Friday, 29^th September, 2017

 

The House met at 1415 hours

 

[MR SPEAKER in the Chair]

 

NATIONAL ANTHEM

 

PRAYER

 

_______

 

BUSINESS OF THE HOUSE

 

The Chief Whip and Acting Leader of Government Business in the House (Mr Musukwa): Mr Speaker, I rise to acquaint the House with the business it will consider next week.

 

Sir, on Tuesday, 3^rd October, 2017, the Business of the House will begin with Questions for Oral Answer, if there will be any. That will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will commence the debate on the Motion of Supply on the 2018 National Budget, which the hon. Minister of Finance will present today.

 

Mr Speaker, on Wednesday, 4^th October, 2017, the Business of the House will start with Questions for Oral Answer, if there will be any. That will be followed by presentation of Government Bills, if there will be any. Thereafter, the House will consider Private Members’ Motions, if there will be any. The House will, then, continue with the debate on the Motion of Supply on the 2018 National Budget.

 

Sir, on Thursday, 5^th October, 2017, the Business of the House will commence with Questions for Oral Answer, if there will be any. That 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 on the 2018 National Budget.

 

Mr Speaker, on Friday, 6^th October, 2017, the Business of the House will start with the Vice-President’s Question Time. That will be followed by Questions for Oral Answer, if there will be any. Thereafter, the House will consider Government Bills, if there will any. The House will, then, continue with the debate on the Motion of Supply on the 2018 National Budget.

 

Mr Speaker, I thank you.

 

Hon. Government Members: Hear, hear!

 

_______

 

MOTIONS

 

BUDGET ADDRESS

 

The Minister of Finance (Mr Mutati): 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 1^st January to 31^st December, 2018, presented to the National Assembly on Friday, 29^th September, 2017.

 

Sir, I am a bearer of a message from His Excellency the President of the Republic of Zambia, Mr Edgar Chagwa Lungu, …

 

Hon. Government Members: Hear, hear!

 

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

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, this is the second address I am making since I was granted this rare and momentous task of being Minister of Finance. The walk has not been easy but, collectively, we have made notable successes, as I will show.

 

Mr Livune: Question!

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, once again, I thank His Excellency the President of the Republic of Zambia, Mr Edgar Chagwa Lungu, …

 

Hon. Government Members: Hear, hear!

 

Mr Livune: Question!

 

Mr Mutati: … for giving me this rare opportunity. My uninhibited gratitude also goes to my colleagues in the Cabinet, you, Mr Speaker, all the hon. Members of this august House and the people of Zambia for the support they have given me in the performance of my duties. Further, I applaud the Church, media, private sector, civil society organisations (CSOs) and co-operating partners for their support in our development endeavours.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, during the Official Opening of the Second Session of the Twelfth National Assembly, His Excellency the President of the Republic of Zambia …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … reminded the nation of the need to uphold national values and principles, which are centred on patriotism and love for one another. As enshrined in the national anthem, “One land and one nation is our cry”. I wish to reiterate the President’s call, as it is critical if we are to effectively implement our development agenda and meet our aspiration, as a nation, without leaving anyone behind.

 

Mr Speaker, the people of Zambia deserve peace and stability, decent employment, quality public services and an environment where they can create wealth and thrive. Attaining those outcomes is the task with which the people of Zambia have entrusted us, and we shall attain them through the diligent pursuit of the strategic objectives of the recently-launched Seventh National Development Plan (7NDP). We aspire to make a reality of the plan’s theme of “Accelerating development efforts towards the Vision 2030 without leaving anyone behind”.

 

Sir, during the implementation of the Economic Stabilisation and Growth Programme dubbed “Zambia Plus” over the last nine months has achieved a lot. The Patriotic Front (PF) Government is cognisant of the fact that our people deserve much more and has made strides in that regard, yet challenges still remain. For example, youth unemployment and poverty levels remain high. In this regard, the Government is resolved to work tenaciously to uplift the wellbeing of our people and enhance their meaningful participation in the economy.

 

Mr Speaker, inclusive growth is only possible if we are steadfast in collectively implementing bold policy decisions and reforms. This year, the Government implemented austerity measures that have started showing some positive results in securing sustainable growth. Through these measures, it significantly reduced the accumulation of arrears. Further, as a result of the reforms, Zambia’s credit rating outlook and investor confidence have improved. The Government is mindful that despite the positive outlook, the measures, in the short term, have not yet favourably impacted on the welfare of our people. The long term benefits will be inclusive growth and prosperity.

 

Sir, by working collectively, we can clearly define our goals and priorities. Our commitment to inclusive development remains unwavering while our actions remain fiscally prudent. In that regard, the theme of the 2018 Budget is “Accelerating fiscal fitness for sustained inclusive growth without leaving anyone behind”.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, my address to this august House is in four parts. In Part I, I review the performance of the global and domestic economies during 2017 and present the outlook for the rest of the year, in Part II, I outline the macro-economic objectives, policies and strategies for 2018 while, in Part III, I present the details of the 2018 Budget. In Part IV, I conclude my address.

 

PART I

 

GLOBAL AND DOMESTIC ECONOMIC DEVELOPMENTS IN 2017

 

Sir, the global economy is projected to grow by 3.5 per cent in 2017, compared with 3.2 per cent in 2016. This is mainly premised on a projected 4.6 per cent growth in the large and developing economies, driven by the gradual improvement in commodity prices. Growth in the advanced economies is expected to strengthen to 2 per cent in 2017, up from 1.7 per cent in 2016. Sub-Sahara African growth is projected to expand to 2.7 per cent in 2017, up from 1.3 per cent in 2016, driven mainly by increased agricultural and mining output.

 

Mr Speaker, as global economic activities gain momentum, commodity prices are expected to continue strengthening in 2017. For example, copper prices are projected to average US$5,827 per tonne in 2017. Similarly, international crude oil prices are expected to surge to an average of US$49 per barrel in 2017, up from an average of US$42.8 per barrel in 2016.

