BUSINESS REVIEW - 2011 post - Budget analysis



By MAIMBOLWA MULIKELELA and BRIAN HATYOKA

INFRASTRUCTURE development is a cardinal undertaking for any government to spur growth in the economy and also avail the citizens efficient service delivery particularly in the social sector.

At Independence, the new Zambian Government embarked on infrastructure development throughout the country as a starting point towards building a self-reliant Southern African country able to handle its own affairs after buckling under a heavy yoke of colonialism.
It was an inevitable tall order for the Kenneth Kaunda-led Government which put up a determined programme to build the nation with emphasis on the social sector. The task continued many years later.
At one point the task seemed fullfiling, but with an increase in population and the resultant effects on the economy, more needed to be done in infrastructure development and in other areas.
Even now, this task needs to be enhanced as a sure way of meeting growing human needs, especially with the rise in population as well as, increased economic activity.
In the 2011 National Budget, Finance and National Planning Minister Situmbeko Musokotwane has committed 50 per cent towards the social sector and human development with emphasis on infrastructure development.
With the theme: ‘A People’s Budget, from a People’s Government,’ the minister’s 50 per cent proposal towards the noble cause underpins the seriousness with which the Government is undertaking the rehabilitation and expansion of the social sector in health and education.
The K20.5 trillion Budget, up from K16.7 trillion in 2010 and K15.2 trillion in the 2009, shows significant shift towards self-financing as about 76.8 per cent would come from domestic revenue while 7.7 per cent would come from grants from cooperating partners.
The deficit of 15.5 per cent would be financed through domestic and external borrowing.
Dr Musokotwane at a post Budget discussion said the Government is moving away from total dependence on donors to finance the Budget from own resources.
“The cooperating partners are ready to finance. Let me clarify this, they are not withholding any finances as some people may want to believe. We are slowly beginning to raise resources on our own. In any case, there should be a time that we should do it all by ourselves,” he said.
It is clear that the Government’s agenda next year and beyond is aimed at improving the livelihood of the people through provision of quality social service and at the same time focusing on growing the economy.
Health, education and improvement of water as well as sanitation, which are significant components in any economy, have received a major boost to enhance the quality of services in the country.
Major projects are being undertaken in health, education and other sectors in almost all the districts as a response to the growing demand as well as, meeting the citizens’ needs.
The essence of concentrating on infrastructure development is to ensure that Zambia meets some of the MDGs target by the year 2015 ultimately improving the livelihood of the citizenry who in turn, should offer their services through participation in the economy.
For instance, the allocation to road infrastructure development has more than doubled from K1, 461.9 billion in 2010 to K3, 098 billion next year under which rehabilitation as well as, building and maintenance of bridges countrywide would be undertaken.
A reliable road network is a sure pre requisite to national development because transportation and communication becomes efficient.
The road network plays an important role for export of commodities such as minerals and agricultural products to the ports.
Main and feeder roads need rehabilitation to facilitate the transportation of agriculture and other commodities to the market.
The Government would continue to set agriculture as one of the main drivers in the economic diversification and extend the support to livestock and fisheries by encouraging increased output and greater productivity.
The sector is extremely important for economic growth in terms of poverty alleviation, job creation, and improvement in income as well as, reducing food prices.
Beneficiaries in the Farmers Input Support Programme (FISP) would be increased from 500,000 to ensure that more small-scale farmers access inputs and ultimately increase production.
About 80 per cent of the crop is produced by small-scale farmers on whose efforts the Government anchors the trust for sustainable food security.
The trade unions have time and again requested that the Government should move upwards the tax exempt threshold to give relief to the workers.
Last Friday, Dr Musokotwane proposed to increase the Pay-As-You-Earn (PAYE) exempt threshold by 25 per cent, from K800,000 in 2010 to K1 million per month in 2011.
This clearly gives relief to workers in low-income bracket and would increase consumer demand, thereby contributing to Value Added Tax (VAT) in getting goods and services.
On energy, the country’s focus in the medium term would be to turn Zambia’s vast energy potential into generation capacity that can be used to light and power homes and businesses for decades to come.
The Government would, through the Rural Electrification Programme, develop mini-hydro power stations and extend access to electricity in rural areas. This will help open up rural outposts to investment and reduce the rural-urban divide.
