I PROPOSE SETTING UP OF NLIP FOR ZAMBIA

ON 11 October we featured a theoretical policy which I called the National Leadership Identification Policy (NLIP).

As we continue to give the highlights of the 2013, I revisit the article this week.

In that article which generated a lot of interest I wrote that for quite some time, I had been pondering on how best to tackle the topic and what to include or indeed what to omit, resulting in procrastination.

I said I had dragged my feet on the topic but it had kept on haunting me such that I could not just ignore it.

 

The NLIP, is a set of strategies which should be used in identifying and keeping a pool of credible citizens ready to join the national leadership at any given level, especially in the public service.

Before that Finance minister Alexander Chikwanda was quoted in the media as saying that technocrats or civil servants employed by the government to think are disappointing President Michael Sata.

Mr Chikwanda had said the technocrats who were employed to advise the government were not playing their role.

If the implementers are that vital to the success of the policies then their identification is equally paramount.

This means that my NLIP is important if we are to have a cadre of qualified citizens ready to take up the responsibilities at various levels and in various fields of public service.

By qualified citizens I do not necessary mean people with academic qualifications only but those with holistic qualifications, bearing in mind that some are natural or born-leaders while others are made.

Even those who are not educated there is a role they can play in national development!

I am aware that currently potential public workers are identified and employed by the Public Service Commission and I am sure that this is done as need arises.

With the NLIP, however, I am looking at a scenario where the policy would guide the people responsible on how to come up with a team of qualified people whose details would be saved and whenever need arises it is just a matter of going to the pool and get one name.

Apart from that the policy should be able to guide on how to “fish out” a potential leader from any part of the country and in any field to go and take up the national leadership in the public service.

On this I am not talking about political leaders because I suppose the individual political parties have their own mechanisms of how to identify potential leaders.

As I reflected on this, my mind took me to First Republican President Kenneth Kaunda’s top civil servants and how he could have managed to identify leaders at various levels of the public service.

Glancing at some of the profiles of these former public servants reveals their wide-ranging backgrounds with some of them having been hardly educated but performed extremely well.

Before they were identified they had mere leadership potential in their own light and the identification exposed them to leadership.

Some of them could - prior to their appointments - have been good headmen, teachers, like Dr Kaunda himself, kapasos (chief retainers) or indeed good managers with massive potential for national leadership.

Like an article on the Cornerstone Business Solution website indicates, leadership is a combination of inherited and acquired characteristics.

It states that even if your genes did not make you a ‘natural’ leader you can certainly learn a lot about leadership if you are called upon to lead.

Natural leaders stand out – they are easy to identify.

Identifying those that have the latent potential to become leaders is a much harder process but it’s what every leader has to do when looking for team members to carry the national vision.

I posed a question to various senior citizens I met when preparing this discussion on how Dr Kaunda’s administration managed to identify the potential leadership especially from far-flung areas, and one
common word came out, “mechanism”.

The respondents said the administration had a deliberate mechanism through which potential leaders were identified, most of the time without the candidates knowing it or lobbying.

I am told some potential leaders were followed in their fields, right in their villages while cultivating and picked to go and become leaders like district governors, through the “mechanism”.

“Look at past performance first. Who has been able to define a vision and motivate others to go with it? Who has shown the willingness to take on a challenge and enjoyed accomplishing something noteworthy? This is what leaders do,” partly reads the article by the Cornerstone Business Solution.

Therefore, as a nation we need this mechanism to be able to haul out potential leaders from villages, communities, districts or provinces, companies, churches, markets, name it for national duties.

I am mindful that the challenge now is that there are too many qualified people as compared to those days when only a few people had academic qualification what with only about 100 graduates at Independence.

Therefore, the National Leadership Identification Policy is more imperative now than then because given the high number of “qualified people” it is easy to appoint wrong ones thereby affecting policy
implementation.

For comments/other contributions call: 0955431442, 0977246099 or email: jmuyanwa@gmail.com.

SUBSIDY REMOVAL: 2014 HOTTEST MOVE

THE removal of subsidies on fuel is debatably one of the most  controversial policy measures which the current government has come  with this year.

It is a single move which has remained hot to date, more than six  months down the lane.

 The measure which was accompanied with the reduction in the Farmers  Input Support Programme (FISP) will remain so for a long time to come  because of its impact on lives of people.

Like I stated in this forum on May 8 2013, the move could have been  better handled than it was.

To start with any subsidy on the price of a commodity reflects what  the government wants to achieve at that particular time and,  therefore, it has several opportunity costs.

I indicated then and still indicate that due to the scarcity of funds,  the government will always have to make choices on what to spend the  limited resources on and what to forego.

Wisely or not the subsidy on fuel prices was introduced to mitigate  the effects of the high prices of the commodity in the country.

It followed the realisation of the cardinal role the commodity plays  as the lubricant of the entire economy and therefore the argument  whether it was the right thing to do or not will remain relative and a  matter of policy objective.