 

Sir, the Zambian economy has, in 2017, continued to rebound and growth is expected to be above 4 per cent, up from 3.8 per cent in 2016. The key drivers of the growth will be the mining, agricultural and manufacturing sectors supported by improved electricity generation. It is worth noting that the Zambian economy has outpaced the Sub-Sahara African economic growth of 2.7 per cent.

 

Mr Mutati: This is a reflection of the sound economic policies that this Government has been pursuing.

 

Mr Livune: Question!

 

I repeat: This is a reflection of the sound economic policies that this Government has been pursuing.

 

Hon. Government Members: Hear, hear!

 

Mr Livune: Question!

 

Mr Mutati: Questions are good for democracy.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, I now outline in detail, the developments in the domestic economy. 

 

Real Sector

 

Mr Speaker, during the 2016/2017 Farming Season, crop production was favourable, with significant increases in the output of maize, Irish potatoes, rice, tobacco, groundnuts and soya beans while growth in the fisheries sub-sector for both capture and aquaculture fisheries also strengthened to 77,029 metric tonnes for the period January to June, 2017, up from 56,241 metric tonnes in the same period in 2016. This is attributable to more participation by commercial and emergent fish farmers in aquaculture and the enhanced enforcement of regulations in capture fisheries. The livestock sub-sector saw an increase in the livestock population to 4.9 million during the period January to June, 2017, up from 4.3 million in the same period in 2016. This was due to stocking and restocking, and improved animal disease control programmes.

 

Mr  Speaker,  on  account  of improved water levels, in  the  first  eight months of 2017, electricity generation  increased by 23.7 per cent to 9.4 million MW hours, and that has significantly reduced load-shedding and improved the prospects for industrialisation.

 

Sir, at the end of August, 2017, copper production stood at 510,369 metric tonnes, with the year-end production expected to exceed 770,000 metric tonnes.

 

Mr Speaker, following the modernisation of the Harry Mwaanga Nkumbula International Airport, tourist arrivals at the airport increased by 23.6 per cent in the first half of 2017. We anticipate similar trends at the Simon Mwansa Kapwepwe and Kenneth Kaunda international airports in Ndola and Lusaka, respectively, once the modernisation of the two airports is completed.

 

Hon. Government Members: Hear, hear!

 

External Sector Performance

 

Mr Mutati: Sir, the performance of the external sector has improved relative to 2016. Zambia’s trade balance recorded a surplus of US$388.3 million during the first six months of 2017, compared with a surplus of US$45.8 million during the corresponding period in 2016, mainly due to higher export earnings relative to imports. The total export earnings were 25.8 per cent higher at US$3.9 billion.

 

Mr Speaker, copper export earnings were higher by 38.1 per cent at US$2.9 billion, up from US$2.1 billion in the corresponding period last year due to a rise in both export volumes and prices. Non-traditional exports, however, marginally declined to US$811.7 million during the first six months of 2017, down from US$835.5 million during the same period in 2016. The gross international reserves, as at the end of August, 2017, were estimated at US$2.3 billion, relatively unchanged from the end figure for 2016. This translates into 3.2 months of import cover.

 

Monetary and Financial Performance

 

Sir, monetary performance in 2017 has been positive. The exchange rate of the kwacha against major tradeable currencies has been relatively stable, appreciating by 4 per cent to date, while inflation fell significantly to 6.6 per cent in September, 2017, down from 18.9 per cent during the same period in 2016. The Bank of Zambia (BoZ) also eased the monetary policy significantly in 2017, reducing the policy rate from 15.5 per cent in January, 2017, to 11 per cent in August, 2017. Statutory reserve ratios reduced from 18 per cent to 9.5 per cent over the same period. Overall, the performance and condition of the financial sector remained satisfactory as at end of August, 2017. The banking sector also maintained a strong capital adequacy position and satisfactory earnings performance.

 

Mr Speaker, despite the easing of the monetary policy, commercial bank average lending rates only fell marginally to 26.6 per cent in August, 2017, down from 29.4 per cent in December, 2016. Private sector credit remained subdued, contracting by 2.9 per cent as at the end of August, 2017, while asset quality deteriorated, as reflected by the increase in non-performing loans, to 12.2 per cent relative to the total loans, compared with 9.7 per cent as at the end of December, 2016. This is above the internationally-accepted threshold of 10 per cent. However, measures are being taken to reverse the trend and restore asset quality in the banking sector.

 

Sir, the Government has successfully restructured the Intermarket Banking Corporation Zambia (IBCZ) Limited, which was closed last year, and I am glad to inform the House that a shareholder agreement for the new restructured bank has been concluded and the capital requirement met. The bank will operate under the name of Zambia Industrial Commercial Bank and will take over the assets of IBCZ Limited.

 

Hon. Government Members: Hear, hear!

 

Hon. UPND Members: Question!

 

 Mr Mutati: The management for the restructured bank has been appointed and will soon commence operations.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, following the successful restructuring of the IBCZ, the Government is now repositioning the National Savings and Credit Bank (NATSAVE) and Development Bank of Zambia (DBZ) to improve their governance structures and capability to contribute to the development of the banking sector and the economy. The exercise will include the restructuring of NATSAVE into a fully-fledged commercial bank with private sector participation.

 

Fiscal Performance

 

Sir, the execution of the Budget in 2017 remained a challenge. Revenues and grants are projected to be below target by 7 per cent at K42.1 billion by the end of 2017. This will be on account of delayed and non-implementation of some measures, such as the use of fiscal devices; low compliance in some tax types; and the non-disbursement of grants by some co-operating partners. In line with the fiscal consolidation stance, expenditures are projected to be below target by 6 per cent. Consequently, the deficit, on cash basis, is expected to close the year at 6.8 per cent of the gross domestic product (GDP).

