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Alba Iulia
Saturday, August 8, 2020

FDD’s Reaction to the National Budget

Columns FDD's Reaction to the National Budget

NEW BUDGET, SAME OLD STORY

Hon Felix Mutati and his drafters of the budget tried very hard to sound convincing and forward looking in their wording of the 2017 National Budget, but like the old cliché goes the devil is in the detail. A critical analysis of the 2017 budget has proved that there is really nothing fundamentally new or radical about this budget; The 2017 National Budget, just like the previous ones under the PF Government lacks radical measures to eradicate poverty, create jobs, create wealth, spur growth and ensure sustainable development. Just like the previous PF budgets, there is really nothing much in this budget that can significantly turn the fortunes of the poor farmers or the working poor or the small and medium scale businesses.

Finance Minister,Felix Mutati arrives at the parliament building for the presentation of 2017 budget in Lusaka.
Finance Minister,Felix Mutati arrives at the parliament
building for the presentation of 2017 budget in Lusaka.

There is an enormous gulf, in fact a gigantic contrast between what Hon Mutati says are his macro objectives and the measures he has actually proposed to achieve the same said macro economic objectives. He says we should not spend more than what we have but his Government is creating more ministries as well as proposing the re-introduction of Deputy Ministers among other unnecessary government expenditure; He says Agriculture and industrialisation will be the hub of Zambia’s economic recovery but his allocations to these sectors fall far below recommended thresholds; he says capital projects such as road constructions will be slowed but he goes ahead and allocate collosal sums of money in the budget towards the construction of the same roads; He says the Public Finance Act must be amended to make it more punitive to public officers who are embezzling public resources but his Government has serious inertia on acting on the Auditor General’s report despite the amended Republican Constitution being very instructive on what should be done with regards to thieving public officers.

In short, in terms of the quantum, the structure and focus, nothing really has changed in this year’s budget; The working poor will have to pay more in taxes than the mining conglomerates and other corporations put together. Small and medium sized businesses will either have to cut down on their business activities or cut down the size of their workforce or worse still fold up all together due to the ever rising cost of doing business, the massive hikes in taxes such as income tax rates, exercise duty, company income tax and other regulations such as lending rates that have drastically been adjusted upwards.

Let’s now break down the budget in terms of sectors and allocations.

Of the total budget of K64.5 billion Kwacha a total of K19 billion, that is 29% of the entire budget will be financed through borrowing.

1. GENERAL PUBLIC SERVICES

Out of a total of K18billion kwacha allocated to General Public Services, a whopping K11.5 billion of this money will go towards payment of debt leaving a paltry K6.5 billion for actual implementation of public services. Debt repayment and payment of arrears to road contractors and suppliers will gobble the biggest chunk of the entire general public service allocation. CDF has remained almost static at K1.4 billion despite the fact that the cost of goods and services is ever on the rise.

2.HEALTH

The biggest challenge beleaguering Zambia’s health sector is the lack of access to quality and affordable healthcare by our people.

The total allocation to the health sector is K5.8 billion representing 8.9% of the entire budget. To begin with this amount falls far below the recommended 15% threshold and to make matters worse, the bulk of this allocation is going to emoluments. Only slightly over K1billion will go towards the purchase of drugs, medical supplies and infrastructure development the rest, about K4.7 billion will go to emoluments.

3.MAPHUNZIRO

Like the health sector the biggest challenge hampering our education sector is the lack of access to quality and affordable education.

K10 billion, representing 16.5% of the budget has been allocated to the education sector. Of this about K8.4 billion will go to emoluments leaving very little for infrastructure development, training and research and development.

