sufficient capacity to manufacture most of these sporting equipment. Therefore the removal of duty will only be for a period of 3 years.
138. Sir, as a result of the above measures the Treasury has put back K186.2 billion into the Zambian economy.
RATIONALISATION OF TAX INCENTIVES FOR EMPLOYMENT CREATION AND VALUE ADDITION
139. Mr. Speaker, in support of our strategy to promote local value addition, I propose to increase customs duty on flat rolled products of iron or non-alloy steel used in the manufacture of roofing sheets. I further propose to increase duty on similar products excluding those coated with tin and lead. Similarly I intend to increase customs duty on yarn synthetic stable fibre not put up for retail sale.
140. Sir, the estimated gain from these measures is K76.2 billion.
141. Mr. Speaker, our current tax incentive regime remains one of the most generous in the region but this generosity has not translated into creation of decent employment opportunities for our people. As part of our resolve to review the tax incentives regime, I propose the following changes.
142. Sir, this budget will make it a requirement for tax incentives to be granted only when the investor meets their obligations related to employment creation for Zambians. This will be done by amending the Zambia Development Agency Act, the Income Tax Act and the Customs and Excise Act, to make the realisation of employment pledges by investors an essential trigger for them to access the incentives.
143. Sir, I also propose to revise upwards to 20 per cent from zero the Withholding Tax payable on any management fees, consultancy fees or interest payment to a non-resident contractor by a person developing a Multi-Facility Economic Zone or an Industrial Park as well as any person operating in a Multi-Facility Economic Zone or an Industrial Park.
144. On a similar note, I propose to change the effective date on which tax exemptions on business profits and dividends for businesses developing or operating in priority sectors,
Multi-Facility Economic Zone and Industrial Parks take effect. Sir, the effective date of the exemptions will now be the date of commencement of business operations instead of the date of first declaration of profits or dividends, currently in place.
145. Mr. Speaker, to further rationalise granting of incentives, I propose to standard rate goods and services when supplied to or imported by businesses operating in Multi-Facility Economic Zones or Industrial Parks.
146. Mr. Speaker in order to further promote local value addition I propose that, where exemption from customs duty is granted as an incentive, it will only apply on goods that are not locally produced.
SUPPORT TO TOURISM AND ARTS
147. Mr Speaker, in line with the interventions I have stated, aimed at enhancing the competiveness of the tourism sector, and in order to leverage the maximum benefit from hosting the 2013 United Nations World Tourism Organisation Conference, I propose to suspend duty on the following goods:
a) New motor vehicles for tourism enterprises that offer transport services; and
b) New articles and equipment needed to furnish or refurbish accommodation and catering facilities for businesses licensed as tourism enterprises.
148. Sir, as a clear demonstration of our commitment to leverage these benefits, the suspension will come into effect from midnight tonight and will last up to 31st December 2013.
149. Mr. Speaker, currently some tourist activities for which tour guide services are provided, are zero rated for VAT purposes, while the service of tour guiding is standard rated. I propose to remove the inconsistency by zero rating tour guide services. I further propose to extend the zero-rating of adventure tourism applicable to foreign tourists to local tourists. Sir, these measures are intended to foster development of the tourism industry and encourage local tourism.
150. In order to strengthen our local heritage and culture, and support the growth and marketing of the domestic music and visual arts industry, I propose to remove customs duty on charcoal drawing sticks, palette knives, mixers, microphones and magnetic tape.
HOUSE KEEPING MEASURES
151. Mr. Speaker I propose to amend the Income Tax Act, the Value Added Tax Act and the Customs and Excise Tax Act to update, strengthen and remove ambiguities in certain Sections of the tax legislation.
NON TAX REVENUE
152. Mr. Speaker, since assuming office I have noted that some of the fees for services provided by Government departments are far too low and have not been revised for a long time. I propose to effect changes to the relevant pieces of legislation in order to bring such fees to cost reflective levels and to raise revenue for development projects.
153. Sir, I have noted with grave concern the profligacy with which some revenue collecting statutory bodies have utilized and accounted for public resources. Consequently, I propose to make it mandatory for revenue collecting statutory bodies to deposit all their collections from various fees and fines into the Treasury.
154. I expect to raise K 267.7 billion from these non-tax measures.
155. Mr. Speaker, these measures, excluding the one I have indicated on tourism, will take effect on 1st January, 2013.
PART IV CONCLUSION
156. Mr. Speaker, the budget proposed for 2013 launches Zambia on a new path of inclusive development and societal transformation, where the benefits of growth are not merely recorded in dry statistics but felt tangibly by all Zambians in all areas that directly affect their material well being and those of their families. This is the promise that the PF Government made to the Zambian people last year and it is a promise that we are unswervingly committed to fully deliver upon.