 

Debt and Arrears Position

 

Mr Speaker, the stock of the Government’s external debt, as at the end of August, 2017, was US$7.56 billion, representing 29 per cent of the GDP. The stock of domestic debt, in the form of Government securities, was K44.6 billion, representing 18 per cent of the GDP. So, the total public debt, external and domestic, at the end of August, 2017, was K114.9 billion or US$12.45 billion, representing 47 per cent of the GDP. I will subsequently outline the measures we are taking to comprehensively deal with the issue of debt.

 

Sir, the stock of domestic arrears, as at the end of June, 2017, was K13.2 billion, down from K19.1 billion in December, 2016. The significant reduction in arrears is attributable to the Government’s concerted effort to clear them augmented by the tax amnesty that was declared, which have given life back to businesses.

 

Hon. Government Members: Hear, hear!

 

PART II

 

MACROECONOMIC OBJECTIVES, POLICIES AND STRATEGIES FOR 2018

 

Mr Speaker, accelerating fiscal fitness is critical for sustained inclusive growth, diversification and job creation. These outcomes are in conformity with the strategic objectives of the 7NDP. In this regard, the macro-economic objectives and policies for 2018 will be to:

 

1. achieve real GDP growth of, at least, 5 per cent;

 

1. maintain single-digit inflation in the range of 6 to 8 per cent;

 

1. maintain international reserves of, at least, three months of import cover;

 

1. attain domestic revenue  mobilisation of, at least, 17.7 per cent of GDP;

 

1. limit the fiscal deficit, on a cash basis, to 6.1 per cent of the GDP;

 

1. limit domestic financing to no more than 4 per cent of the GDP;

 

1. accelerate the implementation of measures towards the diversification of the economy;

 

1. reduce the stock of arrears and curtail the accumulation of new arrears; and

 

1. slow down on the contraction of new debt to ensure sustainability.

 

Hon. Government Members: Hear, hear!

        

Mr Mutati: Slow down, slow down. Pole, pole.

 

Interruptions

 

Key Integrated Multi-Sectoral Policies and Interventions

 

Mr Mutati: Sir, the 7NDP has adopted an integrated multi-sectoral approach to development. This entails that sectors have to work together in clusters to achieve the objectives of the plan. In this vein, the policy and structural interventions for 2018 will be aligned to the following five pillars of the plan:

 

1. economic diversification and job creation;

 

1. poverty and vulnerability reduction;

 

1. reduction of development inequalities;

 

1. enhancement of human development; and

 

1. creation of a conducive governance environment for a diversified and inclusive economy.

 

Mr Speaker, there is a need to create a supportive environment for the effective implementation of the plan. That will be achieved by creating a stable macro-economic environment and fiscal space while consolidating policy and structural reforms, as outlined in the Economic Stabilisation and Growth Programme. Let me, now, outline the policies under each of the five pillars of the plan.

 

Pillar One: Economic Diversification and Job Creation

 

Sir, the continued over-reliance on the mining sector has exposed the economy to volatility arising from external shocks. Further, owing to high mechanisation, the mining sector’s ability to absorb the large number of youths entering the labour market each year is limited. There is, therefore, a need to diversify the economy to labour-intensive sectors, such as agriculture and tourism.

 

Agriculture, livestock and fisheries

 

Mr Speaker, diversification remains the key to the transformation of agriculture. The Government will, therefore, implement measures aimed at raising farmer productivity and promoting diversification in the sector. One such measure is the introduction and development of the farming block model, of which three will be operationalised on the Copperbelt and in Muchinga and the Northern provinces in 2018.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: The model, which is anchored on a core venture, agro processing facilities and smallholder farmers, will further allow smallholder and emergent farmers to benefit from technology transfer and access to ready markets. In addition, the Government is facilitating a US$100 million public-private sector investment in a tractor and agricultural equipment assembly plant in the Lusaka South Multi-Facility Economic Zone (MFEZ). The plant will be operational by the end of 2018. Further, the Government has obtained US$40 million from Export-Import (EXIM) Bank of India for agricultural mechanisation.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, to maintain the diversification drive, the Government will, during the 2017/2018 Farming Season, fully migrate to the electronic voucher (e-Voucher) system to cover 1 million beneficiary farmers. The Government has further put in place a new framework to eliminate ghost farmers and the duplication of beneficiaries. As a result of the clean-up, 600,000 undeserving beneficiaries were removed from the system, resulting in a saving of K1 billion.

 

Mr Speaker, in the 2017 Budget, I announced that the Government would construct eighteen artificial insemination centres to improve livestock production and breeds, and I am happy to inform this august House that ten centres have since been completed and are operational. The remaining eight are at various stages of development. In the area of animal health, the Government will continue with animal disease prevention and control programmes across the country. To this effect, works on 200 dip tanks will continue. In addition, the construction of four regional laboratories will be completed by the end of 2018. Further, given the rising market potential for livestock, especially goat and sheep, the Government will facilitate access to both local and foreign markets for livestock products. One such initiative is the export of 1 million goats to the Middle East.

 

Mr Nkombo: Goats!

 

Mr Mutati: You enjoy goats, huh?

 

Laughter

 

Mr Mutati: With regard to fisheries, in 2018, the Government will promote cage fish farming on lakes Mweru, Kariba, Tanganyika and Bangweulu, and Kafue River at Kasaka and in the water bodies in the Western Province. This is in an effort to improve productivity and production to attain self-reliance.

 

Mr Speaker, in 2018, the Government will continue with the implementation of the US$50 million Zambia Aquaculture Enterprise Development Project, which is aimed, among other outcomes, at building institutional capacity for fish, fingerling and feed production. Further, it will provide support to the private sector in developing the aquaculture value chain, including in the establishment of fish feed plants, hatcheries, and freezing and processing facilities. Further, the Government is also currently undertaking a comprehensive livestock and aquaculture census, which will be completed in 2018. The results of the census will guide the formulation of policies to facilitate growth and development.

