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Tembo reacts to the 2021 National Budget

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Sean Tembo

Patriots for Economic Progress, Sean Tembo has reacted and responded to the National Budget for 2021 presented to parliament by the Minister of Finance, Bwalya N’gandu, on Friday last week.

He said the Minister pointed out that the K5.9 billion additional expenditure in the budget was due to fighting COVID-19, but said to the best of his knowledge, there is nothing on the ground in terms of Government’s fight against COVID-19 which can explain this exorbitant K5.9 billion.

“Government did not give out any free masks, COVID-19 test kits are still in short supply with a waiting period for a COVID-19 test of up to 14 days and Government still only has three COVID-19 test Centre’s across the whole country; at UTH, at University of Zambia School of Veterinary Medicine Laboratory and at the Tropical Diseases Research Centre in Ndola.

“So where exactly did Government spend K5.9 billion in the fight against COVID-19? Additionally, almost all expenses incurred by Government so far in the fight against COVID-19 came directly from local and foreign donations,” he said.

Read full statement below;

OFFICIAL RESPONSE TO THE 2021 NATIONAL BUDGET ISSUED BY THE PATRIOTS FOR ECONOMIC PROGRESS (PeP) ON MONDAY, 28th SEPTEMBER 2020

By Sean Tembo – PeP President

  1. As Patriots for Economic Progress, we wish to begin by thanking the Minister of Finance, Honorable Bwalya N’gandu MP together with his team, for the effort and hard work that went into the development of the 2021 National Budget, which was presented to the nation through Parliament on Friday, 25th September 2020.

Indeed, developing a National Budget in the midst of multiple economic challenges, including the downturn in the global economy due to the COVID-19 pandemic, could not have been an easy task.

  1. With regard to the theme of the 2021 National Budget, which is “Stimulate Economic Recovery and Build Resilience to Safeguard Livelihoods and Protect the Vulnerable,” our view is that there could not have been a better theme.

This theme acknowledges the fact that we are in a recession and that we need to do something to recover from where we currently are, and that while we are doing all that, we need to pay special attention to the livelihoods of the most vulnerable in our society.

Having put such an appropriate theme in place, the only question that now remains to be determined is whether the rest of the 2021 National Budget actually lives up to its own theme.

  1. In part 1 of the National Budget, the Minister correctly acknowledges in paragraph 16 that copper prices on the world market have significantly risen to peak at about US$6,840 per metric tonne this month. However, the Minister failed to explain why, with copper prices being that high, Mopani Copper Mines Plc is still insisting to suspend its operations in Kitwe and Mufulira?

Given the fact that Mopani is one of the key players in the mining sector in Zambia today, and their decision to shutdown operations will obviously have dire consequences on the Copperbelt Province in particular and the nation at large, the Minister should have addressed this issue in his 2021 National Budget address.

The Minister should have shared with the nation, what measures his Government has put in place or intends to put in place to mitigate this impending catastrophe.

The only mention of the Mopani issue by the Minister is in paragraph 53, and even then, he only talks about the fact that Glencore, the major shareholders of Mopani have offered to sale their shareholding to Government. However, what is of importance is why Glencore wants to exit the market.

What policy challenges have they been facing which has compelled them to exit? It is important to do a proper diagnosis here because if we do not, other mining houses will soon follow the footsteps of Glencore and exit our market.

  1. In paragraph 23 of the National Budget address, the Minister indicates that projected total expenditure for the 2020 financial year is K111.9 billion which is K5.9 billion higher than the 2020 National Budget which was K106 billion.

The Minister goes on to say that the K5.9 billion additional expenditure was due to fighting COVID-19. To the best of our knowledge, there is nothing on the ground in terms of Government’s fight against COVID-19 which can explain this exorbitant K5.9 billion.

Government did not give out any free masks, COVID-19 test kits are still in short supply with a waiting period for a COVID-19 test of up to 14 days and Government still only has three COVID-19 test Centre’s across the whole country; at UTH, at University of Zambia School of Veterinary Medicine Laboratory and at the Tropical Diseases Research Centre in Ndola.

So where exactly did Government spend K5.9 billion in the fight against COVID-19? Additionally, almost all expenses incurred by Government so far in the fight against COVID-19 came directly from local and foreign donations.

