Tuesday 23rd February, 2016

The House met at 1430 hours

[MR SPEAKER in the Chair]

NATIONAL ANTHEM

PRAYER

____ 

MINISTERIAL STATEMENTS

DEVELOPMENT OF NORTHERN AND SOUTHERN TOURISM CIRCUITS

The Minister of Tourism and Arts (Ms Kapata): Mr Speaker, I thank you for giving me the opportunity to issue a ministerial statement on what the Ministry of Tourism and Arts is doing about the development of the Northern and Southern tourism circuits.

Mr Speaker, the Southern Tourism Circuit covers the Southern, Western and parts of Lusaka provinces, while the Northern Circuit encompasses Luapula, Northern and Muchinga provinces. The tourism attractions in the two tourism circuits include:

Tourism Circuit Tourism Attraction
         
Southern Victoria Falls 
Mosi-oa-Tunya National Park 
Tongabezi Lodge 
Boiling Point 
Zambezi Sawmill Train 
Mukuni Park Lion Encounter 
African Queen Gorge 
Kafue National Park 
Lochnivar National Park 
Chete Islands 
Lake Kariba 
Lower Zambezi National Park 
Chirundu Fossil Forest 
Ng’ombe Illede 
Kafue Gorge 
Ngonye Falls 
Sioma Ngwezi National Park 
West Zambezi Game Management Area (GMA) Zambezi Plains 
Liuwa National Park 
Simalaha Conservancy 
Mulobezi GMA 
Northern    Mumbuluma Falls
Mambilima Falls 
Musonda Falls 
Lusenga National Park 
Lumangwe Falls 
Kabwelume Falls 
Ntunbachushi Falls 
Lake Bangweulu 
Samfya Beach 
Nsumbu National Park …
Mr Chansa: Hear, hear!

Ms Kapata:                 Kalambo Falls 
Lake Chila 
Chishimba Falls 
Mweru-wa-Ntipa National Park 
Chilubi Island 
Lavushi Manda National Park 
South Luangwa National Park 
Safwa Rapids 
Chipoma Falls 
Mwenzo Missions Lodge 
Nyika National Park 

Mr Speaker, the development of the Northern and Southern tourism circuits requires co-ordinated implementation of activities in terms of infrastructure and investment. In this regard, the following has been considered for implementation:

(i)    prioritisation of the creation of a Special Purpose Vehicle (SPV), in collaboration with the Industrial Development Corporation (IDC), which is meant to play a catalytic role in developing tourism infrastructure and provide a channel through which funds can be raised for the development of identified tourism assets and sites.

(ii)    creation of a SPV on product development in order to diversify the tourism product base to make it more competitive, as provided for in the Revised Tourism Policy of 2015.

(iii)    formulation of the Tourism and Hospitality Act No. 13 of 2015 which provides for the incorporation of commercial entities to undertake business activities on behalf of the Government for and in relation to meetings, incentives, conferences, exhibitions and other tourist-related services.
(iv)    setting up of a SPV through which all public tourism investment assets would be owned, following His Excellency the President’s directive to the Minister responsible for Tourism and Arts at the Official Opening of the Fifth Session of the Eleventh National Assembly on 18th September, 2015.

(v)    setting up of the SPV called Tourism Development and Investment Corporation Limited (TDIC) as a company limited by shares on 12th November, 2015. To operationalise it, assets comprising state-owned tourism entities and identified tourism sites for development will be transferred to create the capital base.

(vi)    preparation of information memoranda for each tourism site for use in mobilising funds and engaging private sector operators and global brands.

(vii)    full representation of the Ministry of Tourism and Arts on the TDIC Board so as to ensure alignment to the ministry’s policy objectives for tourism development.

Mr Speaker, in conclusion, I would like to appeal to the hon. Members of this august House to support the Government’s initiatives to develop and promote the tourism sector in the country.

Mr Speaker, I thank you.

Hon. Government Members: Hear, hear!

Mr Speaker: Hon. Members are now free to ask questions on points of clarification on the statement given by the hon. Minister of Tourism and Arts.

Mr Nkombo (Mazabuka Central): Mr Speaker, I listened attentively to the hon. Minister’s statement, but did not hear her mention the Kundalila Falls. If she did, I apologise for that. If she did not, I would like to know which of the two circuits the Kundalila Falls are in. That is if they belong to any of the two.

Ms Kapata: Mr Speaker, the Kundalila Falls are in the Northern Tourism Circuit.

Mr Speaker, I thank you.

Mrs Masebo (Chongwe): Mr Speaker, I would like to find out which State-owned enterprises in the tourism sector have been given to the Industrial Development Corporation (IDC). Also, is the hon. Minister able to give us the names of the sites that they intend to give?

Ms Kapata: Mr Speaker, quite a number of sites have been given to the Industrial Development Corporation (IDC). For example, it has been given nine sites in the Northern Circuit which are spread across Mansa, Samfya, Kawambwa and Kaputa. These include the Mambilima and Musonda Falls, Samfya Beach, Chilubi Island, Lake Bangweulu, Lunsenga/Mweru Wantipa National Park and Luvushi Manda National Park. Others include the South Luangwa National Park, Safwa Rapids, Chipuma Falls, Mwenzo Mission Lodge and Nyika National Park. 

Mr Speaker, there are quite a number of sites that are operating hand-in-hand with the IDC. 

Mr Speaker, I thank you.

Mr Mtolo (Chipata Central): Mr Speaker, can the hon. Minister indicate what will happen to the staff that have been on the ground managing some of the sites and those that were at the different centres. 

Ms Kapata: Mr Speaker, the staff will be retained. We only want to boost the investment in the above-mentioned areas.

Mr Speaker, I thank you.

Bishop Lt-Gen. Shikapwasha (Keembe): Mr Speaker, I did not hear the hon. Minister mention anything about the sites in the central part of the country such as the Lower Zambezi and many others. Does it mean that these sites are not part and parcel of the development?

Ms Kapata: Mr Speaker, the sites in the central part of the country are equally important. However, I stated that my statement would only address the Southern and Northern circuits. Otherwise, all the tourist assets are of equal importance.

Mr Speaker, I thank you.

Dr Musokotwane (Liuwa): Mr Speaker, I thank the hon. Minister for mentioning Liuwa. However, I did not hear what she specifically intends to do in Liuwa. Will the hon. Minister construct a road going to Liuwa to promote investment or an international airport for tourists to come? What are the plans for Liuwa?

Ms Kapata: Mr Speaker, this question was addressed on the Floor of the House when Hon. Pande asked a Question on behalf the hon. Member for Liuwa. We stated that roads leading to tourist attractions, particularly Liuwa National Park, will be worked on.

Mr Speaker, we are also aware that the runway at the airstrip in Liuwa is in a marshland and that the Government is in the process of putting up a better runway.

Mr Speaker, I thank you.

Mr Pande (Kasempa): Mr Speaker, I am quite familiar with most of the sites that the hon. Minister has mentioned. I appreciate that the Government is going in the direction that has been explained by the hon. Minister. My question is similar to that by Hon. Bishop Lt-Gen. Shikapwasha. Can I take it that this is only the first phase? If it is, when is the Government moving to the other areas like the North-Western Province where there is the source of the Zambezi River, and which has been neglected for many years? When will you move to the North-Western and Central provinces?

Ms Kapata: Mr Speaker, we are taking one step at a time. Once the giving away of the first batch of tourism sites proves to be a success, we shall give away the assets in the other circuits.

Mr Speaker, I thank you.

Mr Konga (Chavuma): Mr Speaker, my question regarding when attention would be given to the source of the Zambezi River, which has given rise to the existence of the mighty Victoria Falls, has already been asked by Hon. Pande. 

Mr Speaker, I thank you.

Mr Kazabu (Nkana): Mr Speaker, I would like to find out from the hon. Minister whether she is aware of the existence of the Chalimbana Cave. If she is, when will it be included among the tourism sites?

Ms Kapata: Mr Speaker, Zambia is endowed with a lot of tourism attractions. However, like I stated earlier, we are going to begin with a few sites and extend to other places in due course.

Mr Speaker, I thank you.

Dr Scott (Lusaka Central): Mr Speaker, could the hon. Minister enlighten us on who will be able to borrow money in Zambia. Which Zambian can invest in tourism given that commercial interest rates in the banks are now rising towards 40 per cent, and doubling every two years, and when we are also competing with countries whose cost structures are about half of ours? 

Ms Kapata: Mr Speaker, we shall consult on this matter. I cannot give an outright answer because I did not talk about bank interest rates in my statement.

Mr Speaker, I thank you.

POWER IMPORTS FROM AGGREKO

The Minister of Energy and Water Development (Ms Siliya): Mr Speaker, I thank you for giving me an opportunity to update the nation on the emergency power imports from Aggreko and to clarify the salient issues that came up on Tuesday, 9th February, 2016, when the hon. Member of Parliament for Chongwe asked whether mining companies had been paying a premium for the 148 MW of power imported from Aggreko in Mozambique. 

Sir, Zambia has been experiencing a power deficit since 2015 due to the low rainfall experienced during the 2014/2015 rainy season. The power deficit stood at 560 MW in June, 2015. Currently, the deficit stands at about 1,000 MW. This is mainly because Zambia’s electricity is hydro generated, 95 per cent of which is from the reservoirs of the three main hydropower stations in the south of the country. Arising from the deficit, the Zambia Electricity Supply Corporation (ZESCO) Ltd commenced a stringent load-shedding programme in order to preserve water in the dams and avoid a complete shutdown of the generating plants. ZESCO Ltd has taken short, medium and long-term measures, which include the importation of power, in order to mitigate against the reduced power generation. Following approval from the Government, ZESCO Ltd contracted Aggreko to supply 148 MW of power for the period September to December, 2015, which was reduced to 40 MW for the period January to December, 2016, as the company had earlier committed the supply of 108 MW to other customers. At the time, Aggreko was the only supplier with power readily available. All the other possible suppliers ...

Interruptions

Mr Speaker: Order!

Ms Siliya: ... required timelines of between three to six months to deploy their respective facilities before supply could commence. Aggreko is known to be a world leader in temporary power supply and has a fleet of 20,000 generators which, in aggregate, amount to over 9,500 MW of generation capacity. Its headquarters are domiciled in Scotland and it is listed on the London Stock Exchange (LSE). 

Mr Speaker, the imports of power from Aggreko came at a great cost for ZESCO Limited, the Government and the people of Zambia. During the period September, 2015, to December, 2015, a total of US$40,122,847 was spent on the importation of the 148 MW. ZESCO Ltd bought power from Aggreko at US$18.43 and sold the same amount of power at an average cost of 5 cents per kW/h to its customers. This resulted in a huge deficit. In the interest of sustaining the operations of ZESCO Ltd in order to continue supplying electricity to the key sectors of the economy such as the mines, agriculture, health, education and other economic and social sectors, the Government provided financial support to ZESCO Ltd for the power imported from Aggreko. Out of the total cost of US$40,122,847 of power supplied between September and December, 2015, the Government paid US$32.5 million, while ZESCO paid a total of US$7.5 million. It will cost ZESCO US$5.5 million per month for the 40 MW for the period January to December, 2016. As you may be aware, the tariffs for the supply of bulk power to mining and other companies are more than those for the maximum demand customers. Maximum demand refers to customer categories whose consumption ranges from 16 to 10,000 kV Ampere. Therefore, any consumption beyond the aforementioned is governed through development agreements, which include specific Power Purchase Agreements (PPAs) with either ZESCO Limited or the Copperbelt Energy Corporation (CEC). The agreements are designed to create price stability for concerned customers so as to enable better planning and protect major industries from price shocks that could threaten their survival and create economic instability and loss of jobs. 

Sir, due to the severe power deficits that the country is faced with, ZESCO Ltd declared a force majeure on all its contracts with its mining customers ...

Interruptions

Mr Speaker: Order, on my immediate left! 

Ms Siliya: ... and advised them that it would limit supply to 70 per cent of the declared demand. Consequently, when Aggreko commenced the supply of emergency power to ZESCO Ltd in September, 2015, all the mining companies that required supplies above 70 per cent of their respective declared demand were required to pay a premium of US$10.16 per kW/h. In addition, the tariffs for the mining companies were further adjusted to US$10.35 per kW/h effective January, 2016, through a separate negotiation process facilitated by the Ministry of Energy and Water Development. This was done because we recognise the validity of their respective PPAs and the need to adjust the tariffs in order to enable ZESCO Ltd to continue operating viably and supply power. The new tariff is all-inclusive in that it takes into account the cost of ordinary as well as ...

