DAILY PARLIAMENTARY DEBATES FOR THE THIRD SESSION OF THE ELEVENTH ASSEMBLY

Friday, 11th October, 2013

The House met at 1415 hours

[MR SPEAKER in the Chair]

NATIONAL ANTHEM

PRAYER

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ANNOUNCEMENT BY MR SPEAKER

EXPANDED COMMITTEE ON ESTIMATES

Mr Speaker: I wish to inform the House that the hon. Minister of Finance will, today, Friday, 11th October, 2013, present to this House, the Estimates of Revenue and Expenditure for the Financial Year, 1st January to 31st December, 2014.

In accordance with the established practice, the Estimates of Revenue and Expenditure for 2014 will be referred to the Expanded Committee on Estimates for further consideration. The Expanded Committee on Estimates will comprise hon. Members of the Committee on Estimates, chairpersons of all General Purposes and Portfolio Committees as well as the Chairperson of the Parliamentary Reforms and Modernisation Committee.

While the Expanded Committee on Estimates is convening, the House will continue with the general policy debate on the Budget and consideration of any other business assigned to it. The Expanded Committee on Estimates will, therefore, hold its first meeting on Monday, 14th October, 2013, and will be expected to present its report to the House on 1st November, 2013.

Thank you.

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BUSINESS OF THE HOUSE

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

Sir, on Tuesday, 15th October, 2013, the Business of the House will commence with Questions, if there will be any. This will be followed by the presentation of Government Bills, if there will be any. Then, the House will commence the debate on the Motion of Supply.

Mr Speaker, on Wednesday, 16th October, 2013, the Business of the House will begin with Questions, if there will be any. This will be followed by presentation of Government Bills, if there will any. Thereafter, the House will consider Private Members’ Motions, if there will be any. The House will, then continue with the debate on the Motion of Supply.

Sir, on Thursday, 17th October, 2013, the Business of the House will commence with Questions, if there will any. This will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will continue with the debate on the Motion of Supply.

Mr Speaker, on Friday, 18th October, 2013, the Business of the House will begin with the hon. Member for Kalomo Central, Mr Muntanga, leaping to his feet to ask the first question in the Vice-President’s Question Time that he is missing so much today.

Laughter

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

I thank you, Sir.

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MOTIONS

BUDGET ADDRESS

The Minister of Finance (Mr Chikwanda): Mr Speaker, I beg to move that the House do now, resolve into Committee of Supply on the Estimates of Revenue and Expenditure for the year 1st January, 2014 to 31st December, 2014, presented to the National Assembly in October, 2013.

Sir, I am a bearer of a message from His Excellency the President recommending favourable consideration of the Motion that I, now, lay on the Table.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, as we prepare to celebrate our 50th Independence Anniversary in 2014, we are reminded that our greatest strength as a country is the peace and unity which has been the hallmark of our nation.

Hon. Government Members: Hear, hear!

Mr Chikwanda: The peace and unity which we have enjoyed over the last half a century has been by design and attests to our collective wisdom and vision and not the least, the commitment of our founding fathers who gave meaning to the notion of  “One Zambia, One Nation.” We have an inescapable duty to pass on this legacy to posterity.

Sir, 2014 also marks the third year of the Patriotic Front (PF) Government. This administration is now well in stride with concrete policies and programmes in place to accelerate broad-based growth, diversity of the economy and the entrenchment of social justice so that Zambians, in rural or urban areas, male or female, young or old and differently  abled benefit from the nation’s development.

Mr Speaker, it is in this context that the theme of the 2014 Budget is, “Moving Forward to Consolidate Growth and Social Justice in Peace.”

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, my address today is in four parts. In Part I, I discuss the global and domestic economies in 2013. In Part II, I outline the Government’s macro-economic objectives, policies and strategies for 2014. In Part III, I present the 2014 Budget. I conclude my address in Part IV.

PART I

OVERVIEW OF THE GLOBAL AND DOMESTIC ECONOMIES IN 2013

Mr Speaker, the global economy continues to slowly recover with growth in 2013, projected at 2.9 per cent. This reflects an economic slowdown in the leading emerging economies of Brazil, Russia, India and China, a weaker growth in the United States of America and the prolonged recession in the Eurozone. However, Sub-Saharan Africa’s economic performance has been relatively strong with real gross domestic product (GDP) growth projected at 5 per cent.

Sir, commodity prices have, generally, been lower in 2013, relative to 2012 due to the sluggish performance of the world economy. Copper prices fell from an average of US$7,960 per tonne in 2012 to US$7,416 between January and September, 2013. Even so, copper prices still remain high by historical standards. The oil prices have stabilised in 2013 at slightly over US$100 per barrel.

Mr Speaker, notwithstanding the challenging global economic environment, Zambia’s GDP growth is projected to remain strong at above 6 per cent. This is on account of the favourable performance in the mining, construction, manufacturing, transport and communication sectors. However, with the decline in agricultural output, this projected outturn is lower than our budget forecast of about 7 per cent.

Sir, in 2013, our Monetary Policy focused on achieving a year-end inflation of 6 per cent. As at the end of September, 2013, inflation remained above the target of 7 per cent, following inflationary pressures largely associated with the removal of fuel and maize subsidies. To address these inflationary challenges, the Bank of Zambia (BOZ) raised the policy rate over the first half of the year to 9.75 per cent from 9.25 per cent in December, 2012. To complement this, the Central Bank undertook aggressive open market operations to curb money supply growth.

Mr Speaker, average commercial bank lending rates have remained relatively stable at 16.5 per cent at the end of September, 2013.

Hon. Opposition Members: Aah!

Mr Livune: Question!

Mr Chikwanda: Sir, the Government still believes that these rates are unacceptably high and are holding back domestically financed investments.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the exchange rate has stabilised at around K5.4 to the US dollar, reflecting an improvement in the supply of foreign exchange during the third quarter of 2013. 

Sir, the banking sector’s overall performance is measured by capital adequacy, asset quality and liquidity factors. All the three factors have remained favourable. Following the increase in the minimum capital requirements, most commercial banks are now compliant. All the banks are expected to fully comply by the end of this year. The number of non-bank financial institutions continued to grow, rising to 109, as at the end of September, 2013, from 104, a year earlier.

Mr Speaker, external sector performance, as at the end of September 2013, improved. The merchandised trade surplus increased by 17 per cent to US$435.5 million compared to US$368.5 million in 2012. Continuing the trend of the past three years, the volume of non-traditional exports continued to grow strongly, recording a 49 per cent increase to US$2.49 billion over the first eight months of this year compared to US$ 1.6 billion in the corresponding period in 2012.

Sir, exports of gemstones, cement, electricity, sugar, tobacco, cotton lint, maize and maize seed all registered strong growth. This demonstrates the increased diversification and resilience of our economy.

Sir, gross international reserves at the end of September, 2013 stood at US$2.7 billion dollars, about US$200 million higher than a year earlier, translating into three months of import cover.

Mr Speaker, the stock of the Government’s external debt is estimated to have increased marginally, by 1.8 per cent to US$3.13 billion as at the end of September, 2013, from US$3.08 billion as at the end of 2012. This increase was on account of net disbursements on the existing loan portfolio. The interest paid on the current external debt portfolio as at 30th September, 2013, was US$90.78 million.