 

Sir, the Government will also enhance extension service provision. In partnership with the private sector, it will work towards improving agricultural market information systems and the development of functional markets, which is essential to sustained higher production, enhanced agriculture value chains, improved farmer incomes and reduced poverty. To support the outlined measures, the Government will recruit 750 extension service workers in the agricultural sector.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati:

 

Industrialisation

 

Mr Mutati: Mr Speaker, industrialisation is key to the promotion of value addition and attainment of the Government’s economic diversification agenda. In order to facilitate expansion of the country’s industrial base, the development of MFEZs and industrial parks will continue. In this regard, the establishment of the Kafue Iron and Steel, Kalumbila and Chembe MFEZs is underway. In order to enhance the operations of the existing zones and parks, the Government will, in 2018, review their performance to identify and address the challenges affecting their operations.

 

 Sir, in the 2017 Budget, I announced that the Government, working with the private sector, would set up the Agricultural and Industrial Credit Guarantee Scheme, and I am happy to report that it has been done. The scheme will facilitate access to affordable credit to small and medium enterprises (SMEs). Further, the Government will engage financial institutions to increase credit to the SMEs using movable assets as collateral in line with the provisions of the Movable Assets Act. In addition, to further enhance access to finance by SMEs, we will include the use of securities and stocks as collateral.

 

Tourism

 

Mr Speaker, marketing and partnership with the private sector in conservation remain central to tourism promotion. Emphasis will also be put on ensuring that the creative sector becomes an integral part of economic development. In order to reduce the cost of doing business and unnecessary bureaucracies in the tourism sector, the Government will, together with the Business Regulatory Review Agency, establish and operationalise a single licensing system. With regard to infrastructure development, the Government will, through an integrated approach, prioritise the major roads, bridges and air strips leading to tourism destinations. Further, it will facilitate development of requisite infrastructure to ease access to tourism sites, rehabilitate heritage sites and strengthen wildlife protection.

 

Mining

 

Mr Speaker, policy consistency is critical to the creation and sustenance of investor confidence. The Government is committed to ensuring that this cause. In 2018, its focus in the mining sector will be on broadening the tax base and enhancing mineral production to include non- traditional minerals, such as gemstones and industrial minerals. It will also strengthen the regulatory framework and enforcement in the sector to curb avoidance of paying taxes and levies. Further, to enhance information provision and planning, the Government will, in 2018, continue with the geological mapping programme for the remaining 40 per cent of the country. In addition, to promote inclusiveness in the sector, the Government will continue to support artisanal and small-scale miners through the Development Mineral Capacity Building Programme. Further, promotion of downstream value chains will be emphasised.

 

Energy

 

Mr Speaker, stable and reliable energy supply is critical to the welfare of our people and productivity of business. Priority in the electricity sub-sector will, therefore, be on increasing the energy mix through the promotion of off-grid electricity generation and alternative energy sources. In this regard, the Government will continue with on-going reforms in the sector to boost private sector participation.

 

Sir, in 2018, the Government will present the Energy Regulation and Electricity Bills to this august House for enactment. The Energy Regulation Bill will allow for enhanced supervision and regulation of the energy sector while the Electricity Bill will, among other outcomes, allow for participation of other players in the industry. To ensure cost reflectivity in tariffs and encourage investment in the sector, the Government will, in 2018, finalise the cost of service study. The results will provide the basis for future adjustments to electricity tariffs.

 

Mr Speaker, to promote small and medium private sector investment in renewable energy, the Government will implement the Renewable Energy Feed-In Tariff Regulatory Framework. The target for Phase I is to add 200 MW. I wish to inform this august House that financial closure on the Scaling Solar Project has been reached and its construction is expected to start in October, 2017.

 

Sir, I am glad to inform this House that the dam construction of the 750 MW Kafue Gorge Lower Project is progressing well. Further, the work on the second phase of the 300 MW Maamba Thermal Plant is expected to commence in 2018. In addition, the 250 MW Kalungwishi Hydro Power Project will commence in 2018.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, the Government, in collaboration with the Government of the Republic of Zimbabwe, has commenced preliminary financing arrangements for the development of the 2,400 MW Batoka Hydro Power Project. In addition, it has continued working on linking Zambia to the Southern and East African Region through the Zambia-Tanzania-Kenya Inter-connector Project, which will enhance electricity trade, improve power security, ensure reliability of supply and foster regional integration by connecting power, for the first time, from Cape to Cairo.

 

Mr Mutati drank water.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: This is cold energy.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, in the 2017 Budget Address, the Government indicated its intention to disengage from direct procurement of finished petroleum products by March, 2017, to remove the burden of oil procurement from the Treasury, attain efficiencies and promote private sector participation. The measure will take effect in the first quarter of 2018.

 

Transport, Information and Technology Infrastructure

 

Sir, it is often said that development follows infrastructure. Therefore, in 2018, the Government will continue with the on-going road projects, including the Link Zambia 8,000 Kilometre (Link Zambia 8000), the Lusaka 400 Kilometre (L-400) and the Copperbelt 400 Kilometre (C-400) road projects.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: To reduce congestion in Lusaka, the US$240 million Lusaka City Traffic Decongestion Project, which is financed by our co-operating partners, is expected to commence in 2018.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, the recently launched Lusaka/Ndola Dual Carriageway is one of the most economic roads.

 

Interruptions

 

Mr Mutati: Let me hasten to mention that the project consists of two phases. Phase I will be the construction of the dual carriageway while Phase II will involve the construction of auxiliary infrastructure, such as hotels, toll gates and service stations.

 

Hon. Government Members: Hear, hear!

 

Interruptions

 

Mr Mutati: Wait for the main issue.

 

Interruptions

 

Mr Mutati: Mr Speaker, Phase I will be financed through public-private initiatives …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … while Phase II will be financed through private sector participation.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, nothing will lean on Government balance sheet.

 

Hon. Government Members: Hear, hear!

 

Interruptions

 

Mr Speaker: Order!

 

Hon. Government Members: Bweshapo!

 

Mr Mutati: Mr Speaker, for the sake of clarity, Phase I …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … will be financed by public-private initiatives …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … while Phase II will be financed by the private sector, ...

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … meaning that the Government will not borrow a dollar for the project.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati drank water.