  1. As Patriots for Economic Progress, we have further noted the lack of consistency by the Minister in the cut-off dates that were used in his review of the 2020 budget performance.

With regard to expenditure to date, the Minister uses a cut-off date of August 2020. With regard to the balance of our Gross Foreign Reserves, the Minister uses a cut-off date of July 2020. With regard to the exchange rate between the Kwacha and the US Dollar, the Minister uses a cut-off date of September 2020.

With regard to our stock of foreign debt, the Minister uses a cut-off date of June 2020. With regard to our stock of domestic debt, the Minister uses a cut-off date of August 2020.

This haphazard approach in assessing different economic variables in measuring the 2020 budget performance, makes it difficult if not impossible to draw any meaningful conclusions. In the next budget presentation, the Minister is advised to pick one cut-off date against which all economic variables will be measured.

  1. On the macroeconomic objectives for 2021, our view is that they are not ambitious enough. An objective is supposed to be reasonably ambitious, otherwise it loses its purpose of driving performance.

A GDP growth rate target of 1.8 percent for 2021 is too low by any standards. Equally, a target of increasing the Gross Foreign Reserves from the current 2.3 months of import cover to 2.5 months of import cover in 2021 lacks any ambition on the part of the Minister.

Similarly, targeting a tax-revenue to GDP ratio of 18 percent for 2021 from the current 17.8 percent, is a display of total lack of ambition on the part of the Minister of Finance, especially given the fact that Zambia’s tax-revenue to GDP ratio is the lowest in the region.

South Africa’s tax-revenue to GDP ratio has averaged 25% in the past five years, whereas that of Zimbabwe is 23%, Botswana 26%, Namibia 27% and Lesotho 24%. Under these circumstances, we would have expected the Minister to set a tax-revenue to GDP ratio target of at least 20% for 2021.

  1. In paragraph 55, the Minister correctly recognizes the fact that the energy deficit and subsequent loadshedding by ZESCO has had a more retrogressive impact on our economy than even the COVID-19 pandemic. However, the story of pipeline energy projects to be soon commissioned to end the energy deficit, is one that is almost as old as the PF Government itself.

In this regard, the Minister has failed to show how his story of pipeline energy projects is different from similar stories and promises presented to this nation by other officials of the PF Government, including President Lungu himself, which have never come to fruition to this day. What the Minister must recognize is that the citizens of this Republic cannot feed on his excuses.

What we need are practical solutions to the problems that are currently bedeviling us. Not excuses.

  1. While we applaud the Minister and his Government on the successful completion of the Kazungula Bridge linking Zambia and Botswana, we believe that the time is now ripe for this country to invest in a comprehensive Highway Emergence Health Response System which will ensure that whenever there is a road traffic accident, properly trained and equipped paramedics are able to get to the scene and assist victims in the shortest possible time. Due to the absence of any Highway Emergence Health Response System, this country has needlessly lost and continues to lose lives.

The most recent being the untimely demise of Mr David Phiri alias known as Daev Zambia, together with four of his colleagues along the Chirundu-Kafue Road a few days ago. We have no doubt that had this country put in place a properly functioning Highway Emergency Health Response System, these five young souls would not have been lost. Indeed, it is almost literally impossible to survive a road traffic accident if it takes as long as 3 hours to be taken to a health facility.

  1. With regard to proposed expenditure for the 2021 financial year, amounting to K119.6 billion, our view is that it is reasonable as it represents about 32 percent of GDP and further represents a 13 percent increase from the 2020 proposed expenditure of K106 billion.

However, our disappointment arises from Government’s continued failure to adhere to its own budget, year in and year out. Indeed, Government has always found it fashionable not to fund items that have been provided for in the National Budget and yet fund items that were never provided for in the national budget.

It is for this reason that we wish to re-echo calls for the amendment of the law so that the Minister of Finance can be compelled to present to Parliament a line by line review of the extent to which the previous year’s National Budget was funded, before presentation of the next National Budget. Such a law will ensure accountability and transparency in the actual use of public resources.