Mr Speaker, as at the end of September, 2013, the stock of domestic debt including arrears stood at K18.52 billion, representing an increase of 22.5 per cent from K15.12 billion at the end of 2012. As a result, interest payments on the Government’s securities rose by 40.8 per cent to K1.69 billion at the end of September, 2013, from K1.20 billion in the corresponding period last year. The rise in stock is largely on account of higher borrowing induced by the need to increase efforts to grow the economy.

Hon. Opposition Members: Question!

Interruptions

Mr Chikwanda: Sir, to support the provision of long-term financing to the private sector, the Government approved the issuance of kwacha-denominated bonds by the International Finance Corporation (IFC) and the African Development Bank (ADB). Subsequently, in September, 2013, the IFC successfully issued a five-year K150 million bond. These resources are now available to the private sector for investment in our economy.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, with regard to fiscal policy, the Government undertook measures to address long-standing structural challenges relating to fuel and maize subsidies as well as distortions in the Public Service pay structure. This was done to reinforce fiscal prudence as well as enhance productivity for better Public Service delivery. As a result of these developments, the projected fiscal deficit for 2013 will be 8.5 per cent of the GDP compared to the Budget estimate of 4.5 per cent.

Sir, on 1st January, 2013, we successfully rebased the kwacha. As at 30th September, 2013, BOZ had withdrawn K3.7 trillion of the old currency. This represented a withdrawal rate of 97 per cent. This cash exchange exercise will continue until 31st December, 2015, to enable all Zambians, particularly, those in rural areas to exchange their old notes for the rebased kwacha.

Mr Speaker, to shorten and standardise cheque clearing across the country, the Cheque Truncation System became operational on 1st February, 2013. All commercial banks are expected to re-engineer their systems by February, 2014, in order to make the Cheque Truncation System fully operational.

Sir, in May 2013, the Government issued Statutory Instrument No. 55 of 2013 on the balance of payments to facilitate better monitoring of financial flows between Zambia and the rest of the world. This will help us better manage external risks in the world where volatile capital flows have caused significant disruption to emerging economies. I wish to reiterate that this does not in any way amount to the reintroduction of exchange controls as the Government has no plans to do so. Zambia will remain one of the few countries in the region without exchange controls. This has made Zambia a very attractive investment destination with foreign direct investment (FDI) of US$5 billion pledged in the first nine months of this year.

Hon. Government Members: Hear, hear!

PART II

MACRO-ECONOMIC OBJECTIVES, POLICIES AND STRATEGIES FOR 2014 AND THE MEDIUM-TERM

Mr Chikwanda: Mr Speaker, the Sixth National Development Plan (SNDP) has been revised to align it with the PF Government’s development agenda. At the centre of the plan, is an ambitious job creation agenda in the agricultural, tourism, manufacturing, energy and construction sectors so as to consolidate economic growth and promote social justice. 

Sir, in this context, our macro-economic objectives for 2014 are to:

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

(b)create, at least, 200,000 decent jobs;

Mr Livune: Question!

Mr Chikwanda: Yes!

Laughter 

Mr Chikwanda: 

          (c)    attain year-end inflation of no more than 6.5 per cent;

    (d)    increase international reserves to over three months of import cover;
    
    (e)    maintain a fiscally sustainable public external debt level so that debt servicing and 
amortisation do not exceed 30 per cent of the domestic revenue;

    (f)    increase domestic revenue collections to over 21 per cent of the GDP; and

(g)    limit domestic borrowing to 2.5 per cent of the GDP and contain the overall deficit to not more than 6.6 per cent of the GDP.

Policies and Strategies for Consolidating Growth and Job Creation

Mr Speaker, in my 2013 Budget Address, I laid out the key policy focus of the PF Government with emphasis on the creation of employment for our people. This was the first time that the Government made a clear and specific commitment to job creation in such an ambitious and transparent manner.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, it reflects the PF Government’s total commitment to inclusive growth and social justice where all the people benefit from the nation’s development.

Hon. Opposition Members: Question!

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, preliminary figures captured by the Central Statistical Office (CSO) indicate formal sector employment rose by over 58,000 in the first nine months of 2013.

Hon. Opposition Members: Question!

Mr Chikwanda: Mr Speaker, these figures only capture the number of people employed in the formal sector and do not reflect the total number of jobs created in the economy as a whole. 

Sir, to ensure that the Government is able to better capture the jobs created in the economy, data collection will be strengthened so that comprehensive labour market information at national and sub-national levels can be produced in a timely manner.

Mr Speaker, I would like to inform this august House that the Government is concluding work on rebasing the country’s national accounts. This will provide a more accurate measurement of our economy, and thereby, facilitate better informed economic policy and decision-making.

Agriculture, Forestry and Fisheries    

Sir, in the 2012/2013 Farming Season, crop and livestock production had mixed results. The outbreak of armyworms at the time of planting and lower than normal rainfall in the southern half of our country led to reduced maize output.

Sir, more regrettable was the significant decline in cotton production due to poor pricing in the previous year. Burley tobacco, soya beans, wheat and sunflower, however, were among the crops which registered higher production levels. The livestock sub-sector has continued to grow in 2013 with cattle numbers increasing by 10 per cent to almost four million and the number of poultry increasing by 18 per cent to over 92 million.

Hon. Government Members: Hear, hear! Proper figures!

Mr Chikwanda: Mr Speaker, the promotion of a diversified agricultural, forestry and fisheries sector will be a central pillar of our development strategy for consolidating economic growth in 2014. It is the Government’s desire to see the agricultural sector grow to its full potential with our many small-scale farmers graduating to become prosperous medium to large-scale producers.

To this end, the Government will continue constructing multi-purpose dams and irrigation schemes to limit dependence on rain-fed agriculture. We shall also continue our livestock re-stocking and disease control measures, including investment in dip tanks and scaling up research to promote artificial insemination programmes so as to improve livestock breeds. The Government will also construct silos to increase storage capacity and minimise post-harvest losses.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the Government will reposition the fisheries sub-sector so that the country can become a net exporter of fish. To achieve this, we will promote aquaculture development, improve infrastructure for fisheries research and marketing. In particular, the Government will promote the growing of fish fingerlings by the private sector, …

Hon. Government Members: Hear, hear!

Mr Chikwanda: ... pen and cage culture as well as establish lake-based hatcheries and nurseries.

Mr Speaker, as announced by His Excellency the President, the Government has established eleven large-scale forestry nurseries across the country, each raising 1.5 million seedlings per year. These nurseries will not only contribute to the creation of about 200,000 jobs over the next five years, but will also complement efforts at global level to mitigate climate change. Further, as part of the Government’s efforts to improve the management of forestry resources, enhanced community and private sector participation is envisaged.

Sir, I am happy to report that by reviving the operations of the Nitrogen Chemicals of Zambia (NCZ), the company has been able to produce over 70,000 metric tonnes of Compound D fertiliser, so far, …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … thereby supporting the early delivery of fertiliser to farmers throughout the country. 

Hon. Government Members: Hear, hear!

Hon. Opposition Members: Question!

Mr Kambwili: Imwe, bamalukula ichongo!

Interruptions

Mr Speaker: Order!