 

Interruptions

 

Mr Mutati: Sir, the National Road Tolling Programme has proved to be successful in raising revenue for road maintenance and rehabilitation. In the first eight months of 2017, the Government raised K490.5 million.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: This is a sustainable way of ensuring that our road network is well-maintained. In this regard, the Government will, in 2018, continue to construct toll gates across the nation.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, in my last Budget Address, I urged pension funds to participate in the financing of development projects, and I am glad to report that the National Pension Scheme Authority (NAPSA) has taken up the challenge to finance the K2.1 billion Chingola/Solwezi Road Project.

 

Hon. Government Members: Hear, hear! Ema NAPSA aya.

 

Mr Mutati: The recovery of the invested funds will be through revenue from toll gates to be constructed on the road.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, I encourage other pension funds to take up the challenge to diversify their investment portfolios through such arrangements.

 

Sir, to further diversify sources of financing for infrastructure development, the Government will, in 2018, set up an Infrastructure Development Fund, which will be financed through proceeds from the sale of Government assets, pension fund participation …

 

Mr Kambwili interjected.

 

Mr Mutati: … and the sale of infrastructure bonds. Hon. Dr Kambwili, I bring you greetings from Mporokoso.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, in the railway transport sub-sector, the Government will re-vitalise Zambia Railways Limited (ZRL) and concession the Tanzania-Zambia Railway Authority (TAZARA). Further, the Government will, through a Public-Private Partnership (PPP) arrangement, commence the development of the Chipata/Petauke/Serenje Railway Line.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, the expansion and modernisation of the Kenneth Kaunda International Airport (KKIA) is expected to be completed in 2018. Further, the Government has commenced the construction of the Copperbelt International Airport.

 

Mrs Simukoko and Mr Sampa: More jobs!

 

Mr Mutati: Hundreds and many more. Hon. Prof. Lungwangwa, there are the dividends about which you speak.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, to improve information and communications technology (ICT) infrastructure, the Government will invest in and upgrade telecommunication networks, data centres and access devices through the Smart Zambia Master Plan to improve the flow of information in and among Government institutions, enterprises and among citizens to bring about social and economic benefits. This is also aimed at transforming the Government’s mode of delivery of public services from traditional face-to-face interactions to online channels to ensure that citizens and business entities can access services anywhere and anytime. The Government will also facilitate the up-scaling of ICT skills for both Public Service and private sector workers, and accelerate the mainstreaming of an ICT culture in the Zambian education curriculum ...

 

Mr Ng’ onga: Hear, hear!

 

Mr Mutati: … to ensure early adaptation and sustainability of ICT-based solutions.

 

Sir, in order to achieve universal access to communication services, the Government is constructing communication towers across the country. Under the first phase, the Government has constructed 204 towers. In 2018, it will commence the construction of 1,009 towers in unserved and under-served areas under the second phase. So, the whole of Zambia will be connected.

 

Mr Sing’ombe: Including Dundumwezi?

 

Mr Mutati: In particular, Dundumwezi.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, the interventions under Pillar I are aimed at creating a supportive environment to stimulate economic diversification and job creation, as enshrined in the 7NDP. These interventions also underscore the Government’s commitment to creating jobs for our people.

 

Pillar II: Reducing Poverty and Vulnerability

 

Mr Speaker, the Government remains committed to reducing poverty and vulnerability among its citizens. In 2018, it will continue to implement policies and initiatives aimed at protecting and empowering the vulnerable members of our communities. To assist in planning and policy formulation, and eliminate duplications in social protection programmes, the Government is implementing the electronic single registry of beneficiaries for all social protection programmes. The system, which has been piloted in five districts, will be rolled out to thirty-six additional districts in 2018.

 

Social Cash Transfer Scheme

 

Sir, the Government scaled up the Social Cash Transfer (SCT) scheme in 2017 by increasing coverage and monthly payments to each beneficiary household. Further, the number of beneficiary households was increased from 242,000 in 2016 to 590,000 in 2017. In 2018, the number of beneficiaries will be further increased 700,000.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: In addition, the Government will fully migrate to electronic cash transfer using cellular phones.

 

Mr Ngulube: Proper!

 

Public Welfare Assistance Scheme

 

Mr Mutati: Mr Speaker, in 2018, the Government will increase support to this programme from 134,000 targeted beneficiaries this year to 200,000. This will enable people to have access to education and healthcare.

 

Food Security Pack

 

Sir, in the 2018/2019 Farming Season, the Government will increase the number of household beneficiaries under this programme to 80,000 from 40,000 in the 2017/2018 Farming Season. The objective of the programme is to support vulnerable, but viable farmers.

 

Home-Grown School Feeding Programme

 

Mr Speaker, the Home-Grown School Feeding Programme has proved effective in    increasing school attendance and combating malnutrition among vulnerable pupils. I wish to report that, by the end of June, 2017, over 956,000 children were on the programme in both Government and community schools. The focus, in 2018, will be to increase the number of learners on the programme from the 1.2 million projected at the end of 2017 to 1.5 million.

 

Hon. Government Members: Hear, hear!

 

Womens’ Development Programme

 

Mr Mutati: Sir, the Government will continue to implement the Womens’ Development Programme, which is aimed at enhancing access to productive resources and entrepreneurship skills for poor and vulnerable women. Under the programme, about 30,000 women countrywide will be empowered with productive grants and micro credit in 2018.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: In addition, the Government, with support from the World Bank, is targeting to provide educational support to 16,000 girls from extremely poor households in sixteen districts, and 75,000 women with grants in fifty-one districts.

 

Climate Change and Disaster Risk Reduction

 

Mr Speaker, Zambia has not been spared from the adverse effects of climate change, which has the potential to reverse our developmental gains. In this regard, the Government will implement strategies to mitigate and adapt to the adverse effects of climate change. Some of the measures include the Pilot Project for Climate Change Resilience currently being implemented in the Western, Southern and Central provinces. This intervention will also be extended to the Northern, Muchinga and Luapula provinces.

