DAILY PARLIAMENTARY DEBATES FOR THE FOURTH SESSION OF THE ELEVENTH ASSEMBLY

Friday, 10th October, 2014

The House met at 1415 hours

[MR SPEAKER in the Chair]

NATIONAL ANTHEM

PRAYER

______

ANNOUNCEMENTS BY MR SPEAKER

EXPANDED COMMITTEE ON ESTIMATES

Mr Speaker: I wish to inform the House that yesterday, Thursday, 9th October, 2014, I announced the composition of the Expanded Committee on Estimates which will consider the 2015 Budget. The Expanded Committee on Estimates will submit its report to the House on Thursday, 30th October, 2014.

SOLAR POWER PROJECT BY ZESCO

Mr Speaker: I wish to inform the House that the Zambia Electricity Supply Corporation (ZESCO) Limited embarked on a solar installation project to mitigate the power deficit being experienced in our country, which has led to load shedding.  As a demonstration of ownership in championing energy efficiency, conservation of power and harnessing other renewable energy sources, ZESCO Limited installed mini solar power plants at its head office and Parliament Buildings.

Following the successful completion of the works, ZESCO Limited will hold a commissioning ceremony of the solar plants at the Parliament Buildings Foyer, on Tuesday, 14th October, 2014, at 0930 hours.  All hon. Members of Parliament are invited to attend and, in particular, those from the Committee on Economic Affairs, Energy and Labour are expected to be in attendance.  Of course, attendance will be on a voluntary basis.

Laughter

Dr Kaingu: Question!
________

BUSINESS OF THE HOUSE

The Vice-President (Dr Scott): Mr Speaker, I rise to give this House an outline of the business it will consider next week.

Sir, on Tuesday, 14th October, 2014, the Business of the House will commence with Questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. Then, the House will commence the debate on the Motion of Supply.

Mr Speaker, on Wednesday, 15th October, 2014, the Business of the House will begin with Questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will consider Private Members’ Motions, if there will be any. The House will, then, continue with the debate on the Motion of Supply.

Sir, on Thursday, 16th October, 2014, the Business of the House will commence with Questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will continue with the debate on the Motion of Supply.

Mr Speaker, on Friday, 17th October, 2014, some of my friends in the Opposition will be pleased to notice that the Business of the House will commence with the Vice-President’s Question Time …

Hon. Opposition Members: Hear, hear!

The Vice-President: … which is when hon. Members can ask questions to clarify any small issues on which they are not yet clear.

Mr Livune: Question!

Hon. Opposition Members: Hear, hear!

The Vice-President: Sir, this will be followed by Questions to hon. Ministers, if there will be any. Then the House will deal with the presentation of Government Bills, if there will any. Thereafter, the House will continue with the debate on the Motion of Supply.

I thank you, Sir.
_____

MOTIONS

BUDGET ADDRESS

The Minister of Finance (Mr Chikwanda): Mr Speaker, I beg to move that the House do now, resolve into the Committee of Supply on the Estimates of Revenue and Expenditure for the year 1st January, 2015 to 31st December, 2015, presented to the National Assembly in October 2014. 

 Sir, I am the bearer of a message from His Excellency the President …

Mr Livune: Question!

Mr Chikwanda: … recommending favourable consideration of the Motion that I, now, lay on the Table. 

Mr Speaker, on the 24th of October, 2014, Zambia celebrates its Golden Jubilee which will mark half a century of the country’s political Independence. The nation has achieved so much over the past fifty years. We have had an unbroken period of political stability and peaceful co-existence by putting into practice our motto of “One Zambia One Nation.” We have advanced the cause of freedom and self-determination at home and abroad by fighting for the liberation of our neighbours. We have also advanced a generation of Zambians who are contributing to the growth of the nation at home and in the diaspora. These are achievements worth celebrating. 

Hon. Government Members: Hear, hear!

 Mr Chikwanda: Sir, one of Zambia’s many unique attributes has been its unparalleled political and social stability since Independence in 1964. This includes the period up to the 1980s when Zambia was home to many liberation movements from its neighbouring countries and was, therefore, in the forefront of their independence struggles. 

Sir, from 1991, Zambia has been a vibrant multi-party democracy having discarded the one- party system with a very un-salutary governance track record. The Patriotic Front (PF) came into power three years ago through a peaceful transition. This political stability and social harmony has been the platform upon which our strong economic growth and macro-economic stability has been anchored. 

 Mr Speaker, despite these significant milestones, more still remains to be done to make our Independence more meaningful in the lives of our citizens. The development challenges we face as we enter the sixth decade as a nation remain daunting. Overall, poverty in Zambia remains high at above 60 per cent even though it is much lower in urban areas at around 23 per cent. Some of the most critical challenges that the Government faces, therefore, are to create decent jobs and wealth to ensure a greater provision of social safety nets. 

 Sir, Zambia has a very young population, and a growing labour force, with over 53 per cent of the population below the age of 18 years and 90 per cent of its population below the age of 45 years. Being a country of predominantly young people, Zambia can yield a demographic dividend if its youth are equipped with skills and meaningfully involved and deployed in the various productive sectors of the economy. 

 Mr Speaker, these challenges are made even more formidable in the face of threats posed by climate change, over-reliance on primary commodities, low technological advancement, low productivity and rapid urbanisation. Over the past three years, the PF Government has continued to strengthen the requisite macro-economic foundations for development. This has been done by upgrading investments in all sectors including infrastructure which is necessary in addressing the challenges of accelerated development. 

 Sir, it is in this context that the theme of the 2015 Budget is “Celebrating Our Golden Jubilee as One Zambia One Nation by Making Economic Independence a Reality for All”. 

Hon. Government Members: Hear, hear!

Mr Livune: Question!

Mr Chikwanda: Mr Speaker, economic development that facilitates prosperity for all can only have meaning and sustainability if it is firmly premised on fiscal prudence and responsibility. This should be our legacy to posterity. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, when framing the 2015 Budget, our vision was to bring economic independence to the millions of Zambians. That has been our practical guide and moral benchmark. My address today is in four parts. Part I provides an overview of the global and domestic economic developments this year. In Part II, details of the Government’s macro-economic objectives and sectoral policies as well as strategies for 2015 are presented. The main details of the 2015 Budget are given in Part III and my address is concluded in Part IV. 

PART I

GLOBAL AND DOMESTIC ECONOMIC DEVELOPMENTS IN 2014

 Mr Speaker, the global economy continues to recover, but at a subdued pace. Output is projected to increase to 3.3 per cent this year, up from 3 per cent in 2013. In advanced economies, positive growth is projected in the United States of America while in the Eurozone, there are concerns about stagnation and deflation. The emerging economies such as China and India, will continue with their positive growth trajectory, albeit at a lower rate. In Sub-Saharan Africa, growth is projected to decline marginally from the 2013 level to 5.1 per cent this year.

 Sir, the performance of commodity prices varied in 2014. Copper prices averaged US$7,097 per metric tonne during the first nine months, down from US$7,752 per metric tonne in 2013. This reflects the sluggish demand for copper particularly by China. Similarly, crude oil prices have marginally declined during the same period to an average of US$102.95 a barrel compared to US$103.22 in 2013. It is also worth noting that the current spot prices for crude oil are showing a downward trend of below US$100 per barrel. With regard to food items, prices for main cereal crops such as maize, wheat and rice declined while those of meat and dairy products increased. 

Mr Speaker, on the domestic front, preliminary projections are that real gross domestic product (GDP) growth will be higher than the projected 6.5 per cent for this year. This will be mainly driven by a good harvest in the 2013/2014 Farming Season, increased electricity generation, investments in private and public infrastructure and growth in the manufacturing as well as in transport and communications sectors. 