  1. As Patriots for Economic Progress, we bemoan the proposal by Government to borrow about 43 percent of money needed to fund the 2021 National Budget, which amounts to K51.6 billion. Indeed, one of the main reasons why our economy has faltered is because of excess borrowing.

Therefore it beats logic how Government believes that additional borrowing can be a solution to the current problem of excess borrowing. Our view is that the only way that we can come out of our current economic downward spiral is by increasing our economic productivity as well as ensuring adequate domestic resources mobilization.

When it comes to domestic resources mobilization, we are saddened by the realization that Government has continued to fail to create capacity and capability for the Zambia Revenue Authority (ZRA) by creating the necessary conducive policy framework necessary for ZRA to collect tax revenue.

Indeed, year in and year out, we have witnessed continued lethargy on the part of Government to enact laws that are necessary for ZRA to collect tax revenue which is already provided for in the National Budget.

Additionally, Government has consistently failed to adequately fund ZRA so that it can attract and retain appropriately qualified and experienced personnel necessary for the Authority to diligently discharge its mandate.

The total culmination of all these failings on the part of Government is that Zambia has the lowest tax-revenue to GDP ratio of 17.8% in the region. We are literally failing to milk the cow.

  1. As Patriots for Economic Progress, we further bemoan the continued appetite by Government to allocate resources towards charitable activities at the expense of economic empowerment activities. In the 2021 National Budget, we have noted that Government has allocated about K5.7 billion towards the Farmer Input Support Program (FISP) which is a predominately charitable programme.

Additionally, Government has allocated a total of about K2.3 billion to Social Cash Transfer in the 2021 National Budget. This translates to a total of about K8 billion towards charity in the budget.

In the same budget, we have noted that the Government has allocated a meagre K266 million towards Economic Empowerment Programmes. Our view is that if we are going detach our citizens from the shackles of poverty and squalor, the solution lies in economic empowerment and not charity. Therefore, instead of Government spending a whooping K8 billion on charity and a paltry K266 million on economic empowerment, we would have been happy if these figures were reversed.

  1. As Patriots for Economic Progress, it is our considered view that Governments proposed measures of seeking to assist the sectors of our economy that have been severely hit by the adverse impact of COVID-19 is too little.

The proposal to reduce the corporate tax rate for hospitality and tourism establishments from the current 35% to 15% is unlikely to have any relief effect on the sector because almost all players in this sector have been and continue to be in a loss position due to the impact of loadshedding.

Consequently, they have not been paying any corporate tax in the first place. Therefore, to propose to reduce the corporate tax rate for someone who is not paying corporate tax in the first place is akin to donating a pair of shoes to someone who does not have legs. As kind as the gesture might be, it is meaningless.

  1. In total, it is our considered view that the 2021 National Budget that was presented by the Honorable Minister of Finance to the fifth session of the twelfth Parliament on Friday, 25th September 2020 lacks the gravitas necessary to Stimulate Economic Recovery and Build Resilience to Safeguard Livelihoods and Protect the Vulnerable. In other words, the content of the budget falls far short of its own theme.
  2. As Patriots for Economic Progress, we shall, in our usual fashion, prepare and present to the nation the PeP 2021 Alternative National Budget. It is worth mentioning that we are happy as a Party that Government saw it fit to adopt two of our recommendations in last years PeP Alternative National Budget.

These were to increase the threshold of the tax exempt portion of the monthly salary from K3,300 to K4,000 as contained on page 17 of the PeP 2020 Alternative National Budget.

Additionally, Government saw it fit to adopt our recommendation to increase the tax rate on the gross proceeds of gambling from the current 10 percent to 25 percent, as outlined on page 19 of the PeP 2020 Alternative National Budget.

However, we wish to encourage Government to adopt a lot more of our recommendations in the interest of the wellbeing of the Zambian people. The PeP 2021 Alternative National Budget will be presented to the nation at 0930hrs on Wednesday, 21st October 2020 at Palm Valley Resort in Lusaka.

Thank You and May God Bless the Good Citizens of this Republic and Our Ailing Nation.

YOURS TRULY

SEAN ENOCK TEMBO (SET)
PARTY PRESIDENT
PATRIOTS FOR ECONOMIC PROGRESS (PeP)

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