In my view the increase in the prices of fuel is among a few changes  which affect the national economy and all citizens including those in  the countryside who may not be able to board any form of motor vehicle  at all.

They are affected through the ripple effects which are quite drastic  and effective.

The same goes with the adjustment in the prices of mealie meal which  ironically affects even the self-catering rural dwellers through the  immediate effects.

The subsidy on fuel is distinctive in that it can be on consumption  and on production at the same time depending on what the subsidised  fuel is used for.

Therefore, whether to continue with the subsidy is neither wrong nor  right, but depends on what the Government wants to achieve at a given  time.

In short, the government was neither wrong nor right in removing it.

I stated that from the detailed justification which came through then  Mines, Energy and Water Development minister Yamfwa Mukanga when  announcing the measure and the subsequent one by President Michael  Sata it was clear that the government meant well.


What the government did not do is to prepare the minds of the people.

The responsible ministry should have psyched the people by offering  prior information on how the government had been performing on the  subsidy and some of the challenges.

That did not come from the ministry or ministries responsible until  President Sata told the nation on May 2 that in 2012 alone, the  treasury redirected resources amounting to K754 million from
implementation of other government programmes to the fuel subsidy.

According to State House for the 2013 budget, the Government already  paid K571.5 million in fuel subsidies.

It was estimated that more than K1.1 billion would have been paid in  2013 as subsidies if no adjustment were made to the price build up  and/or the pump price.

Our government had an opportunity to ensure the data resonated well  with the status quo, during the unveiling of the 2014 National Budget  in October this year.

One expected Finance minister Alexander Chikwanda to inform the nation  that so much money was saved following the removal of subsidies on  fuel and the reduction on FISP.

He should have gone a step further - like he did last year on the  Eurobond funds – by telling the nation the areas in which the saved  money would be spent on.

That could have gone miles in helping to bring the issue to rest once  and for all.

On the other hand, however, the removal of subsidy on maize and  fertiliser - justifiably or not - helped to revive the argument on the  need to diversify consumption from nshima to other foodstuffs.

Like I asked then, were Zambians created to survive on only nshima  made from maize meal as staple food? What of other crops like rice,  sweet potatoes, cassava, Irish potatoes, macaroni, finger millet and  sorghum?

The overdependence on maize and its products has amplified the  position of the cereal crop to a political produce.

Yes, the continued dependence on nshima made from maize is not helping  us at both household and national level.

I would say the development provides all of us with an opportunity to  rethink on our feeding choices and come up with alternatives to maize.

I feel even at the peak of the subsidy on its cultivation, maize has  been grown by the local small scale farmers at higher cost given the  low productivity.

Reducing or eradicating the overdependence syndrome on maize would  require the total change of the mindset by the citizenry, including  the farming community.

For that to occur, the Government should play an active role in  marketing and popularising the consumption of other foodstuffs,  including nshima made from other crops.

For comments/other contribution call: 0955 431442, 0977 246099,
0964742506 or e-mail: jmuyanwa@gmail.com or
Ends…

2013 REVIEW STARTS

AS we move towards the end of 2013, we will, in the next number of weeks, look at some of the highlights of the year in terms of new policies.


We will look at the implementation of these policies and how that will possibly affect the economic sector in 2014 and beyond.

 

Without going into details, I have in mind the rebasing of the Kwacha whose upshots affect all Zambian nationals and residents.

 

 

 

Effective January 1, 2013, Zambia has had a new currency.


Then there is the introduction of the Cheque Truncation System (CTS) for all commercial banks whose implementation, however, seems to have not achieved the desired goals.

 

 

 

There are various policy changes which have been effected through Statutory Instruments (SIs) like number 55 of 2013 as well as the now infamous SI 89 on the export of unprocessed minerals.

 

 

 

We will further relook at some of the notable economic achievements in the year and the challenges like the widened budgetary deficit.

 

 

 

The deficit which was initially planned at 4.3 per cent will rise up to 8.5 per cent by December 31 2013.

 

The review will lead us to the 2014 National Budget where I will draw the readers’ attention to some of the measures espoused in the document.

But that will be after looking at some of the efforts the Bank of Zambia has made to address various monetary challenges in the country, including the high lending interest rates.

 

 

 

 

We will further refocus at the newly-launched Mines and Mineral Development Policy and ascertain its relevancy to the sector.

 

 

 

By the time we look at all these issues, we may well be in time to welcome the beginning of 2014 at which instant Policy Analysis may go on recess while we try to look at its relevancy to you, the readers.

 

 

 

Before going full throttle into the 2013 review, however, I want to attend to unfinished business by featuring an abridged mail from a reader on the toll gate fees.

 

 

 

Bwalya Mutale, a CIMA student writes:

 

 

 

“Dear Muyanwa (Mr)

I hope and trust that my mail finds you well.

I write to make a comment on the on-going toll gate debate in Zambia. First and foremost it is agreeable that this toll gate fees are another increase on the tax burden on the ordinary Zambians.

 

The question that begs for an immediate answer is, is the tollgate tax the only and best method to better roads?