 Sir, the growth recorded over the past three years has been accompanied by a significant rise in employment. In my 2014 Budget Address, I informed this House that the Government’s ambition was to create 200,000 decent jobs in 2014. I wish to report that current estimates are that the Zambian economy will generate about 120,000 new formal sector jobs in addition to thousands of other jobs being created in the informal sector. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the jobs in the formal sector will mainly be in the private sector, reflecting its growing capacity as the primary engine of economic growth and job creation. 

 Mr Speaker, in 2014, the Treasury took measures to consolidate the country’s fiscal position. These measures included actions to contain the size of the public sector wage bill and streamlining of expenditure towards priority programmes. As a consequence, the end year budget deficit is expected to be within the programmed level of 5.5 per cent of the GDP compared to 6.5 per cent that obtained in 2013. 

 Mr Speaker, inflation was contained within single digits over the first nine months and was 7.8 per cent in September, 2014 from 7.1 per cent in December, 2013. The slight increase was due to the depreciation of the kwacha, mainly in the first half of the year, and the pass-through from the upward adjustments in fuel prices and electricity tariffs. With these pressures now largely accounted for, the Government is confident that for the sixth consecutive year, inflation will be maintained in the single digits range in line with Government’s macro-economic objectives. 

Sir, the first half of 2014 experienced a rapid depreciation of the kwacha against the major currencies, reaching a high of K7 per US Dollar in May. This partly arose from a reduction in the supply of foreign exchange to the market, particularly from the mining sector, and the subsequent speculative behaviour. In response, the Bank of Zambia (BOZ) tightened the country’s monetary policy through a number of measures, including adjusting upwards the policy rate, increasing the statutory reserve requirement and extending its application to Government and vostro accounts. Through these measures, the exchange rate has now stabilised around an average of K6.2 per US Dollar. 

Sir, the tight liquidity conditions came at the cost of a temporary rise in interest rates which constrained access to credit. Having achieved relative stability in the foreign exchange market, BOZ has, since July, 2014, eased liquidity conditions. As a result, the daily average overnight interbank rate reduced to 12.8 per cent as at the end of September, 2014 from 25 per cent at the end of June, 2014. With a gradual increase in liquidity, it is expected that commercial banks will pass on the benefits to borrowers by reducing lending rates. High interest rates inhibit growth and ultimately stoke up inflationary spirals. 

 Sir, the overall condition and performance of the financial sector was satisfactory as at end of September, 2014. The financial sector’s aggregate capital adequacy and earnings performance improved, while asset quality and liquidity conditions remained stable. With regards to the implementation of the new capital adequacy framework for the banks, impressive progress has been made in terms of compliance. 

Sir, during 2014, trading activity on the Lusaka Stock Exchange (LUSE) increased, reflecting improved investor sentiments and participation on the local bourse. Market capitalisation increased by 8 per cent to K62.9 billion while the all-share index rose by 17 per cent to 6,620.9 by the end of September 2014. 

 Mr Speaker, LUSE listing requirements stipulate that no single shareholder should control more than 75 per cent of the equity in any company. This is to ensure that more of our citizens participate in capital markets. I am, therefore, directing the Securities and Exchange Commission (SEC) to ensure that all the listed companies comply with this requirement. To comply with the listing requirements, the Government will itself reduce its shareholding in Zambia Consolidated Copper Mines-Investments Holding (ZCCM-IH) Plc to 60 per cent from the current 87 per cent. The 27 per cent shares will be sold to Zambian citizens as a way of entrenching the economic independence of our people. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, the overall balance of payments is expected to register a surplus of US$486 million in 2014 compared to a deficit of US$344.9 million in 2013. This surplus is attributed to improvements in both the current and financial accounts. Higher copper export volumes and the receipt of the Eurobond proceeds account for the expected improvements. 

Mr Speaker, consistent with improvements in the overall balance of payments position, gross international reserves are projected to increase to US$3.2 billion at the end of December, 2014, representing three months of import cover, from the US$2.7 billion or three months of import cover recorded at the end of December, 2013. 

Mr Chikwanda drank water.

Mr Mbewe: Hear, hear!

Mr Chikwanda: Hmm.

Laughter 

Mr Chikwanda: Mr Speaker, the stock of Government’s external debt as at end of September, 2014 was US$4.7 billion. This represents an increase of 34 per cent from US$3.5 billion as at the end of 2013. The increase in the external debt stock was mainly on account of the US$1 billion Eurobond that was issued in April as part of the programmed financing in the 2014 Budget. The total external debt service for the first nine months of 2014 amounted to US$126.2 million which is less than 3 per cent of the domestic revenues.

Mr Speaker, Zambia’s domestic debt including arrears as at end of September 2014 stood at K21.9 billion representing an increase of 5.6 per cent from K19.7 billion as at end of December 2013. The increase was largely on account of programmed financing for the 2014 Budget. 

Mr Livune: Question!

Mr Chikwanda: Hmm.

Hon. Government Members: Hear, hear!

Mr Livune: Question!

Mr Chikwanda: Mr Speaker, with the indulgence of the hon. Member for Katombola, I will proceed to part II.

Laughter

Hon. Members: Hear, hear!{mospagebreak}

PART II 

MACRO-ECONOMIC OBJECTIVES, POLICIES AND STRATEGIES FOR 2015

 Mr Speaker, the Government, in 2015, will continue to focus on industrialisation together with job and wealth creation, so as to reduce poverty and inequality on a sustainable basis. This will be achieved by investing in sectors that have been identified to best promote employment for our youthful population, significantly increase productivity in the economy by empowering our workers with the requisite skills for the 21st century, contribute to higher and inclusive economic growth rate, and develop the rural areas to narrow the urban-rural divide. These include the agriculture, tourism, manufacturing and construction sectors. Additionally, for inclusive growth, emphasis will be placed on investing in the social sectors. 

Mr Speaker, the specific broad socio-economic policy objectives for 2015 will be to: 

(a)    achieve a real GDP growth rate of above 7 per cent; 

(b)    achieve an end year inflation rate of not more than 7 per cent; 

(c)    increase international reserves to, at least, 4 months of import cover;
 
(d)    raise domestic revenue collections to, at least, 18.5 per cent of the GDP; 

(e)    contain domestic borrowing to not more than 2 per cent of the GDP;

(f)    accelerate the diversification of the economy, and continue the drive to create decent jobs, especially for the youth; and 

(g)    accelerate the implementation of interventions in the health, education, water and sanitation sectors. 

Economic Sector Policies

Agriculture
 
Mr Speaker, Zambia’s agricultural sector recorded a historic achievement during the 2013/14 Farming Season when over 3.35 million metric tonnes of maize was harvested, the highest tonnage ever obtained. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, this strong performance was due not only to an 8.1 per cent increase in the area planted, but more importantly and significantly, a 22.3 per cent increase in the yields, reflecting higher productivity by our farmers. The area planted for other crops such as rice, groundnuts and millet also increased, reflecting that our goal of crop diversification is becoming a reality. 

Mr Speaker, to achieve even more productivity in agriculture, the Government will increase the resources allocated to the sector. Among other things, this will allow for the provision of effective extension services that will equip our farmers with the technical knowledge and skills to remain productive in the face of challenges posed by changing weather patterns. The Government will, therefore, recruit 500 additional extension officers and better equip them by providing motor cycles and extension kits.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the Government will also ease the housing problem for extension officers by continuing to rehabilitate camp houses in 2015. 

Sir, to further promote crop diversification, extension services will continue to support farmers in growing crops suitable for the particular ecological zones. The Farmer Input Support Programme (FISP) will also be tailored to provide seeds for a variety of crops according to ecological comparative advantages. Achieving greater productivity and diversification in agriculture will require limiting spending on maize which currently absorbs over two thirds of the entire agriculture budget. 

