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.

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.