Mr Chikwanda: Sir, the Government will continue to revamp the NCZ Plant in 2014 so that it can even produce urea fertiliser. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, the goal is to localise fertiliser production and move away from the severe logistical challenges of imports.

Mr Speaker, I also wish to report that the Food Reserve Agency (FRA) is on course to meet the target of procuring 500,000 metric tonnes of grain for strategic food reserves.

Mr Livune: Question!

Mr Chikwanda: Sir, in this marketing season, the private sector has actively participated in purchasing the bulk of the maize. This is consistent with the Government’s policy of encouraging private sector participation in maize marketing.

Tourism Sector

Mr Speaker, it gives me great satisfaction to report that Zambia successfully co-hosted the United Nation’s World Tourism Organisation’s (UNWTO) 20th General Assembly this year.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, this is because the Government provided targeted tax incentives for the tourism sector in 2013. In addition, the Government heavily invested in the expansion and rehabilitation of infrastructure at the Harry Mwaanga Nkumbula International Airport as well as in road infrastructure and social amenities in Livingstone.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, this international event was one of the most successful in the history of the UNWTO with approximately 4,000 delegates. Further, it significantly raised Zambia’s international profile as a world-class tourism destination.

Sir, the Government intends to build on this raised international profile to achieve its development targets for tourism. These include the promotion of product diversification and further investment in tourism infrastructure, including in the Kenneth Kaunda International Airport. The aim is to diversify the tourism base by improving accessibility to our national parks, heritage sites and other natural tourist attractions. The Government will also continue to streamline licensing procedures and enhance capacity in the hospitality industry.

Mr Speaker, a cardinal aspect of Zambia’s draw as a tourist destination is the vibrant local cultural heritage. To this end, the Government is committed to developing the creative arts industry. I am pleased to inform this House that the PF Government has already introduced the hologram to protect income rights of musicians and film-makers. In 2014, the Government will also complete work on the National Film Policy.

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

Manufacturing Sector

Mr Chikwanda: Mr Speaker, in my Budget Address last year, I outlined the Government’s intention to strengthen the manufacturing sector. I am pleased to report that this year, the Government released K106.9 million to the Development Bank of Zambia (DBZ) to support the financing needs of industries, particularly, small and medium-scale enterprises. These enterprises also benefitted from the resumption of funding through the Citizens Economic Empowerment Fund.

Sir, we also strengthened the linkages between the manufacturing and agricultural sectors through the rehabilitation of the NCZ. The company has resumed ammonium nitrate production which ceased in 2002, allowing it to respond to the immense business opportunities presented by the ever-increasing demand for the product from the mining sector. This will improve the company’s financial viability by widening its product range.

Mr Speaker, the removal of Customs Duty on most electrical and mechanical industrial equipment in 2013, allowed manufacturers to import major capital items at relatively lower costs. As a result of this measure and other initiatives under the Private Sector Development Programme, the manufacturing sector is expected to grow by 4.3 per cent in 2013.

Sir, in 2014, we will continue to promote the diversification of manufactured products, especially those with export market potential by, among other things, accelerating the development of the multi-facility economic zones (MFEZs). The Government remains committed to facilitating value addition in the manufacturing sector with a view to exploiting regional and international export markets and creating more jobs for our youths.

Mr Chikwanda drank some water.

Hon. Members: Hear, hear!

Hon. Opposition Members: No whisky!

Mining Sector 

Mr Chikwanda: Mr Speaker, the mining sector’s performance in the first half of 2013 remained positive. Copper production increased by 13.2 per cent in the first half of 2013 to over 374,000 metric tonnes compared to production over the same period in 2012. This was due to improved mining production techniques. The opening of Lubambe Mine and ramping up of production at Mulyashi Copper Mine contributed to the growth in mining activities. On the basis of this performance, copper production from large-scale mines is projected to exceed last year’s production levels.

Sir, fraudulent reporting by the mines shall not be tolerated as we need to increase our income from this sector.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, the Government requires an informed transparent and non-discriminatory platform so that it can effectively collect taxes from the country’s mining industry. In 2013, the Government designed a multi-purpose and multi-stakeholder framework for monitoring the country’s mineral value chain from the exploration to exporting stage. The implementation of the framework will commence soon to ensure the independent and effective monitoring of mining activities by verifying the quantities and quality of the country’s mineral wealth.

Mr Speaker, the local auctioning of gemstones commenced this year. The Government will continue to encourage this initiative and urge small-scale gemstone miners to use this approach so that they can get better value for their gemstones. Local auctioning will also improve the Government’s ability to collect the appropriate revenue from the sub-sector.

Private Sector Development

Sir, the Government will continue to implement reforms aimed at building and enhancing a sustainable legislative and regulatory environment for private sector-led growth. This will include the continuation of business registration and licensing reforms. Key among these is the establishment of provincial one-stop shops for business registration and decentralisation of certain elements of the filing procedures for registration to local authorities to reduce the cost of doing business in our country.

Infrastructure Development

Transport and Communications Infrastructure

Mr Speaker, in 2014, the Government will continue to implement the Link Zambia 8,000 km Road Programme.

Hon. Government Members: Hear, hear!

Hon. Opposition Members: Question!

Mr Chikwanda: Sir, I am happy to report that under this programme which commenced last year, work is progressing well on over 1,500 km of roads. These include the Mongu/Kalabo, Kalabo/Sikongo/Angola Border, Kasama/Mporokoso/Kaputa, Mbala/Nakonde, Mansa/Luwingu, Chipata/Chadiza/Katete, Chama/Mutumbo, Isoka/Muyombo/Chama, Kitwe/Chingola, Pedicle,
and the Leopards Hill/Chiyawa roads as well as the Bottom Road from Munyumbwe to Chaanga.

Hon. Government Members: Hear, hear!

Mr Chikwanda: The programme is expected to promote the development of local contracting capacity and create 24,000 jobs throughout the country. Already, 16,000 workers, mainly youths, have been employed.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, His Excellency the President launched the Pave Zambia 2,000 km Road Programme …

Interruptions

Mr Speaker: Order!

Mr Chikwanda: … in September, this year and work has commenced in Chawama in Lusaka and Petauke in the Eastern Province. The Government will also scale up this programme in 2014 to cover all the provinces. Once fully operational, this programme will generate income for up to 20,000 workers.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, in addition to township roads, the Lusaka 400 km Road Programme was launched this year with the aim of decongesting the capital city by constructing 400 km of link roads. I am pleased to report that work on this programme has progressed significantly with over 150 km of roads to be completed by the end of this year. This programme is expected to be completed by 2016.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, as regards the feeder roads, the Government plans to rehabilitate 1,300 km of the core feeder road network in the country. This will help rural areas to better access markets. The Zambia National Service (ZNS) will supplement the efforts of the Rural Roads Unit (RRU) in the provinces.

Mr Speaker, K618.5 million from the Eurobond proceeds was earmarked for track rehabilitation and procurement of rolling stock for Zambia Railways Limited. Progress has been lethargic due to procurement delays and administrative bottlenecks. I am, however, glad to report to this House that these issues have been resolved and work will be scaled up in 2014.

Interruptions

Mr Speaker: Order, on the left!