 Mr Speaker, in the context of the growing threats of climate change, the Government will upscale support to conservation farming involving a total of 84,000 farmers in thirty-one districts during the 2014/15 Farming Season. 

Sir, to maximise the use of our arable land and grow crops throughout the year, irrigation development will continue to receive high priority with the construction of, at least, one smallholder irrigation scheme in each province. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, this is expected to bring a further 6,000 ha under irrigation in the next twelve months thereby bringing the total land area brought under irrigation with Government support over the last three years to 17,500 ha. 

Mr Speaker, the focus in the livestock sub-sector will be to enhance extension and disease control services. This will be done by establishing twenty-three livestock extension service centres, constructing and rehabilitating livestock blocks and camp houses, establishing thirteen satellite insemination centres and upscaling disease control measures. The Government will also encourage initiatives by the private sector to promote livestock production. 

Mr Speaker, the current annual national fish consumption rate in Zambia stands at 130,000 metric tonnes. However, the annual national production rate is 95,000 metric tonnes of which 20,000 metric tonnes is from aquaculture and 75,000 metric tonnes is from rivers and lakes. 

 Sir, with the depletion of fish in our main water bodies, the development of aquaculture has become imperative. In this regard, the Government will undertake reforms that will ease entry of our enterprising citizens in the private sector into aquaculture production. In addition to this, the Government will continue with research activities, the provision of extension services, surveillance and fish re-stocking. 

 Mr Speaker, the Government will, in 2015, build on the phenomenal success that has been scored at the Nitrogen Chemicals of Zambia (NCZ) where the production of D Compound fertiliser has reached 100,000 metric tonnes …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … for the 2014/2015 Farming Season. The annual production capacity of the NCZ for D Compound has been increased to 150,000 metric tonnes following the recapitalisation of the company by the PF Government. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the recapitalisation process will continue in order to enable the company commence the production of ammonium nitrate to facilitate the manufacturing of top dressing fertiliser and explosives locally, thereby creating further employment opportunities and reducing the importation of fertiliser into the country. Importing fertiliser is like importing air and water.

Laughter

Hon. Government Members: Hear, hear!

Mr Chikwanda: Manufacturing Sector

 Mr Speaker, in order to add impetus to job creation, the Government has granted a number of tax concessions over the past three years to spur growth in the manufacturing sector. To further promote growth in the sector, Government departments are hereby directed to give preference to locally-produced goods in line with the Industrialisation and Job Creation Strategy. To this effect, beginning 1st January, 2015, the Government will remove the voucher system applicable on such imports. 

Mr Speaker, in my 2014 Budget Address, I announced that the Government had released K106.9 million to the Development Bank of Zambia (DBZ) to support the financing needs of small and medium enterprises (SMEs). 

 Sir, I am pleased to report that all the funds have been disbursed to forty-seven the SMEs involved in various sectors including agro-processing, manufacturing, engineering, fisheries, tourism and hospitality as well as the construction and agriculture sectors. In order to facilitate further lending to the SMEs, in 2015, the Government will commit additional funds to further recapitalise the DBZ. 

Mr Speaker, to further enhance medium to long-term financing for the SMEs, the Government will support initiatives such as the Alternative Investment Market launched by LUSE. Such frameworks will allow SMEs to raise funds from the stock market at an affordable cost and tap into technical and managerial skills through new equity partners. 

 Sir, the Government will also scale up entrepreneurship training and market relevant skills development under the technical education, vocational and entrepreneurship training institutions. These interventions will invariably lead to wealth and job creation as SMEs hold the greatest potential and prospects for job creation. 

 Sir, the Government will also continue allocating funds to the Citizens Economic Empowerment Commission to support value chain development. Out of the 1,526 approved projects this year, 1,072 projects valued at K48 million have since been funded, 92 per cent of which are in rural areas, thus contributing to our efforts to narrow the urban-rural divide. Of the funded projects, 64 per cent went to women and youths. 

Hon. Government Members: Hear, hear!

Hon. Opposition Members: Where?

Mr Chikwanda: Katombola.

Laughter

Hon. Government Members: Hear, hear!

 Mr Chikwanda: Sir, further, the Government has already embarked on the designing of industrial clusters that are going to be established in each district …

Hon. Opposition Members: Hear, hear! 

Interruptions 

Mr Chikwanda: … as a way of realising economic independence for our people. The clusters will provide industrial workshops …

Hon. Opposition Members: Aah!

Mr Chikwanda: … from which our entrepreneurs will be able to manufacture various products, thus promoting value addition, particularly in the areas of metal fabrication, timber and agro-processing, aquaculture and automotive industry. 

 Mr Speaker, the Government will continue to facilitate infrastructure development to support the growth of the manufacturing sector through the promotion of multi-facility economic zones and industrial parks. 

Tourism Sector

 Mr Speaker, Zambia’s tourism sector has immense potential for increasing revenue collection and the delivery of decent jobs to its citizens due to its labour intensive nature. I am glad to inform this august House that growth in this sector has been positive in recent years. In 2013, tourist arrivals increased by 6.5 per cent to over 900,000. Preliminary data for 2014 shows that this number will be surpassed as end-June, 2014, arrivals of over 455,000 were 5.2 per cent higher than in the same period last year. 

Sir, to unlock the massive potential for employment in this sector, the Government will continue to improve airport infrastructure, electricity connectivity and access roads to tourist areas, particularly those along the Northern Circuit, Lower Zambezi and Kafue National parks. 

Mr Speaker, as regards airport infrastructure, the Government is expanding and upgrading the Kenneth Kaunda International Airport in Lusaka and will construct a new airport at Simon Mwansa Kapwepwe Airport in Ndola. Further, plans are underway to rehabilitate a number of aerodromes across the country to increase access by air. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mining Sector 

Mr Speaker, production in the mining sector in the first eight months of 2014 at 448,673 was about 50,000 metric tonnes lower than the corresponding period in 2013. This has largely been on account of a significant fall in the output recorded at one of the major mines due to the temporary suspension of mining operations as a result of operational challenges. The depletion of oxide ore at some mines and stockpiling of concentrates also contributed to the lower output. Despite these operational constraints, copper production is expected to be marginally higher than the 2013 production of about 790,000 metric tonnes. 

 Sir, the Government is promoting the domestic auctioning of gemstones in order to obtain maximum benefits from the resources and to promote transparency and accountability in this sub-sector. This is in support of the diversification and growth of the mining sector, evidenced by gemstone sales of US$50 million in the first eight months of this year. This move will also contribute to domestic revenue collection, thereby enhancing our fiscal position as we make economic independence a reality for all. 

Economic Infrastructure Development

 Mr Speaker, as emphasised by His Excellency the President in his address to this august House, infrastructure development is an indispensable pillar in our efforts to raise the productivity of our businesses, diversify the economy and promote inclusive growth. In this regard, the PF Government has made tangible progress in developing key infrastructure in the transport, communication and energy sectors. 

Transport and Communication Infrastructure 

Roads 

Mr Speaker, the Government has continued implementing the Road infrastructure Development Programme under the Link Zambia 8,000 km Road, …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … Road Tolling and the Lusaka 400 km Road projects. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, equipment for Pave Zambia 2,000 km Road Project has since been procured and distributed to all the provinces. The manufacturing of pavers has commenced in seven provinces.

Mr Ng’onga: Hear, hear!

 Mr Chikwanda: Sir, the Government’s expectation is that the rapid acceleration of this project in 2015 will provide further income earning opportunities for our unemployed youths. 

