Felix Mutati’s budget is wrong and contradictory-Charles Kakoma

UPND Spokesman Charles Kakoma has described the 2017 national budget presented last Friday by Finance Minister Felix Mutati as wrong and contradictory.

Mr Kakoma said the priorities that Mr Mutati has set for the budget are that the entire budget offers no hope for the suffering masses unless a proper surgery is done.

He states that Mr Mutati’s pronouncement that Government has no business to be in business represents a policy contradiction between what President Lungu wants and what the Finance Minister is preaching.

Mr Kakoma said President Lungu in his speech to Parliament this year clearly stated that he wanted to see the newly created state owned Industrial Development Corporation (IDC) to take a leading role in Zambia’s industrial development agenda.

He said President Lungu wants one million jobs in the next five years and the Finance Minister is targeting 100,000 jobs next year adding that whoever advised President Lungu to make the 1 million jobs pronouncement was a joker.

“Even at a time when the economy was growing at 7% per annum, Zambia failed to create the 500,000 jobs that the President promised the youth. Now that economic growth will drop to 3.4% next year, how possible will it be to create 100,000 jobs. There is no magic to job creation but to grow the economy. Prospects for increasing employment are dim in an economy under stress,” he said.
Mr Kakoma observed that even the government itself has frozen employment in all ministries, except education and health.

“With the anticipated increase in costs of production as a result of increases in fuel and electricity tariffs, many businesses will shed off labour to remain afloat,” he said.
Below is Mr Kakoma’s full statement

2017 National Budget: My Reflections

I heard my dear friend, Finance Minister, Felix Mutati playing with catchy economic phrases in the National Budget. He said “you cannot spend cash which you do not have “. He also said “Government will have no business to be in business.
Fair enough. Economists, businessmen and politicians have used these sexy statements from time immemorial. Will these pronouncements be translated into reality in the 2017 budget? Is the 2017 national budget reflecting the economic recovery plan needed in Zambia?

I doubt and here is why:

1. Government business

Government has no business to be in business? It won’t work in the 2017 budget. It actually represents a policy contradiction between what President Lungu wants and what the Finance Minister is preaching. The President in his speech to Parliament this year clearly stated that he wanted to see the newly created state owned Industrial Development Corporation (IDC) to take a leading role in Zambia’s industrial development agenda.

So my friend Felix, you can go ahead and withhold funding to the IDC because the President is wrong to involve government in business. But I see that even when you strongly believe that government has no business to be in business, you are proposing to spend about K3 billion on farmers input support programme next year.

2. Cash Budget

The minister says that you can’t spend what you don’t have. That is partly true. But will it work in 2017 in a country which believes in deficit financing? I doubt.
Zambia has run a cash budget before. Under President Chiluba , Zambia had a cash budget monitored by the IMF. It was a disaster for the poor people. The cash that was available was used to meet the luxury needs of the apamwambas such as foreign travel, seminars, allowances and luxury vehicles.

There was no money for medicines, roads, food security packs, pensions, water, sanitation and education for poor people’s children. I can see history repeating itself.
The problem in Zambia is financial indiscipline which is motivated by greed and corruption. There is scramble for the little money in the treasury. Those with political power and influence get the cake. Rules for sound fiscal policy are ignored.

We have high inflation and interest rates now because of poor adherence to financial management and political will to live within the approved budget. There is always unauthorised and excess expenditure appearing in the Auditor General’s report every year.

If you want to test your fiscal policy, my friend Felix Mutati, next time the President wants to fly out for an activity that was not budgeted for, put your foot down because there is no money to hire a jet. Infact, in order to live within our means, the Finance Minister should shoot down proposals that tend to bust the budget such as reintroduction of positions of deputy minister. He should actually advise the President to immediately do away with positions of District Commissioner because we have now got elected representatives at district level (mayors and chairmen) to coordinate government activities at district level.