Interruptions

Mr Speaker: Order!

Hon. Member for Katuba. You are disturbing the House. 

Ms Siliya: ... emergency power to the mines. For January, 2016, ZESCO Ltd has billed the mining companies the new tariff of US$10.35 per kW/h. 

Mr Speaker, I wish to take this opportunity to update the House on the current status of the electricity sector in the country

Mr Speaker, as already stated, the country has been experiencing a power deficit since 2015 due to low water levels in reservoirs that feed hydropower plants. The deficit has resulted in ZESCO Ltd introducing a stringent load shedding regime in order to preserve water in the dams, thus avoiding a complete shutdown of the generating plants. Currently, the load shedding schedule is 0600 hrs to 1400 hrs, 1200 hrs to 2000 hrs, 1400 hrs to 2200 hrs and 0000 to 0600 hrs. 

Sir, in spite of the stringent load shedding, I wish to report to the House that the nation enjoyed stable electricity supply during the festive period in 2015 due to: 

(a)    ZESCO Ltd securing increased imports from the Day Ahead Market within the SAPP; and 

(b)    the industrial load significantly reducing on account of the industrial vacations.

Mr Speaker, some of the technical challenges that were experienced during 2015 and early 2016 were:

(i)    cable faults at customer service substations due to aging of cables, thefts, and vandalism; 

(ii)    faults on the transmission network at the 330 kV Leopard Hill Substation. As hon. Members may be aware, the infrastructure was installed in the 1960s and has deteriorated over the years. To remedy the situation, ZESCO Ltd is carrying out maintenance through thermal scanning. Additionally, ZESCO Ltd is in the process of procuring isolators to replace old infrastructure. This exercise is expected to be completed by 2017; and 

(iii)    tripping on the inter-connector on the Zimbabwean side on 10th December, 2015. During this time, the 1330 kV interconnector was out for maintenance for five days as per request by the Zimbabwe Electricity Supply Authority (ZESA), the equivalent of ZESCO in Zimbabwe. However, both interconnector lines have been maintained and are operational. 

Mr Speaker, allow me to inform the House about some of the interventions that we have put in place to address the power deficit due to low water levels at both Itezhi-tezhi and Kariba dams, the Government, through ZESCO Ltd, has engaged several suppliers of emergency power. By the close of 2015, ZESCO Ltd had successfully negotiated PPAs with various independent power producers and utilities in the SAPP. ZESCO concluded negotiations with Karpower International Limited for the procurement of 100 MW emergency power for two years at US$16.73 kW/h. This 100 MW will later be increased to 200 MW. The PPA between the parties has since been signed. I am glad to inform the House that the ship which will supply ZESCO with the first 100 MW docked at the Port of Nacala in Mozambique last Friday, 19th February, 2016, and commercial operations are expected to commence in March, 2016. The power from the Karpower ship will cost ZESCO Ltd and the Government about US$146,000 annually translated into about US$12 million per month. 

Mr Speaker, ZESCO Ltd has concluded negotiations with Electricidade de Moçambique (EDM) for the purchase of up to 150 MW of power, commencing on 1st January, 2016. The initial tariff is 14cents per kW/h and will be subject to the United States Producer Price Index (USPPI) escalation in January, 2017. The PPA is for twenty-four months. The total annual cost of importing power from EDM in Mozambique, the equivalent of ZESCO Ltd, is approximately US$122 million, which translates into about US$10 million per month.  

Mr Speaker, ZESCO Ltd has also successfully negotiated a PPA with Eskom Holdings SOC Limited for the purchase of 50MW to 300 MW of emergency power for twelve months, mostly as off-peak power supply. The tariff will vary from ZAR800 or 6 cents per kW/h to ZAR2,600 or 19 cents  per kW/h, depending on the time of use. The proposed tariffs, which are emergency rates, will be subject to monthly adjustment and will be based on the emergency rates notified to the SAPP by Eskom and published by the SAPP.

Mr Speaker, the Government had further advertised for the procurement of an additional 200 MW emergency power from four inland thermo power plants. Hon. Members of the House may wish to note that the evaluation process has since been completed and discussions are underway with the Ministry of Finance over financing of the purchase agreements which will be signed with the successful bidders. 

Mr Speaker, the Government is committed to the deployment of renewable energy technologies to diversify the sources of power generation. To this end, the Government is evaluating bids for the development of 300 MW solar power plants across the country. Additionally, the Government is procuring 600 MW of solar power through the Industrial Development Corporation (IDC). 

Two plants of 50 MW each constitute Phase 1 of the 600 MW programme. Currently, the IDC is in the process of selecting the winning bidder via a Request for Proposal (RFP) using a transparent and competitive bidding process. The bidder with the lowest tariff will be awarded the contract to build the solar plant. This will cost approximately US$1.2 billion and all this will primarily be financed by the private sector, with IDC funding a minority shareholding on behalf of the Zambians. I wish to remind the House that in reference to this amount last Friday, I erroneously mentioned US$1.2 million instead of US$1.2 billion. 

Sir, currently, companies like Zambia Sugar Plc and Kafue Sugar are utilising bargasse to produce electricity for the operations of their plants. On 1st September, 2015, the Cabinet Office held a one-day programme with various investors which was aimed at facilitating the participation of both the private and local firms in the implementation of the Industrialisation and Job Creation Strategy, through the formation of strategic partnerships and projects in the sector. Following this, His Excellency President Edgar Chagwa Lungu commissioned the US$190 million Kawambwa Ethanol Project on 16th December, 2015. 

Hon. Members of the House may wish to note that satellite models have revealed that Zambia has potential for wind speed of more than 5 metres/second to support power generation in the north-western and northern parts of the country. In addition, the ministry is developing a national renewable energy resource map, focusing on solar and wind with the help of the World Bank. The map will provide the Government and private investors with information on the country’s resource potential to guide investments in suitable locations with the quantities of renewable resources of energy available in Zambia. The activity will be completed in 2017. 

Mr Speaker, in 2015, the Zambezi River Authority (ZRA) projected that the rainfall pattern would be below normal, while the generation of power by the Zimbabwe Electricity Supply Authority (ZESA) and ZESCO Ltd was above the stipulated amounts, thereby causing a significant reduction in water levels. In a normal season and about this time of the year, the water levels in the Kariba Dam should be at 60 per cent. However, currently, the water levels are hovering around 12 per cent, while the dam levels are at about 477 metres. Even though the water level is 2 metres above the minimum level, it is still above 5 to 6 metres less than the normal level at this time of the year. Although there seems to be a slight rise in the water levels, it is prudent to keep in mind that the levels may not be sustained at the required levels due to the persistently poor rainfall patterns. 

Mr Speaker, this, therefore, entails that the Government continues to plan and expedite processes to allow for both public and private investments in renewable energy and also exploit the potential of hydropower in Luapula, the Northern and Northern-Western provinces of Zambia where rainfall patterns seem to be better. The ministry has since written to the Energy Regulation Board (ERB) to reveal all the generating licences in the hydropower sector that are not operating to allow for serious investors to exploit the potential. 

Mr Speaker, I thank you.

Hon. Government Members: Hear, hear!

Mr Livune: Question!

Laughter 

Mr Speaker: Hon. Members are now free to ask questions on points of clarification on the statement by the hon. Minister of Energy and Water Development. 

Mrs Masebo: Mr Speaker, is the hon. Minister saying that the Government imports electricity from Electricidade de Moçambique (EDM) at a higher price than was negotiated with the mining companies for the supply of electricity, and that because of the expensive importation of power, the people of Zambia are made to pay a higher tariff to make up for the difference? 

Further, hon. Minister, are you also saying that you are exporting electricity to South Africa at a lower price than what you are actually paying for the importation? Please, clarify.

Ms Siliya: Mr Speaker, the Government has been subsidising the importation of electricity for a long time. This is what has led to the dialogue on how sustainable this was. The dialogue is not just within the borders of Zambia, but is going on at the SADC regional level where Ministers of Energy have agreed that there is a need to gradually migrate to cost-reflective tariffs by 2019 so that we continue to supply power and maintain economic activities in our countries. 

All the examples I gave about Mozambique and South Africa are in relation to Zambia’s importation of power and not exportation. In almost all the cases, the amount at which we are importing the power and selling it to Zambian consumers at domestic, social or commercial level, especially for the mines, is much more than that at which we are actually selling it.  

I thank you, Sir. 

Ms Namugala (Mafinga): Mr Speaker, the hon. Minister indicated that in some cases, the Government buys power at US$18.43 per kW/h and sells it to the mines at 5 cents per kW/h. The subsidy for the mining sector is too much for the Treasury to afford.

Sir, will the Government continue to hold discussions with mining companies with the view to revisiting the Power Purchase Agreements (PPAs) so that some of the resources can be directed to other areas of need.

Ms Siliya: Mr Speaker, we have been talking to all the consumers of electricity in the country and have heard their arguments. Discussions with the mines began late last year. The argument of the mines was that the low copper prices resulted in loss of capacity to generate windfall revenue, thus affecting their balance sheet and forcing many of them to lay off workers. This has also made it difficult for them to take on new cost centres. During the negotiations, the Government had to consider the fact that its priority is to safeguard the jobs of its citizens. 

Sir, even though emergency power is being imported from Aggreko at about US$18 per kW/h, what seemed like a fair price for electricity was US$10.35 cents per kW/h, which was the most the Government saw itself being able to continue to subsidise the mines at. This is the reason the mines were billed at US$10.35 per kW/h, which is almost 100 per cent increase, in January this year.

I thank you, Sir.

Mr Muchima (Ikeleng’i): Mr Speaker, when will public investment in the energy sector be increased if the Government keeps protecting the monopolistic tendencies of the Zambia Electricity Supply Corporation (ZESCO) Ltd? When will the energy sector be liberalised so that there are many players in the sector and there is competition? This will enable poor Zambians, especially those in the hospitality industry, to benefit from the low prices that will come with the competition.

Ms Siliya: Mr Speaker, we have continually heard arguments for and against the privatisation of ZESCO Ltd. Those against it argue that it is a matter of national security. However, dialogue is still ongoing. 

Sir, at the moment, ZESCO Ltd is the only institution that has transmission lines. If you are going to generate power, you should be able to supply it to the areas where it is needed. There are some instances where ZESCO Ltd has partnered with private power producers. There is an independent power-generating company in the hon. Member’s area. This shows how far we have come in the energy sector in Zambia in terms of opening up to private participation. 

Mr Speaker, recently, we awarded the Western Power Company a generation licence and continue to invite the private sector, especially Zambians, to participate in the potential that we see in the North-Western, Northern and Luapula provinces. Changes in climate and rainfall patterns seem to show that the potential for mini-hydropower generation lies in the parts of the country where rainfall patterns are more stable. 

Sir, dialogue on ZESCO Ltd is ongoing but, as the Government, we are preoccupied with making sure that there is stable power supply and that there are no disruptions to economic activities that would result in job losses for the many Zambians that need them.
I thank you, Sir.

Mr Nkombo: Mr Speaker, ...

Mr Mwewa: On a point of order, Sir.

Mr Speaker: A point of order is raised.

Mr Mwewa: Mr Speaker, I thank you for giving me the opportunity to rise on a point of order.

Sir, the Attorney-General, who is the Government chief legal advisor, made a statement on the Zambia National Broadcasting Corporation (ZNBC) news on Sunday to the effect that the amended Constitution has excluded hon. Deputy Ministers. I struggled to understand what the Attorney-General meant because I thought that portfolio of Deputy Minister appeared in the same place as that of Minister in the Constitution. However, the Attorney-General clarified that it was not a lacuna to have the portfolio of Deputy Minister removed from the amended Constitution. If that is the case, what are hon. Deputy Ministers doing in the ministries?

Hon. Opposition Members: Hear, hear!

Mr Mwewa: The people of Mwansabombwe are wondering what is happening. It is for this reason that I need a serious ruling from you, Sir, to clarify what that clause means.

Hon. Opposition Members: Hear, hear!

Mr Speaker: Let me begin by indicating that I will not permit further points of order until we dispose of the ministerial statements. I want us to be more focused on these earnest matters that the hon. Ministers have brought to the House.