Sir, under Phase I of the Link Zambia 8000 km Road Project, a total of twenty-two projects valued at K9.8 billion, covering a length of 2,260 km are under implementation countrywide. Included under this programme are the Kasama/Mporokoso, Mbala/Nakonde, Chama/Matumbo, …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … Chongwe/Katoba Basic School and Isoka/Muyombe/Lundazi/Chama roads. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, additionally, works on the Kitwe/Chingola Dual Carriageway are advanced at 40 per cent, the Pedicle Road at 48 per cent, the Mansa/Luwingu Road at 37 per cent, while 19.5 km of the Kawambwa/Mushota Road and 60 km of the Bottom Road …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … have been completed. I wish to also inform this august House that the procurement process for the engagement of a contractor for the Kalabo/Sikongo Road has commenced.

Mr Livune: Question!

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, works have also been completed on the Kasama/Mbesuma and Kalulushi/Lufwanyama roads. 

Mr Speaker, the Government is alive to the reality that maintaining our road network in a good state entails investing in road maintenance and rehabilitation. In this regard, 63 km of the Lusaka /Chirundu Road has been rehabilitated. Further, 52 km of the 91 km road from Luangwa Bridge to Feira has been upgraded …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … to bituminous standard while maintenance works will soon commence on the Chinsali/Nakonde Road. 

Sir, the Government is also constructing a number of bridges to ease the movement of our people and open up our rural areas. In this regard, the Government recently completed and commissioned the Michael Chilufya Sata Bridge in Chiawa. Further, twenty-two out of twenty-six bridges on the Mongu/Kalabo stretch are under construction with seven bridges already completed. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the construction of the Mufuchani Bridge in Kitwe is also underway.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, I wish to also report that the contract for the construction of the Kazungula Bridge has been signed and the contractor is mobilising. 

Hon. Government Members: Hear, hear!

Mr Livune: Question!

Interruptions 

Mr Chikwanda: Mr Speaker, the Government is operationalising the Road Tolling Programme as an innovative and self-financing mechanism for sustainable road rehabilitation and maintenance. This programme is being implemented at eight weighbridges and eighteen ports of entry targeting vehicles with weights in the excess of 6.5 tonnes. So far, K187.4 million has been raised from this programme in 2014. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Railways 

Mr Speaker, the Government is committed to improving the railway network to reduce the heavy load on our roads. I wish to report that of the targeted 442 km of the Livingstone/Chingola line, a total distance of 117 km has been rehabilitated, while 133 km will be completed by the end of 2014. 

 Furthermore, Sir, progress has been made in refurbishing passenger coaches resulting in improved services which have attracted over 7,600 passengers per week compared to less than 5,000 under the concessionaire. In addition, the volume of cargo transported has increased to over 400,000 tonnes during the first half of the year from about 280,000 tonnes during the same period in 2013. 

Hon. Government Members: Hear, hear!

 Mr Chikwanda: Sir, the rehabilitation of storage facilities at Chipata Station has been completed and Zambia Railways Limited has since commenced operations on the Chipata/Mchinji Railway Line. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, this route will enhance regional trade through the Nacala Corridor. 

Hon. Government Members: Yes!

Mr Chikwanda: Mr Speaker, the 162 km Mulobezi Railway Line together with livestock wagons and passenger coaches are also being rehabilitated. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, work on the Copperbelt inter-mine railway network is progressing well at Konkola and Nchanga Mine plants. Rehabilitation works along the Luano/Chililabombwe Railway Line are also nearing completion. 

 Mr Speaker, the Government will continue to support the Tanzania-Zambia Railway (TAZARA) to ensure that it facilitates the movement of goods and passengers as well as enhances local and foreign trade links. The Government is, therefore, resolving the policy constraints relating to the operations of TAZARA by harmonising positions with its Tanzanian counterparts.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Energy Infrastructure 

Sir, the energy sector continues to grow and contribute positively to economic growth. The Government has moved proactively to reduce the power deficit in the electricity sub-sector which has potentially been a major hindrance to the economic prosperity of the country. We have just brought on stream 360 MW of power having completed the Kariba North Bank Hydro-power Extension Project. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, another 120 MW at the Itezhi-tezhi Hydro Power Plant and 300 MW of thermal power being developed in Sinazongwe by the private sector will come on stream next year to further enhance our power generation capacity. The Government will continue to undertake extension and rehabilitation works on the transmission and distribution networks under the Power Rehabilitation Project. 

 Sir, the construction of the Pensulo-Kasama and the Pensulo-M’soro-Chipata 330 kV transmission lines is expected to be completed next year. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, the works on the 750 MW Kafue Gorge Lower Project, including the two 330 kV transmission lines, are back on course following the strengthening of the governance structure for the project in line with international good practices. It is expected that by the end of 2014, the procurement process for the engineering, procurement and construction contractor, the transaction advisor and fund manager will be finalised. Government’s expectation is that the execution of this project will accelerate in 2015. 

Mr Speaker, Government’s policy in the petroleum sub-sector is to ensure a stable supply of fuel in all parts of the country. To this end, the programme of building provincial depots will continue. The Mpika Fuel Depot has been commissioned, while the Solwezi and Mongu Fuel depots are expected to be completed in 2015. The identification of additional sites in the remaining provinces is in progress. 

 Sir, in order to deal with the challenges in this sector, the Government is reviewing the petroleum supply chain and the financing options. Further, alternative sources of fuel supply are being pursued to reduce costs. Discussions at bilateral level with oil producing countries for the supply of crude and finished products have commenced in order to streamline the procurement processes by eliminating middlemen. 

Social Sector Policies

 Mr Speaker, to advance the Government’s commitment to social justice, its social sector priorities in 2015 will remain focused on improving access to and enhancing the delivery of education, health and water and sanitation services as well as accelerating the implementation of social protection programmes. 

Education and Skills Development 

Mr Speaker, the Government will continue to focus on increasing equitable access to quality education. It will also continue to empower our youths through skills training. In order to increase access, and improve progression rates to higher levels of learning, the construction of education facilities especially at secondary and tertiary levels will remain paramount. Emphasis will also be placed on enhancing early childhood education. 

Sir, to improve the quality of education, the Government will continue the programme of upgrading teacher qualifications to meet the minimum standards required. The training of teachers in science, mathematics and technology subjects will be scaled up to address the inadequate number of teachers in these fields. The Government will continue implementing the revised education curriculum that puts emphasis on life skills in order to align student qualifications to the needs of the industry and the wider economy. 

Mr Speaker, the Government will also continue with the School Feeding Programme in order to promote the cognitive development of young children, particularly the disadvantaged. 

Health Sector

 Mr Speaker, in line with the Government’s objective of bringing cost effective quality health services as close as possible to all Zambians, the Government will continue to increase the availability of frontline health personnel, enhance infrastructure and improve the provision of drugs and medical equipment. The health status of Zambians continues to improve under the PF Government …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … as revealed by the 2013/2014 Zambia Demographic Health Survey.

 Sir, in order to address human resource constraints in the health sector, the Government has been implementing the National Training Operational Plan since 2013. The current number of frontline health personnel stands at 13,147. In 2015, the Government plans to recruit additional staff so that the overall number of health personnel increases by over 2,000, bringing the total number to over 15,000. 

Hon. Government Members: Hear, hear!
    
Mr Chikwanda:  Sir, the Government has commenced the construction of two new training institutions in Senanga …

Interruptions

Mr Chikwanda: … and at the Levy Mwanawasa General Hospital in Lusaka. In addition, twenty seven health training institutions are under rehabilitation and expansion. This is expected to accelerate the supply of medical staff by increasing the number of health graduates to 10,000 per year from the current 5,500. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, thirty district hospitals are also under construction in various parts of the country. The construction of eight district hospitals will begin before the end of this year. In addition, the programme to construct 650 health posts is underway …

Mr Livune: Question!