3 Employment Creation

The President wants one million jobs in the next five years and the Finance Minister is targeting 100,000 jobs next year. Whoever advised the President to make the 1 million jobs pronouncement was a jocker. Even at a time when the economy was growing at 7% per annum, Zambia failed to create the 500,000 jobs that the President promised the youth. Now that economic growth will drop to 3.4% next year, how possible will it be to create 100,000 jobs. There is no magic to job creation but to grow the economy. Prospects for increasing employment are dim in an economy under stress. Even the government itself has frozen employment in all ministries, except education and health. With the anticipated increase in costs of production as a result of increases in fuel and electricity tariffs, many businesses will shed off labour to remain afloat.

4. Lack of an Export Led Growth

With the declining fortunes in the mining sector, attention should have been made to other sectors such as tourism, agriculture and manufacturing to earn foreign exchange. It is possible to increase non-traditional exports within one year with a serious diversification programme. But as usual, “diversification ” is just a boring song which appears in both the President’s and Finance Minister’ speech. It is possible to increase the output of maize, rice, beans and wheat in Zambia for export to other countries. I have been to Isoka, Mongu, Zambezi, Chavuma and other districts where small scale farmers are successfully growing rice. Give them the inputs and extention support services and you will see the miracle. Support outgrower schemes for wheat farmers and within two years, Zambia will be the bread basket of Africa. Create a revolution in the agricultural sector. I can’t see the revolution in the budget in terms of funding and policies.

There will be employment freeze in the agricultural sector but you want to make agriculture the pillar of a smart Zambia. Even if you provide money for fish farming but fail to employ aquaculture officers to teach small scale farmers how to do it, how will it help. I can’t see how the high cost of fertiliser has been reduced in the budget. You expect villagers to use e-vouchers to sale their maize to Food Reserve Agency whose marketing function has been taken away in the budget?
Just wait for the maize marketing disaster next year.

5. Cost-Push Inflation

The whole domestic resource mobilisation strategy appears to be centered on heavy taxation of imports. Perhaps we are back to the Kaunda days of import substitution strategy of development which failed lamentably. What is needed is an Export Led development strategy. Zambia is heavily dependent on imports. In an import-dependent economy, heavy taxation of imports has the same effect as depreciation of the kwacha in terms of cost-push inflation. The inflationary pressures of the tax measures in the 2017 budget will be felt within the first quarter of next year. Prices of goods will escalate. It is a wander that with the anticipated increase in the price of imports, the minister is projecting inflation to drop from 23% a few months ago to 9% next year.

6. EDUCATION

The story of education in Zambia is a sad one. A lot of children are out of school now because parents can’t afford school fees. The 2017 budget is very clear; let the dead bury themselves. Ignorance is going to be the cornerstone of development in Zambia. Perhaps, I’m missing something in the education equation in Zambia. How much does it cost to educate a pupil, say in grade 8? The government already pays the salaries for teachers, buys the desks, books, chalk and other educational materials.

The government already foots the recurrent operating expenses such as stationery, fuel, electricity, water and other expenses. These costs form the largest component of expenditure in education. Why should the government let children fail to go to school because of school fees and examination fees? What kind of Economics is this? Perhaps one can argue about the cost of food and accommodation for those in boarding schools. What about those in day schools?

The money is there. Why would you spend billions of kwacha on law and order as if the country is at war? Why buy more teargas to stifle people’s democratic right to assemble, associate and speak instead of educating our children? Why would you think that buying sanitary towels is more important than paying school fees for that same child? Is it because someone with connections to government will get a contract to supply the pads? Why do you think that spending money on social cash transfer is more sustainable than investing in education when infact the same people you fail to educate will soon que to get social cash handouts? Why increase in women and youth empowerment funds when you know that these funds are highly politicised and end up being shared by cadres? The priorities are wrong. The 2017 budget is wrong and offers no hope for the suffering masses unless a proper surgery is done.