It is unfortunate that the hon. Member is raising this point of order when it was also raised by the hon. Member for Lukulu West. I do not have to consult the Hansard because just my memory informs me that this point of order was raised before. I have also said before that we must take time to reflect over what we did in this House last year and familiarise ourselves with it.

Laughter 

Mr Speaker: If you do not have copies of Act Nos.1 and 2 of 2016, please, consult the Clerk of the National Assembly and, in your own time, go through the Acts, clause by clause. There is a serving done by Act No. 1. You can go back to your constituents and explain to them what we did last year, as they are wondering why the hon. Deputy Ministers are still in office.

Mr Nkombo: Mr Speaker, I appreciate the statement by the hon. Minister, but it has left me more confused than I was before she submitted it, especially on the part of the interventions that she outlined, including the importation of power from the Eskom Holdings SOC Limited power ships and Electricidade de Moçambique (EDM). Why was her statement void of the update on the power generation potential at the Itezhi-tezhi Hydropower Station, which is supposed to generate 120 MW and Maamba Collieries, which is supposed to generate thermal power? Is it possible to explain whether it does not make sense for her to consider looking at internal sources of energy before looking at importing power from Eskom Holdings SOC Limited on a liquid term, where they will be buying, for example, from 6 cents to 19 cents per kW/h?

Ms Siliya: Mr Speaker, you just referred to the Hansard which is a record of whatever happens in this House. I would advise my dear friend, the hon. Member of Parliament for Mazabuka Central, that we must read to lead. I have given many statements in this House in which I have explained that with the current low water levels, the generation capacity for the country, which was at just over 2,000 MW even with the opening of the Itezhi-tezhi Hydropower Station, is still not able to meet the demand. At the moment, we are actually 1,000 MW short of the installed capacity. Even Itezhi-tezhi Hydropower Station, which is supposed to produce 120 MW, is only just producing about 40 MW because of the low water levels. 

Sir, Kafue Gorge Lower, which is currently under construction, will only come online in four years’ time. As the Ministry of Energy and Water Development, we have said many times, looking at all the hydropower-generation capacity that we have in the country, that power generation has reduced gradually as per the prediction of the Zambezi River Authority (ZRA). The ZRA told us that there would be below normal rainfall in 2015, 2016 and, possibly, even 2017. So, it would not be in the interest of the Government, the people of Zambia or even the economy to import emergency power if we had the capacity locally. The importation of emergency power is meant to mitigate the 1,000 MW shortfall so as to keep the economy running. This will also enable us to run the mines at 100 per cent. 

Mr Speaker, you will recall that in my statement last year, I said that we had asked the mines, through the Zambia Electricity Supply Corporation (ZESCO) Limited, to reduce their production by 70 per cent because we were only going to give them that much power until we negotiated for the importation of emergency power. This is why we have been holding negotiations with them on the cost of emergency power. The truth of the matter is that there is no power within the borders of Zambia for us to meet the demand in the country at the moment. That is why we have to import power.

I thank you, Sir.

Mr Mbewe (Chadiza): Mr Speaker, the hon. Minister said that power is imported from Mozambique at a higher price and sold to the Zambians at a subsidised price. She also mentioned that power is exported to other countries like South Africa, Tanzania and Namibia. Is this power sold at the same price as it is imported or we are selling it at a subsidised price? 

Ms Siliya: Mr Speaker, before I respond to the hon. Member for Chadiza’s question, let me go back to the question raised by the hon. Member for Mazabuka Central in which he referred to Maamba Collieries Limited.  We have said many times, and this has also appeared in the papers, that Maamba Collieries Limited is not online yet. It has the potential to produce 300 MW, and is now constructing another plant that will produce 150 MW. We expected it to come online in April but it did not. Now, we have been told that it will come online in July this year. So, we shall continue to wait. I repeat that there is no power at the moment within the Zambian borders to meet the demand. 

Mr Speaker, power is imported through the Southern Africa Power Pool (SAPP), Electricidade de Moçambique (EDM), Eskom, Karpowership and elsewhere. We had to make the decision to import emergency power. In the past, Zambia used to export excess power. Now, we do not have excess power to export. We had an agreement with Botswana to import about 20 MW and also with the Democratic Republic of Congo (DRC), but we declared a force majeure. We had a firm agreement to export 53 MW to Namibia, and we negotiated to reduce that to 33 MW off peak power. Like I said earlier, currently, Zambia is importing power from South Africa, Mozambique and other sources within the SAPP, especially at night in order to keep the country running.

I thank you, Sir.

Mr Speaker: Could you address the cost dimension to the power that is exported, hon. Minister?

Ms Siliya: Mr Speaker, I do not have the exact cost of our exports through SAPP, but I can only give the figures of, at least, one company within Zambia, where ZESCO actually sells power and that is, the Copperbelt Energy Corporation Plc (CEC). We sell it at a wholesale price of between 4.5 cents to 5 cents per kilowatt for onward sale to the mines. 

I thank you, Sir.

Dr Musokotwane: Mr Speaker, the power shortage that we are faced with at the moment cannot be attributed to shortfalls in water alone. It must also be attributed to policy choices that were made about four years ago of stopping the Kafue Gorge Lower project which, of course, would have given us more power because the water from the Kariba Dam would do the same job twice. There was also Maamba Collieries plant which should have come on stream much earlier in 2014, to be specific. Kafue Gorge Lower should have come online in 2015. If those policy choices had not been made, our situation would not be as bad as it is today. What has the Government or the hon. Minister learnt from these mistakes so that we do not fall into the same hole twice in future?

Ms Siliya: Mr Speaker, we cannot decide at which point of the timeline we can begin from. We can begin from 2007 when there were many reports, informing the Government that there would be a power shortage in this country in 2015, 2016 and 2017 if nothing was done about it. We can also begin from 2014, like the former hon. Minister of Finance has decides to. However, we can go twenty or thirty years back when this country should have constructed the Batoka Hydropower Station because we would not be having these problems now. So, I think, we have a choice to decide at which point of the timeline to begin from. That is why I feel the time for the blame game is over. What is important is that all of us, from both sides of the House, and as a country, have learnt …

Hon. Government Members: Hear, hear!

Ms Siliya: … that, firstly, we should diversify our energy mix so that we are not dependent on hydropower alone. Secondly, all of us must begin to put national interest first and work together. If we had continued talking to each other, as Zambians, whether in 2007 or 2014, we would have found a common solution. So, one can decide at what point on the timeline he/she wants to start. However, let us move forward and ensure that the economy is running. As the Government, we are ensuring that we import power to mitigate the power deficit in the country.

I thank you, Mr Speaker.

Hon. Government Members: Hear, hear!

Mr Lufuma (Kabompo West): Mr Speaker, I would like to thank the hon. Minister for that statement clarifying the situation pertaining to power in this country. There is something that has been bothering me for a while now and this relates to the water levels in the Kariba Dam. My school of thought actually insists that it is not the drought that has caused the current situation, but rather the inferior quality of equipment from China that was installed …

Hon. Government Members: Question!

Mr Lufuma: … and is consuming so much water that it is depleting the levels in the Kariba Dam. That is the major cause of the power deficit and not the drought. Could the hon. Minister clarify that issue.

Ms Siliya: Mr Speaker, I have belaboured this point many times. In South Africa, they had an important programme called “Read to Lead”. So, we must also read to lead. Chief Simamba of Siavonga District lives near the Kariba Dam. I am sure he would tell us that he has never seen, in many years, the water as low as they are at the moment. If science states that we are generating hydropower and that in February, the average water levels are usually above 6 m or 7 m of the minimum level of 475 m. Currently, the water levels are only 2 m above 475 m, surely, should we continue debating this issue? If the equipment on the Zambian side, that is, the Kariba North Bank, is of an inferior quality, does that mean that the two countries have colluded and there is the same inferior equipment on the Zimbabwean side? Let us be serious …

Hon. Government Members: Hear, hear!

Mr Speaker: Order! Order!

Ms Siliya: … about finding solutions because I have belaboured this issue. It has absolutely nothing to do with the equipment that was installed. The turbines at Kariba are water driven. We have the Zambezi River Authority (ZRA) to which the Zambian and Zimbabwean governments provide resources for its existence and whose main purpose is to determine the water capacity in the dam and the water levels that the two utility companies should use to generate power. Surely, are you saying that we, as the Government and the people of Zambia who invested in the construction of the dam in order to power the country, have been wasting our time with the ZRA? As the Government, we do not think so because we know that power in this country is water generated.

Hon. Government Members: Hear, hear!

Ms Siliya: Mr Speaker, all we need to do is come up with an energy mix where we are not only dependant on hydropower, but also solar and bio-fuel. While we continue to debate the basics, we will be missing an opportunity to make money and get rich. I advise my colleagues to visit my ministry and see the opportunities that are available like my dear good friend, Hon. Mutati, who came to my office recently.

Interruptions

Ms Siliya: So, let us stop debating the basics. Let us grab the opportunities and not be left behind because in this crisis lies an opportunity of wealth creation for both individuals and nations.

I thank you, Sir.

Hon. Government Members: Hear, hear!

Mr Ntundu (Gwembe): Hon. Minister, tone down.

Mr Speaker: Hon. Member for Gwembe, that is not your business.

Mr Ntundu: Sir, we are worried about the water levels that are going down. I expected the hon. Minister to mention what the Government is doing about this in her statement. For instance, in Akosombo Dam in Ghana, after the water drives the turbines, it is pumped back into the dam so that the water levels do not go down. So, instead of the Government spending colossal sums of money importing electricity, does it have any plans to pump back the water into the Kariba Dam so that the water levels are kept constant? I would like to hear …

Mr Speaker: You have made your point.

Ms Siliya: Mr Speaker, if Hon. Prof. Luo was here, she would have said that a man makes a point with passion, while a woman makes a point with emotion. Nonetheless, let me give my simple response.

Laughter

Ms Siliya: Mr Speaker, in my statement, I belaboured what the Government is doing to ensure that we invest in hydropower in parts of the country where the rainfall patterns seem to be much better. That is why I appreciate my colleague, the hon. Member of Parliament for Mwinilunga East, who also came to my office to discuss hydropower generation in Mwinilunga.
Hon. Government Members: Hear, hear!

Ms Siliya: That is what we, as the Government, want to hear about. Some officials from the Zambia Electricity Supply Corporation (ZESCO) just returned from the Democratic Republic of the Congo (DRC) where there were talks at a bilateral level about the possibility of exploring the potential for electricity generation in Luapula so that when the rain patterns in the southern part of Zambia are poor, we can fall back on the capacity in the North-Western, Northern and Luapula provinces. These are long and medium-term measures. The short-term measure was to import power. They say the best time to plant a tree is twenty years ago. Batoka Hydropower Station was not constructed twenty years ago but, by the end of this year, we expect to complete the procurement process. Furthermore, since it is upstream, we expect that the same amount of water that will be used upstream will be used by the Kariba Dam so that we generate double the amount of power with the same water. These are some of the measures that the Government is putting in place. Yes, there are rare and costly situations where water is diverted back.

However, Sir, we should not forget that although most of the Zambezi River is in Zambia, it is in the Zambezi River Basin which involves a lot of countries and we need to discuss these water issues with those countries. Currently, there is a meeting on water going on in Botswana. Part of the discussion involves the Zambezi River Basin and all the countries that are affected by the Zambezi River in one way or the other. So, we are cognisant of all these issues. As a country, let us appreciate that when we say US$40 million was paid to Aggreko, it does not mean that President Lungu, Her Honour the Vice-President and Minister of Development Planning or any Minister paid that money. What it means is that the cost is incurred by all of us, Zambians. So, all of us must be concerned and appreciate this. I know that this is a political year, and people want to take advantage of issues, including those that should not be taken advantage of.

Hon. Government Members: Hear, hear!

Ms Siliya: Sir, there is no immediate solution to the power problem. It took almost two years for South Africa to solve the problem of load shedding. We have done our best to maintain the electricity supply levels. I am sure that my colleague appreciates the Government’s efforts because he showed such passion about this issue.

I thank you, Sir.

Hon. Government Members: Hear, hear!