 

I leave it to the Zambians to answer but what is my point?

 

My point is that a quick glance at the Zambian budget shows that a staggering 60 per cent or so of the total budget goes to consumption!

 

If I was the minister of finance, my objective should then be to find creative ways to reduce this trend first before going about in burdening the poor Zambians with more tax.

You see no one can ever develop if they eat more than they invest.

Back to the tollgate tax, no one can deny that through this tax government will raise substantial amounts of revenue which could lead to better roads. But you see our governments have a pedigree of long fingers.

 

Tell me, if tomorrow the doctors took to the streets demanding better salaries that our government will not be tempted to deep their fingers in these same funds!

So you see the problem is financial discipline.

Zambia currently ranks amongst the top in the high cost of living category in the region.

 

Of course this is subject to further debate by experts. So if the tollgate tax is implemented that should push the cost of living higher and so will inflation. This then means the recent salary increments will be wiped out by inflationary pressures.

 

This again will contradict the government’s goal of creating a middle class.

“In my concluding the tollgate fees should just be for bigger automobiles especially those trucks exporting copper which is not even properly taxed while the ordinary cargo should be exempted,” ends Mr Mutale.

Further, in response to my question if there is anything positive about the fees, Mr Mutale writes:

“My desire which I believe is shared by many is to see a better Zambia for all.

 

I do in some way agree that certain strategic roads should be tolled especially those going to the mining regions such as Copperbelt and North-western Provinces.

 

However, to be effective these fees should not go to the central treasury but should be left to develop the respective provinces. In other words the revenue should be ring-fenced as provincial or some other criteria but not centralised.

 

This will mean decentralising the road fund into regions so that the money does not come to Lusaka. This will also be in line with government’s policy of decentralisation.

 

For comments/other contributions call: 0955431442, 0977246099 or e-mail: jmuyanwa@gmail.com.

POLICY ANALYSIS: TOLL GATE DEBATE RAGES ON

POLICY ANALYSIS: TOLL GATE DEBATE RAGES ON: LAST week on Policy Analysis we looked at tollgate fees in an article  which was written by a Zambian student, Edwin Hatembo Jr, who is  s...

TOLL GATE DEBATE RAGES ON

LAST week on Policy Analysis we looked at tollgate fees in an article  which was written by a Zambian student, Edwin Hatembo Jr, who is  studying in South Africa.

 Following the article, I received an avalanche of feedbacks from  readers within the country mainly condemning me for what they termed  biased reporting.

 Most of the contributors seemed to have been too emotional to even  observe that the article was not written by me but by a guest writer.  They offloaded all their tirades on a wrong target.
One of such reactions reads:
“James
Your article today understates two reasons why toll roads are  monopolistic within the boundaries of Zambia. 1. There are no  alternative roads north, south, east, or west. 2. All charges will be passed onto consumers. This is tax by the backdoor.

The experience in other countries suggest revenue raised is not spent  on roads when run by the state as funds are diverted to other uses and  roads.

Let's not be naïve. Toll charges at internal points will be bad for  Zambians.  Toll charges at borders have a tenuous link to road  maintenance and more about taxation revenue.

Tolls like subsidies will cost ordinary Zambians. Your analysis is  weak lacking real numbers and international comparisons.

You cannot conclude that qualitative benefits 'far outweigh' without  numbers. We know for example that 60 per cent of tax revenue is spent  on consumption.

The lack of alternative roads weighs against the imposition of tolls. Twenty-six tolls will push up inflation.

“This is biased reporting. Again,” ends the concerned resident who  sent the message through his
Blackberry® SmartPhone on MTN Zambia.

If I was the author of the original article, I would have given this  reader an “A” for churning out a good critic whose only flaws were  prejudice and wrong target.

As they say: “do not kill the messenger for the bad message.” In this  case I was the messenger since the article by Mr Hatembo Jr was  carried on my column.
For two or more other articles, I would be found culpable of some  ethical or other offence if I attempted to reproduce them but all I  can say is that people should argue with the facts or issues not with  the authors.



“I READ with keen interest the article headlined ‘Why Zambia needs  toll gates’ by James Muyanwa in the Times of Zambia of Wednesday  October 30, 2013.

Toll gate in Nigeria

Another reader contributing through a letter to the editor writes:

 Indeed toll gates may be one sustainable way of road infrastructure  improvements.  However, I find it strange that James seems to have taken a political  stand in the way he went on justifying the necessity of toll gates.

 By this, I mean his inclination to political overtones rather than  coming out with a balanced intellectual exposition.

 For all purposes and intent, James ignored the reality that  over-taxation and double taxation seem to be the only available  options for revenue generation each time the Government treasury runs
out of money.

 He allegedly failed to bring out the reasons or justification that the  Government gave to the people of Zambia for introducing the fuel levy  are the same that James is now advancing on the need for toll gate  fees.

 Has the road infrastructure throughout the country been developed to  expectations as advanced by the Government 22 years ago?

The answer is simple road infrastructure development remained  far-fetched as if fuel levy was abandoned many years ago.