Energy Infrastructure

Mr Chikwanda: Mr Speaker, the Government continues to work with the private sector to increase installed electricity generation capacity and to improve the transmission infrastructure. The extension of the Kariba North Bank Power Station will add 360 megawatts of hydro-power to the installed capacity. By the end of this year, 180 megawatts will be added and the balance will come on stream in 2014.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, in addition, the Ndola Energy Heavy Fuel Generation Project is nearing completion and will contribute 50 megawatts by the end of this year.

Sir, in my address last year, I informed the nation that the Government was working with strategic private partners to develop the Itezhi-tezhi and Kafue Gorge Lower Power stations. With respect to the Itezhi-tezhi Power Station, financing has been secured and works have progressed well while for the Kafue Gorge Lower Power Station, the tender process to engage a strategic partner is in progress. The Itezhi-tezhi Power Station is expected to come on stream in 2015 with 120 megawatts while Kafue Lower Gorge Power Station with the capacity of 750 megawatts is expected to come on stream in 2019.

Sir, to support these investments, the Government will continue with the policy of attaining cost-effective electricity tariffs while ensuring efficient service delivery.

Mr Speaker, with regard to fuel, two provincial depots will be completed this year and a third in 2014, with installations in other provinces to follow thereafter while efforts to upgrade the Indeni Refinery will continue in 2014. The Government will also explore other options, including the construction of a new refinery with efficient capacity to meet the ever-increasing demand of our robust economy with surpluses for export purposes.

Hon. Opposition Members: Question!

Social Sector Policies for Inclusive Growth

Mr Chikwanda: Mr Speaker, the Government’s past efforts at social protection have centred on poorly targeted subsidy programmes where the beneficiaries were not the intended poor. Accordingly, the Government policy is shifting to better designed social protection programmes such as the Social Cash Transfer Scheme that has been successfully piloted in several districts.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, this scheme has proved more effective in targeting the most vulnerable members of our society. In 2014, the Government’s contribution to the Social Cash Transfer Scheme will be scaled up by over 700 per cent in order to make a significant impact on reducing extreme poverty.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, in the same vein, the Food Security Pack Programme will also be scaled up.

Mr Lubezhi Question!

Mr Chikwanda: Yes!

Laughter

Mr Chikwanda: Mr Speaker, the Government will develop the National Social Protection Policy which will, among other things, address the needs of differently-abled persons. The Government will also mainstream disability issues into the Farmer Input Support Programme (FISP), the Social Cash Transfer Scheme and other social protection programmes.

Hon. Government Members: Hear, hear!

Health Sector 

Mr Chikwanda: Mr Speaker, concerning the health sector, the Government remains committed to bringing affordable and quality health care as close to the family as possible. Accordingly, the Government will continue to develop regional hubs to decentralise the storage and distribution of medical drugs and supplies to better ensure their availability to all Zambians. Two hubs in Chipata and Choma have already been established with two more in Mongu and Kasama planned for 2014.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Sir, in 2014, the Government will procure specialised medical equipment and requisite supplies for tertiary level hospitals to ensure the non-interruption of services and reduce the number of referrals abroad. Further, the Government will continue investing in district hospitals, especially for those areas which are currently not served with first level referral services and will also continue with its programme of constructing 650 health posts.

Hon. Government Members: Hear, hear!

Education and Skills Development

Mr Chikwanda: Mr Speaker, in 2014, the Government will accelerate the reintroduction of primary and secondary school system, promote the teaching of life skills to enable learners to cope with the demands of self-employment in the labour market, promote the teaching of science and mathematics subjects, construct more technical schools and provide laboratory equipment.

Sir, with regard to tertiary education, the Government will increase the number of students accessing quality and affordable university and college education by:

(a)expanding student accommodation, lecture rooms and libraries at the University of Zambia (UNZA), Copperbelt University (CBU) and Mulungushi University;

(b)continuing with the development of infrastructure at Chalimbana and Palabana universities in Lusaka Province, Paul Mushindo and Robert Makasa universities in Muchinga Province, Mukuba University on the Copperbelt and Kwame Nkrumah University in the Central Province; and

(c)commencing the construction of Luapula University in Luapula Province and King Lewanika University in the Western Province.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, the Government will also commence the construction of three new teacher training colleges in the Eastern, Western and North-Western provinces and five trades training institutes at various locations across the country.

Interruptions

Mr Speaker: Hon. Members, the time for debate has not commenced.

Water Supply and Sanitation 

Mr Chikwanda: Mr Speaker, in 2014, the Government will increase rural access to clean drinking water from the current 61 per cent to 65 per cent. This will be done by drilling 2,000 new boreholes, constructing 250 hand-dug wells and establishing 50 piped water schemes. In addition, 2,000 boreholes and 100 hand-dug wells will be rehabilitated. Further, rural access to sanitation facilities will also be increased to 48 per cent from the current 43 per cent. This will be achieved by promoting community-based approaches and the construction of 500 institutional latrines.

Mr Speaker, in urban and peri-urban areas, the Government will increase access to clean and safe drinking water to 84 per cent in 2014 from the current 82 per cent. This will be achieved through the rehabilitation of water supply infrastructure in various urban towns as well as the creation of a new water utility company in Muchinga Province.

Money and Financial Sector Policies

Sir, in 2014, BOZ will maintain price and financial system stability by continuing to implement monitory policies through its Interest Rate Targeting Framework. Further, it will strengthen the regulatory framework governing the financial sector by updating and harmonising legislation.

Mr Speaker, the Government will continue to maintain a flexible exchange rate regime with the BOZ only intervening to smoothen short-term volatility. Additionally, BOZ will continue to build international reserves to over three months of input cover.

Sir, to further reduce the cost of financial services, the National Financial Switch is expected to be implemented in 2014. The switch will integrate different payment channels such as automatic teller machines, point of sale terminals, mobile and internet banking platforms and other e-commerce and e-governance platforms.

Debt and Aid Policy 

Mr Speaker, to ensure sustainable borrowing, the Government will continue to conduct regular debt sustainability analyses to guide its future borrowing decisions. Sustainability will be increasingly defined in terms of the proportional debt service and amortisation costs to domestic revenues.
Mr Livune: Question!

Mr Chikwanda: Mr Speaker, over the years, budget support received as grants from our co-operating partners has reduced to around 6 per cent of the Budget. In recognition of this trend and taking into account the Busan Declaration on Development Aid Effectiveness, the Government will revise its Aid Policy in 2014. The policy will articulate mechanisms for engaging our co-operating partners in line with the Government’s priorities as outlined in the Revised SNDP. Further, aid management and co-ordination will increasingly focus on aid for trade, recognise the role of the private sector institutions and civil society in development as well as facilitate capacity building initiatives for such institutions.

Fiscal Policy

Sir, 2013 has been a challenging year for the country’s Fiscal Policy, but important steps have been taken to address policies that have created structural imbalances. Challenges will remain in 2014, but the Government is actively engaged in creatively resolving them so as to maintain prudent fiscal management.

Mr Speaker, strengthening domestic revenue mobilisation is central to the Government’s aim of enhancing public infrastructure development to achieve sustainable economic growth. With external support having lessened, the Government increasingly needs to raise more revenue domestically and aims to mobilise 23 per cent of the GDP by 2016.

Sir, the 2014 Budget is premised on the imperative to address bottlenecks in tax administration in order to enhance domestic revenue mobilisation. 

