PF’s Reaction to UPND 2022 Budget in Full

On the 14th of August, 2021, we were told that a new dawn had come to Zambia and we were advised that we should record everything they were promising us and start ticking because the UPND Government would deliver on its promises. This was put even stronger on the 16th August 2021 at the Heroes Stadium.
Following the opening of the first session of the thirteenth National Assembly, we pointed out that the speech of the President had watered down or ignored many of their campaign promises such as:

1. Free education from Grade one to university education;
2. Increase in the FISP;
3. Reduction of cost of fertiliser;
4. Increase in salaries for Civil Servants;
5. Reduction of cost of mealie meal;
6. Avoidance of borrowing and dismantling of national debt; etc.

We were told that it was too early to judge the UPND Government as they were simply completing the 2021 budget they inherited from the PF Government and that we should wait for their own budget.

Fortunately, time never stands still and the 29th October came and their long-awaited inaugural budget had to be presented.

Numerous comments have been made on the budget, some critical and of course some in support. The PF leadership met with PF Members of Parliament last weekend to jointly analyse and adopt a common position on the 2022 budget.

I now wish to present to you our findings which we arrived at after very careful and painstaking probing.

From the outset let me state that the budget in its entirety is a hoax as it is not correct, secondly, it is an illusion as it is not tenable, thirdly it is a façade or a deception as it hides the real intention of its authors and fourthly it is retrogressive as it brings back the many gains that have been achieved, fifthly it is a breach of the fundamental campaign promises upon which the UPND was voted and sixthly and most importantly it is pro-capital and against the poor.
Let me explain.

1. A Hoax: Figures in a budget ought to balance first within the two aspects namely the expenditure side and within the revenue side and between the two aspects. As the nation has already been made aware by our alert MPs in parliament, the 2022 budget has a discrepancy of K37bn on the expenditure side. Why is such an expenditure hidden?

2. An Illusion: The UPND proposes to grow the budget from K119bn in 2021 to K 173bn in 2022 representing an increase of 45% and yet they have proposed increases in consumption and reductions in revenue such as the Mineral Royalty Tax, Corporate Tax, and customs duties. As though this is not enough they have decided to utilise a onetime revenue stream in the form of the Special Drawing Rights (SDR) of $1.2bn to finance recurrent expenditure. We challenge the UPND government to explain how these recurrent expenditures to be financed by this one-time gift shall be paid in 2023 and subsequent years. Has anyone assured them that this gift shall be perennial? We would like to ask the UPND Government how SDR which is meant to be the balance of payment support can be transformed into budget support? As far as we know SDR can only be sued to finance foreign exchange payments outside the country after the government has provided the kwacha equivalent to the Central Bank. As you can see this is an illusionary budget that cannot be implemented.

3. A Façade a deception: There is no cost item that is more widely discussed in the 2022 budget than the Constituency Development Fund. This was poor dramatics attempting to deceive MPs and the general citizenry that there will introduce fiscal decentralisation. First decentralisation, by those of us who understand it is an organic process which is done gradually and systematically to allow for development of capacity and systems to support it. It does not happen like magic – that you get power from the centre and immediately send it to the most peripheral of the development hierarchy. Secondly reading the budget speech critically you will realise that the central government is simply abdicating on its development responsibilities and its fiduciary responsibility. It has passed on numerous central government responsibilities to Constituencies without taking into account the lack of capacity in the constituencies. Actually the financial burden passed on to the constituencies outstretches the K 25.7m by leaps and bounds. It is a clear deception aiming at passing blame for government failure to MPs.

If spending K1.6m was such a time consuming process marred with irregularities as have been reported by the Auditor General’s reports, what will happen with K25.7m and with increased scope? We have therefore directed our MPs to educate this government on the history and rational of the CDF. Now that MPs are going to superintend over and get directly involved in the implementation of government projects who shall perform the oversight function? This move is contradictory to the dictum of separation of power and must be stopped to curtail the intentions of diluting effectiveness of Parliament in its oversight role.

4. A retrogressive budget: The PF government optimised the mine tax regime making it possible to collect taxes in excess of $600m for the year 2021. Our mining tax regime saw mining companies post profit and pay taxes to the benefit of the Zambian people. Now the UPND has made MRT deductible rendering that no mining company shall pay any taxes at all. Zambians have been denied an opportunity to benefit from their God given resource at a time when the copper process are at their highest in the history. What a retrogressive regime?
As though this were not enough, the UPND has decided to reduce corporate tax from 35% to 30% with an eventual revenue loss of K 600m in 2022 alone. To add salt to injury the UPND government has also decided to do away with customs duty on the export of maize. I will address all these matters in more detail a little later.

5. Breach of fundamental campaign promises: The UPND won the 2021 elections on a number of promises that they made to the Zambian people. Most fundamental among them was debt management. They criticised the PF government on the debt we had contracted. They promised that they will be frugal and will not borrow but will instead pay back debt to make it sustainable. Shockingly if not insultingly we see a direct breach of the confidence the Zambian people riposted in this regime. Whereas the PF government borrowed $11bn in 10 years an average of $1.1bn per year, this regime in only one year shall borrow $4.6bn. This is against the campaign gibberish from their President who stated that we had reached the ceiling in borrowing and we could borrow no more. Truth be told, Zambians voted on the basis of well-orchestrated deceit – ‘ba na ti gona’. At this rate and with the desire to fulfil their lofty promises, this regime will have borrowed $23bn in five years’ time. This is double what we borrowed in 10 years.