Dr Kalila (Lukulu East): Mr Speaker, I am particularly concerned about the cost implications of our power imports. Given the severe fiscal implications of our economy, I would like to find out how the Government is financing the power imports and how it intends to continue importing power. If I heard her correctly, the hon. Minister said that in the next twenty-four months, the country will spend about US$22 million per month on electricity imports. Does our economy have the capacity to sustain this?

Ms Siliya: Mr Speaker, personally, I have been amazed at the ingenuity of the Ministry of Finance and the Minister responsible for that ministry because the country has continued to import power. There are huge costs being incurred by the Government of Zambia and its people. What is important is that we have continued to supply power, and hope that the situation can improve as soon as possible so that load shedding can be minimised. That way, those who are engaged in economic activities will not suffer opportunity costs because of load shedding.

I thank you, Sir.

Ms Lubezhi (Namwala): Mr Speaker, the Patriotic Front (PF) Government is on record as having removed some of the subsidies which the Zambian people were enjoying. I am also cognisant of the fact that the PF Government contracted a loan just to import power and subsidise the mines. Why does the Government find it prudent to supply subsidised power to the mines that are business entities, yet it denies its citizens subsidies?

Hon. UPND Members: Hear, hear!

Mr Speaker: We seem to be going round in circles.

Ms Siliya: Mr Speaker, I need to be educated on that kind of economics. I said that the Government is subsidising all power in this country. We import power at US$18.3 per kW/h and consumers at household level are paying 5 cents per kW/h. The Government heard the cry of the people when they asked it to continue subsidising the cost of electricity and not hike the tariffs. As for the mines that were also buying power at 5 cents per kW/h, it was agreed that discussions be held on this issue since the whole country was affected by the power deficit. Remember that the mines employ our relatives. So, as the Government, we have to take into consideration the fact that if the power that is supplied to the mines is not subsidised, then, the mines will lay off their workers. So, we agreed that while we are gravitating towards cost reflective prices, let us, at least, meet each other half way. That is how we increased the price for the mines from 5 cents to US$10.35/kW/h, leaving the household consumers at 5 cents. That meant that the Government continued to subsidise the household consumers more than the mines. That is because we are looking at the economy in totality, bearing in mind the fact that one intervention against the mines might, in turn, hurt thousands of Zambians who are working for the mines and their households. If that happens, people will fail to pay school fees for their children. I think that is the long and the short of the matter.

Mr Speaker, I thank you.

Hon. Government Members: Hear, hear!

Mr Speaker: Let us avoid getting the hon. Minister to repeat herself. Doing that is not businesslike.

Mr Mbulakulima (Chembe): Mr Speaker, I do not want the hon. Minister to repeat herself, but to shed more light on the Maamba Power Project. Maamba is special in the sense that the power to be produced there will not give us headaches since it will not be hydro-generated. As the hon. Minister rightly put it, this project was supposed to come on board in April this yaer, but was moved to August this year. The Head of State is on record as having said that all things being equal, the project will come on board in January. This is February and the project is still not complete. So, instead of us looking to Stockholm, Johannesburg and Maputo for imports, is there nothing we, as Zambia, can do to bring the Maamba Power Plant, which is not hydro-driven, on board? Could you shed more light on this matter and assure the people that even if the project is in private hands, the Government is concerned about it and will do something to kick-start it.

Ms Siliya: Mr Speaker, indeed, the Government shares the same concern with the hon. Member because the power from Maamba is expected to support the North-Western Province, particularly First Quantum Mine (FQM) and its subsidiary Kalumbila Minerals Limited. Officials from the two companies were in my office yesterday to discuss the same project. I am grateful that the needed infrastructure is already in place. The Zambia Electricity Supply Corporation (ZESCO) Limited has already put up the evacuation infrastructure and the transmission lines. All what remains to be done is the connection through Choma. I have been to Maamba personally and asked the contractor to look me in the eye and tell me when the project will come on board. 

Sir, initially, the contractor told us that the project would be completed by January this year. That is why the President said that it would be ready by then. The contractor then said it would be ready in April. Finally, the contractor has said it will be ready in July. That is what forced me to go on site about two months ago. From what I saw, 85 per cent of the works were complete. When this project comes online, it will begin with an electricity supply of 150 MW because only one side of the plant has been completed. We have been having discussions with another investor who is hoping to put up a power plant in Sinazongwe that will produce 300 MW. This has been going on for two years. So, we are beginning to wonder if he will be able to construct the plant or we should revoke the licence and give it to somebody else. However, this is just a potential power plant. As long as it is not connected to the national electricity grid, it does not mean anything to us. It is the same thing with the Maamba Power Plant. Until it is connected to the national electricity grid, it is of no use to us. That is why we have to import power at a high cost at the moment.

Mr Speaker, at the moment, the country has a shortfall of 1,000 MW.  Therefore, we have to everything possible to meet the power deficit. Even with what we are currently importing, we still have load shedding for long hours which, I am sure, we would all like to see reduced. Therefore, we are all looking forward to seeing the Maamba Thermal Plant operational. It is also our hope that we can find a serious investor in Sinazongwe to a new power plant. Once again, I am asking the hon. Members of Parliament to show interest in investing in this sector so that the opportunity does not pass them by. I say so because we know that even in times of crises, two things must emerge. There must be leadership, which is shown by us in the Government, providing an opportunity through the creation of wealth at personal level and national levels to those interested in doing business.

I thank you, Sir.

Mr Shakafuswa (Katuba): Mr Speaker, on a lighter note, Hon. Gary Nkombo, ...

Mr Nkombo: Yes.

Mr Shakafuswa: ... emphasised that when he was in the third year at university, a young and pretty woman also went to the university. So, he was appreciating the fact that he ‘read’ and is still ‘reading’.

Mr Speaker, we need to invest more in power generation. In view of this, does the hon. Minister not think that ventures in power generation, which require huge investments, should be private sector-driven instead of the Government being the one riding the horse? For instance, the Batoka Gorge Hydropower Project requires about K2 billion. Therefore, if there is a deficit of 1,000 MW in national electricity supply, should we not come up with incentives to attract the private sector to invest in power generation? We need to hold the bull by the horns so that Zambians realise that electricity generation is expensive and that what they are paying for electricity supply at the moment cannot sustain the continued supply of this ‘luxury’.

Ms Siliya: Mr Speaker, let me begin by stating that hydropower will continue to be the base load for long-term power supply in this country. At the moment, it is just a matter of us shifting investment in hydropower to the North-Western, Northern and Luapula provinces. I do not think you can go anywhere and find a solar plant with a capacity of 1,000 MW. It is very difficult to put up such a project because of land issues and so on and so forth. Solar power also has its limitations because energy it is only generated during the day. So, I want to emphasise that we should not forget that our base load will continue to be hydropower. 

Mr Speaker, the Government’s policy has been consistent. We have been clear that we want private sector participation in this sector. I am sure the Ministry of Commerce, Trade and Industry, particularly the Zambia Development Agency (ZDA), can attest to the fact that the energy sector is one of the key areas with potential for private investors. When we were in France, most of the queries about Zambia, if not all, were on the energy sector. So, there is a lot of private-sector interest in the energy sector, and I believe that the guiding incentives under the ZDA also apply to this sector. For instance, there are financial incentives that are negotiated with the Ministry of Finance, as has been the case with the mines. This is because we want to see speedy investments in various sectors of our economy. 

Sir, we are not only focusing on big projects like the Batoka Gorge Hydropower Project, which will cost K5 billion and not K2 billion, as the hon. Member stated, but also to see mini-hydropower stations of about 20 MW and below being put up. Many Zambians can get together and set up power plants which can generate 1 or 2 MW. So, investment in power plants should not only be restricted to those with a capacity of, for example, 15 MW or more. About 20 MW can power a small town. 

So, we want to put up a variety of hydropower stations, while we support the up-scaling of solar power generation and look at the potential of biofuels, wind energy and coal-powered generation plants. However, we still want to look at hydropower generation because, as I mentioned earlier, it will continue to be the base load for this country for many years to come until we wake up one day to find that the rivers have completely dried and there is no rain at all.

I thank you, Sir.

COUNTRY’S ECONOMIC STATUS

The Minister of Finance (Chikwanda): Mr Speaker, I express my unfettered gratitude for the opportunity to present a statement on the state of the country’s economy. It is my inescapable duty, as the hon. Minister of Finance, to apprise the nation, through this august House, on the performance of our economy in 2015, the economic outlook in 2016 and the medium-term. In my statement this afternoon, I will highlight our assessment of economic growth as well as the developments in the fiscal, monetary and external sectors.

Mr Speaker, distinguished hon. Members will recall that when I presented the 2015 Budget, the broad specific socio-economic policy objectives included achieving a real gross domestic product (GDP) growth rate of above 7 per cent, end year inflation rate of not more than 7 per cent and containing the fiscal deficit within sustainable levels. These objectives were predicated on favourable global and domestic economic environments. 

You may further recall that in my June, 2015 address to this august House, these prospects were downcast, with growth expected at around 5 per cent, owing to concerns emanating from external and domestic developments. The following are the specific economic highlights.

Real GDP Growth

Sir, preliminary estimates indicate that the economy grew by 3.5 per cent in 2015. This reflects a generally slow global growth which has dampened demand and prices of many commodities, including our major export commodity, copper. In addition, adverse weather conditions and electricity deficits affected output across the different sectors. The agriculture sector contracted by about 8.3 per cent, while mining sector output slowed down substantially, with a growth rate of only 1.5 per cent. However, positive growth was registered in the construction, transport and communications, and manufacturing sectors.

In 2016, the economy is expected to grow at around 3.7 per cent against the budget projection of about 7 per cent. The lower-than-expected outturn is on account of the expected continuation of adverse weather conditions, persistent electricity deficits and the challenges associated with the mining sector, which have their origins in depressed commodity prices, which are a consequence of a porous global economy.

Mr Speaker, the Government has taken stock of the economic challenges that we have been faced with as a country in 2015 and 2016. In this regard, the Government has taken measures this year to increase the resilience of the economy to both external and domestic shocks. 

In the agriculture sector, efforts have been stepped up in developing irrigation facilities and diversifying the sector away from maize production through the introduction of the e-Voucher System. In the mining sector, the mineral royalty regime has been redesigned in order to sustain the operations of the mining companies and secure jobs while, at the same time, minimising the impact of these events on the fiscal position. 

The Government will also continue putting up economic infrastructure, particularly in the transport and energy sectors to underpin growth and employment creation this year and beyond. In the energy sector, the coming on stream of additional power from greenfield projects is expected to support higher growth prospects.

In the medium-term, growth is expected to improve to an average of 5 per cent. This is further premised on a more stable macroeconomic environment, improvement in weather conditions, stabilisation of commodity prices on the international market and increased electricity generation. 

Mr Speaker, the resolve of the Government is to continue with policies and strategies that will further consolidate the diversification of our economy and, in the process, ensure resilience to any adverse external developments such as those experienced in 2015.

Mr Speaker, budget implementation in 2015 was faced with challenges attributed to shortfalls in both revenues and grants, coupled with expenditure pressures. The Government raised a total of K34.1 billion in revenues and grants against a budget target of K35.4 billion. This represents a 4 per cent under performance on account of lower collections in customs duty and mineral royalties. Custom and excise duty was below target by 26 per cent due to reduced import volumes, while mineral royalty collections under performed by 37 per cent due to the reduction in the rates. Total expenditure amounted to K51.26 billion and was, therefore, 10 per cent above the target of K46.6 billion. 

Sir, this outturn was on account of unforeseen expenditures related to the importation of emergency power, high expenditures on farm inputs and grain purchases by the Food Reserve Agency (FRA) beyond what was provided for in the Budget. Fuel subsidises were also higher on account of the depreciation of the Kwacha which also impacted negatively on constitutional payments such as debt servicing and maintenance of missions abroad.

Mr Speaker, interest rates went up due to tightened monetary conditions, resulting in higher payments on domestic debt. Further, the fiscal deficit in 2015 was 8.1 per cent of GDP higher than the revised projection of 6.9 per cent of the GDP in June, 2015 due to the mismatch in revenue and expenditure.

Mr Speaker, the Government is confident that the 2016 Budget deficit will be contained around 3.9 per cent of the GDP. This is premised on the implementation of fiscal consolidation and sustainability measures that were announced by His Excellency the President in November, 2015. For the medium-term, the Government will reduce the deficit to an average of 3 per cent of the GDP. This will be firmly anchored on continued realignment of expenditures to priority areas such as infrastructure, maintaining the policy of realigning subsidises and improved public service delivery. 