Therefore, I will propose specific interventions, including a continuation of tax policy reforms, improving the performance of Value Added Tax (VAT) and Excise Duty, rationalising the investment tax incentives regime, promoting efficiency and simplifying tax administration.

Mr Speaker, last year, I informed this House that we shall continue to modernise tax administration to reduce the cost of compliance and increase operational efficiency. To this end, the Zambia Revenue Authority (ZRA) has embarked on the automation of tax operations through the introduction of web-based tax administration systems. These systems will make it easier for taxpayers to comply with tax obligations from anywhere as long as they have internet connectivity.

Mr Speaker, with regard to the non-tax revenues, the Government will continue to modernise current payment systems and update the Fees and Fines Act to enhance domestic revenue mobilisation. To improve accountability, the Government will implement the requirement for all statutory bodies collecting public funds to channel all their revenue to the Treasury. 

Mr Speaker, in order to improve transparency within the maize marketing system, all the receipts from the sale of maize by the FRA are now going to be deposited into a Government account. Further, to strengthen accountability and curtail the accumulation of contingent liabilities, the operations of the FRA will be funded directly from the Budget from 2014
Hon. Members: Hear, hear!

Mr Chikwanda: Mr Speaker, in this regard, the Government has assumed the agency’s outstanding obligations to the commercial banks.

Hon. Government Members: Hear, hear!

Public Financial Management Reforms

Mr Chikwanda: Mr Speaker, in August this year, I launched the Public Financial Management Reform Strategy that covers the period 2013 to 2015. The strategy involves undertaking reforms in ten critical components of the public financial management cycle. Once implemented, the strategy is expected to enhance prudent financial management.

 Sir, I am pleased to inform you that progress has already been made in implementing several components of these reforms. With regard to public procurement, the Zambia Public Procurement Authority (ZPPA) has already been transformed from an executing institution to an oversight and regulatory institution with procurement functions decentralised to spending agencies. Further, …

Hon. Opposition Members: Hear, hear!

Mr Chikwanda: ... a Draft Planning and Budgeting Policy - where is Hon. Hamudulu?

Hon. Opposition Members: Hear, hear!

Mr Chikwanda: Sir, a Draft Planning and Budgeting Policy has already been developed and is now undergoing consultation with stakeholders. The policy will integrate planning and budgeting as well as foster parliamentary oversight. It will also enhance citizens’ participation in planning and budgeting. Once approved by Cabinet, the policy will be given legal backing through a Planning and Budgeting Act. The Yellow Book format will also be modified to provide more information relating to the output and impact of Government programmes.

Hon. Members: Hear, hear!{mospagebreak}

Mr Chikwanda: Mr Speaker, the Government has embarked on a programme to strengthen cash management by addressing the challenges associated with large, unutilised balances in Government bank accounts. Keeping these funds idly denies resources to programmes that require immediate financing and often entails the Government borrowing its own funds from the commercial banks. Therefore, under the public finance management reforms, the Government will accelerate the establishment of a Treasury Single Account to enhance the Government’s ability to oversee its accounts and avoid the accumulation of idle funds. Currently, the Government is using the Treasury Single Account to fund personal emoluments, transfers to grant-aided institutions and capital programmes. Beginning in 2014, this will be extended to funding other categories of expenditure.

Public Sector Reforms

Mr Speaker, public sector pay has been characterised by distortions in salary levels and inequities in other conditions of service. Thus, in 2012, the Government adopted a ten-year Integrated Competitive Total Remuneration Strategy. The Government is committed to effectively implementing this ten-year strategy, which aims to harmonise pay for similar positions across the three arms of the State. It will also rationalise allowances by abolishing some and consolidating others into the salary.

Mr Speaker, in 2013, the Government fast-tracked the implementation of these reforms, especially to benefit the lower paid public workers. Over the next two years, the Government will commence the addressing of structural anomalies in the remuneration structure. In order to provide sufficient fiscal space for the provision of basic social services and investment in public infrastructure, and to reduce the proportion of the revenue spent on the Public Service wage bill, which is projected at 52.5 per cent in 2014, I propose a two-year public salary sector wage moratorium and to defer new recruitments to 2015.

Hon. Opposition Members: Ah!

Mr Chikwanda: Mr Speaker, the Integrated Competitive Total Remuneration Strategy will also entail a revision of public pensions, enhancement of the Public Service Performance Management System and the creation of a Public Service Credit Union to replace the various loan schemes currently in place. The first stage has been the establishment of the Civil Service Micro-Finance Company, which by the end of September, 2013, had already disbursed about K53 million to over 4,000 beneficiaries in the Civil Service. It is expected that with these reforms, coupled with performance-related pay, productivity and service delivery in the Public Service will be enhanced.

Pension Reforms

Mr Speaker, a good pension system should subscribe to the basic principles of affordability, sustainability, portability, wide coverage and adequacy. The current pension system, particularly the public pension, one clearly falls short of these principles. The public pension funds, for instance, are fiscally unsustainable, not transferable between jobs and unable to meet the minimum living requirements of retires. Over the medium to long-term, the Government will implement wider reforms that will make it achieve the principles I have highlighted above.

Mr Speaker, the Public Service Pension Fund (PSPF) has huge deficits which are projected at K2.9 billion in 2014, K2.6 billion in 2015 and K2.8 billion in 2016. Given that the PSPF is wholly owned by the Government, it means that these deficits have to be funded from taxpayers’ money. Against the backdrop of significant fiscal challenges that we are experiencing to mobilise sufficient resources for development, pension reforms can no longer be avoided. The Government will, therefore, implement changes to the PSPF that will include changing the retirement age, revising the basis for calculating the pensionable emoluments …

Hon. Opposition Members: Question!
Mr Chikwanda: … and reviewing the commutation factors.

Hon. Opposition Members: Question!

Mr Chikwanda: Mr Speaker, I am convinced that these reforms will translate into a more favourable and sustainable pension system with greater inter-generational equity.

Hon. Opposition Members: Ah!

Decentralisation Policy

Mr Chikwanda: Mr Speaker, the creation of thirty new districts over the past two years is a practical demonstration of the Government’s commitment to enhancement of citizen participation in local governance, development and service delivery.

Col. Lungu: Question!

Mr Chikwanda: Mr Speaker, for decentralisation to be meaningful, fiscal decentralisation must be implemented to ensure that devolved functions are adequately financed. The Government is undertaking a comprehensive study to overhaul the inter-governmental fiscal architecture. This will guide financial allocations to councils over the medium-term. In 2014, grants to councils will be raised again significantly, and the Government will revert to the formula based recurrent grants.

PART III

THE 2014 BUDGET

Mr Chikwanda: Mr Speaker, the PF Government has an unwavering commitment to fulfil its pledge to the nation that all Zambians must benefit from the robust economic growth that this country has registered …

Hon. Opposition Members: Question!

Mr Chikwanda: … and is expected to continue experiencing over the medium-term. Development will be brought closer to the people so that our vision of bringing transformational change in the lives of our people is not mere rhetoric. This is even more important for us in 2014 when Zambia will celebrate fifty years of Independence.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, in formulating the 2014 Budget, I have followed certain principles starting with the imperative to reconfigure our expenditure profile towards growth promoting sectors. Unless we are able to devote a large proportion of our resources to investment, we shall neither be able to achieve the necessary restructuring of our economy nor ensure a satisfactory long-term sustainable level of economic growth. A further equally- important imperative is the need for not only sustaining high levels of growth, but also ensuring that that it translates into tangible benefits for all Zambians.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, I now turn to the details that the majority of my fellow Zambians are eagerly waiting for, these being the key highlights of the Budget.