4.AGRICULTURE

President Edgar Lungu and his Ministers have spent alot of time talking about their vision to diversify our economy from one, depending on copper mining to one depending on Agriculture. And most people were expecting a revolutionary change to the allocation and structure of the budget money towards the agriculture sector but apart from the K55.4 million Kwacha that has been earmarked for a cashew nuts project in western province nothing much has changed to ensure a robust program of mechanisation, diversification and agro-processing. The allocation to FISP has remained static and the biggest question with regards to FISP is whether it has been effective in moving farmers from the peasantry bracket to the subsistence bracket and enventually to the commercial brackets. It seems FISP is there to just keep farmers stagnant in their poverty. Very few farmers are graduating from peasantry to subsistence due to inadequacy of FISP and the infective manner it is being administered.

I want to commend the Minister, however for proposing the removal of bans and price fixing because such measures distort production as they send uncertainty in the market.

Very little has been allocated to Rural Electrification. This will continue to undermine rural development because electricity just like fuel is the engine of production.

The story of irrigation has been on the cards for years now but nothing significant has been achieved. I would like the Hon Minister to explain what happened to the 150million dollars that was borrowed for irrigation projects as way back as 2014.

5. HOUSING AND SANITATION

Over 40% of Zambia’s population has no access to clean water and over 40% of our rural population has access to sanitation. We expected a significant amount of the proposed budget, as opposed to the K822 million to be allocated towards housing, water and sanitation because these are crucial in the provision of healthcare and reducing the burden on our healthcare system. Housing is dignity. Water is life and nyumba ni chimbuzi. This meager allocation will only have a 3% bearing on improving access to housing, clean water and sanitation. This is very minute.

6. ENERGY

It is now abundantly clear that loadshedding is damaging our economy as it is seriously hampering production. And it is also very clear that our over dependence on hydro power is not helping us. We expected a revolutionary change in the allocation and structure of both the budget and ZESCO with regards to energy but it’s the same old story.

The Minister should also have explained what happened to the Eurobond money which was meant to improve generation, transmission and distribution of electricity. What happened to that money. Equally what happened to the Eurobond money meant to revamp railway transport?

In terms of the percentage quantum Hon Mutati has significantly increased the allocation to social protection, however, the social cash transfer at about K192 per month is quite insignificant.

All in all, in terms of the quantum, the structure and focus, the 2017 budget is just the same as the previous budgets. In short, we have a new budget but the same old story. Zambians should just brace themselves for harder times.

Zikomo

38 COMMENTS

    • I was young and now i am old but i have never seen the Zambian budget fully implemented or1/4 of it. Its just words my brothers save your breath it will never happen until Christ comes, Africans are destined for poverty and we should just accept that, Where if the independence we fought for now that our own leaders are our new colonizes .

  1. Know it all by FDD President Nawakwi. Just like other former Finance Ministers, they want to mutilate their colleague’s work. Quite typical.

  2. Sad but true, once again a Zambian GRZ instead of exploring all available avenues of increasing value addition options & productivity of our nation, has focused its energy on squeezing ever more “revenue” from already overburdened citizenry, the reality is that the national cake that we continue to bake every year is too small for the number of diners @ the table! The PF GRZ needed to look @ how to bake ever larger national cakes going forward, only then can we expect to get bigger slices onto our various plates.

    Seems the next five years will be yet another wasted opportunity to reinvigorate our economy!…

    • @ Jeke
      true that the next 5 years will be another wasted opportunity to reinvigorate our economy.We lost a lot of tax payers monies during the compains.pamafi party and Jameson Vodka Chakolwa Rungu was careless and they need to account for every single coin spent…

  3. Just a contribution and an observations on 2017 budget Many though space :
    The national budget 2017 is weak on parity conditions as implied in the well assessed growth forecast and fiscal measures announced Let remove the idolatry of interest rates with them not having any meaningful impact You will need to see it consolidating as implied not to lose the ground there is a danger to recess or slump or stagnate To think you will recover the global economic fortunes and Global economic prospects for 2017 -2030 is still projected to be risky and as forecasted markets shall forever be in turmoil with spill overs amid weak growth in economies…