 It seems James does not see this to be double taxation in view of the fuel levy.

 He has not told the public what concrete mechanisms and measures have  now been introduced to ensure that every ngwee that is collected from  the toll gate will directly get into the road fund.
Bornwell Siakanomba  Policy development consultant

“LUSAKA” ended the consultant.

 However, like other readers, Mr Siakanomba is aiming at a wrong target  and if he had taken time to relook at the article in question he could  found out that on that day I merely provided a forum for Mr Hatembo Jr  to air his views to which, as a Zambian, he is entitled.

 As a columnist, I am aware, though, that there are always two sides to  any policy, the merits and demerits but if a reader chooses to  champion one side, like Mr Siankanomba and other readers did, they are  entitled to do that.

 My duty, however, as a journalists is to balance the views of the two  opposing parties and I have done just that by using the views of Mr  Siankanomba and others to counter Mr Hatembo Jr’s.

 What is important is that the target and the real issue should not be  lost; otherwise we will be fishing in the dark.

 For comments/other contributions call: 0955431442, 0977246099 or
email: jmuyanwa@gmail.com.

ADVANTAGES OF TOLL GATE FEES

Today we feature an article written by a Zambian, based in South Africa and it reads:

There has been a debate in Zambia as to whether we are ready to have tollgates or not. Some corners of society argue that Zambia does not have the capacity to build such infrastructure.

Firstly, Zambians need to understand what a toll gate is, how a toll gate is built and how it operates.

Secondly, to the average Zambian, having to pay for a service that is generally perceived to be free seems to be an absurd thing.

Why should one pay for a road when they want to move from one place to another. To understand this one needs to know what a toll road is.

This is a privately or publicly built road for which a driver pays a toll (a fee) for use.

To build roads costs billions of kwacha.

Tollgates are necessary as the money raised from this will be used to maintain the roads and assist us in meeting the demands of social services.

Toll roads therefore will reduce the total net cost to the economy, ensuring greater opportunities for prosperity and growth.

ADVANTAGES OF TOLLGATES

 Procurement and dedication of funds: Toll road schemes are more costly for road users than obtaining funds through taxation or a fuel levy, but the funds can be obtained much sooner.

Toll roads enable the public sector to contract the private sector for the construction, operation and maintenance of the road for a period of 25 to 30 years.

It is in short a self-generating form of income, the Zambian Government will play a moderating role and just ensure the laws are adhered to and roads are safe.

Improved road:  The road is usually upgraded and expanded before it is tolled. This expansion provides increased capacity and thus reduced congestion.

The upgrade of a road generally also improves the safety and decreases accidents. Expansion of roads like the Great North and Great East Roads in this regard would be a good thing.

Tolls also act as a form of congestion charge. It rations the use of the road to those with the highest need to travel.

Job creation and gross domestic product (GDP): Toll roads can significantly increase Gross Domestic Product (GDP) over the lifetime of the project. A toll road project leads to direct (constructors, builders, architects) and indirect (toll road attendants, ambulance services at toll points, casual workers) job creation.

We are so much in need of job creation in Zambia as the population is ever-increasing.

Encourage the use of public transport: Government will make revenue if they are to invest in the public sector like a modern train service and bus service because people will use them to avoid unnecessary toll fees.

This is a spill-over effect of tollgates.

Other major advantages of toll roads relates to funding, road condition and job creation.

Disadvantages

The disadvantages of toll roads are mostly related to user reactions. An increased load might be imposed on the alternative routes due to traffic diversion. Public transport will not be advanced, since toll roads encourage public vehicle use.

It has been revealed that society generally reacts negatively towards toll roads in the first few years after implementation. This is because the public finds it difficult to pay for things which were originally provided for free of charge.

Tolling is experienced as a sudden real expense, while the savings in running costs, services and saved time are not immediately notable. As soon as users get used to the tolls and realise the benefits, their attitudes will improve drastically.

The advantages far out-weigh the disadvantages so it tells us something

Why do I pay taxes and now also tolls? When we pay taxes the money is used for the service which government renders to us all. Taxes are used to pay for these services, whether we make use of all of them or not.

Tolls on the other hand, will pay only a portion of road that we use in other words it is a user-fee. Toll fees are used directly on the road, which is a benefit to the motorist.

Taxes will not be used to fund a toll road and therefore this will reduce the tax obligation of the individual.

Why do we have to pay tolls on an existing road, which was paid for out of taxes?

Road performance depends on how, what and when maintenance is performed.

Roads deteriorate over time due to environmental influences such as weather, ultra-violet radiation, overloading etc.

Tolls are not levied on the value of the current asset (road), but only on the initial and future improvements, including operations and maintenance. Funds derived from taxes are used on other things.

What will the toll fees be used for?

The tolls collected on a specific road will be used to, inter alia, and repay the loans obtained to finance the building, upgrading or improvement of the road. In addition, it provides a dedicated on-going revenue stream, which enables the road to be adequately maintained and improved, independent of tax based revenues.

What do I get from using a toll road?