Mr Speaker, the Government proposes to spend a total of K42.68 billion or 30.7 per cent of the GDP. This will be financed through domestic revenue of K29.54 billion as well as grants of K2.63 billion from our co-operating partners. 

Mr Mulusa: Oh, no!

Hon. Opposition Members: Ah!

Mr Chikwanda: Mr Speaker, the balance of K10.51 billion will be met through foreign and domestic borrowing.

Hon. Opposition Members: Question!

Allocations by Financial Classification

Mr Speaker, I now provide details of how resources have been allocated in 2014 by broad Government functions.

FUNCTION    ALLOCATION                        SHARE OF
         (K’million)                              BUDGET
    
(General Public Services    10,729.3    25.1%
o/w Grants to Local Authorities    626.6
Constituency Development Fund    210.0
Domestic Debt    2,850.5
External Debt    1,822.4
Resource Mobilisation     428.8
Constitution Making Process    44.2
Infrastructure in New Districts      550.0
Defence    2,744.3    6.4%
Public Order and Security    2,121.4    5.0%
Economic Affairs    11,943.4                           28.0%
o/w Economic Empowerment Funds              108.7
    Youth Skills Training                55.0
    Strategic Food Reserves             1,013.3
    Farmer Input Support Programme            500.0
    Construction & Rehabilitation of Silos            179.7
    Construction of Dip Tanks            52.2
    Power rehabilitation Project (ZESCO)                550.0
    Railway Rehabilitation/Recapitalisation                339.8
    Road Infrastructure                 5,126.9
    Procurement of Dredgers                    87.0
    Procurement of Radar Equipment                    147.0
Environmental Protection                    162.2    0.4%
Housing and Community Amenities                 661.0
o/w Water Supply and Sanitation                      417.8
Health                   4,228.4    909%
o/w Drugs and Medical Supplies                         738.7
    Medical Infrastructure & Equipment                 312.3
Recreation, Culture and Religion                      298.9    0.7%
Education                   8,607.0    20.2%
o/w School Infrastructure (Primary &Secondary                 861.1
    University infrastructure                 404.3
Social Protection           1,183.0    2.8%
o/w Public Service Pension Fund         754.2
    Social Cash Transfer         199.2
    Food Security Pack         50.0
    TOTAL            42,682.0    100%

General Public Services

Mr Speaker, the Government has set aside K10.73 billion or 25.1 per cent of the Budget for general public services, which include allocations for infrastructure development for new districts, inter-governmental fiscal transfers and debt payments. Combined, these three account for 56.5 per cent of this allocation.

Mr Speaker, to ensure that our people in remote and under-developed areas do not remain disconnected from our development efforts, K550 million has been set aside for infrastructure development in the newly created districts  and the new provincial capitals namely Choma and Chinsali.

Hon. Government Members: Hear, hear!

Mr Speaker, a further K836.6 million has been allocated for transfers to local authorities and this includes K210 million for the Constituency Development Fund (CDF). 

Hon. Government Members: Hear, hear!

Mr Livune: Question!

Mr Chikwanda: Mr Speaker, with regard to debt management, a total of K4.65 billion has been set aside to settle domestic and external debt payments. 

Mr Speaker, Zambia with a land area in the excess of three quarters of a million square kilometres has less that 10 per cent of this land on title. In order to bring sanity in land administration and management, as well as entrench security of tenure for land owners, I have allocated K100 million to undertake the National Land Audit and National Titling Programme. The National Titling Programme will regularise the registration of land, ensure that owners have title deeds and enhance their ability to access credit. Further, the programme will increase revenue for the Government.

Mr Speaker, I have allocated K44.2 million to commence the preparatory work towards the successful adoption of the new Constitution.

Economic Affairs

Mr Speaker, in order to consolidate our robust economic growth trajectory and improve our people’s standard of living, it is cardinal that we continue to invest in our economic sectors. Therefore, I have allocated K11.94 billion to economic sectors, representing 28 per cent of the Budget. I have allocated K3.08 billion or 7.2 per cent of the Budget to the agricultural sector.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, of this amount, 51 per cent is earmarked for programmes that can make the diversification of the sector a reality. 

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, key interventions include the countrywide construction of dip tanks and storage facilities for which an allocation of K231.9 million has been provided. The target is to increase the number of dip tanks to combat animal diseases and increase grain storage capacity to 1.3 million metric tonnes by the end of 2014. In addition, K80.9 million has been allocated to the development of irrigated agriculture. I have also allocated K500 million for the FISP to facilitate the provision of affordable crop and livestock inputs for our small-scale farmers.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, to secure and maintain the 500,000 metric tonnes of strategic food reserves, K1.0 billion has been set aside under the 2014 Budget. Further, K6.07 billion or 14.2 per cent of the Budget has been allocated to the transport sector to construct, rehabilitate, and maintain, road, rail, water and air transport infrastructure.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, K5.13 billion of this is earmarked for the Link Zambia 8,000 km Road Programme, Pave Zambia 2,000 km Road Project, Lusaka 400 km Road Project and feeder roads in the rural areas.

Hon. Members: Hear, hear!

Mr Chikwanda: Mr Speaker, with regard to the rail sub-sector, the Government has allocated K339.8 million to recapitalise the Tanzania Zambia Railway Authority (TAZARA) and rehabilitate Zambia Railways Limited (ZRL). The quality of rail travel for both goods and services will improve and the negative impact on the nation’s roads from heavy commercial traffic will be mitigated.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, I have allocated K250 million for other critical interventions in the transport sector. These include the procurement of radars to bring our air safety levels to world standards and dredging equipment and water vessels to improve water transport in the country.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, in the energy sector, K550 million has been set aside for the power rehabilitation projects under the Zambia Electricity Supply Corporation (ZESCO) while K65 million has been allocated to the Rural Electrification Programme.

Education

Mr Speaker, the importance of education in facilitating economic development and reducing poverty cannot be overemphasised. In this regard, I propose to spend K8.61 billion or 20.2 per cent of the Budget on education. Out of this amount, K1.28 billion will go towards the construction of education infrastructure which will include fifty-three new secondary schools …

Hon. Government Members: Hear, hear!

Mr Chikwanda: ... and the upgrading of 220 basic schools into secondary schools.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, the Government will also construct an additional 150 primary school classrooms in the rural areas with corresponding 150 teacher houses by using the community mode.

Hon. Opposition Members: Question!

Mr Chikwanda: Mr Speaker, included in the education sector infrastructure budget is K404.3 million for university and other tertiary infrastructure in particular student hostels at UNZA, CBU and Mulungushi University …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … while an additional K395.3 million has been provided for operational grants for universities, student tuition and bursaries.

Health

Mr Speaker, I propose to spend 9.9 per cent of the Budget or K4.23 billion on health services in 2014. Within this amount, K245.7 million is provided for the construction and rehabilitation of district hospitals, health centres, training schools and the upgrading of tertiary health care. In order to enhance the availability of essential drugs and medical supplies, the budget in 2014, for these items, has been increased by 24.3 per cent to K738.7 million from K594.1 million …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … in 2013. A further K66.6 million has been provided for medical equipment, including the specialised equipment I mentioned earlier.