Mr Speaker, the Government has also commenced the operations of the Treasury single account which is expected to contribute to improved fiscal management, enhance implementation of monetary policy and end the vice of the Government borrowing its own funds as a result of the Government’s substantial unspent balances in the commercial banks. Further, the tightened controls on the Budget as a result of the enactment of the new Constitution will ensure that budgeting is realistic and the misapplication of funds curbed.

Mr Speaker, debt sustainability remains a key objective of the Government. I wish to inform the House that despite the sharp depreciation of the Kwacha, Zambia’s debt ratios remain within the internationally-acceptable thresholds. Zambia’s external debt as at end of December, 2015, stood at US$6.3 billion. This represents 38.7 per cent of GDP below the internationally-accepted threshold of 40 per cent. When domestic debt is included, the ratio of total public debt to GDP is 52.7 per cent which is below the international threshold of 56 per cent.

Sir, that said, excesses and euphoria in terms of borrowing will continue to be discouraged. To this end, borrowing will continue to be limited to sectors that underride further growth. The Government will also continue to undertake periodic debt sustainability analysis to establish the sustainability of the country’s debt, and the public will continue to be informed on the debt situation in line with the provisions of the amended Constitution.

Mr Speaker, in line with the requirements of the Constitution, I will, in due course, request this august House to realign the debt ceilings on domestic and external loans and contingency liabilities. This measure is aimed at ensuring that adequate resources are mobilised to attain our ambitious growth and poverty reduction objectives.

Mr Speaker as earlier indicated, we set an inflation target of 7 per cent for 2015. At the end of December, 2015, the inflation rate was recorded at 21.1 per cent. The higher inflation was mainly as a result of the pass-through-effects of the sharp depreciation of the Kwacha in the third quarter of 2015 coupled with high production costs which were induced by power rationing. 

Mr Speaker, inflation is expected to remain high, particularly during the first half of this year, but will decline sharply from the third quarter. We project that inflation will be at 15 per cent by the close of the year. Over the medium-term, we expect inflation to return to single digit levels. As the exchange rate stabilises, fiscal deficits reduce and the power situation improves for the better.

Mr Speaker, in regard to the current exchange rate, the bias for the larger part of 2015 was towards the depreciation of the Kwacha. For instance, the Kwacha depreciated by 24 per cent and 20 per cent in September and October, 2015, respectively. In response the Bank of Zambia (BoZ) tightened the monetary policy and sold foreign exchange to the market that lead to relative stability of the currency observed since November, 2015. This was complemented by the Treasury that increased its operational liaison with the Central Bank and began to operationalise the Treasury Single Account (TSA) to facilitate effective cash flow management. As a result, the Kwacha appreciated against the United States Dollar by 8.6 per cent to K10.98 in December, 2015, from K13.70 at the end of September, 2015. The Kwacha also firmed up against other major trading currencies and has currently stabilised at around K11.30 per United States Dollar.

The Government will continue to ensure stability of the exchange rate by using appropriate fiscal and monetary instruments while maintaining a fine balance, – and a fine balance it is –  between the use of these instruments and growth objectives or imperatives.

Mr Speaker, consistent with the rise in inflation rate, interest rates have remained relatively high during 2015. The Commercial bank average minimum lending rate rose to 23.9 per cent at the end of December, 2015, from 20.5 per cent in December, 2014, reflecting the tight monetary policy stance, particularly in the last quarter of 2015. 

Sir, the Government, however, remains committed to easing liquidity conditions in the financial sector once stability in the exchange rate has been sustained. 

Mr Speaker, in 2015, the position of the balance of payments deteriorated with the current account positing a deficit. The financial account, however, registered a surplus mainly on account of increased financial inflows associated with issuance of the third Eurobond, while the capital account balance reduced, following a decline in inflows of project grants. 

Sir, at the end of December, 2015, an overall balance of payments deficit of US$432.3 million was recorded compared to the surplus of US$321.6 million registered in 2014. This outturn was mainly on account of the deficit in the current account balance which, in turn, was explained by lower copper and reduced non-traditional export earnings. 

Mr Speaker, at the end of December, 2015, the current account deficit was US$67.7 million compared to the surplus of US$581.2 million in 2014. This was mainly on account of a deficit in the trade balance of US$74.3 million from a surplus of US$1.6 billion in 2014, following a sharp decrease in the exports of both traditional and non-traditional exports. 

Mr Speaker, investor confidence continued to be strong in 2016, as evidenced by the continued rise in ...

Hon. UPND Members: Ah!

Laughter

Mr Chikwanda: I will read that again.

... (FDI) inflows. At the end of December, 2015, FDI inflows were US$1.6 billion. That is, 3 per cent higher than that in 2014. It is worth noting that the investments covered growth sectors such as agriculture, tourism, mining and manufacturing. 
Sir, at the end of 2015, foreign reserves were US$2.98 billion, compared to US$3.01 billion at the end of 2014. This translates to 3.7 months import cover and is in line with the Southern African Development Community (SADC) convergence target. The goal is to attain four months of import cover in the medium term and sixteen months thereafter. 

Sir, the Government has continued to enjoy good relations with the IMF. Following the expiry of the last programme in 2011, it has been interacting with the IMF through standard surveillance under the provisions of ...

Mr Speaker: Order!

Business was suspended from 1615 hours until 1630 hours.

[MR SPEAKER in the Chair]

Mr Chikwanda: Mr Speaker, with your indulgence, I will repeat the beginning of the statement on the relations with the International Monetary Fund (IMF). 

Sir, the Government has continued to enjoy good relations with the IMF. Following the expiry of the last programme in 2011, the Government has been interacting with the IMF through standard surveillance under the provisions of Article 8 of the IMF’s governing laws. The last review we had with the IMF was in November, 2015.

Sir, I wish to inform this august House that at its meeting held on 15th February, 2016, the Cabinet approved the Government’s engagement with the IMF on an economic programme in 2016. In this regard, an IMF team is expected in the country in March, 2016, to commence discussions. 

I must explain that the mandate of the IMF is to assist member countries in the BOP. All member countries have a right to seek recourse to its assistance on terms that are mutually agreed upon between it and the respective government, in this case, the Government of the Republic of Zambia (GRZ).

Mr Speaker, I now turn to the challenges in the mining sector. The challenges currently being faced in the mining sector transcend socio-economic dynamics in the areas where the mining companies operate. Closing of any mining operation has the potential of disrupting the core economic and social structures of the country. Therefore, the linkages between mining and other sectors should not be downplayed. In recognising this fact, and as I referred to earlier, the Government has taken a bold step to ensure the continuation of mining activities and limit the disruptions such as loss of employment and potential increase in poverty levels that would arise from the closure of any mining operation. In view of this, I will present, in this sitting of the House, a realignment of the fiscal regime for the mining sector which will keep the mining companies afloat in both boom and bust periods. 

Sir, I, therefore, call upon hon. Members on both sides of the House to fully support the measures. For a while, the mines will continue to be the single most significant growth engine of our economy. Supporting the mining sector is, therefore, an essential requirement. It is a compelling need.

Mr Speaker, as I conclude, let me indicate that the Government will continue with inclusive growth and job-creating strategies through ensuring macro-economic stability that supports both local and foreign direct investment (FDI). Further, the Government will continue to pay particular attention to the diversification of the economy and support to the Small and Medium-sized Enterprises (SMEs) and will encourage effective and regular engagement with investors and the private sector, as has been the case in the past. This will ensure mutual benefits and equity for both the country and investors. Difficulties experienced in the global economy will continue in the foreseeable future. The only way we can insulate our country against externally-induced shocks is to utilise the unmatched comparative advantage in areas like the agriculture and energy sectors. This entails hard work and streamlined thinking, for it cannot be business as usual. 

I thank you, Sir. 

Hon. Government Members: Hear, hear!

Mr Speaker: Hon. Members are now free to ask questions on points of clarification on the ministerial statement given by the hon. Minister. 

Ms Namugala: Mr Speaker, my concern is over Zambia’s ability to sustain both its domestic and foreign debt. According to the hon. Minister of Finance, foreign debt stands at US$6.3 billion. He has also indicated to us that we are just 2 percentage points away from the internationally-accepted standard of 40 per cent of debt to the gross domestic product (GDP). In view of the fact that we need to import power of about US$1.2 billion and our Budget for 2016 is about US$4.6 billion, can the hon. Minister indicate to us how we are going to finance the power imports and whether our debt will continue to be below the 40 per cent acceptable standard in relation to the GDP. 

Mr Chikwanda: Mr Speaker, it is quite easy to interchange between the Kwacha and Dollar. I think that the cost of importing power is not US$1.2 billion. I think it may be K1.2 billion, although this is still quite high and not sustainable for the country. So, the quicker we develop other sources of power and cut down on the importation of power, the better for the economy. The importation of power was not budgeted for and the revenue inflows do not conduce to the eventuality of paying such large sums of money. We shall have to divert money from other projects, which were budgeted for, and which may not be the neatest thing to do. However, we have no alternative since we cannot create resources which we do not have. As to the question of the 40 per cent debt threshold, a threshold is just a threshold. It is not mandatory that you should stay within the threshold. You can go beyond the threshold, but it depends on how you use that money that you borrow. If you borrow for consumption, it is a serious issue, but if you borrow to invest in growth-promoting projects to enhance your capacity to grow the economy, then, it is acceptable. There are countries even in the Southern African region that are already around 56 per cent of debt of their GDP. In terms of external borrowing, there are many countries in Africa which have gone beyond 50 per cent external debt as a proportion of their GDP. However, the most important thing is to grow the economy because there is no alternative. We have to borrow both locally and externally in order to carry on with our developmental projects. As I said earlier, the Budget for this year is K53 billion and we only expect tax and non-tax revenue of about K35 billion. So, there is this gap that has to be financed by both internal and external borrowing. 

I thank you, Sir. 

Mr Simuusa (Nchanga): Mr Speaker, I wish to thank the hon. Minister of Finance for revising the mine tax regime. I agree with the hon. Minister that despite our plans to diversify from mining into agriculture et cetera, mining still remains the backbone of this nation and we cannot ran away from that. I commend the Government and the hon. Minister for revising the mine tax regime. We have been experimenting with several mine tax regimes from 2008. This may be the fifth or sixth mine tax regime we are putting in place. When the new mine tax regime is put in place, what effect will it have on the economy and on the mining sector? How long is the new mine tax regime going to last? Is the new mine tax regime going to change again or will continue in the foreseeable future?

Mr Chikwanda: Mr Speaker, the hon. Member for Nchanga has put me in an invidious position because I do not want to pre-empt a Bill that I will bring to Parliament on the redesign of the mining taxation. 

Hon. Simuusa, let me assure you that this time, we made sure that we sat with the mining companies and agreed on the tax regime. The sliding scale, which we are going to use, actually originated from the mining companies via the Zambia Chamber of Mines and we made very little modification to it. So, I think that this time around, this arrangement will last. The sliding scale means that in the years that the mines will have severe or acute difficulties, they will have lower royalty rates and in the years that the prices will rise to higher levels, we shall factor in what some people call windfall tax. This is when we shall realise higher levels of tax revenue from the sector. 

This is all I can say for now, but I am happy that when this Bill is presented to Parliament, the hon. Member for Nchanga will be one of the most ardent supporters. 

Mr Speaker, I thank you. 

Mr Mwiimbu (Monze Central): Mr Speaker, I take the statement by the hon. Minister as one that has been made with courage, as he has painted a gloomy picture of the economic and financial situation in Zambia. 

Mr Speaker, as a Member of Parliament, I have noted, with concern, that most of the budgetary allocations to key sectors and ministries such as Health, Higher Education and General Education, have not been disbursed. As Members of Parliament, we have also taken note of the fact that the Constituency Development Fund (CDF) has not been disbursed from 2015 to date. 

Hon. UPND Members: Hear, hear!

Mr Mwiimbu: I would like to find out from the hon. Minister of Finance what immediate measures he will put in place to ensure that the Budget is on track and that the operations of the Government do not grind to a halt? 

Mr Chikwanda: Mr Speaker, there is preference in the use of words. Hon. Mwiimbu says I have presented an exceedingly gloomy picture. All I have presented is a true picture of the economy. I do not want to embellish or glamourise things which are not very good. 