Toll roads are built and maintained to the highest possible standards. Therefore, you are assured of a smooth ride, saving you on the running costs of your vehicle and saving you time. Improved security ensures you a safe and pleasant journey.

Conclusion

In conclusion, Zambians should understand four realities about the transportation infrastructure situation facing us.  Firstly, the time for continuous expansion of the capacity of road networks is reaching saturation point and new ways of managing traffic and infrastructure should be implemented.

Secondly, public funds are not enough to sustain or maintain roads at the current or anticipated future levels based on the prevailing interest to expand traffic and the road network.

Thirdly, borrowing to build and operate a heavily subsidised transportation infrastructure is not sustainable.  Fourthly, the rapid expansion of fleet of cars on our roads is simply unsustainable.

Zambians should actually learn from other countries such as South Africa and Morocco which have some of the best roads world-over.

Edwin Hatembo Jr.

(The author is Zambian student doing a course in International relations in South Africa.)

For comments/other contributions call: 0955431442, 0977246099 or email: jmuyanwa@gmail.com.

Ends…

 

 

 

 

 

CHEQUE TRUNCATION SYSTEM FAILS

 

IN February this year I wrote that the Bank of Zambia (BoZ) has become a major channel of economic makeover under the current government administration.

With the advent of the new administration in September 2011 the Central Bank became a critical driver of change and has since then recorded debatably more innovations than any other government wing.

Before the end of the year, the BoZ revised the minimum statutory capital requirement from K12 million or $2.3 million to about K104 million for local commercial banks and to about KR520 million or $100 million for foreign banks.

The reserve ratio for both local and foreign currency deposits were pegged at five per cent from eight per cent while the core liquid assets ratio came down to six per cent from nine per cent.

Systematically, the BoZ introduced the Policy Rate in March last year while transforming the Base Lending Rate (BLR) into a mere lending interest rate.

On December 19 2012 the BoZ announced the capping of the effective annual lending interest rate that commercial banks can charge any borrower which currently is pegged at 18.25 per cent.

The BoZ moved a step further and introduced a cap on the effective annual lending interest rates that non-bank financial institutions it licenses charge their customers.

The Central Bank implemented the Kwacha rebasing and effective January 1 2013 Zambia has had a new currency.

The BoZ had become more proactive, the performance which has enabled it to achieve all these feats.

This year, one of the major measures is the Cheque Truncation System (CTS) for all commercial banks which was intended to completely change this mode of payment and revolutionalise the cheque clearing system.

Cheque truncation is the conversion of physical cheque into a substitute electronic form for transmission to the paying bank.

Instead of manually moving the cheque from one bank to another for payment, under the CTS banks use electronic images thereby bringing down the time required for processing.

The BoZ in partnership with the Bankers Association of Zambia (BAZ) and the Zambia Electronical Clearing House Limited (ZECHL) introduced the CTS in the country with effective from February 1, 2013.

The Central Bank said this is an efficient method of clearing cheques using images between banks as opposed to sending physical cheques presented for payment in a bank by individuals or corporate bodies.

The implementation of the cheque truncation was supposed to benefit banks and the public in a number of ways.

“To facilitate implementation of the new cheques clearing system, BAZ has introduced new cheques with enhanced security features which are consistent with the operational requirements of the CTS.”

“In addition to the standard features of a cheques which will include the name of the bank or branch on which the cheques is drawn, date, amount, bank code, name of drawer ,crossing, Magnetic Ink Character Recognition (MICR) code line, the new cheque will have the following distinct features, ” the statement from the BoZ read in part.

According to the BoZ the CTS were supposed to:

•             Eliminate the cumbersome physical presentation of cheques, save time and cost associated with handling physical cheques.

•             Shorten and standardise the clearance period across the country to one day meaning the value of the cheque will be given a day after the date the cheque is deposited.

•             Improve the velocity or speed of cash flow between the transacting parties in the economy because of reduced clearing period.

•             Reduce risks associated with manual handling and physical movement of cheques.

•             Reduce the incidences of cheque-related frauds.

•             Introduce efficiency in the work processes for banks because of the reduction in the work-time and manpower required at the branches manning the activities.

•             Encourage the wider use of cheques in settlement of payments.

Nine months down the lane, however, the system seems to have lamentably failed to live up to the promise of efficiency.

Instead of the one day  a cheque should have been taking to clear, it still takes three to four days to do so while the payees are waiting.

From my interaction with some bankers and other related professionals I gathered that there was lack of preparedness on the part of the commercial banks before implementing the CTS.

The lack of preparedness was as the result of a short notice from the BoZ on the measure.

As the results by February 1 2013, most banks had not acquired the necessary facilities for the exercise and even up to now some of them do not have.

Other observers feel the commercial banks have just “sabotaged” the exercise saying they had showed some resistance right from the start.

Whatever the reason, the fact is that the CTS has failed to work, resulting in the authorities reverting to the old system and deferring it to next year, while banks which are able to implement it are free to do so even now.