 

Ms Kalima: Hear, hear!

 

Mr Mutati: To address deforestation, the Government will implement the US$32.8 million Integrated Forestry Landscape Project in the Eastern Province with the support of its co-operating partners. Further, it will strengthen the national disaster response system.

 

Pension Reforms

 

Sir, in my address to this august House last year, I indicated the Government’s intention to review legislation to ensure a pension system that is affordable, sustainable and capable of providing broader social security protection. I am happy to report that the Social Protection Bill has now been finalised. Among other provisions, the proposed legislation will include the establishment of a unified pension system, a national social security agency and a national social security fund, and provide for basic social protection, including health and maternity insurance. It will also extend national social security coverage to the self-employed and other people. These reforms will be a fundamental paradigm shift from the existing system and will help reduce destitution among our people. I, therefore, urge all hon. Members of this august House to critically debate and support the Bill when it is presented to the House.

 

Pillar Three: Reducing Development Inequalities

 

Mr Speaker, the Government is concerned about the developmental inequalities that exist between rural and urban areas in terms of social service delivery, infrastructure and financial inclusion, among other aspects. It will, therefore, in 2018, prioritise increased access to social services and completion of on-going education, health, and water and sanitation infrastructure projects in rural areas. In order to attract investment in rural areas, the Government will continue with the construction of economic infrastructure, such as feeder roads, communication towers and electrification infrastructure.

 

Feeder Roads

 

Sir, the Government is committed to upgrading, rehabilitating and maintaining feeder roads to enhance the connectivity of rural areas to markets. It will continue to work with co-operating partners in this area and has since secured US$200 million from the World Bank under the Rural Connectivity Project. So, all areas will be connected.

 

Hon. Government Members: Hear, hear!

 

Interruptions

 

Mr Mutati: Hon. Prof. Lungwangwa.

 

Decentralisation

 

Mr Mutati: Mr Speaker, centralisation of power, particularly in respect of resource control and decision-making has hampered the attainment of equitable national development. In order to address that, the Government will, in 2018, ensure that the finances required for the provision of frontline public services and infrastructure projects at provincial and district levels are deconcentrated to the provincial administrations.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: To enhance the participation of citizens in project identification, planning, and monitoring and evaluation, the Government will commence the devolution of powers from the centre to lower-level structures. This will help to remove bureaucracy and enhance timely delivery of services.

 

Sir, to deliver services, councils need to raise substantial revenue from property rates. However, procedural delays caused by processes set out in the 1997 Rating Act have led to substantial revenue losses by councils. To address these challenges, in 2018, the Rating Act will be repealed and replaced to ensure that councils gain revenue buoyancy and adequacy from property rates. This will go a long way in establishing a sound financial base for local authorities in accordance with Article 151 of the Constitution of the Republic of Zambia.

 

Pillar Four: Enhancing Human Development

 

Mr Speaker, human development plays a critical role in promoting inclusive growth and laying a foundation for future prosperity. The 7NDP identifies three key components of human development, namely health, education and skills development, and improved access to water supply and sanitation.

 

Health

 

Sir, health is key to enhancing productivity and the welfare of our people. In strengthening health systems, priority will be on the completion of on-going construction of health infrastructure, ensuring availability and timely supply of drugs, procurement of medical equipment, recruitment of health personnel and promotion of innovative health financing.

 

Mr Speaker, in the 2017 Budget Address, I informed the House that the construction of 350 health posts will be completed this year. As at end of August, 2017, 275 health posts had been completed and are operational. Further, Matero and Chilenje clinics have been upgraded to first-level hospitals while thirty-five district hospitals are at various stages of construction. Other projects, which include the modernisation and upgrading of various hospitals, are still underway. In order to increase access to health services, the Government will, in 2018, continue to construct and upgrade health facilities across the country, and procure modern medical equipment. It will also introduce measures to strengthen the local manufacturing of drugs, thereby assuring security of supply. This will also create employment opportunities for our people and conserve foreign exchange.

 

Sir, in order to ensure timely and adequate availability of essential medicines and medical supplies, the Government will establish an additional regional hub in Ndola this year, two more in Mansa and Mpika, respectively, and a sub-hub in Kabompo.

 

Hon. Lufuma, take note.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Further, the Government has put in place prefabricated storage facilities in the districts to increase storage capacity and ease drug accessibility.

 

Mr Speaker, human resources remain a critical component in the provision of quality health services to Zambians. In 2018, the Government will recruit 1,000 health personnel to add to the 7,400 already recruited this year.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, in 2018, the Government will establish a social health insurance scheme to increase the resource envelope and promote universal health coverage. In that regard, the Social Health Insurance Bill will be tabled before this august House. Further, in order to enhance health service delivery, it will, in 2018, focus on prevention, control and treatment of communicable and non-communicable diseases. It will also focus on reproductive, maternal, neonatal, child and adolescent health, nutrition and health promotion. Further, it will introduce e-services in health institutions, starting with the University Teaching Hospital (UTH).

 

Education and Skills Development

 

Mr Speaker, education and skills development are vital to ensuring a high quality labour force, which is necessary development. In this regard, the focus of the Government is on increasing access to quality education at all levels by constructing and rehabilitating education facilities at all levels, providing equipment and learning materials, recruiting teachers and creating sustainable financing mechanisms for higher learning institutions. As part of the long-term financing solution for technical, vocational and entrepreneurship training (TEVET), the Government established a Skills Development Fund this year, which has, so far, raised K105.4 million.

 

Sir, in 2018, the focus in the primary education sub-sector will be on continuing efforts to increase access to and improving quality of primary education. Infrastructure development in the primary education sub-sector will focus on the completion of schools under construction and rehabilitation of classrooms. With regard to secondary education, the Government will focus on the implementation of the two-tier system, which offers learners the opportunity to follow an academic or vocational career pathway.