However, as I said earlier, Zambia is still growing. One of our major problems, for those hon. Members who are economists, is that we have not adequately quantified the goings on in the economy. The gross domestic product (GDP) figures that we use are tentative and are an underestimate. You only need to go round Lusaka and other rural towns to see the amount of construction taking place, after which you will get furious and try to find out where the money came from because the people did not borrow from the banks or mortgage institutions. This is an indication that there is a lot of money in the economy. 

Interruptions

Mr Chikwanda: Yes, Hon. Mwiimbu, things are not really rosy and it would be dishonest for the Government to present a rosy picture of things. There are challenges in the economy which have mainly arisen from the weaknesses in the global economy. This has occasioned a serious downward slide in commodity prices and, therefore, the revenue we get from the mining sector is not forthcoming. 

However, we are going to pick up. There is a resolve to pick up as there are a lot of activities going on in the private sector. We shall continue to encourage them and pursue policies which create a conducive or enabling environment for the private sector to function. As I indicated in my presentation, the foreign direct investment (FDI) levels in 2015 were a lot higher than they were in 2014. So, every year, there is more FDI coming into the economy and we hope that this will be the case in the 2016 fiscal year. 

Mr Speaker, of course, funding for Government operations has been severely constrained. So, when we have a difficult situation like now, we must prioritise our expenditure. There are three areas of priority. The first one is to service both internal and external debt because we cannot renege on this one because it would be bad for the image of the country. The second priority is that of expenditure which relates to the constitutional obligation of paying emoluments for public sector employees. The third priority, after debt servicing and emoluments, that of financing services to health and education. These three continue to be given priority even though we may be one or two months behind in meeting the requirements for the health sector in terms of drugs. 

What we shall de-prioritise are things like excessive travel both within and outside the country and allocations for people to continue with interminable seminars at which they are paid allowances. These will enjoy very low priority or no priority at all. The situation is difficult, but we shall pull through, through collective resolve. As admonished by the hon. Minister of Energy and Water Development, if we all resolve to apply ourselves seriously to this task, we can get our country to go forward. 

Mr Speaker, I thank you.

Mr Speaker: Hon. Members are now free to ask points of clarification on the statement given by the hon. Minister of Finance. 

Ms Lubezhi: Mr Speaker, going by the loaded statement by the hon. Minister of Finance, I would like to find out from him how he would translate the Patriotic Front (PF) economics at household level in Kalingalinga. 

Mr Chikwanda: Mr Speaker, I do not fully understand what I am required to …

Laughter 

Mr Chikwanda: … do or say. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Hon. Member for Namwala, you are trying to express a concern about the poverty levels of the dispossessed or disadvantaged. We have to work on meaningful economic growth rates because at 3.5 or 4 per cent, when we discount the population growth rate at 2.7 per cent, it means that our economy will only grow at 1.2 per cent in net terms. This does not give us a margin of leeway to impact on poverty reduction. So, the challenge is for us to work hard and grow the economy to higher levels of beyond double-digit figures. This way, we shall make a palpable impact on poverty reduction. I seem to get your concerns in the context of how we shall impact on poverty reduction not only in Kalingalinga, but also in all the far-flung areas of Zambia. 

Mr Speaker, I thank you. 

Mr Lufuma: Mr Speaker, we seem to have serious challenges because all the fundamental economic performance indicators such as the gross domestic product (GDP), employment, inflation and others are in the negative. Everything seems to be in decline and this gives us no hope whatsoever. 

Sir, in 2015, when the new tax regime of 9 and 20 per cent royalty taxes for underground and open pit mining, respectively were was introduced, the mining conglomerates sought audience with the Executive, but their requests fell on deaf ears. Now that the economy is in the doldrums, the Patriotic Front (PF) Government has woken up to the need to have discussions with the mining conglomerates. Is this not too little too late? 

Mr Chikwanda: Mr Speaker, the Government has a multidimensional approach to issues because it presides over composite interests. In redesigning the mine tax regime, which we shall bring to the House, we took into account the views of the mining companies and the wise counsel we get from Parliamentarians, including the hon. Member for Kabompo West. That is what it means to be a Government that is presiding over diverse interests which are sometimes diametrically opposed. You have to do a good job of balancing. It is like walking on a tight rope across the Mosi-oa-Tunya, if you please.

Sir, we have done the listening and, as I said earlier, I do not want to pre-empt something which is in the offing. Parliamentarians will have a lot of time to discuss matters at the opportune time. What I have done is just to present an honest statement to Parliament to apprise the hon. Members of the House on the state of the economy. On the balance, things do not look exceedingly cheerful, but there is no cause for despondency. What we need is a collective resolve to get out of this situation. 

Mr Speaker, Zambia has lavish endowments. You heard the hon. Minister of Energy and Water Development talk about the power sector. We may have difficulties in terms of the availability of water in the southern part of our country, but there is plenty of water in the northern part. There is also solar energy. If we can streamline things and avoid red tape and excessive bureaucracy, I am sure that we can get several companies to put up about 500 MW of solar power which can then end our power blues before the end of the year. Zambia has got plenty of comparative advantages in areas such as energy, agriculture and so on and so forth.

Sir, recently, we incurred a loan of US$45 million on concessionary terms from the African Development Bank (ADB) for promoting cashew nut growing in the Western Province. At the moment, a tonne of cashew nut fetches more than twice the price of copper on the international market. This is an isolated example to show the enormous potential that Zambia has. 

Mr Speaker, we have to streamline our thinking. It cannot be business as usual. We have to think outside the box. This is where we have to apply our intellect. We cannot go on with the usual rhetoric, theatrics or ritualism. We have got to think deeply and solve the problems that currently affect our country collectively.

I thank you, Sir.

Mr Speaker: As we progress, let us avoid long winding statements. This is time for questions for points of clarification.

Mr Mutati (Lunte): Mr Speaker, the hon. Minister has said, on several occasions, that the cost of money and the available liquidity in the market are elements that are slowing down private sector growth. What else can the hon. Minister do in the sector in order to assist in the creation of jobs by lowering the cost of money and making liquidity available in the banking sector?
Mr Chikwanda: Mr Speaker, the cost of money is a function of multiple factors. One of the things that increase interest rates is Government borrowing. That is why we want to limit it. If we reduce the level of deficits, we shall also begin to impact on the cost of money because when the Government borrows and Treasury Bills and Bonds are going at higher prices, the interest rates are marked upwards. Huge deficits, which we finance through borrowing, are some of the issues we need to put behind us. 

Sir, at the moment, banks are not very liquid. In fact, it is not a secret that the stability in the exchange rate has been induced by illiquidity in the banking system. The Bank of Zambia (BoZ) took certain monetary measures to constrain the over liquidity of the banks because the banks did not use their liquidity constructively. The banks no longer have a lot of leeway or latitude to speculate.

Mr Speaker, the other thing that has constrained the liquidity of the banking system is simply the measures taken by the Treasury. We have created the Treasury Single Account (TSA) and reigned in truant accounts from erring ministries. We have also withdrawn our large balances from the banks because, as I indicated in the statement, borrow our own deposits from the banks at a fee, but that is no longer taking place. The Ministry of Finance and the BoZ will enter into discussions to see at what point we can relax the monetary benchmarks so that we can induce a bit of liquidity into the market. However, we shall leave that to the discretion of the BoZ.

Sir, the new Constitution is very good because it entrenches the operational autonomy of the Central Bank. So, just in case we have a Finance Minister with suspect sanity levels, he cannot tell the BoZ what to do. Now that the BoZ is the sole authority on monetary issues under the new Constitution, the Ministry of Finance can only discuss the issues. Very often, we read the same notes and try to synchronise our perceptions. It is not always that our perceptions on fiscal issues are inter-related. At the end of the day, we harmonise our views because we are in the same Government. I thank the hon. Member for Lunte for drawing the Government’s attention to those matters.

I thank you, Sir.

Mr Kazabu (Nkana): Mr Speaker, the hon. Minister of Finance informed this House and the nation that the economy grew by 3.5 per cent in 2015. What sectors of the economy contributed to that 3.5 per cent growth? Further, on what sectors of the economy can we anchor our future for a better life?

Mr Chikwanda: Mr Speaker, sectors that contributed to that paltry growth were principally the construction and, to some extent, agriculture sectors because, at a reduced crop level of 2015, we are still the only country in the region that had maize surpluses to export to the other areas. So, agriculture made a significant contribution to the growth rate, even though that was at a reduced pace.

I thank you, Sir.

Mr Speaker: Going forward, which sectors can we anchor the economy on?

Mr Chikwanda: Mr Speaker, the sectors on which we shall anchor our economy are obviously agriculture, tourism and mining. We have to think more deeply both in the arable and livestock sectors of agriculture that will anchor the economy. The world still needs food, especially proteins. So, you can still export massive quantities of beef instead of importing tilapia from the not very clean waters of China and Thailand. So, the agriculture and livestock sub-sectors will be very strong growth engines for the economy. 

Sir, going into the future, we can also anchor the economy on areas such as tourism though you cannot just wave a magic wand and get an inflow of tourists. You have got to build the infrastructure and, also, as you structure the economy, some of the costs have to come down. For instance, Zambia is a high cost economy. Which tourist is going to rush to Zambia to come and pay for hotels which cost twice what they cost in Zimbabwe and Botswana? Those are some of the factors we should take into account. We have got tourism attractions, but we have to think of the costs. So, it is a long overhaul. It is a battle of Mount Longdon to get the economy on an even kill, lower the costs and build infrastructure. 

Mr Speaker, our game parks here are much better than those in neighbouring countries. They are certainly far better than Kenya which gets millions of tourists, but we will have to put up infrastructure such as roads, lodges and hotels to benefit from tourism. So, you have to invest in the necessary requisite infrastructure in order to benefit from these growth areas.

Mr Speaker, mining will continue to be a big source though it is concentrated on the Copperbelt. There are many minerals that are yet to be exploited. The gemstone industry is still a large reservoir of potential wealth for our country. As I said in my statement, Zambia has many lavish endowments which we can make use of. One hopes that going forward, we shall begin to see more meaningful participation by Zambians in the economy because Zambians were rather on the periphery on the economy. It is just foreigners who make the best opportunity of our country.

I thank you, Sir.

_________

QUESTIONS FOR ORAL ANSWER

TIMOR CONSULTING

323. Mrs Masebo (Chongwe) asked the Vice-President and Minister of Development Planning:

(a)    whether Timor Consulting, an Israeli-based company, was registered in Zambia;
(a)    whether the company had any role to play in the 2016 General Elections;

(b)    if so, what the role was; and

(c)    whether the stakeholders in the forthcoming elections had been advised about the presence of Timor Consulting.

The Deputy Minister in the Vice-President’s Office (Mr Bwalya): Mr Speaker, a search at the Patents and Companies Registry Agency (PACRA) has revealed that there is no company called Timor Consulting registered in Zambia.
Mr Speaker, the Electoral Commission of Zambia (ECZ) has no dealings with Timor Consulting. As such, it has no role to play in the 2016 General Elections in Zambia. There are no dealings whatsoever with Timor Consulting. Hence, there is no need to discuss the company with the stakeholders in the forthcoming elections.

I thank you, Sir.

Mrs Masebo: Mr Speaker, …

Mr Mwiimbu: On a point of order, Mr Speaker.

Mr Speaker: A point of order is raised.

Mr Mwiimbu: Mr Speaker, thank you for according me the opportunity to raise a serious constitutional point of order hinging on the rights of the people of Monze. You may not be aware that from last week, battalions of paramilitary police were dispatched to Monze by the hon. Minister of Home Affairs.

Interruptions

Mr Mwiimbu: Mr Speaker, the paramilitary police have occupied schools in Monze. As a result, pupils cannot learn in a conducive environment because of the presence of paramilitary police in the school grounds. The people of Monze are being traumatised by the huge presence of the Zambia Police Paramilitary in the town. 

Interruptions

Mr Mwiimbu: Mr Speaker, as you may be aware, there has not been any incident of violence in Monze , …

Interruptions

Mr Speaker: Hon. Members, let us behave in an honourable manner. Those who are behaving in a manner that I cannot even describe, please, desist from doing that. 

The hon. Member may continue. 