For comments/other contributions call: 0955 431442, 0977 246099, 0964 742506 or e-mail: jmuyanwa@gmail.com.

ZAMBIA: 2014 BUDGET REVIEW

 

BY JAMES MUYANWA

THE 2014 National Budget underscores the need to balance between augmenting expenditure towards programmes directly benefiting the people on one hand and adhering to fiscal discipline on the other.

Coming against the backdrop of the expected bigger fiscal deficit of 8.5 per cent for 2013, the 2014 budget is a mitigation of this year’s economic performance.

In the main it is a full embodiment of Patriotic Front (PF)’s economic belief which is, however, pressured by various distressing circumstances including the poor harvest of most crops including the staple food, maize, in the 2012/13 farming.

Another inflationary pressure comes from the payment of the subsidy on fuel which occurred before the provision was removed in May 2013.

Through the 2014 National Budget which was unveiled by Finance Minister Alexander Chikwanda last Friday, the government targets to achieve real Gross Domestic Product (GDP) growth rate of above seven per cent.

The GDP growth is expected to close this year at six per cent from seven in 2012 which was the initial projection under the 2013 budget.

As already pointed out that target for 2013 will not be achieved mainly because of the drop in agricultural output and the seven-per cent fall in the prices of copper on the international market.

The most consistent feature of the budget by the PF is the job creation target and next year, just like last year, the government aims at creating at least 200,000 jobs.

About 58,000 new ones were created in first three quarters of 2013 and it would be interesting to get the final result as to how many jobs will have been created this year by December 31 2013.

The government, however, indicates that the 58,000 are only those engaged in the formal sector and do not reflect those created in the economy as a whole.

On inflation which, currently stands at seven per cent, the 2014 budget projects to bring down the figure to not more than 6.5 per cent. This is an upward adjustment of the target from not less than six per cent projected for this year.

Internationally, the government aims at increasing the international reserves to more than three months of import cover.

It currently stands at US$2.7 billion which is $200 million more than last year’s and translates into three months import cover.

Another important target is the maintenance of the fiscally sustainable public external debt which limits the amount of serving and paying off to 30 per cent of the GDP.

The government’s external debts stood at a staggering $3.13 billion as at end of last month up from $3.08 billion by end of September 2012.

To be able to achieve most these targets the government proposes to increase domestic revenue collection to more than 21 per cent of the GDP.

This is critical, considering that nearly K30 billion of the almost K43 total budget will be domestic revenue with grant only amounting to K2.63 billion of the total resource basket.

To cap it all on the 2014 macro-economic targets, the government proposes to limit domestic borrowing - currently standing at K18.52 billion - to 2.5 per cent of the GDP and contain overall deficit of the budget to not more than 6.6 per cent of the GDP.

That is a tall order considering that in this financial year, the deficit which was planned at 4.3 per cent of the GDP ballooned to 8.5 per cent as already indicated.

In terms of sectors the country recorded mixed results in this farming season in terms of crop and livestock production.

The situation was compounded by the outbreak of the army worms at the time of planting and lower than normal rainfall in the southern part of the country, resulting in the drop in maize output.

Last year’s lower prices of cotton frustrated the farmers, resulting in major decline in its production.

The country, however, posted higher production in burley tobacco, soya beans, wheat and sunflower as well as in the livestock sub-sector.

The number of heads of cattle in the country has grown by 10 per cent reaching almost four million while poultry rose by 18 per cent to over 92 million.

In 2014 the government envisages diversification of the sector.

“It is Government’s desire to see the agriculture sector grow to its full potential with our many small-scale farmers graduating to become prosperous medium to large scale producers.

“To this end, Government will continue constructing multi-purpose dams and irrigation schemes to limit dependence on rain-fed agriculture,” Mr Chikwanda says.

It will next year continue revamping the Nitrogen Chemicals of Zambia (NCZ) plant to extend the operations towards the production Urea and ultimately localise fertiliser production.

For tourism, which is another priority sector, the main highlight under the 2013 budget was the co-hosting of the 20^th session of the United Nations World Tourism Orgasanisation (UNWTO) general assembly.

 To ensure successful hosting the government had provided targeted tax incentives for the tourism sector.

In 2014, it will continue building on the raised international profile, through  the promotion of product diversification and further investment in facilities.  

The aim is to diversify the tourism base by improving accessibility to national parks, heritage sites and natural attractions.

Streamlining of licensing procedures and enhancement of capacity in the hospitality industry will be scaled up.

The Government says it is committed to developing the creative arts industry and the hologram to protect income rights of musicians and film makers has been established aready.

In 2014, Government will complete works on national film policy.

In the manufacturing sector the promotion of diversification will be doubled up especially for products with export market potential.

This will be done through the speeding up of the development of the Multi-Facility Economic Zones (MFEZs).

Measures to enhance the facilitation of value addition in manufacturing with a view to exploiting regional and international export markets as well as creating more jobs for our youths will be intensified.

For mining, copper production in the country increased by 13.2 per cent in the first half of this year despite the seven-per cent fall in the prices of the commodity on the international market.