Mr Chikwanda: … and will be completed by the end of 2016.

Hon. Opposition Members: Hear, hear!

Dr Kaingu: Wenye.

Mr Chikwanda: Sir, to further improve the quality of health care and reduce referrals both locally and abroad, the Government is well advanced with the modernisation programme to upgrade the health facilities at the University Teaching Hospital in Lusaka, Livingstone General Hospital and Kitwe and Ndola Central hospitals. Under this programme, the Government is procuring specialised equipment including CT scans, magnetic resonance imaging machines and catheterisation laboratories. 

Mr Speaker, improving the supply of medical drugs and logistical systems remains a priority of the Government in order to ensure timely and adequate supplies. In line with this, the Government embarked on the establishment of six regional hubs under Medical Stores Limited. The Choma and Chipata regional hubs are already operational and a third, in Mongu, will be operational by the end of 2014. The remaining three are expected to be operational in 2015. 

Mr Chikwanda: Water Supply and Sanitation 

Mr Speaker, the PF Government remains committed to ensuring that all Zambians have access to clean water supply and sanitation services. I am pleased to report to this House that out of the 2,000 boreholes planned for this year, 1,514 had been drilled as at end of September, 2014. 

Hon. Opposition Members: Where?

Mr Chikwanda: Sir, this year, ten piped-water schemes and 921 boreholes have been rehabilitated. As a result of these interventions, rural access to clean and safe drinking water has increased to 64 per cent from 61 per cent of the population …

Mr Mwila: Hear, hear!{mospagebreak}

Mr Chikwanda: … in 2013. 

 Mr Speaker, in 2015, the Government will continue implementing interventions aimed at increasing rural access to clean and safe drinking water from the current 64 per cent to 67 per cent. This will be achieved by constructing an additional 2,500 water points, mainly boreholes. The Government will also rehabilitate an extra 2,000 existing water points during the same period. 

 Sir, to ensure adequate access to sanitation facilities, the Government has trained people and rolled-out sanitation projects in forty-four districts. This has resulted in 1.3 million people in rural areas having access to adequate sanitation facilities. In 2015, the Government will continue promoting community-based approaches and the construction of institutional sanitation facilities. With these interventions, rural access to sanitation facilities is targeted to increase to 45 per cent from the current 43 per cent. 

 Mr Speaker, the Government, in 2015, will increase access to clean and safe drinking water in urban and peri-urban areas from the current 83 per cent to 85 per cent of the population. This will be achieved through the rehabilitation and construction of water supply infrastructure in the various urban towns under the eleven water and sewerage utility companies. 

Sir, the Government is committed to improving sanitation facilities in urban and peri-urban areas. As such, designs for water supply and sanitation improvements under the Lusaka Water Supply, Sanitation and Drainage Project have been completed while rehabilitation works on the water and sewerage systems under the Southern and Mulonga Water and Sewerage Companies in Livingstone and Chingola have commenced. 

Mr Speaker, promoting sustainable solid waste management is critical to ensuring environmental protection. In 2015, the Government will provide resources to local authorities to enable them procure refuse trucks and other solid waste management equipment countrywide. Local authorities will be encouraged to embark on waste-to-energy projects through public-private partnership (PPP) arrangements. 

Social Protection 

Mr Speaker, the Government remains committed to ensuring adequate social protection for its citizens. The provision of sustainable and equitable pension benefits as well as other social safety nets for vulnerable members of society is, therefore, at the core of the Government’s social protection policy. 

Sir, our public pension system is characterised by huge actuarial deficits, low annuities and unsustainable entitlements. To address these challenges, an inter-ministerial committee was constituted to review the pension system. The committee has since completed its review and made recommendations to redesign the pension rules and framework and harmonise the social security legislation. The Government is now considering these recommendations. 

Mr Speaker, to effectively contribute to the eradication of hunger and extreme poverty in rural households, the Government scaled up the Social Cash Transfer Scheme in 2014. As at June 2014, over 145,000 individuals had been supported. More than 80 per cent of the people who were supported were female. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, it is projected that by the end of 2014, about 190,000 beneficiaries will be reached. This scheme will continue in 2015 as a tangible demonstration of the Government’s resolve and commitment to eradicate hunger and extreme poverty.

Hon. Government Members: Hear, hear! 

Mr Chikwanda: Mr Speaker, the Government remains committed to implementing other social safety nets including the Women Empowerment Programme, Food Security Pack, Public Welfare Assistance Scheme, medical grants and bursary schemes for students. 

Mr Livune: Question!

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, in 2015, the Government will review some of these programmes with the aim of rationalising coverage to maximise their impact. 

Debt and Aid Policy
 
Sir, the Government remains committed to maintaining a sustainable debt level. In this regard, the Government conducted a debt sustainability analysis in June, this year, which indicated that the country’s debt position remains sustainable. The net present value of Zambia’s external debt as a per centage of the GDP remains below the internationally accepted threshold of 40 per cent.

Mr Speaker, I wish to assure this House that the PF Government will exercise fiscal prudence when contracting debt. Therefore, borrowing will be restricted to financing only critical capital investments.

Hon. Opposition Members: Question!

Hon. PF Members: Hear, hear! 

Mr Chikwanda: Sir, to avoid burdening future generations with unsustainable debt, the Government will further strengthen domestic revenue mobilisation so that an increasing proportion of the Budget is financed from domestic resources.  

Sir, on the domestic front, the Government will limit its borrowing to not more than 2 percent of the GDP to ensure that our fiscal policy does not crowd out the private sector. This will further support the lowering of interest rates in the domestic market. Heavy borrowing by the Government pushes up the cost of Treasury instruments, that is bonds and treasury bills, and in the process raises commercial bank interest rates. This impedes all businesses, particularly SMEs from borrowing and dampens their impetus for job creation. 

Sir, as I indicated in my last Budget Address to this august House, the revision of Zambia’s aid policy has become imperative. This is in view of the general global decline in official development assistance (ODA) and the shift by bilateral cooperating partners from direct budget support to sector and project support. 

Sir, I am pleased to inform the House that the Government has made progress in drafting the new policy which will focus more on strengthening trade relations, enhancing private sector exchanges and partnerships to build capacity in the various priority sectors of the economy, in line with the revised Sixth National Development Plan (SNDP). 

Fiscal Policy 

Mr Speaker, substantial progress has been made in 2014 to consolidate the fiscal position. The end-year overall deficit is projected to be within the target of 5.5 per cent of GDP, down from 6.5 per cent in 2013. In 2015, the Treasury will continue to exercise prudent fiscal management with the overall deficit targeted to further fall to 4.6 per cent of the GDP. 

Sir, this lower fiscal deficit is a fine balance between ensuring macroeconomic stability and the need to fund critical public infrastructure that supports a higher and sustainable growth trajectory. The deficit will over the medium-term continue to be reduced to around 3.3 per cent of the GDP by 2017. In recognition of this effort, I am glad to inform this House that international rating agencies recently revised Zambia’s outlook from stable to positive, and affirmed the country’s ceiling at B+. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, key to the achievement of our fiscal deficit target will be the continued control of the recurrent expenditure of the Budget. Further, limiting expenditure on maize marketing, ensuring cost reflective fuel pricing and rationalising capital expenditure will be essential in containing the deficit.  

Mr Speaker, to further strengthen the fiscal position in 2015, the Government will improve the efficiency with which it controls its resources through the full operationalisation of the Treasury Single Account. This will ensure better cash management and avoid idle balances in the banking system. Consequently, the need for the Government to borrow unnecessarily on the money markets to finance its operations will be curtailed. 