Mr Mwiimbu: Mr Speaker, I was saying that apart from the alleged violence that took place in Bweengwa, Monze has been a peaceful town. There has not been any incidence of violence or any disturbance in Monze, but the people are alarmed by the huge battalions of the Zambia Police Force who are patrolling the streets of Monze day in, night out. 

Mr Speaker, our people are being victimised by the paramilitary officers. The Government may not be aware that there is no provision, whatsoever, in the Constitution of Zambia Amendment Act that provides for any state of emergency. 

Mr Lufuma: Hear, hear!

Mr Mwiimbu: Mr Speaker, what law is being used to violate the rights of the people of Monze? Why should the Government take the law in its own hands? Is it in order to invoke a state of emergency in Monze which is not provided for in the current Constitution of Zambia?

Sir, I need your serious ruling.

Hon. Opposition Members: Hear, hear!

Mr Speaker: My ruling is that the hon. Minister of Home Affairs should update the House by responding to those issues raised by the hon. Member for Monze Central by the end of the week.

May the hon. Member for Chongwe continue.

Mrs Masebo: Mr Speaker, it is pleasing to note that the Government has stated that this company is not known, has no business in any election work and no contact with the Electoral Commission of Zambia (ECZ) because we have been asked many questions relating to the presence of the consulting firm when we go to our constituencies. Could the hon. Minister help me understand whether there is any Government department or organisation that has a direct relationship with the consulting company other than the ECZ?

The Vice-President and Minister of Development Planning (Mrs Wina): Mr Speaker, there has been a sustained campaign against the Patriotic Front (PF) on online social media as well as the print media. This is where this issue of Timor Consulting Company has emanated from. The relationship between Timor Consulting Company and State House is non-existent. This is a fabrication of the hate media to mislead the people of this country. This company is not known by either State House or the PF. However, the PF is a social club. If it was necessary for it to contract a media consultancy company, it could have done so. The truth of the matter is that this is not the case.

I thank you, Sir.

Mr Speaker: Your Honour the Vice-President and Minister of Development Planning, the hon. Member for Chongwe also wanted confirmation that no other Government department has any dealings with the same firm.

The Vice-President and Minister of Development Planning: Mr Speaker, as far as I know, there is no other Government department dealing with this company. Suffice it to say that if Hon. Masebo has evidence of any contracts or agreements between this company and the ECZ or any Government agency, we would be very delighted if that information was made available.

I thank you, Mr Speaker.

Hon. Government Members: Hear, hear!

Mr L. J. Ngoma (Sinda): Mr Speaker, information in public domain is that there is such an organisation in Zambia doing consultancy work for the Patriotic Front (PF) with the sole aim of delivering victory in the forthcoming elections.

Hon. Government Members: Question!

Mr Speaker: Order! Order! 

Mr L. J. Ngoma: Mr Speaker, this is a serious matter. Could Her Honour the Vice-President and Minister of Development Planning categorically state whether the information in public domain, which is negatively impacting on the PF Government, is not true? If it is not true, why have they not taken those media outlets, for instance, the media houses known to have published this information, including certain letters, to task because this matter is bringing the name of the PF into ridicule?

The Vice-President and Minister of Development Planning: Mr Speaker, it is not possible to take a media house or anybody else to court without evidence. If evidence was produced, …

Mr Mwila: Yes!

The Vice-President and Minister of Development Planning: … indicating that there was a signed agreement between the PF and Timor Consulting Company, at least, that would enable the PF to take the matter to court. However, as it is, it is mere hearsay. That is what I can say for now.

I thank you, Mr Speaker.

Mr Nkombo (Mazabuka Central): Mr Speaker, from the information that has been circulating in the media, there appears to be truth in the fact that Timor Consulting Company actually arrived on the Zambian soils and that it is a specialised clandestine company that assists governments, especially those that seem to be quickly falling out of favour with their citizens, …

Hon. Government Members: Ah!

Mr Mwila: Question!

Mr Nkombo: … to deliver victory.

Mr Speaker: Order! Order!

Continue, hon. Member.

Mr Nkombo: Mr Speaker, Her Honour the Vice-President and Minister of Development Planning spoke on behalf of the Government to the effect that she is unaware about the existence of this company. Cap 12, Section 16 of the Laws of Zambia states that:

“Any person who, before the Assembly or any authorised Committee, intentionally gives a false answer to any question material to the subject of enquiry which may be put to him during the course of any examination – such as this one – shall be guilty of an offence against Section One Hundred and Four of the Penal Code.”

Your Honour the Vice-President and Minister of Development Planning, in the event that it is discovered that Timor Consulting Company is actually here to assist your party to deliver victory in this year’s election, are you ready and liable to face this piece of legislation that is in the Penal Code? Are you ready to say that you know not of any existence of this company, which is supposed to be assisting your political party to deliver victory on 11th August, 2016?

The Vice-President and Minister of Development Planning: Mr Speaker, this is purely speculation. I know not of this company that the hon. Member is referring to. I do not think that the Patriotic Front (PF) needs to import consultants to win an election.

Hon. Government Members: Hear, hear!

The Vice-President and Minister of Development Planning: Sir, we have run campaigns before without any resources from the Government, and we won the elections.

Hon. Government Members: Hear, hear!

The Vice-President and Minister of Development Planning: Mr Speaker, what makes the hon. Member think that we have to find a consultant to manipulate anything or votes? This is misleading the people of Zambia. This is also undermining the integrity of the PF.

Hon. Government Members: Hear, hear!

The Vice-President and Minister of Development Planning: Sir, I do not think that the membership of this party takes kindly to such insinuations. I am surprised that online social media speculations can be taken so seriously by educated hon. Members like the hon. Member for Mazabuka Central.

I thank you, Sir.

Hon. Government Members: Hear, hear!

Mr Mwiimbu (Monze Central): Mr Speaker, I would like to remind Her Honour the Vice-President and Minister of Development Planning that the former Secretary-General of the Patriotic Front (PF) had informed the nation that in the last election, the PF was assisted by the Kenyans.

Hon. Government Members: Ah!

Mr Mwiimbu: Sir, that is in public domain.

Hon. UPND Members: Yes. You were assisted.

Mr Mwiimbu: Mr Speaker, I would like to inform Her Honour the Vice-President and Minister of Development Planning that some of us know who Timor Consulting is. We also know that it is headed by an Israeli lady and that this company has contracts with the Government.

Tagging on the issue which Hon. Gary Nkombo raised, what would be your position if we brought evidence to show that there are Government agencies that had contracts with Timor Consulting to provide Information Communications Technology (ICT) Services to the Government?

The Vice-President and Minister of Development Planning: Mr Speaker, if these contracts are there, I am not aware of them. That is a fact. I have requested that this evidence be brought to the House so that we know this company. If that evidence is brought here and we learn that the company is involved in clandestine activities, the public will be made aware. As far as I am concerned, I am not aware of its existence in Zambia.

Sir, referring to the former Secretary-General of the Patriotic Front (PF), I suppose that is why he has ran away from the PF.

Laughter

The Vice-President and Minister of Development Planning: Sir, in any case, I understand that he is now friends with the United Party for National Development (UPND).
Laughter

The Vice-President and Minister of Development Planning: Mr Speaker, perhaps, the new allies will use his knowledge and intelligence in contracting consultants of that kind.

I thank you, Sir.

NCHEKA PRIMARY SCHOOL IN MALAMBO

324. Mr Shuma (Malambo) asked the Minister of General Education when Ncheka Primary School in Malambo Parliamentary Constituency, whose roof was blown off more than two years ago, would be rehabilitated.

The Deputy Minister of General Education (Mr Mabumba): Mr Speaker, the blown off roof at Ncheka Primary School will be rehabilitated this year because it has been provided for in the 2016 Annual Work Plan. The works will be undertaken as soon as the funds are released.

I thank you, Sir. 

Mr Mbewe (Chadiza): Mr Speaker, thank you, ...

Mr Mutelo: On a point of order, Sir.

Mr Speaker: A point of order is raised.

Mr Mutelo: Mr Speaker, I apologise to the hon. Member on the Floor for interrupting his debate. We have three arms of Government. These are the Executive, Judiciary and Legislature. As the Legislature, our job is to introduce Bills, pass them and send them to the President for assent, just like we did with the Constitution of Zambia (Amendment) Bill.

Sir, is the Executive in order, more so the Head of the Executive, to start interfering with the work of the National Assembly by saying that if there is any Bill in line with a certain issue that will go to him, he will not assent to it. Does that not amount to interfering with the duties of the National Assembly? If we send Bills to the Head of the Legislature for signing and he does not sign them, will they keep coming back to the National Assembly? We can do that because it is provided for in the law. Is the Executive in order to start threatening us when we are doing what we were elected to do? Any kind of interference, just like marriage interference, is a crime. Is the Executive in order to threaten not to assent to a Bill every time it is sent there? It may be his right not to sign Bills, but it is also our right to pass them.

Mr Speaker: I think you are done.

Mr Mutelo: Mr Speaker, I am done because Parliament has done it.

Mr Speaker: Take a seat.

Laughter
Mr Speaker: I must say that this point of order has come very late in the day. This Parliament is in its fifth year. So, by now, we should have an appreciation of how this House functions. I want to appeal to the senior hon. Members of this political grouping to assist their colleagues appreciate some of these basic processes. 

Laughter

Mr Speaker: I always say that the President is a special member of the Legislative Assembly. At the end of the day, there is no Bill that can be passed into law without his assent. It is as simple and as basic as that. These are issues that we should discuss in year one and not year five when we are about to leave.

Laughter

Mr Speaker: We should not be discussing these issues in year five. It is not interference on the part of the President to refuse to assent to a Bill. It is within his Constitutional mandate. He can refuse to do that. That is the power he enjoys. I do not think I should expend more time on this matter than I have already done. I suppose you wanted to have a light moment as the day is wearing out. 

Laughter

Mr Mbewe: Mr Speaker, I remember that the hon. Minister is also a former pupil of Chizongwe Boys Secondary School. I am grateful that his ministry has constructed a 1 x 3 classroom block at Taferansoni Primary School this year. That is a job well done. However, where have the lessons at Ncheka Primary School been conducted since the school has not had a roof for two years? 

Mr Mabumba: Mr Speaker, the lessons have been conducted within the same institution. However, like I have said, we have included the rehabilitation of the roofs that were blown off in the annual work plan for 2016.

Thank you, Sir.

__________ 

BILLS

SECOND READING

THE MOVABLE PROPERTY (Security Interest) BILL, 2015

The Minister of Commerce, Trade and Industry (Mrs Mwanakatwe): Mr Speaker, I thank you for the opportunity to make my statement on the Movable Property (Security Interest) Bill …

Mr Speaker: Order!

Hon. Minister, at this juncture, you are merely moving that the Bill be read a second time.

Interruptions

Mrs Mwanakatwe: Sorry, Mr Speaker. I am in a hurry, but let me start afresh.

Laughter

Mrs Mwanakatwe: Mr Speaker, I beg to move that the Bill be now read a second time.

Mr Speaker, I thank you for the opportunity to make my statement on the Movable Property (Security Interest) Bill, 2015. I wish to express my gratitude to your Committee for putting in place a transparent consultative process on the fundamental aspects of the Bill. 

Sir, this Government is committed to reforming the country’s financial sector and has placed access to finance as a priority pillar under the Financial Sector Development Plan (FSDP). This Bill, once enacted, will be an important step to improving access to finance. This Bill is also part of the Private Sector Development Reforms (PSDR), which the Government is implementing, with the aim of creating a conducive business environment within which the private sector, particularly Small and Medium-sized Enterprises (SMEs) can grow and flourish.

Mr Speaker, studies undertaken on the status of Micro, Small and Medium-sized Enterprises (MSMEs) in Zambia showed that not more than 10 per cent of MSMEs in Zambia were banked with less than 2 per cent of MSMEs indicating that they had a loan for financing a business, other than for starting the business. Similar studies at regional level have shown that only 23 per cent of enterprises in Sub-Saharan Africa have access to a line of credit or loans from financial institutions and only 13 per cent use a bank loan to finance investment. These studies demonstrate the extent to which MSMEs are cut out from accessing finance to grow their businesses.

Mr Speaker, one of the most prominent factors impacting access to finance by SMEs is the issue of collateral to use in securing the finance. The practice by financial institutions is to lend money based on immovable property such as land and buildings. This is because the legal framework does not effectively provide for the use of movable property as collateral. The existing legal framework only supports the use of immovable property such as land and buildings as collateral.