  4. Economies that are well positioned will emerge were as countries like Zambia risk submerging if this Budget is not well flexed For instance You can consider the worst case of not having the IMF package and best case of IMF package and surely you will see how your Capital Accounts and Current Accounts with look like
    Now from the investments perspective, investors will assess this budget carefully and most will be risk averse as the environment being created is such that the trends do not help to have so much hope in Zambian asset classes and securities so when you tighten,opportunise the business cycles and ensure the macroeconomic measures and policies implied…

    • Well said, you would however do well for all readers to be concise and simply state the fact we need monetary policy adjustments….interest rate is averse to any progressive economic efforts. In my opinion we ll never pull ourselves out of this situation for as long as we are consistently spreading ourselves thin, to move forward we need drastic actions that will temporarily leave some areas of the economy reeling but uplifting others for the long term and have it go around in that manner…..chilimba sectorwise. But then we have populism to contend with.

  5. implied must be analysed critically in as much as they relate to the level of inflation, unemployment, consumption, government spending, and investments These business cycles implied and being created in the budget 2017 must be in tandem with the rest of global markets especially the ones Zambia is inclined e.g. the Bricks and other emerging markets Then also align policies in terms of Government spending and see how corporates and firms activate business cycles to ensure that these measures have a good transmission mechanism Often when I hear I tend to pause and think the effect
    It should affect the overall level of activity within a country and the balance of austerity and…

  6. enjoyment must not be hash but carefully over a period of 3 year within the global economic outlook
    For instance when I look at the agricultural ,construction,manufacturing,transportation,ultilities,retail businesses and financial services including the other The budget has not provided that Initiative and impetus that it was expected to support the structure and drive the growth to the projected meagre 4% What this means is that there has to be flexibility and initiative to create an exciting environment even in this
    There are structure measures that are needed to at least cushion and balance the effect of measures to ensure our businessmen are insulated from…

  7. severe economic conditions seen in 2017
    When you look at the social scheme in pensions and cash transfer and see the longevity risk exposure of many of these our people in their retirement and living incomes ,you will observe that the budget 2017 has given SOCIAL security a leap service The problem is not in the allocation but longevity of incomes in jobs created and retirement adjusted incomes that are inflation adjusted

    To conclude the Budget indicators 2017 are weak on parity conditions and everything possible should be done to ensure its flexible enough to meet the unfolding financial and other commodity crisis that can impact both regional and globally

  8. You will need to reassess the global prospects and markets in regions and sub Sahara and the BRICA in particular as nothing may come from trumpets orientation

    The theme of the budget 2017 must also flow with the fiscal and monetary policy analysed Manufacturers in those debt dismantling may opt not to spend money but may behave like a currency trade who buys to always keep the dollar and the financial market mechanisms may not work as before to ensure that the intention of the minister are well supported to create that multiplier and velocity in the economy

  9. You will need to reassess the global prospects and markets in regions and sub Sahara and the BRICA in particular as nothing may come from trumpets orientation and avoid creating a further debt but instead steady to grow and avoid clamping the IMF support package Planning and critical review will be important given the exposure, the weak balance of payments and weak reserves position

    If there is no meaningful exports in value and volumes to depict the growth then it will be worse-off again in the long-term We need to increase the share of 32% exported goods in the emerging markets

  10. Okay with the level and thinking of DECENTRALISATION the equalization fund would be projected to grow and erode the savings from subsidies remove CARE must be made so that these councils do not INCURE mountains of debt in this new DECENTRALISATION system that will also be retrogressive to the Central Budget and will result in increased pressure and dissatisfaction amongst our people MOST of these councils have no created capacities

    Its a challenge you are decentralizing when you are weak and expenditure mismatch should be the issue to avoid Local authorities being a source of haemorrhage

  11. You were saying the budget is not being presented there is no money in the Treasury,the budget has been presented you come up with other criticism,ther will never be any perfection in the way things are done in Zambia just work hard for yoself and don’t trust any politian or else you wil have heart attack due to your expectations.