Sir, a strengthened fiscal position will also arise as a result of the continuation of the Government’s effort to modernise tax administration with a more robust tax system. This will enhance the operational efficiency within the Zambia Revenue Authority (ZRA) and reduce the cost to taxpayers of complying with their tax obligations. 

Mr Speaker, the reformation of the land titling procedures and the roll-out of the Zambia Integrated Land Management and Information System (ZILMIS) is expected to be completed in 2015, thereby boosting non-tax revenues. As a consequence of these efforts, and changes in the tax policy which I will detail later, the revenue to the GDP ratio in 2015 is projected to rise to 18.5 per cent from 17.2 per cent projected for end of 2014. 

Mr Speaker, there are some concerns regarding the application of Value Added Tax (VAT) (General) Administrative Rule No. 18 on proof of export requirements. It has been noticed that some exporters have not complied with the requirements of Rule No. 18 and this has led to non-payment of VAT refunds. It is the Government’s desire to see these concerns being resolved expeditiously and amicably.

Hon. Government Members: Hear, hear! 

Mr Chikwanda: Monetary and Financial Policies

Mr Chikwanda took a glass of water.

Mr Livune: Yes, drink water.

Mr Chikwanda: Aqua est vita.
 
Mr Speaker, in order to support poverty reduction and economic growth, our monetary policy in 2015 will remain focused on achieving a single digit inflation rate of not more than 7 per cent. Higher inflation adversely affects the poor majority of our people who have no way of protecting their incomes. Consequently, BOZ will control inflation through the increased use of market-based monetary tools that avoid economic distortions. Further, a liberal foreign exchange system will be maintained, with the Central Bank’s interventions limited to smoothing out short-term fluctuations in the exchange rate. 

Sir, increased access to formal financial services remains a priority objective for this Government. To demonstrate its commitment, the Government will continue to implement the various initiatives enshrined in the Financial Sector Development Programme. Initiatives to extend financial services to ordinary citizens and small business enterprises will be prioritised around two broad strategies. The first of these is the development of a regulatory framework for agency banking aimed at encouraging financial institutions to take banking services to the vast majority number of unbanked Zambians. The second is the implementation of the National Strategy on Financial Education to provide ordinary Zambians with financial knowledge. 

Structural Reforms

Public Financial Management Reform 

Mr Speaker, a sound public financial management (PFM) system is indispensable to the efficient collection of public finances, their allocation to priority areas and the efficient accounting and control of these finances. In this regard, the PFM Reform Strategy was launched earlier this year to enhance PFM practice in Zambia. 

Sir, key milestones achieved, so far, include the publication of the National Planning and Budgeting Policy and the rolling-out of the Integrated Financial Management and Information System (IFMIS) to more sites. Work has also progressed on the drafting of the National Planning and Budgeting Bill and the mainstreaming of IFMIS into Government structures. 

Mr Speaker, another significant achievement is the submission today, as part of the 2015 Budget, of an output-based budget (OBB) for the Ministry of Education, Science, Vocational Training and Early Education. The OBB is one tangible outcome of implementation of the Planning and Budgeting Policy. It requires that the Budget becomes more results-oriented and in line with national development priorities. It will also provide this House with more relevant information for assessing the Government’s budget proposals and performance. 

Sir, as a Government that believes in inclusiveness, I wish to report that a consultative meeting was held with members of the Expanded Committee on Estimates on the proposed OBB pilot. More consultative and sensitisation meetings will be held with Members of this august House and other key stakeholders before progressively rolling-out the OBB to all ministries, provinces and other spending agencies. 

Public Sector Reforms 

Mr Speaker, in order to strengthen governance and operational efficiency of State-owned enterprises (SOEs), the Government has incorporated the Industrial Development Corporation (IDC). The IDC will be the holding company for all SOEs and will become the main vehicle for investment in strategic sectors where the private sector is not able to venture. 

Sir, the Government is concerned about the low levels of efficiency, high level of liabilities and poor financial management practices in some grant aided institutions. In order to address these concerns, the Government has commenced a review to assess their viability and sustainability of SOEs. Institutions that will be found unsustainable will either be abolished or reverted to the Central Government. 

Fiscal Decentralisation 

Mr Speaker, I am pleased to announce that the review of the intergovernmental fiscal architecture has been completed and work to implement the results of this review has commenced. Consequently, in 2015, the Local Government Equalisation Fund (LGEF) will be established to provide a stable, buoyant and predictable source of revenue from the Central Government to supplement local Government revenue. This will enable councils to deliver better municipal services and invest in local development projects. 

Sir, financing of this fund will be based on a revenue sharing arrangement, where the Central Government will allocate a minimum of 5 per cent of total income taxes. Allocations to individual councils will be formula-based to ensure equity and transparency. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the release of grants to councils will be conditional on the observance of good public financial management practices and the delivery of essential municipal services. 

Private Sector Development Reforms 

Mr Speaker, in order to reduce the cost of doing business for the private sector, the Government will operationalise the provisions of the Business Regulatory Act of 2014 to ensure that the principles of the law are complied with when introducing licences. In this regard, the Government will work towards institutionalising regulatory impact assessments to rationalise licences and streamline procedures.

Sir, I now move to the crunch.

PART III

THE 2015 BUDGET

Mr Speaker, in 2015, the Government proposes to spend K46.7 billion or 24.6 per cent of the GDP. This will be financed from domestic revenues of K35.1 billion which is 75.2 per cent of the total Budget and 18.5 per cent of GDP. Grants from cooperating partners of K1.2 billion or 2.6 per cent of the total Budget will complement domestic revenues. Domestic borrowing is projected to be 2.0 percent of GDP translating to K3.8 billion while K4.2 billion is a combination of foreign programmes and project financing. The balance of K2.4 billion is made up of proceeds from the 2014 Eurobond. 

2015 Expenditure Allocations by Function

Sir, in line with the sector policies outlined in Part II, I now discus the supporting expenditure allocations by functions of the Government. 

2015 EXPENDITURE BY FUNCTION

Function    K’million    Percentage of Budget

General Public Services    12,040.18    25.80
Public affairs and summit           68.86    
Constitution making process           29.26    
Constituency Development Fund              210    
Local Government Equalisation Fund         586.76    
Domestic debt interest      2,896.16    
External debt interest      2,391.68    
Compensation and awards              100    
Defence       3,247.21           7
Public Order and Safety      2,180.02        4.7
Economic Affairs     12,746.64      27.3
Empower funds           123.7    
Sovereign Wealth Fund              100
Farmer Input Support Programme      1,083.17    
Strategic food reserve           992.9    
Rural Electrification Fund           70.71    
ZESCO power rehabilitation              600    
Roads infrastructure      5,626.51    
O/W GRZ contribution      3,226.34    
Environmental Protection         174.96        0.4
Housing and Community Amenities          798.71        1.7
Water and sanitation         540.99    
Health      4,464.09        9.6
Drugs and medical supplies         753.52    
Medical infrastructure and equipment         268.24    
Recreation, Culture and Religion         323.63        0.7
Education       9,433.33      20.2
School infrastructure      1,069.53    
University infrastructure              650    
Social Protection       1,257.80        2.7    
Public Service Pension Fund              805    
Social Cash Transfer         180.59    
O/W GRZ contribution              150 
Food Security Pack                50

Grand Total     46,666.56       100

General Public Services 

Mr Speaker, K12 billion or 25.8 per cent of the Budget has been allocated to general public services. To ensure that the Government meets both its domestic and external debt obligations, K2.9 billion and K2.4 billion have been provided respectively. Other notable expenditure allocations under this category include K669.4 million for grants to local authorities of which K586.8 million is for the LGEF. 