 

Mr Speaker, at the tertiary education level, in 2017, the Government committed itself to operationalising the Higher Education Loans and Scholarships Scheme. I am pleased to inform this august House that the Higher Education Loans and Scholarship Board has established by the Government to oversee the operations of the scheme. The Government will, in 2018, continue with the construction of universities and university colleges specialised in science, technology, mathematics and the performing arts. Further, it is committed to completing on-going infrastructure and equipping TEVET institutions.

 

Water Supply and Sanitation

 

Sir, in my last Budget Address, I allocated K391.7 million to water supply and sanitation programmes throughout the country. I am pleased to report that the investment has resulted in the drilling of 1,340 boreholes and construction of ten small water schemes in rural areas. A further 600 boreholes have been rehabilitated. The investment will support the provision of safe and clean water to 600,000 households in rural areas.

 

Mr Livune: Question!

 

Mr Mutati drank water.

 

Mr Mutati: Mr Speaker, water and sanitation infrastructure is being constructed and upgraded in urban and peri-urban areas, key among which is the Kafue Bulky Water Supply Improvement Project under the Millennium Challenge Account, which is aimed at increasing water supply to 110 million litres of water per day to Lusaka and surrounding areas.

 

Ms Chonya: Question!

 

Mr Mutati: In 2018, the focus will also be on the dismantling of the arrears owed to contractors and suppliers in order to complete the on-going water supply and sanitation projects.

 

Sir, investment in the sector will only yield tangible results if accompanied by supportive policy and legislative reforms. In this regard, the Government will present to this House amendments to the Water Supply and Sanitation Act No. 28 of 1997 in order to strengthen   the legal framework for the provision of water and sanitation services in Zambia.

 

Pillar Five: Creating a Conducive Governance Environment for a Diversified and Inclusive Economy

 

Mr Speaker, legal, policy, regulatory and structural reforms are critical to the creation of a conducive governance environment that supports a diversified and inclusive economy. The Government will, therefore, continue its reform agenda in fiscal, land administration and management, debt management, and monetary and financial sector systems.

 

Fiscal Policy

 

Mr Speaker, during 2017, the Government commenced  the  implementation of measures aimed at restoring fiscal fitness in order to attain inclusive  growth  and development under the Economic Stabilisation and Growth Programme. Accordingly, in 2018, the Government will continue to implement measures aimed at restoring Budget credibility, transparency and policy consistency while scaling up social protection. The Government will also ensure that the allocations to the health and education sectors, as proportions of the total Budget, are protected.

 

Mr Speaker, domestic resource mobilisation will be enhanced and subsidies gradually reduced so that resources can be channelled to areas with higher socio-economic returns. Under the    Economic Stabilisation and Growth Programme, the Government has undertaken to restore Budget credibility and stability. Enhanced domestic resource mobilisation will be a pillar to achieving this objective, complemented by policies that ensure that expenditure is maintained at affordable levels.

 

Mr Speaker, in 2018, the Government will implement measures that will simplify the tax system and make it fairer in order to expand the tax base and increase compliance. The measures will include continued modernisation and automation of revenue collection processes and up-scaling of taxpayer education and services. Currently, compliance levels are at 52 per cent. In addition, tax incentives will be rationalised while audit functions will be augmented to address base erosion and profit shifting. On the expenditure side, the measures will be:

 

1. Concentration of resources in areas that facilitate economic diversification, including the completion of on-going projects so as to realise value for money;

 

1. prioritisation of the dismantling of arrears;

 

1. control of the growth in the wage bill by limiting recruitments to critical sectors and cleaning up the payroll;

 

1. limitation of the fiscal deficit in order to ensure sustainability of debt; and

 

1. pursuit of project financing through PPPs.

 

Mr Speaker, to support and anchor fiscal prudence, the Government will further undertake legal reforms that will include:

 

1. revisions to the Public Finance Act to make it more punitive to cases like abuse and misapplication of funds;

 

1. revisions to the Public Procurement Act to ensure value for money, and introduce benchmarking of prices and requirements for project appraisal prior to granting of tender approvals;

 

Interruptions

 

Mr Mutati: Fire tenders.

 

Laughter

 

Mr Mutati: Mr Speaker, we are fixing the law, not the processes.

 

Mr Kambwili: Question!

 

Mr Mutati: It is good for democracy.

 

1. enactment of the Planning and Budgeting Bill, which will anchor Budget and plan preparation in law and enhance participation by citizens, including hon. Members of Parliament; and

 

1. pension reforms, including reform of the public pension funds and enactment of the Social Protection Bill.

 

Mr Speaker, to maximise national benefits from our mineral assets, the Government has been implementing the Mineral Value Chain Project, which is intended to foster mutual accountability and transparency in the management of our mineral resources. I am pleased to report that nine of the major mining houses have now been migrated to reporting their production figures on a full-time basis on the electronic system. Further, two laboratories for assaying mineral quality will soon be fully operationalised.

 

Mr Speaker, in April, 2017, the Government announced a three-month amnesty on interest and penalties for taxpayers who had outstanding tax liabilities with the Zambia Revenue Authority (ZRA). Owing to the overwhelming response of 1.3 million applications from taxpayers, the Government extended the amnesty to 15^th September, 2017. The Government is greatly indebted to the taxpayers for responding to the amnesty. It will, therefore, continue to support those who have the time to pay agreements within the allowable time.

 

Mr Speaker, to enhance performance orientation of the Budget and align it to the development outcomes of the 7NDP, the Government will migrate the Budget to output-based budgeting (OBB). In 2018, the Ministry of Community Development and Social Services will join the two ministries responsible for education in implementing OBB. In 2019, OBB will be rolled out to all ministries, provinces and other spending agencies.

 

Land Administration and Management

 

Mr Speaker, access to land is critical to our economic diversification agenda, reduction in poverty and vulnerability, and reduction of inequalities among our citizens. I indicated, in my 2017 Budget Address, that the Government would commence the Land Titling Programme, starting with pilot sites in Lusaka. I am glad to report that the pilot has since been concluded. So, in 2018, the Government will roll out a national land titling pilot project with the aim of issuing titles for, at least, 300,000 pieces of land. The programme will significantly contribute to the generation of Government revenues.