This is attributable to improved mining production techniques, the opening of Lubambe Mine and the scaling up of production at Mulyashi Copper Mine.

The government is, however, wary of the fraudulent reporting by some mines indicating that the trend will not be tolerated anymore because the country needs to benefit more from the sector in terms of income through appropriate tax.

In 2014, the Government will continue to implement the Link Zambia 8000 programme and work is progressing well on over 1,500 kilometres of roads.

The programme is expected to promote development of local contracting capacity and create 24,000 jobs throughout the country.

Then there is the Pave Zambia 2000 programme which was launched last month.

The Government further plans to rehabilitate over 1,300 kilometres of the core feeder road network in the country to open up the rural areas.

For energy, the Government will continue working with the private sector to increase installed electricity generation capacity and improve the transmission infrastructure.

Projects include the extension of the Kariba North Bank Power Station which will add 360 megawatts of hydro power to the installed capacity.

By the end of this year, 180 megawatts will be added and the balance will come on stream in 2014.

In addition, the Ndola Energy heavy fuel generating project is nearing completion and will contribute 50 megawatts by the end of this year.

With respect to Itezhi tezhi, the government had secured financing and works have progressed, while for the Kafue Gorge Lower power station, the tender process to engage a strategic equity partner is in progress.

Itezhi-tezhi is expected to come on stream in 2015 with 120 megawatts.

The Kafue Gorge Lower power station with the capacity of 750 megawatts is expected to come on stream in 2019.

“To support these investments, Government will continue with its policy of attaining cost reflective electricity tariffs while ensuring efficient service delivery.

For fuel, two provincial fuel depots will be completed this year and the third one in 2014, with subsequent installations in other provinces.

While efforts to upgrade Indeni Oil Refinery will continue in 2014, Government will also explore other options including construction of a new refinery with ample capacity to meet the ever-increasing demand of the economy.

In coming up with the 2014 Budget, the government has managed to attain some semblance of the balance between the needs of the social sector and those intended to spur economic growth. 

MFEZs TRIGGER ZAMBIA'S INVESTMENTS

ON this column today, I feature an article by a guest writer. Enjoy the reading!

By JUDITH NAMUTOWE

 THE Government has continued to score success in meeting its mandate  of promoting trade and investment in Zambia.

 This is evidenced by the growing number of both local and foreign  investors that have continued to invest in all sectors of the economy  in the country.

 China is one of the major sources of these investors in Zambia having  set up more than 280 business enterprises mainly in construction,  mining and mineral processing, manufacturing, agriculture,
infrastructure development, tourism and resource extraction.

 Projects include, the Chambeshi MFEZ and the Lusaka East MFEZ being  developed by China Non-Ferous Metal Mining (Group), Zhongui mining  with investment estimated at US$5.3 billion, Bank of China and China  Henan Construction Company among others.

Although long distance exists between China and Zambia, traditional  friendship between the two countries is deep.

With the joint efforts of Governments and enterprises from both  countries, Zambia-China economic and trade cooperation has enjoyed  rapid development and fruitful results have been achieved.

To date, China has invested more than US$2.1 billion in Zambia in  areas of mining, agriculture, finance and light industry, hence  Chinese investment in Zambia has formed an industrial system of
exploitation, smelting, processing and trade.

But despite Zambia being well endowed with an array of natural  resources ranging from agricultural products to minerals, most of  these resources have remained unexploited and are usually exported in
raw form.

The Zambian Government has recognized the inadequate capacity of the  local manufacturing sector to add value to the raw materials due to  low investment.

 So, it is promoting value addition to Zambia’s natural resources  through processing in Zones and cluster development in the country,  which lead to sustainable economic growth, job creation and wealth  creation.

 The development would also lead to improved investor confidence and  ultimately benefit Zambia through skills and technological transfer,  increased Government revenue and increased  joint venture
partnerships.

  The major vehicle through which China is helping Zambia achieve that  is the Zambia-China Cooperation Zone (ZCCZ) which is the first Chinese  overseas economic and trade cooperation zone established in Africa.

 It was established in 2007 with an investment of US$900 million under  the framework of China-Africa Cooperation Forum.

 About 26 Chinese and Zambian enterprises which settled in the Zones  have paid nearly US$200 million to the Zambian Government in a form of  taxes.

 Recently ZCCZ hosted the first-ever Zambia International Construction  Materials and Light Industries Products Trade Fair and Investment  Forum at the Lusaka East MFEZ under the theme “Value Addition Through  Zambia-China Economic Cooperation.”

ZCCZ managing director Baosen Zan hailed the country’s economic growth  which has been attributed to the massive infrastructure development  currently being undertaken in the local construction industry.

 He said it was undisputed that Zambia’s economic growth was greatly  accredited to the booming real estate and infrastructure development  in the construction industry.

 Mr Baosen said this was why ZCCZ decided to bring to the fair latest  building materials that would benefit the local construction industry.

 The fair which run from September 19 to 23, 2013 provided an  opportunity to the local business community to have a wide exposure to  various state-of-the-art products and meet manufacturers in person.