What is striking and saddening is that there is no mention in the budget speech of how this regime intends to handle the aromatization of the first Eurobond which falls due next year. The Minister should have spent some time explaining this matter rather than hiding in the name of donors and the IMF.

The other fundamental promise was free education from nursery to university. Shockingly this has been only for Secondary schools because as the Minister of Finance himself acknowledged Primary education has been free even under the PF government. What has happened to the promise to our university and college students? Where are the much talked about meal allowances?

We have all woken up to the rude reality of voting for a deceitful government which has the greatest tenacity to breach its promises.

We urge the citizens to read the budget and compare with the numerous campaign promises that were made by the UPND.

6. Being pro-capital and anti the poor: In 2011, the PF government doubled salaries of all civil servants and introduced minimum wage structures to ensure that there was more money put in the pockets of citizens employed by the government and the private sector. In addition, we increased the tax free threshold from K 1,000 to K 4,000 to ensure that we reduced the tax burden on individuals and on households. We did this because we are pro-poor in our policies and we pledge to continue being so.

Conversely, the UPND having been nurtured by capitalists have done the exact opposite, exactly as we had tried to explain to the Zambian people. This regime has increased the tax free threshold by a meagre K 500 which translates in savings of only K 50!! At the same time there have reduced standard corporate tax from 35% to 30% and have made Mineral Royalty Tax deductible thereby introducing a revenue loss of more than $600m (more than K 10.2bn) in 2022 alone. This amount given to capital owners is almost double what this regime is allocating to Social protection through Social Cash transfer (K3.1m), Public Service pension fund (K2m) and Food Security Pack (K1m). This is money they are putting in the owners of capital at the expense of the poor Zambians. Going further, this regime has decided to subsidise the export of maize to the eventual benefit of the importers by removing 10% export duty on maize. Their promise to reduce the price of mealie meal is to be fulfilled in the DRC which imports maize from Zambia. How will this increase the price of maize to the poor small scale famers? How many small scale famers export maize? Rather than encouraging value addition on maize by maintain the 10% customs duty this measure shall encourage the setting up of milling plants in the countries that import maize from Zambia. As such this regime is exporting the much needed jobs.

At a time when the world is grappling with climate change, this regime has decided to make the production of plastics more lucrative by removing 5% duty on the importation of filler masterbatch which is used in the manufacturing of plastics.

Note that whereas the PF government was constantly narrowing the gap between the revenues collected from individuals and from corporations, this regime is to collect K17bn from PAYE as opposed to K16bn from Company Tax!!! The individuals are paying more to run the government than the businesses.

As though this is not painful enough, the UPND government is threatening to increase the cost of both electricity and fuel by introducing cost-reflective tariffs. One wonders how small, medium enterprises shall thrive with high costs of production.

Let me conclude on the most vexing issue of Mineral Royalty Tax.

MRT is not a fee it is a tax which is paid as a final tax by both profitable and loss making mining companies. It is a form of rent paid for mining the mineral resource.
Over the 25 years only Kansanshi and Kalumbila have been declaring profits and paying MRT and company income tax. With this reckless concession the UPND government has given to mining companies, even these two mines will stop paying tax. This will lead to the others such as Lumwana and Lubambe which are at the verge of making profits to also not pay tax simply because MRT will now be tax deductible. This is a scandal especially at a time when prices of copper are at the highest and should have benefited Zambians. Are we losing this money for having elected a government that is puppets of capital? For how long shall foreign direct investors call the shots and continue to milk the poor Zambian children of their blood facilitated by stooges of capital.

We are aware that one of the mining companies has sold the cheap story that if MRT is made deductible they will in turn invest $2bn and increase production to 2m tonnes per year. This is the song that you have heard the New Disaster Government signing about.

What the UPND government is ignoring is that there is no law that compels these companies to keep these super profits in Zambia and there is no law that will hold them accountable to invest the $2bn. In any event if they finally do invest the $2bn in Zambia after having gone away with super profits as a result of not paying MRT does it not follow that it is the Zambians who will have invested on behalf of the mining company? What Zambians ought to know is that the mining companies are aware that collecting tax from mining profits is more complicated than collecting MRT.

Zambians, you are hereby called upon to ask the following questions among others about the 2022 budget:

1. Why are you giving mining companies Tax holidays when the price of copper Is at its highest?
2. How many companies are to benefit?
3. What are their political connections?
4. Why is the budget not balancing?
5. How do you expect to raise K173bn to finance the budget when you are giving concessions to your business friends who have money at the expense of the poor?
6. When shall you start delivering on your promises?
7. When shall you apologise to the PF for castigating us for borrowing at a rate of $1.1 per year and yet you are borrowing at a rate of $4.6bn per year?
8. When will you apologise to Zambians for lying that you inherited empty coffers?
9. When will you stop the blame game of condemning the PF for your every failure?
10. When will you come clean on the fact that you did not come to fix the economy as you purported because by all your actions you are fixing the Zambian people?