Public Order and Safety

Mr Speaker, in order to facilitate the continued maintenance of internal security in the country, I propose to spend K2.12 billion. In order to begin to address the deplorable conditions in our prisons, I have allocated K21.9 million for expanding and improving prison infrastructure. Further, K22.6 million has been allocated to prison farms so as to improve the nutrition of the inmates. 

Mr Speaker, as part of our continuing effort to enhance the crime fighting capacity of the Zambia Police Force, I have in 2014, allocated K27.2 million to the procurement of digital forensic equipment and a mobile forensic laboratory, among others.

Housing and Community Amenities

Mr Speaker, a total of K661.0 million has been allocated for housing and community amenities. Of this amount, K417.8 million has been budgeted for the provision of safe water and sanitation in both rural and urban areas in order to achieve the coverage targets I announced earlier.
Social Protection

Mr Speaker, in the past, social protection programmes have not been given adequate resources. Consequently, I have allocated K1.18 billion for social protection programmes in 2014. A large part of this increase arises from the higher allocations to the PSPF, which will receive K754.2 million in addition to the employers’ contribution. Despite high levels of spending on various subsidy programmes in the past years, the reduction in poverty has remained an elusive goal.

Mr Muntanga: Ehe!

Mr Chikwanda: Mr Speaker, this cannot be allowed to continue. I am cognisant of the successful piloting of the Social Cash Transfer Scheme in several districts across the country and its direct impact on reducing extreme poverty. Accordingly, I have decided to increase the allocation to this scheme from K72.1 million to K199.2 million …

Hon. Government Members: Hear, hear! 

Mr Chikwanda: … in 2014.

Interruptions{mospagebreak}

Revenue Estimates and Measures

Mr Chikwanda: Mr Speaker, Zambia needs to accelerate her efforts in addressing the huge backlog of development arrears which have accumulated over the years. In order to finance our ever-increasing development needs in the sectors highlighted above, it is an inescapable fact that our existing tax regime cannot generate the resources required to meet these demands. Consequently, the measures I now propose are intended to increase our revenue collection to over 21 per cent of the GDP in 2014 and make our tax system fairer and simpler to administer.

Revenues and Financing for the 2014 Budget

    (K’million)    Share of GDP    Share of Budget
Tax Total Revenues        26,643    19.2%    62.4%    
Income Tax    12,966.39            9.3%    30.4%
Company Income Tax    4,046.96
PAYE    5,132.08
Withholding & other     2,185.71
Mineral Royalty
Value Added Tax    8,099.06        5.8%    19.0%
Domestic VAT        81.38
Import VAT    8,017.68        
Customs and Excise    5,577.39        4.0%    13.1%
Customs Duty    2,330.88
Excise Duty    3,246.52
o/w Fuel Levy    861.01
Non-Tax Revenue                    2,895.70    2.1%
Fees and Fines        483.57    
Exceptional    2,163.74
Dividends & On-lending        284.74        
Domestic Revenue                    29,538.54    21.2%
Total Domestic Revenue and                     33,040.29        23.8%
Financing
Total Foreign Grants and                     9,641.75            6.9%
Financing
Grants    2,626.63                    1.89%
General Budget Support    1,083.86
Sector Budget Support        0.00    
Project Grants    1,524.76
Foreign Financing    7,015.12                5.0%    16.4%
Programme Loans    5,500.00
Project Loans    1,515.12        
TOTAL REVENUE AND                42,682.03            30.7%    100.0%
FINANCING    

Revenue Measures

Mr Speaker, I propose to increase the Excise Duty on airtime from 10 per cent to 15 per cent.

Hon. Opposition Members: Ah!

Mr Chikwanda: Mr Speaker, I further propose to revoke the Statutory Instrument (SI) that suspended Excise Duty on clear beer so that the substantive duty rate of 60 per cent is, once again, effective.

Hon. Members: Hear, hear!

Mr Chikwanda: Mr Speaker, the revenue gains from these measures is K514.8 million.

Interruptions

Mr Chikwanda: Mr Speaker, in addition, I propose to increase the Property Transfer Tax rate from the current 5 per cent to 10 per cent.

Hon. Opposition Members: Ah!

Mr Chikwanda: Mr Speaker, this measure is expected to generate an additional K100 million. I propose to introduce a charge at the rate of 0.2 per cent of the value transferred on money transfer services to a recipient within or outside the Republic of Zambia. This measure will bring K180 million to the Treasury. 

Mr Muntanga: Lower taxes?

Mr Chikwanda: Mr Speaker, the above measures will take effect on 1st January, 2014.

Rationalisation of the Tax System

Mr Speaker, to streamline the tax system and make it more equitable and buoyant, we have continued with our tax reforms. In pursuit of this agenda, I propose to expand the VAT base by shifting several categories of zero rated goods and services to the standard-rated category.

Mr Muntanga: Lower taxes.

Mr Chikwanda: Mr Speaker, this will generate a revenue gain of K151 million.

Mr Speaker, to equalise the tax treatment between branches and subsidiaries and prevent tax avoidance, I propose to extend withholding tax to profits distributed by branches of foreign companies. This will generate an additional revenue of K1 million.

Hon. Opposition Members: Hear, hear!

Mr Chikwanda: Mr Speaker, withholding tax on payments to non-residents on royalties, management and consultancy fees is at 20 per cent. In order to align withholding tax rates on all similar payments to non-residents, I propose to increase withholding tax on commissions, public entertainment fees and payments made to non-resident contractors to 20 per cent …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … from 15 per cent. This measure will result in a revenue gain of K71.7 million.

Mr Speaker, in line with the PF Government’s deliberate focus to simplify the tax system and enhance compliance, I propose to change the taxation of rental income by reducing the withholding tax to 10 per cent from 15 per cent …

Hon. Government Members: Hear, hear!

Mr Kambwili: More money!

Mr Chikwanda: … and make this a final tax. As such, Turnover Tax on rental income shall not be applicable.

Hon. Government Members: More money!

Mr Chikwanda: Mr Speaker, as a way to further stimulate the booming property sector, which is a source of employment, I propose to exempt from withholding tax interest arising from the debenture part of the property linked unit paid to Zambian investors by any property loan stock company listed on the Lusaka Stock Exchange (LUSE). 

Mr Speaker, I have noted that persons who make fortunes form gaming, lotteries and betting do not declare income for tax purposes. Incomes from such sources go untaxed into the hands of winners. In order to broaden the tax base, I propose to introduce a withholding tax of 20 per cent on winnings from gaming, lotteries and betting …

Hon. Members: Hear, hear!

Mr Chikwanda: … and make it a final tax.

Hon. Government Members: Yes!

Hon. Opposition Member: What about casinos?

Mr Chikwanda: Sir, the casinos are also covered.

Streamlining of Tax Incentives

Mr Speaker, any investor, foreign or local who pledges to invest, at least, half a million United States Dollars in a priority sector or product, as declared under the Zambia Development Agency (ZDA) Act is entitled to tax incentives. In particular, they are exempt from paying duty for the first five years, are entitled to a five-year income tax holiday and benefit from a further five years of preferential income tax rates. You will recall that in my Budget Address to this House last year, I made reference to our tax incentive regime as being one of the most generous in the region. However, studies undertaken to examine the extent to which investors accessing tax incentives have met their investment obligations, including creating employment, have revealed disappointing results.