Thus, Dr Musokowane has proposed an increase to the Rural Electrification Programme to K314.3 billion in 2011, from K234.7 billion this year.
This is the first step towards attaining the Government’s Six National Development Plan (SNDP) target of increasing rural access to electricity from three to 15 per cent of the rural population by 2015.
The construction of the Kafue Gorge Lower Hydro Power project would add 600 mega watts of generation capacity to forestall the deficit and ensure the industry keeps running efficiently. The upgrading of the Kariba North Bank will also boost generation capacity.
In tourism, the Government is working towards opening up other areas other than Livingstone as evidenced from the improvement in the Northern Tourism Circuit.
Kasaba Bay Pleasure Resort is undergoing a facelift as the runway at the airstrip is being extended, capacity in electricity is being boosted while, the road from Kasama to Mbala up to Mpulungu has been rehabilitated to handle more traffic.
To enhance development in the tourism sector, Dr Musokotwane has allocated K63.3 billion to take full advantage of the recovery in global tourism and reposition Zambia as a premier nature, wildlife, and cultural tourism destination.
Infrastructure in the Kafue National Park will be improved to attract more tourists.
In the manufacturing sector, Government’s policy has always been to align the tax policy among other measurer in order to promote the local manufacturing sector.
Dr Musokotwane has thus proposed to introduce customs duty of 15 per cent on cold-rolled coils, and 25 per cent on deformed bars and galvanised cold-rolled coils.
On the macroeconomic objectives for 2011, it is important to note that the Government would continue with the diversification programme while increasing productive employment and maintaining a stable macroeconomic environment.
Other objectives for next year would be to achieve real Gross Domestic Product (GDP) growth of above six per cent, reduce end-year inflation to seven per cent and to maintain international reserves of at least four months of import cover.
Given the rate at which the economy has so far performed and the outlook in the coming year, it is possible to attain the macroeconomic objectives or even to exceed the target.
So far, some sections of the business community have welcomed the 2011 Budget while others have noted some challenges.
The Bankers Association of Zambia (BAZ) is impressed with Government’s fiscal policy to limit domestic borrowing to 1.4 per cent of Gross Domestic Product (GDP) as this will create space for the private sector.
BAZ chairperson Saviour Chibiya said commercial banks in the country would have more space to give loans to the private sector.
Mr Chibiya said that the banks had a choice to either lend to the Government or the private sector and when the State limits its borrowing it means more resources would be available to lend to the private sector.
The Government has emphasised that the country needs a robust private sector for sustained economic growth and with more space to borrow, the sector will have recourse to financing.
Zambia Agricultural Commodity Exchange (ZAMACE) executive director, Brian Tembo said the 2011 Budget is a fair attempt which for the first time focuses on reduced spending on administrative purposes but more in investment in economic and social sectors.
Mr Tembo welcomed Government’s resolve to improve in major economic sector and improve people’s lives.
”There are some challenges. While the pursuit of a Budget is dynamic and allows for flexibility, we must be careful to avoid over expenditure on consumption,” Mr Tembo said.
Livingstone Tourism Association (LTA) member Fredrick Mwendapole was happy that the tourism sector had been allocated about K63.3 billion in 2011.
Mr Mwendapole, who is Southern Tourism, Agriculture and Commercial Show Society chairperson, was impressed that a component of improving the Kafue National Park has been taken care of in the Budget.
Mr Mwendapole noted that currently, a lot of tourists are going elsewhere as a preferred destination, but if work is done on the Kafue National Park, the situation will be reversed.
He says the opening up of Kafue National Park would also increase the bed nights for the visitors.
”We still need to market Livingstone to the fullest with the availability of the infrastructure so that Zambia remains the preferred destination and that, we should be on the top ten,” he said.
Caritas Zambia representative Edmond Kangamungazi said during the ACCA, ZICA and CIMA Budget analysis that, adjusting the exempt PAYE threshold from K800, 000 to K1, 000,000 per month was commendable.
ZAMBIA Institute of Chartered Accountants president Chintu Mulendema said the 2011 national Budget is centered on the aspiration and ambition to grow the economy and ultimately alleviate poverty in the country.
Mr Mulendema said it was important that the Government had started taking measures to support economic growth through targetting to improve the social sector of the economy.
“In the recent years, the Gross Domestic Product (GDP) has significantly gone up which is very cardinal to the growth of the economy despite poverty levels being high,” he said.
Mr Mulendema said the Budget was significantly targeted to improve the social sector as evidenced from increased resources allocation to health and education.