By Emmanuel Mwamba
(THE VIEWS EXPRESSED IN THIS ARTICLE ARE NOT OF THE ZAMBIAN VOICE AS AN ORGANISATION BUT OF THE AUTHOR WHO IS A FORMER PERMANENT SECRETARY AND A RENOWNED JOURNALIST)
‘’Shamenda Refuses to be Wage Freeze Envoy” screamed the headline in The Post edition of 15th October 2014.
One would ask: “How can the Minister of Labour disown provisions of his own government budget and speak like an overzealous union official?”
If you read The Post as your only source of information, you would be persuaded to assume that the narrative on national issues had degenerated to low levels.
For how does one explain the recent banner headline in the paper that stated; “2015 Budget a Theft Scheme- Edith Nawakwi”
How can a national budget be a theft and corrupt scheme? How can Zambia’s first and only female Finance Minister who is also FDD President make such utterances?
Is this dialogue genuine? Can a national budget truly be a corrupt or theft scheme as alleged by Nawakwi in The Post?
Another headline of interest attributed to Vice President Guy Scott read; “We are Not Looking at Right things – Guy Scott”.
How could the Vice-President, who was part of a Cabinet Meeting (and reportedly chaired it on behalf of President Sata) that approved the Budget, question its content publicly?
How can he let alone differ with or doubt the Budget’s economic philosophy?
What happened to the hallowed principle of collective responsibility by members of Cabinet?
It need not be labored that The Post has declared an open war with Minister of Finance, Alexander Chikwanda and are keen to portray him in the darkest of
terms, demonstrate that he has failed in his job and probably attempt to alienate him from President Sata, his colleagues and in the minds of right thinking Zambians.
But the questions that beg answers are; Is this Chikwanda’s Budget or a government Budget? Didn’t Cabinet sit and approve the proposals and estimates from the Ministry of Finance? Wasn’t Chikwanda presenting the Budget on behalf of government and President Michael Sata?
Infact the statements attributed to Vice President, Guy Scott and Minister of labour and Social Services Fackson Shamenda promote lawlessness and constitute an act of misconduct under the Ministerial and Parliamentary Code of Conduct Act no 35 of 1994, for disowning, disregarding or speaking against a collective decision made by Cabinet.
The law was made to regulate the conduct of our leaders in Cabinet and Parliament and both Scott and Shamenda know this but appear keen to breach these provisions.
What is a Budget?
A budget is a government document presenting government’s proposed revenues and spending for a financial year.
Following the approval by Cabinet, the Minister of Finance on behalf of the Republican President, proceeds to present the Budget to Parliament for approval,
A Budget is an invaluable tool that helps prioritize expenditure and helps manage the country’s resources. It can be a surplus, deficit or balanced budget.
The Budget proposes to raise revenue from taxes and fees imposed and propose to spend it on health, education, infrastructure, and other sectors.
In this budget and in attempt to optimize output or results, Chikwanda has moved the budget from an activity-based budget (ABB) to an output-based budget (OBB).
What are the Issues?
Zambia like many African countries comprises a population of majority of young people. The demographic distribution is that; 53% of the population comprises young people below the age of 18 years, 68% of the population comprises young people below the age of 25 years and 90% of the population is people below the age of 45 years.
The 2015 Budget recognizes that this scenario presents a dangerous scenario if this active population is not provided with economic means.
And that this scenario can be turned to a good opportunity for an active labour force if employment and empowerment opportunities could be created for it.
Since Zambia is an economy that relies on copper, suffers from low technological advancement, experiences low productivity, suffers from underdevelopment and is battling with high unemployment rates, it is imperative that aggressive policies to reverse this scenario are implemented.
Unless we are to make significant changes to diversify the economy and drive Zambia to economic independence, this sad scenario will continue.
Can this budget help bring economic independence to millions of Zambians?
Buoyed by growth in the real Gross Domestic Product (GDP) of over 6.5%, a projected good crop harvest, increased electricity generation, continued investments in private and public infrastructure, and anticipated growth in sectors such as manufacturing, transport and communications, the country is on the right path.
Where is the Money Coming from?
The total Budget is K46.7billion. Up-to 88.5% or K41.2 billion will be raised using domestic revenue measures and financing.
Government hopes to raise K11.8 billion (25.3%) from Income Tax (company income, Pay as You Earn (PAYE), and withholding taxes), Mineral Royalties will contribute K5.9 billion (12.7%), Value Added Tax (domestic and import duty) will contribute K6.57billion (14.10%), and Customs, Exercise and Fuel Levy will contribute K6.97billion and Non-Tax Revenues (fees,fines, exceptional dividends) will raise K3.8billion.