157. Mr. Speaker, President Sata has got us to a good start on the governance plane by emphatically making corruption absolutely tolerance zero-rated. He has established a track record of diligence and dutifulness and being a manager with meticulous attention to detail. Unlike what we saw in the not too distant past, due primacy has been assigned to national interest and not personal glory and greed.
158. Mr. Speaker, our approval rating in the international place particularly in the financial community has shot up. Last month our first sovereign bond issuance at an order book of US$11.9 billion, was 24 times oversubscribed. Let us join the President in getting Zambia moving at full throttle. We need meaningful unity in diversity for unity must never be synonymous with uniformity.
159. We all in this House and outside there in the country need to embrace accommodation and tolerance for the opposite is not an option but a recipe for doom. All of us in this House and those outside who stake a claim to leadership must establish moral/ethical benchmarks that will be our guide, our roadmap and preferably our Modus Vivendi - our way of life.
160. Mr. Speaker, I beg to move.
Labels: 2013 BUDGET (ZM)
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COMMENT - Question: why is Standard Chartered Bank so concerned that the mining sector shouldn't be taxed?
2013 budget has reinforced investor confidence - Babb
By Gift Chanda
Mon 15 Oct. 2012, 14:00 CAT
THE 2013 budget has reinforced investor confidence in Zambia, says a senior Standard Bank official.
Analysing Zambia's 2013 national budget, Yvett Babb,
Standard Bank Africa researcher, said
there has been a lot of speculation on whether the PF government may introduce new revenue measures that may be detrimental to the mining sector but that that has not been the case in the 2013 national budget.
Finance minister Alexander Chikwanda presented a K32.2 trillion budget for 2013 on Friday, raising spending to fund infrastructure and underscoring the government's commitment to creating jobs for majority youths who propelled the PF to power last year.
Chikwanda said spending would rise slightly to 26.6 per cent of GDP from 26.5 per cent in 2012, although the budget deficit would remain unchanged at 4.3 per cent of GDP.
"We know that they Zambia went through a period where they had windfall taxes on the price of copper and there were suggestions under the previous election campaigns that the PF government may seek to reintroduce that but they have been adamant since they came to office that they would not do so," she said on a CNBC Africa special programme on Friday shortly after Chikwanda presented next year's budget.
"There are however continued concerns that the mining sector is not contributing enough to the budget, but we have not seen significant revenue measures that may be detrimental to the mining sector which I think is another positive thing."
Babb said despite being under pressure to create jobs promised to youths who propelled the party to office last year, the PF government did not fall into the trap of introducing new revenue measures that would be less favourable to foreign investors.
She said the PF government's first wholly-developed budget was very much in line with the party's vision of creating more jobs in key sectors such as agriculture, manufacturing and tourism.
"…the positive thing that we have seen from this budget is that they have maintained the budget deficit at fairly suitable and prudent levels at 4.1 per cent of GDP. We have seen they have increased allocation to infrastructure development specifically transport and energy infrastructure and we have seen that they have maintained the levels of recurrent expenditure," she said.
"What we will need to understand further are details regarding the amount of money being allocated to the subsidies. That amount has obviously exceeded previous budget expectations. We have also seen that public expenditure on wages has exceeded budget expectation but again we are keen to see whether this budget has accommodated this increase."
Asked whether Zambia was on the right track in terms of achieving sustainable development, Babb emphasised that job creation and poverty reduction would be crucial for the country in the medium term.
"In the last budget they government did give some direct revenue measures in terms of increasing the tax band for personal income tax therefore allowing for declining in obligation by small and lower earning individuals.
They reduced the VAT on a number of commodities; these all can be seen as supporting lower income individuals in the broader economy but of course the overall question to generate jobs will be key over the medium term and whether this government is going to be successful in terms of addressing the levels of poverty," Babb said.
And secretary to the treasury Dr Fredson Yamba said the 2013 national budget addressed the social agenda President Michael Sata had put forward for the country.
He said significant amounts had been allocated to pressing needs in the health, education and local government sectors.
Yamba further said the government planned to finance the budget deficit of 4.3 per cent of GDP, through domestic and external borrowing.
He said the government had already done a debt sustainability analysis and was sure that the country was in a position to finance that deficit.
Yamba further said the government consulted extensively with stakeholders regarding new tax measures in the budget.
In terms of the breakdown of expenditure of the Eurobond, Yamba said about US$255 million would be spent on capital projects in hydro energy transmission and distribution.
He said the government was going to inject US$430 million in road and rail transport infrastructure.
"The other amounts will go to human capital and access to finance. In this particular aspect we want to look at the rehabilitation of central hospitals, that is three of our referral hospitals because we would like to ensure that we have these hospitals up and running with the right diagnostic equipment.
So we are going to put in US$29 million and access to finance which is one of the major constraints for small and medium business will have US$20 million. Basically that is how the Eurobond will be used but other expenditures, US$1.4 million are fees and transaction cost. We also have a discount premium of US$14.6 million."