Sir, to ensure the continuation of infrastructure development in the newly created provinces and districts, K500 million has been provided in 2015. Further, K210 million has been allocated to the Constituency Development Fund (CDF). I have also provided K100 million to cater for court cases decided against the Government. 

Sir, the Constitution-making process has continued in earnest, as the Government has continued to discuss the matter with all interest groups in order to achieve consensus on both the process and content. I have allocated K29.3 million towards this process. 

Economic Affairs
 
Mr Speaker, the Government proposes to spend K12.7 billion or 27.3 per cent of the total Budget to support the economic sectors and lay the basis for further prosperity for our people. In this regard, an allocation of K5.6 billion has been set aside for road infrastructure, including the Link Zambia 8,000 and Pave Zambia 2,000 km road projects. 

Mr Speaker, diversification from maize remains paramount in attaining more inclusive growth and economic independence. In this regard, K254.9 million has been allocated towards the e-Voucher System which will allow farmers more flexibility of choice in the inputs they receive. A further K1.1 billion has been allocated to the Farmer Input Support Programme (FISP). In 2015, it is expected that 1 million farmers will access inputs through the e-Voucher System and FISP. 

Sir, the Government will continue promoting private sector participation in grain marketing by limiting grain purchases by the Food Reserve Agency (FRA) to the 500,000 metric tonnes required for the strategic food reserves. In this regard, I have provided K992.9 million for strategic food reserves. 

Mr Speaker, to promote irrigated agriculture and increased access to water resources, I have allocated K164.5 million towards the construction and rehabilitation of dams to achieve our target of an additional 17,500 ha under irrigation by 2016. To promote livestock and fisheries, I have allocated K307 million for livestock disease control measures and aquaculture development. 

Mr Speaker, to address the challenges posed by the growing demand for electricity, I have provided K600 million to the Zambia Electricity Supply Cooperation (ZESCO) for power generation, transmission and distribution. A further K70.7 million has been allocated to increase the number of rural communities across the country connected to the national grid under the Rural Electrification Programme. 

Mr Speaker, to continue nurturing the entrepreneurial spirit of our people by empowering them with required finances so as to increase their effective participation in the economy, I have allocated K123.7 million to various empowerment funds that cater for the youth, women and SMEs. 

Mr Speaker, a culture of living hand-to-mouth does not safeguard the interest of posterity. We have a duty and responsibility to secure the future of the next generations. In this regard, I have allocated K100 million for the establishment of a sovereign wealth fund. Going forward, a significant proportion of the dividends from SOEs that will fall under the IDC will form part of the fund. That is to say that most of the dividends from the SOEs will go into the Sovereign Wealth Fund.

Education and Skills Development 

Mr Speaker, I propose to spend K9.4 billion or 20.2 per cent of the total Budget on the education sector. In an effort to reduce the pupil/teacher ratio, 68 per cent of this amount will go towards the recruitment of 5,000 teachers and sustaining the current establishment. I have also provided K1.1 billion for infrastructure development for early childhood, primary and secondary education. 

Sir, K650 million has been allocated to commence the construction of additional student accommodation at the University of Zambia (UNZA), Copperbelt University (CBU), Mulungushi University and Evelyn Hone College, and to continue the construction of new universities. The new universities that are earmarked for completion in 2015 are Paul Mushindo, Chalimbana and Palabana. 

Mr Speaker, the Government will embark on the construction of King Lewanika and Luapula universities in 2015. 

Hon. Government Members: Hear, hear!{mospagebreak}

Mr Chikwanda: Sir, I wish to inform this august House that the construction of the Robert Kapasa Makasa, Mukuba and Kwame Nkrumah universities is almost complete. To supplement the budgetary allocation, the Government will continue to explore opportunities for PPPs as an alternative form of financing the construction of tertiary education infrastructure. 

Sir, a further K79.6 million has been allocated towards the construction of nine trades training institutes across the country, of which three will be completed in 2015 in Isoka, Kalabo and Mwense. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, K28.5 million has been allocated towards the procurement of research and development equipment as well as the commencement of the construction of a national science centre in Chongwe, fisheries centre in Samfya and a mineral research centre in Solwezi. 

Sir, to address the challenges facing our vulnerable school leavers to access tertiary education at our colleges and universities, I have raised the allocation to bursaries by 27.9 per cent to K200.2 million from the 2014 allocation of K156.5 million.

Hon. Government Members: Hear, hear!

Mr Livune: Question! 

Interruptions 

Mr Chikwanda: Sir, the cost of publicly-provided tertiary education per student in the country is among the highest in the Southern African Development Community (SADC) region. There is need, therefore, to review the cost of providing tertiary education in Zambia. 

Sir, following the successful piloting of the school feeding programme, I have allocated K32 million to widen the reach of this programme further in 2015.

Health
 
Sir, in line with the Government’s objective of providing equitable access to quality health care, I have allocated K4.5 billion or 9.6 per cent of the overall Budget in 2015 to the health sector. Of this allocation, K268.2 million has been allocated to the construction and rehabilitation of health infrastructure in various parts of the country. 

Mr Speaker, an allocation of K753.5 million has been set aside for the procurement of essential drugs and medical supplies. I am pleased to inform this House that K52.5 million has been allocated for the net recruitment of over 2,000 health personnel. 

Housing and Community Amenities 

Mr Speaker, the Government has allocated K798.7 million for housing and community amenities, of which K541 million will go to the rehabilitation and construction of water supply and sanitation infrastructure in the rural, peri-urban and urban areas. 

Public Order and Safety
 
Sir, K2.2 billion has been allocated to maintain public order and safety. Key interventions will involve modernisation of our security wings, recruitment of security personnel including immigration and prison officers, rehabilitation of prison infrastructure, and construction and rehabilitation of staff houses. 

Hon. Government Member: Hear, hear!

Mr Chikwanda: Social Protection
 
Mr Speaker, I have provided K1.3 billion for social protection. The Public Service Pension Fund will get K805 million, K180.6 million will be for the Social Cash Transfer Scheme and K50 million for the Food Security Pack. The allocation to social protection translates to 2.7 per cent of the overall expenditure in 2015. 

Other functions 

Sir, K3.7 billion has been allocated to the remaining functions of defence, environmental protection and recreation, culture and religion. Of this amount, K3.2 billion is for the defence function. 

Revenue Estimates and Financing

Sir, let me now outline the details of the revenue measures I am proposing for 2015.

Total Revenue and Financing for the 2015 Budget

    K’million    Per cent     Per cent
        Of GDP    of Budget

Total Tax Revenue     31,282.67    16.5       67
Income Tax    11,793.25      6.2    25.3
Company income tax      2,399.44
PAYE        7,466.9        
Withholding & other      1,926.91
Mineral Royalty       5,936.88      3.1    12.7
Value Added Tax      6,576.73      3.5    14.1
Domestic VAT              157
Import VAT      6,419.73
Customs and Excise         6,974.8      3.7    14.9
Customs duty      3,341.38
Excise duty      3,633.42
O/W fuel levy         903.13
Non-Tax Revenue       3,822.68         2      8.2
Fees and fines         468.58
Exceptional      3,083.73
Dividends & on-lending         270.37
Domestic Revenue     35,104.35    18.5    75.2
Domestic Borrowing       3,771.95         2      8.1
Earmarked Bond Proceeds      2,417.95      1.3      5.2
Total Domestic Revenue and Financing     41,294.25    21.8    88.5
Total Foreign Grants and Financing       5,372.31      2.8    11.5
Grants      1,213.59    0.64      2.6
General budget support
Project grants      1,213.59
Foreign Financing       4,158.72      2.2      8.9
Programme loans      1,482.59
Project loans      2,676.13

TOTAL REVENUE AND FINANCING    46,666.56    24.6     100

Revenue Measures 

Mr Speaker, the proposed revenue measures have been framed in the context of Government’s aim to consolidate its fiscal position and make the tax system simpler and more effective. This entails, inter-alia, accelerating the modernisation of tax administration and restructuring the current mining tax regime in order to capture more resources to address public expenditure needs. 