  12. Capital allowances and equipment are one thing on the side of the Budget lines and affecting specific sectors that have a long lag to realise needed revenues to meet cash flows now You need is Growth for value and commodities that will give you the Revenues you will need

    High to low faster growth in Sub and Brics will have a protracted deceleration in our economy and as a result growth will slump and our measures will fail We will be looking forward to have

    Diversification of regions will be better other than the look east casual approach

  13. A lot to be fixed

    “’Look at the Example of Angola for Instance here and see the emphasis
    The sharp decline in commodity prices in recent years has put severe strains on Angola’s economy. From an average GDP growth of 4.5% between 2010 and 2015, the country’s economy is expected to grow by only 2.5% in 2016 and 2.7% in 2017. The economy has recently undergone some structural changes to try to move away from its dependency on oil revenue. Time will tell whether it will be successful.
    Angola’s ranking as the third-largest GDP in sub-Saharan Africa is testimony to its natural resource wealth. However, this prominent position masks the socio-economic imbalances the country has been experiencing for decades. The drop in the oil price resulted in a shortage of revenue…

  14. that could be balanced only by a cut in public spending. Government spending was cut to $24bn from $30bn projected in the original 2016 budget, as revenues were also slashed to $18bn from $24.4bn. The unfolding of this cut is palpable. Rubbish collection in Luanda has stopped, which helped spread an outbreak of yellow fever from the capital’s vast slums to the rest of the country.
    Being the home of the wealthiest woman in a continent is an enormous contrast compared to Angola’s social and economic indicators. Angola ranks first in under 5 years old child mortality, with 157 deaths per 1,000 live births ; 12% of children are born with low weight; 2.2% of adults live with HIV ; adult illiteracy is still high, and gender inequality is rampant in every aspect of society.
    Structural…

  15. Changes
    In 2015, the government of Angola enacted a new private investment law (Number 14/15) and created a National Agency for Investment Promotion and Export of Angola, APIEX. The measures aim to stimulate economic growth, diversify the economy, and expand and foster greater participation from the private sector in Angola’s economic development.
    However, the new law has received a mixed reaction across the business community, as it raises taxes on the early repatriation of profits and dividends. For the first time, the law draws a clear distinction between foreign and domestic investors, and imposes local partnership requirements for foreign investments in key sectors – which some fear could dissuade international investors. Corporate income taxes were also reduced from 35% to 30%…

  16. The new investment law sets a minimum of 35% local participation or partnership in foreign investments and focuses on six strategic sectors: electricity and water; tourism and hospitality; transportation and logistics; telecommunications and information technology; construction; and media.
    .
    Agriculture and Fishing
    Angola’s agricultural sector accounts for only 11% of the country’s GDP. Recently, Angola shipped, for the first time in more than 40 years, a cargo of 17 tonnes of bananas to Europe. The growth of banana production in Angola was fuelled by Chinese money after agreements exchanging oil for infrastructure development were signed between the two countries back in 2004. Banana production grew from 76,000 tonnes in 2012 to 247,000 tonnes in 2013, which not only ended banana…

  17. banana imports, but also allowed exports to the neighbouring Democratic Republic of Congo.
    Cash crops, such as sugar and coffee, once major Angolan exports, are now being produced again, albeit only on a small scale compared with the period before the country’s 1975 2002 civil war. According to the Ministry of Agriculture, Angola produced 12,000 tonnes of coffee in 2014, its highest level for decades, but well below the colonial-period high of 200,000 tonnes. Most coffee growers are small scale and struggle to market their crops and deal with pests and disease.
    In May 2015, a Portuguese firm, Nabeiro, announced that it was buying out the Angolan state coffee firm, Liangol, whose operations it has been running for almost 15 years. Nabeiro paid $1bn for the company and has now taken over…