Labels: 2013 BUDGET (ZM), ALEXANDER CHIKWANDA, DEVELOPMENT
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It's a development budget - Kwesiga
By Mwala Kalaluka
Sun 14 Oct. 2012, 14:30 CAT
AFRICA Development Bank country representative Freddie Kwesiga has hailed Zambia's 2013 national budget presented last Friday as a development budget saying 'this is the way to go'.
And former Republican vice-president Enoch Kavindele says the 2013 budget is an excellent one and will get the country to a good start.From front page
Meanwhile, Auditor General Anna Chifungula says the 2013 budget is a plus.
In an interview shortly after finance minister Alexander Chikwanda delivered the K32.2 trillion 2013 budget speech at Parliament on Friday afternoon, Dr Kwesiga said he liked the manner Chikwanda presented the core areas of the budget, sector by sector.
"What else did you expect? I think for me this is a development budget," said Dr Kwesiga. "This is the way to go."
He said that the 2013 budget had given very good impetus in areas where the government is spending its resources.
Kavindele said that the PF's maiden budget had gone beyond expectation.
"We are on to a good start. Everything has just gone very correct," said Kavindele.
When asked if the 2013 national budget was indicative of the country's departure from donor dependence, US Ambassador to Zambia Mark Storella said he could only comment after studying the document.
"I have to study it," said Ambassador Storella as he walked out of the Parliament building from the VIP gallery where he had been following Chikwanda's budget presentation with other diplomats.
During presentation of the budget in the House, Chikwanda said President Michael Sata had gotten the country to a good start.
"Unlike what we saw in the not so distant past," Chikwanda said, "let us join the President in getting Zambia moving at full-throttle."
Chikwanda said in his concluding remarks that those that stage a claim of leadership need to set a moral benchmark and embrace accommodation and tolerance.
"For the opposite is not an option but a recipe for doom," said Chikwanda as opposition members of parliament shouted: "Doom, Doom."
Kick-starting the parliamentarians' debate on next year's budget, Bangweulu PF member of parliament Chifita Matafwali described it as an antidote.
"It is always joyous to be associated with a momentous occasion," said Matafwali as opposition members of parliament urged him to take it easy.
"Today's event, on this 12th day of October in the year of the Lord 2012 is an historical and indeed momentous day. It is indeed the first PF moulded budget."
Zesco managing director Cyprian Chitundu said that the money the government had directed to the energy sector in the 2013 budget showed that it wants to do things differently.
"The energy sector has lacked investment for a number of years and we are late," Chitundu said. "Kafue Lower Power Station should have been done 18 years ago. Itezhi-tezhi should have been done 10 years ago. Now we are doing these projects."
Chitundu said the country's energy sector could not continue talking about the glory that was created by first Republican president Dr Kenneth Kaunda.
"This government is saying let us do things differently," said Chitundu. "Once we have constant power supply, the cost of doing business will be lower...and we are very happy with the money that has been given to us. What we have to do now is to start performing."
Meanwhile, Chifungula said the 2013 budget was a plus because it was growth-oriented but she insisted that her office had to be given a higher role in ensuring that there was prudent management of resources in view of the fact that K32.2 trillion was a lot of money.
"Even when you look at the way they are going to spend the Euro Bond, they are looking at energy, road and infrastructure," Chifungula said. "There is nowhere where it will go to consumption at all. It is development."
Outlining the manner in which the recently-acquired US$750 million Eurobond would be expended, Chikwanda said US$255 million would go to the energy sector, US$430 million would be spent in the transport and road sector, US$20 million would go to the Development Bank of Zambia DBZ for the small and medium enterprises, US$29 million on human capital on access to finance while US$1.4 million would go to fees and transaction costs among other disbursements.
"No room for speculation," said Chikwanda.
However, Chifungula said with the increased funding that had been allocated to the Anti-Corruption Commission ACC and Drug Enforcement Commission DEC( over K100 billion), these institutions would now have no excuses in acting on her reports.
"These increased funding are pluses. It is long overdue," Chifungula said. "With this kind of money which is coming to spending agencies, there will be need, especially for our office, to take a higher role. K32.2 trillion is a lot of money."
On the government's decision to delegate the Zambia Public Procurement Authority ZPPA from active involvement in public procurement to an overseer and regulatory role, Chifungula said that was also a positive move.
"That is how it is in most countries. The public procurement is supposed to play an oversight role to see that procedures are being followed," said Chifungula. "They will now have more time to carry out inspections in the spending agencies."
Labels: 2013 BUDGET (ZM), ALEXANDER CHIKWANDA, ANNA CHIFUNGULA, BUDGET, ENOCH KAVINDELE, FREDDIE KWESIGA
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