 The fair also presented a unique opportunity for the booming Real  Estate Industry in Zambia. It will further afford construction  materials wholesalers, retailers and consumers alike  an opportunity
to have access to rich  and abundant types  of construction material  and industrial products with high quality on the world market.

 More than 300 participants from Zambia, China, United Kingdom,  Botswana, South Africa, India and Zimbabwe attended the Investment  forum which was organised by ZCCZ, Zambia Development Agency b (ZDA)  and the Ministry of Commerce.

A total of 90 enterprises participated and showcased their various  products and services while the value of the scheduled orders was  estimated at US$3,000,000 with the biggest business order being in  heavy equipment sector.

  A number of companies have since expressed interest to set up their  presence in Zambia and in particular, Lusaka East MFEZ, among them  Beijing Sunway and Jihai Agriculture who have since set up their  operations in the zone.

 The Zambia-China bilateral trade volume is expected to rise above the  US$3.6 billion recorded in 2012, with the implementation of China’s  offer to increase Zambia’s duty-free export to China to 95 per cent of  its total export items.

China’s investments in Zambia have been on steady increase and about  500 Chinese companies, big or small have been set up in Zambia.

About US$2.6 billion of Foreign Direct Investment (FDI) have been  channeled into Zambia’s economy, creating more than 50,000 job  opportunities.

 The special economic Zones have played a crucial role in China’s  industrialization and economic boom since opening and reform policies  were initiated by late architect Deng Xiaopening in 1978.
It is hoped that using zones, Zambia will follow China’s path and  record similar success in terms of economic development.

 The southern African country could do as well as China has done, or  even better, because it can draw on China’s experiences and avoid any  mistakes.

 For comments/other contributions call: 0955 431442, 0977 246099, 0964
742506 or e-mail: jmuyanwa@gmail.com.
Ends…

IT WILL BE TIGHT 2014 BUDGET

IT looks like it will be a tight budget!

Yes, the 2014 National Budget looks like it will be a stiff one due to the current economic trends including the deficit which is expected to stretch from about 4.3 per cent of the Gross Domestic Product (GDP) to about 8.5 per cent.

From my perusal of current reports by the Ministry of Finance, the International Monetary Fund (IMF) and the World Bank it is obvious that the major job for Finance minister, Alexander Chikwanda (below),  as he presents the budget on Friday, will be more of where to get the resources than what to spend it on.

The deficit has been compounded by two opposing factors, the reduction in the revenue collection by the government chief tax collector, the Zambia Revenue Authority (ZRA) and the increase in expenditure.

Government expenditures this year is expected to be above the budget as the result of the payment made on fuel subsidies which were incurred before the removal of the provision in May.

The unprecedented salary increment for civil servants which was effected last month has also added to the fiscal pressure as well as other expenditures.

On the flip side, on average, the ZRA has been failing to meet the collection targets due to various factors which could not be the subject of this column.

Realistically speaking the government will, under the 2014 national budget, need more funds to cure these fiscal ills than it will be ready to give out.

Yes, like the IMF observed, to address the fiscal challenges the government will have to use a combination of stepped-up revenue collection and tight expenditure controls.

This is more so since the government aims at reducing the deficit to about five per cent of GDP, similar to what was originally planned for 2013.

Ensuring that this budget is adhered to will be another important thing for macroeconomic stability and hence the foundation that will support continued strong growth of the Zambian economy.

That said, I feel the 2014 National budget will require stakeholders and other interest groups including civil servants to be realistic and water down their expectations in terms of increased direct benefits.

At the risk of sounding like a pessimist or indeed a prophet of doom, I would say that I am not expecting much in terms tax rebates on both personal income and the corporate one.

Last year, the government increased the pay as you earn (PAYE) exemption threshold from K2,000 to K2,200 per month.

The K200 increment translated into 10 per cent and I cannot foresee the threshold being increased by a bigger figure for next year than that.

In short the government will have to ensure that it sets aside more funds on production than on consumption to help bridge the current deficit.

Coming at the time when the mine houses who the major contributors to the GDP are grumbling about the current mining tax regime, there will be no “free money” in this budget.

They have been complaining that the current mineral royalty is too high saying the situation has been compounded by the high electricity tariffs being charged by the power suppliers.

In terms of expenditure the government is expected to stiffen the various fiscal disciplinary measures to ensure that spending agencies stick to the budget.

Interestingly the stakeholders including the general citizenry will also be looking out to see how the government will hand the issue of the removal of subsidy on fuel.

This is with a view to seeing which sectors will attract the funds which could have otherwise gone towards the offsetting of the subsidies.

Some provision is expected on the resuscitation of the closed parastatals as well as on beefing up the capital levels for government-sponsored banks to support the local business and farming communities.

Having allocated K3.4 billion for road construction throughout the country in this year’s budget the government will ensure that projects are completed.

For comments/other contributions call: 0955431442, 0977246099 or email: jmuyanwa@gmail.com.