Grants and foreign loans will only contribute 11.5% or K5.3billion of the budget far from the earlier years when financing of up-to 40% of the budget came from foreign grants and loans.
The Wage Freeze- The Elephant in the Room
As a rule thumb worldwide, public sector wage bill should be between 5% to 25% of the National Budget or up-to about 8% of the country’s GDP. This is to ensure that the economy remains stable and competitive.
This is also important to allow government remain with adequate resources to buy medicines in hospitals, provide education and other social services, buy goods and services and embark on infrastructural development.
Following the large pay awards in 2013 that saw the minimum salary for general workers rise to K3, 000.00 far higher than the private sector (which is paying K700 minimum wage), and a rationalization of salaries for all professionals the waged bill jumped to dizzying levels.
Zambia’s public sector wage bill now stands at 52% of the national budget!! This means that over half of the country’s resources are being spent on paying emoluments for 170,000 workers in the public sector.
It is held that government is the employer of last resort and that this expenditure is justifiable due to lack of available formal jobs in the economy.
But the current scenario is totally unacceptable and requires immediate solution. The wage freeze, in the interim is a temporal measure. But the long-term solution might require a trim to this bloated civil service. (Loss of jobs is an undesirable measure but looking at the current public sector wage bill, this is but inevitable).
In my view, the wage freeze and the rising contention over it, is as a result of failure of effective communication by government on this sensitive matter.
First of all, the 200% pay awards that were dished out in the 2013 Budget should have been staggered to a period of two years.
Further although the workers feel that the wage freeze will affect them negatively in light of the increase in food prices and the family food basket, they should be reminded that significant amount of the country’s resources is being spent on the 170,000 lucky ones and that the 14 million Zambians are left in the cold crying for development benefits from the same limited resource envelope.
The civil service is a mere secretariat for government and the people of Zambia. Resources should be spent on Zambia and its people and not the current scenario, where the secretariat is gobbling over half the resources before programs and projects for the people of Zambia are embarked upon.
The Money has Been Spent on Roads!!
This is a strong remark that is constantly being made by union officials that government has spent all its money on roads!
The scrutiny of the budget, however, tells a different story.
Only K5.6 billion is being spent on the road sector. This is a response to the ambitious Link Zambia 8000 project, a legacy project for President Sata that many people; especially our folks in rural areas have appreciated.
General Public Services (public affairs, constitution making process, CDF, local and foreign debt service and compensation and awards) have received K12billion (25.8%).
Defence units have receivedK3.2billion (7%).
Public Order and Safety has been allocated K2.1billion (4.7%).
Economic Affairs (FISP, Empowerment Funds, FRA, Rural Electrification, ZESCO power rehabilitation, road infrastructure) has received K12.7billion (27.3%).
TheEducation Sector has received K9.4billion (20.2%) and the Health Sector has received K4.4billion (9.6%).
Others are social protection;environmental protection, housing and communityamenities, recreation, culture and religion receive the residual balances.
The infrastructure development has mostly benefited from financing from savings from abolished fuel subsidies and recent borrowings. It will be illogical to use these resources to consumptive programs such as wages.
Its just not roads that is the focus of this budget. Numerous programs to increase access to clean and safe drinking water for people in rural areas has been increased, the modernization of hospital infrastructure and upgrade of health facilities is underway besides other projects.
The Changes in the Mining Sector
To answer to the many concerns that Zambia is benefitting poorly from the mining sector, Government has redesigned the tax system that applies to the mines.
The new tax regime for mining operations has replaced the current two-tier system with the following mining tax structure:
(a) 8% Mineral Royalty for underground mining operations as a final tax;
(b) 20 % Mineral Royalty for open cast mining operations as a final tax.
(c) 30% CorporateIncomeTaxrateonincomeearnedfrom tolling; and
(d) 30% Corporate Income Tax rate on income earned from processing of purchased mineral ores, concentrates and any other semi-processed minerals, currently taxed as income from mining operations.
This new tax regime for the mines is intended to increase Government income from the mining sector. It is also aimed at increasing transparency in the sector and achieves a more equitable distribution of the mineral wealth between the Government and the mining companies.
This is an ambitious Budget in scope and in its ideals. If implemented properly, it forms a good earnest step into the next 50 years.
The issues surrounding the huge public sector wage bill, and the measure to impose a wage freeze, requires that government and public sector unions sit to discuss and have an honest discussion on the matter in order to find an amicable solution to the matter.