Mr Speaker, to ease tax compliance, the Government in 2004 introduced a presumptive tax for individual operators of public service vehicles at specific amounts based on a vehicle’s sitting capacity. However, these amounts have not been adjusted in the last ten years and have consequently been eroded by inflation. I, therefore, propose to double the presumptive tax payable by these operators. This measure will raise additional revenue of K3.8 million. 

Mr Speaker, I further propose to increase the specific duty rate on refined edible oil to K2.20 per kg from 85n per kg in order to bring it at par with the ad valorem rate of 25 per cent charged on imported refined edible oil. 

Sir, in order to stimulate the local manufacturing industry and sustain employment in the sector, I propose to increase customs duty on explosives to 25 per cent and on roofing sheets to 30 per cent. 

Interruptions 

Mr Chikwanda: Sir, that measure is on imported products so as to protect the local industry.

Sir, I propose to increase excise duty on imported un-denatured spirits of alcoholic content of 80 per cent or higher by volume to 125 per cent from 0 per cent. 

Interruptions 

Mr Chikwanda: Sir, this proposed measure will only apply to importers who are not licensed to manufacture excisable products while the licensed manufacturers will continue to account for excise duty at the point of sale of the manufactured potable spirits at the current excise duty rate of 60 per cent. The combined revenue gain from these last three measures relating to changes in customs and excise duties is estimated at K40 million. 

Sir, I propose to remove the 5 per cent customs duty on aviation fuel in order to reduce costs in the aviation industry. This measure, together with the expansion of our international airports, are some of the practical steps the Government is taking to make Zambia a regional hub for air traffic. As a result of this measure, the Government will forego K6.3 million in revenue. 

Changes to the Mining Fiscal Regime 

Mr Speaker, last year, I informed this House that we needed to increase our income from the mining sector. Since then, significant progress has been made towards the implementation of a multi-purpose and multi-stakeholder framework for monitoring the country’s mineral value chain aimed at increasing transparency in the sector. 

Sir, building on this framework and in order to achieve a more equitable distribution of the mineral wealth between the Government and the mining companies, I propose to redesign the mining fiscal regime by replacing the current two-tier system with the following simplified mining tax structure: 

(a)    8 per cent mineral royalty for underground mining operations as a final tax;

(b)    20 per cent mineral royalty for open cast mining operations as a final tax; 

(c)    30 per cent corporate income tax rate on income earned from tolling; and 

(d)    30 per cent corporate income tax rate on income earned from the processing of purchased mineral ores, concentrates and any other semi-processed minerals, currently taxed as income from mining operations. 

Mr Speaker, the proposed changes to the mining tax regime will not apply to the mining of industrial minerals. The expected additional revenue, over and above what we have been collecting, in 2015, as a result of these new measures is estimated at K1.7 billion.

House-keeping Measures 

Mr Speaker, I also propose to carry out amendments to the Customs and Excise, VAT, Income Tax, Property Transfer Tax and Mines and Minerals Development Acts so as to update, strengthen and remove ambiguities in certain sections of tax legislation in order to make tax administration more effective. The proposed amendments to these Acts are essentially housekeeping in nature and revenue neutral. 

Mr Speaker all the above tax and revenue measures will take effect from 1st January, 2015. 

PART IV
 
CONCLUSION
 
Mr Speaker, since hon. Member seem to be getting tired, let me conclude my address. I wish to stress that we have in the recent years made some noteworthy achievements to grow the economy. To eradicate the insidious incidences of poverty which are a slur on our collective conscience, we need double digit growth rates. This will entail major changes in our mindsets, particularly, as they relate to a radical improvement in our work culture, sense of duty and responsibility. 

Mr Speaker, our modest achievements, so far, are a product of our collective wisdom of unflinching unity in diversity. We are an oasis of peace, stability and, above all, of human fellowship in a troubled world bedeviled by fratricidal feuds and wars 

Sir, let us continue to rally behind our President, Mr Michael Chilufya Sata, whose transformative development agenda has in a very short time of three years changed Zambia in palpably significant ways.

Hon. Government Member: Hear, hear!

Mr Chikwanda: Mr Speaker, we are all equal stakeholders in Zambia and there is no room for bystanders. The need for sustainable development makes it an inescapable moral imperative for each and every one of us to be active agents of development. However, different our views may be, and this is the core and essence of a democratic society, the development of Zambia is our common and collective agenda. 

Sir, we should all ardently pray that the Good Lord, in his infinite mercy and unfailing compassion, will preserve and guide our President, and indeed the entire leadership of this nation including hon. Members of Parliament, to always be a beacon of hope and human fellowship, so that we can evolve into a role model country. 

Mr Speaker, I thank you.

Hon. Members: Hear, hear! 

Mr Bwalya (Lupososhi): Mr Speaker, on behalf of the people of Lupososhi Constituency, allow me to thank you thank most sincerely for giving me the rare privilege to be the first hon. Member to debate on the Motion moved by hon. Minister of Finance on the 2015 Budget. It is always exciting to be associated with a momentous occasion like this one.

Mr Speaker, allow me to congratulate the hon. Minister of Finance, Hon. Alexander Bwalya Chikwanda, for presenting a well-thought out and all encompassing speech regarding the 2015 Budget.

Mr Livune: Question!

Laughter 

Mr Bwalya: Sir, the Budget Speech by the hon. Minister brings renewed hope and expectations …

Hon. PF Members: Hear, hear!

Interruptions 

Mr Bwalya: … to the people of the Republic of Zambia. It is evident that the hon. Minister proposes to expend national financial resources on critical sectors of the economy. It is, therefore, important that we defer debate on this Motion to Tuesday, 14th October, 2014. This will give us ample time to reflect on the numerous issues which have been raised by the hon. Minister. It will also allow us to converse with our electorates and analyse policies as expounded by the hon. Minister of Finance.

Sir, with these few words, I propose that we defer the discussion of the 2015 Budget to next Tuesday.

Mr Speaker, I thank you.

Hon. PF Members: Hear, hear!

Mr Speaker: Is the proposal seconded?

Ms Imenda (Luena): Mr Speaker, I beg to second the proposal that the debate on the Motion be adjourned until Tuesday, 14th October, 2014. I would like to thank you for according me this opportunity to support the proposal by the hon. Member of Parliament for Lupososhi Parliamentary Constituency.

Sir, I am confident that hon. Members of Parliament in this House will acknowledge that the issues contained in the Budget Speech have an impact on the everyday lives of the citizens of this great country, Zambia. For this reason, it is important that hon. Members are given ample time to carefully scrutinise the Budget Speech, which has just been delivered to this House, in readiness for debate next week. 

Sir, I, therefore, urge my colleagues on both sides of the House to come well-prepared on Tuesday, next week, so that we can engage in serious and meaningful debate on the issues that have been raised in the Budget Speech, including those which may not have been raised …

Interruptions 

Mr Imenda: … and yet affect the lives of our people. Therefore, I wish to support the proposal to defer the debate on the Motion to Tuesday, next week.

Mr Speaker, I thank you.

Hon. Opposition Members: Hear, hear!

Question put and agreed to.

ADJOURNMENT

The Vice-President (Dr Scott): Sir, I beg to move that this House do now adjourn.

Question put and agreed to.

__________ 

The House adjourned at 1609 hours until 1430 hours on Tuesday, 14th October, 2014.