Mr L. J. Ngoma: Yes!

Mr Chikwanda: Sir, while these incentives have been granted on the basis of attracting the FDI and stimulating exports, it has been found that some investors have abused them.

Hon. Members: Yes!

Mr Chikwanda: Mr Speaker, it is only logical and appropriate that those who violate these provisions under which incentives were granted face sanctions including the revocation of their investment licences. I propose to align the sectors declared as priority under the ZDA Act to the Revised Sixth National Development Plan (SNDP). Further, I propose to rationalise the granting of incentives accessed through the ZDA mechanism. In particular, incentives under import duty exemptions accessed through the ZDA will no longer be granted to any new licence holders from midnight tonight …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … apart from licence holders in the MFEZs, industrial parks and business enterprises in rural areas in order to facilitate the development of such areas.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, I wish to reiterate the President’s stance that our Government will continue to implement programmes and activities aimed at attracting and promoting investment into the country. This will be done by accelerating the development of MFEZs and industrial parks which are expected to create over 110,000 jobs once fully operational.

Concessions

Mr Speaker, as a demonstration of our commitment of putting more money in our people’s pockets, I propose to increase the current exempt threshold of Pay-As-You-Earn (PAYE) by more than 36 per cent from K2,200 to K3,000 per month …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … and adjust the bands accordingly.

Hon. Opposition Members: K3,000 only?

Hon. Government Members: Yes!

Mr Chikwanda: Mr Speaker, the expected revenue loss from this measure is K956.6 million.

                Current PAYE Regime
           Income Band                     Tax Rate
          0 – K2,200 per month      0%
K2,200 – K3,000 per month    25%
K3,001 – K5,900 per month    30%
     Above K5,900    35%

                                             Proposed PAYE Regime
Income Band                                 Tax Rate
          0 – K3,000 per month      0%
K3,000 – K3,800 per month    25%
K3,801 – K5,900 per month    30%
    Above K5,900 per month    35%

Revenue Neutral Measures

Mr Speaker, in order to effectively improve tax compliance and curb evasion, I propose to enhance the provisions relating to access to information for tax purposes. Further, I propose to amend the Customs and Excise Act, Income Tax Act and Value Added Tax Act so as to update, strengthen and remove ambiguities in certain sections of these laws and to make tax administration more effective.

Non-Tax Revenues

Mr Speaker, as part of its comprehensive land reform programme, the Government has launched the Integrated Land Management Information System whose benefits, among others, are to strengthen the administration of land and regulate land ownership through surveying and tilting of land countrywide. This measure will improve certainty of land location and ownership, enhance security of tenure for both customary and State land, improve transparency in land transaction procedures and increase revenue collection, among other things.

Mr Speaker, toll fees collected from toll-gates based on the road user pay principle is one of the most sustainable sources of financing for road works. The Government has embarked on the tolling of selected major roads whose proceeds will be channelled to the rehabilitation of roads countrywide.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, tolling of commercial traffic will commence before the end of this year using existing weighbridge infrastructure. To augment the efforts of enhancing domestic revenue, I propose to revise upwards fees and fines to bring them to appropriate cost recovery levels of providing the respective services. These fees include those collected by the Ministry of Lands, Natural Resources and Environmental Protection, Ministry of Information and Broadcasting, Ministry of Mines, Energy and Water Development and Ministry of Home Affairs. These measures will take effect from 1st January, 2014. The Government will raise an estimated K550 million from these non-tax measures in 2014.

Mr Speaker, let me now preserve Hon. Muntanga’s attention span and conclude.

Laughter
PART IV

CONCLUSION

Mr Chikwanda: Mr Speaker, it is only appropriate to conclude my address by paying tribute to our hardworking President, Mr Michael Chilufya Sata, …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … for the inspiring leadership and vision …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … he has provided since the inception of his administration.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, under the leadership of this great patriot, who is focussed, …

Hon. Government Members: Yes!

Mr Chikwanda: … has undivided loyalty and love for his people …

Hon. Government Members: Hear, hear!

Mr Chikwanda: … the nation’s development agenda has moved forward at a robust pace.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, Hon. Muntanga, we all have a duty to join hands with him to intensify our crusade against poverty.

Hon. Government Members: Hear, hear!

Mr Chikwanda: Mr Speaker, our divergent views should never be a cause for drifting from our common purpose of moving the country forward and creating a society premised on social justice and prosperity for all of us.

Hon. Members: That is right!

Mr Speaker, I beg to move.

Hon Government Members: Hear, hear!

Mr Ng’onga (Kaputa): Mr Speaker, allow me to thank you most sincerely for giving me this rare privilege to be the first Member to debate the Motion which has been moved by the hon. Minister of Finance on the 2014 Budget. It is always exciting to be associated with a momentous occasion like this one.

Hon. Government Members: Hear, hear!

Mr Ng’onga: Mr Speaker, allow me to congratulate the hon. Minister of Finance on presenting a well-thought out and encompassing speech.

Hon. Government Members: Bwekeshapo!

Mr Ng’onga: Mr Speaker, the Budget Speech by the hon. Minister brings renewed hope and expectation to the people of Zambia.

Hon. Government Members: Hear, hear!

Mr Ng’onga: Mr Speaker, it is evident that the hon. Minister proposes to expend national financial resources on critical sectors of the economy. It is, therefore, important that we defer the debate on this Motion to Tuesday, 15th October, 2013. This will give us ample time to reflect on the numerous issues raised by the hon. Minister.

Hon. Government Members: Yes!

Mr Ng’onga: Mr Speaker, with these few words, I propose that we defer the discussion of the Budget Speech to next Tuesday.

I thank you, Sir.

Mr Speaker: Is the Motion seconded?

Mrs Mazoka (Pemba): Mr Speaker, I thank you for according me the opportunity to support the proposal by the hon. Member of Parliament for Kaputa Parliamentary Constituency, that the debate on the Motion of Supply moved by the hon. Minister of Finance be deferred to Tuesday next week.

Mr Speaker, I am confident that hon. Members agree that the issues contained in the Budget Speech have a large impact on the lives of the citizens of this great nation.

Hon. Opposition Members: Yes!

Mrs Mazoka: Mr Speaker, it is important that we give ourselves sufficient time to carefully scrutinise the Budget Speech in readiness for debate next week.

Hon. Opposition Members: Hear, hear!

Mrs Mazoka: Mr Speaker, I urge all of my colleagues from both sides of the House to carefully study the Speech and come prepared next Tuesday …

Hon. Opposition Members: Hear, hear!

Mrs Mazoka: … to engage in a serious and meaningful debate on the issues raised in the Speech by the hon. Minister of Finance.

Hon. Opposition Members: Hear, hear!

Mrs Mazoka: Mr Speaker, I, therefore, support the proposal to defer the debate on the Motion of Supply.

I thank you, Sir.

Hon. Opposition Members: Hear, hear!

Question put and agreed to.

ADJOURNMENT

The Vice-President (Dr Scott): 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 1557 hours until 1430 hours on Tuesday, 15th October, 2013.