  18. Angola’s Ginga coffee brand. That is the kind of private investment that Angola needs in its agribusiness. Privatisation always has its risks, but private companies have a clear monetary incentive to be efficient and profitable, while state companies frequently run at a loss and provide room for corruption.
    In the sugar and bio-fuel business, Biocom, a public-private partnership, has set a challenging target for the end of the decade. The company owns a 100,000-acre farm located 300km east of Luanda, in Melanje, and is due to produce 256,000 tonnes of sugar by 2020, which would secure 50% of Angola’s domestic consumption. Besides sugar, the company will produce 33,000 cubic meters of ethanol and generate 235,000 MW of electricity. In 2016, the company will produce 47,000 tonnes of sugar,…

  19. , 16,000 cubic meters of ethanol and 155,000 MW of electricity. Biocom is owned by a partnership consisting of the state oil company Sonangol, the government investment fund Cochan, and Brazil’s Odebrecht.
    The fishing industry in Angola grew from 277,000 tonnes of fish and seafood in 2012 to 300,000 tonnes in 2013, of which 85% is consumed domestically. The country has a target to increase this output to 400,000 tonnes in the coming years. Angola has rich coastal waters and a well-watered interior. Its active fisheries also include rivers, freshwater lakes and reservoirs. The country’s coast is 1,600 km long and its exclusive economic zone waters cover 330,000 km². The country has plenty of potential to significantly increase the size of its fishing industry.
    Developing aquaculture and…

  20. expanding the fishing industry in Angola have the potential to generate jobs and to contribute to food security and poverty reduction, especially in rural and coastal areas. It is also a decisive sub-sector in Angola in terms of social impact. One-third of Angola’s animal protein come from fish, and artisan fishing represents 30% of the country’s total fishing activity countrywide. Many involved in the fishing industry are organised in co-operatives, and over 80% of their members are women.
    Angola is also developing its fish-farming potential. Its first major initiative at the Mucoso centre near Dondo, Kwanza Norte province, opened in April 2014. Bengo province, near Luanda, has several large lakes, such as Nagume, and lagoons that support traditional artisan fisheries. The Kwanza river…

  21. is also home to several existing and new dam projects. These dams can be stocked with additional fish from farms.””

    That is how angola is trying to resolve effectively its DEFICIT and MOVE away from Oil dependency Growth in Revenues Its was nice being hosted by Good people of Angola and nice buildings in Rwanda

    Join also the USA Africa business in South Africa and align to trump policies on 22 November 2016 it will be helpful for Zambia

  22. Comment: The comments though. I wonder if Zambians will ever learn to save time by summarising their thoughts. We all simply a bunch of talkers like the FDD author above! Parrots

  23. Eurozone Q3 Growth Remains Stable At 0.3% Eurozone economic growth stabilized in the third quarter, flash estimate from Eurostat revealed Tuesday. Gross domestic product expanded 0.3 percent sequentially in the third quarter, the same pace of growth as seen in the second quarter. On a yearly basis, GDP growth held steady at 1.6 percent. Both sequential and annual growth figures matched the estimate published on October 31. In the EU28, GDP climbed 0.4 percent from the previous quarter and by 1.8 percent from the same period of previous year

  24. The point is you are looking to brics euro and Americas for FDI and Business so you need to align your exposure accordingly and ensure your debt portfolio is also well balanced in repayment and other

    But if you have to do diversify your fortunes and avoid over exposure to the east and pick and some trumps and rebalance the economy to ensure its efficiency transparency and ethics to support growth and transmission mechanism

  25. Otherwise the decay and lack planning excesses and the behavioural east tendencies will not register any growth for Zambia Money is not all important but happiness and growth is so long as you can enjoy it

    You will not achieve any meaningful growth without ethics and transparency in the markets and investments and later along consolidate to save It will be far fetched and the Mufulira Look Eastly way is slowly eating the Zambian economy and has proved unsustainable model long-term ////

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