This requirement to have fixed assets as collateral significantly limits access to finance for enterprises and individuals wishing to borrow from established financial institutions. This situation is particularly hampering the growth of MSMEs wishing to access financing, but only have movable property to offer as collateral.

Mr Speaker, after recognising this challenge, the Government made a decision to put in place a legal framework that will address the challenge of a lack of access to finance and collateral constraints. The main objective of the Movable Property (Security Interest) Bill, 2015 is to increase access to credit to individuals and firms, especially MSMEs, by creating the appropriate legal and institutional frameworks to allow and facilitate the use of movable assets as collateral for loans. The Bill provides for the establishment of a registry where security interests in movable property can be registered. This is aimed at enabling the use of movable property as collateral for credit.

Micro and small entrepreneurs may not have houses and buildings to offer as collateral, but they have assets of value which can effectively be used to secure credit. Movable property such as inventory and raw goods, vehicles, bank accounts, accounts receivable and secured sales contracts all represent value that can be used as collateral. Other examples of collateral include industrial and agricultural equipment, durable consumer goods, agricultural products (crops, livestock) and intellectual property rights.

Mr Speaker, the Bill provides a legal framework for the effectiveness, perfection and prioritisation of security interests in movable property and their efficient enforcement in case of default. The specific objectives of the Bill are to:

(a)    provide for the creation of security interests in movable property so as to contribute to economic development;

(b)    harmonise secured transaction laws;

(c)    promote low-cost credit by enhancing the availability of secured credit and allowing debtors to use the full value inherent in their assets to support credit;

(d)    establish a collateral office and registry for a single comprehensive registration regime for secured transactions in movable property;

(e)    establish streamlined procedures for obtaining security interests and reducing transaction costs by minimising formalities;

(f)    ensure effectiveness of security agreements and enforceability of security interests in movable property;

(g)    provide for the perfection of security interests; and

 

Mr Speaker, the Bill establishes the registry at the Patents and Companies Registration Agency (PCRA). The agency is now the registry for fixed assets for companies. This new role will enhance its effectiveness as a registry on all matters of collateral. 
To ensure the effective implementation of the Bill once it is passed into law, my ministry will ensure that there is speedy formulation and promulgation of regulations through statutory instruments so as to carry out the object of the Bill better. We will also invest in the institutional and human resource capacity required by PCRA to implement the law and undertake extensive sensitisation campaigns to financial institutions and SMEs on the provisions and benefits of this law.

Mr Speaker, we are aware that there is a significant amount of lending taking place in the informal sector using movable assets. This law will bring these activities into the formal sector through the transparency and protection that this law will provide to both lenders and borrowers. In the long run, the implementation of this law should result in the availability of low-cost credit for SME’s by enhancing the availability of secured credit and allowing debtors to use the full value inherent in their assets to support credit. It will also contribute to the development of an effective credit system in the country and improve the ratings and stability of the Zambian financial system. It will ultimately contribute to the lowering of the cost of credit which will translate into higher productivity and more growth.

Mr Speaker, in conclusion, the implementation of this law is expected to have significant impact, particularly on micro and small businesses, particularly those owned by women and youths. Women and youth entrepreneurs will be able to use their assets, that is, inventory and household goods as collateral for loans. I, therefore, look forward to the full support of the hon. Members of this House so as to enact this Bill as soon as possible.

I thank you, Mr Speaker.

Mr Ng’onga: Hear, hear!

Mr Nkombo (Mazabuka Central): Mr Speaker, in accordance with its terms of reference provided in the Standing Orders, your Committee was tasked to scrutinise the Movable Property (Security Interest) Bill, 2015.

Sir, in seeking to understand the ramifications of the Bill, your Committee sought oral and written submissions from various stakeholders.

Mr Speaker, let me start by indicating to the House that your Committee fully supports the Bill. Your Committee also wishes to report that the Bill received the support of all the stakeholders and witnesses who made written and oral submissions to it.

Sir, your Committee is in full agreement with the views of the Government and the stakeholders that unlocking the value of movable property through a legal reform and public online registries is key to the removal of constraints to economic growth and access to finance in the country.

As the House might be aware, Sir, obtaining credit in Zambia has been a nightmare, especially for the small-scale entrepreneurs.
Mr Ng’onga: Hear, hear!

Mr Nkombo: Consequently, investment has remained constrained and economic growth potentially wasted.

Mr Speaker, your Committee is aware that the use of movable assets as collateral security is not a novel idea. It is already being practiced in the country by some people. However, the effect of this law is that lenders will be given the assurance that they will be able to easily enforce their rights over the property in case of default.

Sir, in supporting the Bill, your Committee notes that one factor that could undermine a credit system is the multiple use of properties as collateral security by would-be borrowers. Your Committee is, however, comforted by the fact that the electronic online registry will be easily searchable and accessible and lenders will be able to verify whether there are prior interests registered against property offered as collateral security on it.

Mr Speaker, may I end my speech by urging the Government to ensure that the Patents and Companies Registration Authority (PCRA), which shall be the host collateral registry, is well capacitated to perform its role diligently.

In conclusion, your Committee wishes to express gratitude to you, Mr Speaker, for granting it the opportunity to scrutinise the Movable Property (Security Interest) Bill, 2015. Your Committee also wishes to extend its gratitude to the Office of the Clerk of the National Assembly for the support rendered to it during the entire process of the deliberations. It is indebted to all the witnesses who appeared before it for their co-operation in providing the necessary briefs. I am hopeful that hon. Members did go through the report so that they can make meaningful debate out of it.

Mr Speaker, I thank you.

Mrs Mwanakatwe: Mr Speaker, I thank you for allowing your Committee to scrutinise this Bill. I think it is an important Bill which will be welcomed, especially by the small and medium-size enterprises. I also want to thank all the witnesses for all the contributions that have gone into ensuring that this Bill comes through Parliament and to thank all the hon. Members for the overwhelming response they have shown.

Hon. Government Members: Hear, hear!

Mrs Mwanakatwe: Mr Speaker, I also want to thank the Chairperson of your Committee for his work and support in ensuring that the Bill goes through.

I thank you, Mr Speaker.
Hon. Government Members: Hear, hear!

Question put and agreed to and the Bill read a second time.

Committed to a committee of the Whole House.

Committee on Wednesday, 24th February, 2016.

THE FINANCIAL INTELLIGENCE CENTRE (AMENDMENT) BILL, 2016

The Minister of Finance (Mr Chikwanda): Mr Speaker, the Bill before this House is principally seeking to amend the Financial Intelligence Centre Act so as to:

(a)    resolve the contradictions between the powers and functions of the board and the centre to enhance legal autonomy and operational independence of the organisation in line with the financial action task force standards by giving the board the oversight role over the operations of the centre;

(b)    give the centre the responsibility to supervise those sectors were proper supervision is lacking or where there is no designated supervision for anti-money laundering and combating terrorism and other serious offences; 

In this regard, the centre is given the power of supervisor of last resort, creates a legal arrangement in respect of entities without a regulator and for checking compliance on anti-money laundering and terrorist financing requirements;

(c)    provide for mechanisms for exchange of information between the centre and the supervisory authority;

(d)    provide for administrative sanctions for specific offences; and

(e)    provide for powers of inspection in order for the centre to monitor compliance with the law.

Sir, this Bill is very necessary and I commend it to the House.

Mr Speaker, I beg to move.

Mr Nkombo: Mr Speaker, in accordance with the terms of reference as provided in the Standing Orders, your Committee was tasked to scrutinise the Financial Intelligence Centre (Amendment) Bill, 2015.

In order to appreciate the ramifications of the Bill, your Committee received both oral and written submissions from various stakeholders.

Sir, from the outset, I would like to state that the Bill received support from the majority of stakeholders who made oral and written submissions.  

Sir, your Committee is compelled to support the Bill because it is cognisant of the fact that if left unchecked, money laundering can have a negative effect on Zambia’s economy due to its negative effect on economic growth.

Sir, both money laundering and the financing of terrorism and their proliferation can weaken individual banks, and are also a threat to the overall financial systems performance of a country. 

Your Committee further notes that money laundering has an effect on the reputation of a country, as investors who provide stable deposits and investments in the economy can easily lose confidence in the country associated with money laundering and can, therefore, take their investment elsewhere.

Mr Speaker, your Committee, therefore, commends the Government, once again, for proposing to strengthen the legal framework through this Bill in order to ensure that the Zambian financial system and non-financial platforms of the economy are not used for purposes of money laundering, financing of terrorist activities and, indeed, the proliferation of these activities. Your Committee has no doubt that the Bill, if passed, will play a vital role to preserve the integrity of the Zambian financial system.

Sir, your Committee is concerned about the wide powers that the Bill proposes to give to the inspectors by the insertion of section 11(b). This section proposes to empower inspectors to enter and search any facility, plant, undertaking, business or other premises where an inspector has reasonable belief that a facility has information or documents relevant to an inspection or that an activity of money laundering or financing of terrorism or proliferation of financing is being carried out or is likely to be carried out. 

Your Committee’s concern is that there is no requirement for an inspector to obtain a search warrant before such searches are conducted. It is of the view that such powers are susceptible to abuse and should be discouraged by all means. 

Your Committee recommends that a provision be inserted in the Bill for all searches to be subject to the inspectors’ obtaining a search warrant.

Mr Speaker, another issue of concern was the possible duplication of roles between the centre and other existing law enforcement agencies. The Bill, in its present form, appears to provide that inspectors’ powers as provided for in sections 11(b) and 11(c) respectively will have a general application to both reporting entities and the public at large. If this be the case, then, the functions of the centre would be in conflict with those of the Anti-Money Laundering Unit under the Drug Enforcement Commission (DEC) due to the duplication of roles.

Sir, in this regard, your Committee recommends that the Bill be amended to categorically state that the powers given to the centre are in pursuance of their mandate and limited in application to the reporting entities only.

Mr Speaker, still on the powers of the centre, your Committee is concerned that Section 11(c) gives powers to inspectors to arrest a person without a warrant where the inspectors believe that a person is committing, has committed an offence or is about to commit an offence. Your Committee is of the view that giving the centre powers of arrest will drastically change its role from that of being an intelligence gathering entity to a law enforcer. 

Your Committee agrees with stakeholders who submitted that the centre should continue to perform its role of gathering intelligence and ensuring compliance to the Financial Intelligence Centre Act and end at administrative sanctions while the powers of arrest should remain the preserve of the law enforcement agencies such as the Zambia Police Force, Anti-Corruption Commission (ACC) and the Drug Enforcement Commission (DEC).

Your Committee, therefore, strongly recommends that powers of arrest be withdrawn by the deletion of section 11(c) of the Bill. 

Mr Speaker, on the whole, this is a progressive piece of legislation which should be supported by the House.

Mr Speaker, on behalf of your Committee, I wish to express our gratitude to you for granting us the opportunity to scrutinise the Financial Intelligence Centre (Amendment) Bill, 2015.

 Your Committee also wishes to thank the Office of the Clerk of the National Assembly for the support rendered to it throughout its deliberations. It is indebted to all the witnesses who appeared before it for their unending co-operation in providing the necessary briefs.

Mr Speaker, I thank you.

Mr Chikwanda: Mr Speaker, I would like to thank the Chairperson and the Committee for having thoroughly scrutinised the Bill. I want to promise that we shall take into fullest view its concerns. However, money laundering issues and financing of terrorism are draconian issues that need to be handled a little more vigorously. 

Mr Speaker, I have no further observation except to thank the House for the unanimous support of this Bill which will bring us in line with international good practice and put us in the league of countries that have taken a serious view of combating money laundering and financing of terrorism. Terrorism may be a bit remote when you just hear about it taking place in Mombasa and other places, but it could also happen in our country. So, any precautions we can take to ensure that we have the means to pre-empt such activities can only be advisable.

Mr Speaker, I thank you.

Question put and agreed to and the Bill read a second time.

Committed to a committee of the Whole House.

Committee on Thursday, 25th February, 2016.

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MOTION 

ADJOURNMENT

The Vice-President and Minister of Development Planning (Mrs Wina): Mr Speaker, I beg to move that the House do now adjourn.

Question put and agreed to.

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The House adjourned at 1805 hours until 1430 hours on Wednesday, 24th February, 2016.

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