 

Debt Management Policy

 

Mr Speaker, the Government initiated a deliberate and ambitious infrastructure development programme in order to address the constraints to growth caused by the poor state of economic infrastructure.  The objective was to create a platform for sustainable and inclusive growth. However, the financing of the programme has led to the accumulation of debt, and the Government is aware of the heightened risk on our debt portfolio, which was worsened by the economic imbalances we experienced in 2015 and 2016 when economic growth was subdued. To address these concerns, the Government has published the Medium-Term Debt Management Strategy, which seeks to return the nation to low risk of debt distress. The strategy outlines measures for drastically reducing the rate of debt accumulation and attaining a cheaper and longer debt maturity profile. In addition, future borrowing will be kept strictly within sustainable levels. The strategy also defines measures for the refinancing of the three Eurobonds and dismantling of the stock of arrears. The Government will also continue to use PPPs and joint ventures to finance projects and reduce the burden on the Treasury.

 

Sir, as part of the transparency and good governance that is the cornerstone of this Government, I will, during this Session of Parliament, present a Bill to repeal the Loans and Guarantees (Authorisation) Act. The Bill will enhance oversight over the borrowing activities of the Government by providing for Parliamentary approve of loans before they are contracted.

 

 

Hon. Members: Hear, hear!

 

Mr Mutati: So, all the plans to borrow will be presented here for hon. Members to approve.

 

Hon. Members: Hear, hear!

 

Mr Mutati: Hon. Nkombo, take note.

 

Laughter

 

Mr Mutati: This is in line with the provisions of the Constitution.

 

Asset Management – State Owned Enterprises

 

Mr Speaker, the Government will put in place a robust asset management system for all state- owned enterprises to assess their viability and sustainability. A comprehensive monitoring and evaluation framework will be developed to ascertain compliance of      state-owned enterprises to good corporate governance and operational efficiency so as to ensure that state-owned enterprises contribute to domestic revenues, employment creation and economic growth.

 

Capital Markets

 

Sir, capital markets in Zambia have remained very underdeveloped and underutilised. The high cost of financing in the banking sector makes the case for development of capital markets as a cheaper source of raising finance imperatives. The Government will, therefore, work to address this challenge.

 

Monetary and Financial Sector Policies

 

Mr Speaker, monetary policy will remain focused on maintaining price stability and continue to utilise market-based instruments in line with the medium-term target range of 6 to 8 per cent. In the foreign exchange market, the BoZ will continue to pursue a flexible exchange rate regime and limit interventions in the foreign exchange market to smoothing of volatility in the exchange rate and building of international reserves. The BoZ will also continue to enhance the forward-looking monetary policy framework anchored on the policy rate as the key signal for the monetary policy stance in order to improve the transmission of price signals and reduce reliance on non-price tools in the conduct of monetary policy.

 

Mr Speaker, the Government remains steadfast in its commitment to maintaining financial sector stability. The Financial Sector Assessment Programme implemented in mid-2016 identified a number of vulnerabilities, risks and reforms needed to support financial stability, development and inclusion. Largely, the required reforms were review and update of various pieces of legislation on the regulation and supervision of the financial sector, modernisation of the payments system and protection of depositors. The BoZ is also strengthening its supervisory capacity, and enhancing its collaboration with the Securities and Exchange Commission (SEC) and the Pensions and Insurance Authority (PIA) as regulators of the financial sector. The Government is also reviewing the Bank of Zambia Act, and the National Payment Systems Act. Further, the drafting of a depositor protection Bill is ongoing. These pieces of legislation will be presented to this august House in due course. Other pieces of legislation that support the financial sector, such as the Insolvency Bill, have already been tabled in the House.

 

Mr Speaker, with respect to insurance, the Government will repeal and replace the Insurance Act to strengthen governance and financial soundness, implement micro insurance and require citizens to insure locally, serve for re-insurance.

 

Sir, the Government is finalising the development of the Financial Sector Development Policy, whose overall objective is to create a well-developed, competitive and inclusive financial system that supports efficient resource mobilisation, and access to financial services and products by all. The policy will promote financial stability, financial inclusion and deposit protection, among other objectives.

 

Mr Speaker, to accelerate financial inclusion, the Government will, over the next five years, implement the National Financial Inclusion Strategy, whose overall objective is to increase access and usage of a broad range of quality and affordable financial services. This is important in promoting the participation of the marginalised populations in rural and peri-urban areas in the business and economic affairs of the country. The target is to increase financial inclusion from the current 59 per cent to 80 per cent by 2022.

 

Public Investment Management Reforms

 

Sir, the Government has, in recent years, increased investment in public infrastructure to facilitate economic development and service delivery. To strengthen co-ordination in the   preparation and implementation of public investment projects, the Government will establish a public investment management system, which will provide standardised procedures and guidelines for the identification, preparation, appraisal and implementation of public investment projects to ensure efficiency and attainment of value for money. In this regard, the Government will, in 2018, establish a feasibility study fund to facilitate the conduct of feasibility studies for major public investment projects before they are considered for financing in the Budget.

 

External Sector Policy

 

Mr Speaker, the Government policy in the external sector will remain anchored on the maintenance of an open economy with a competitive and market-driven foreign exchange rate. The focus will be on the promotion of a diversified export base to increase exports and foreign direct investment (FDI) inflows, and maintain international reserves to, at least, three months of import cover.

 

International Monetary Fund (IMF) Programme

 

Sir, the economic challenges that faced the nation in the second half of 2015 and most of 2016 had to be confronted with bold reforms and measures. The measures outlined in the Economic Stabilisation and Growth Programme were anchored on domestic solutions. The programme provides measures for restoring Budget credibility and sustainability, enhancing domestic resource mobilisation, improving economic and fiscal governance, and ensuring economic stability, growth and job creation while protecting the poor. In implementing these measures, the Government saw the need to collaborate with both external and internal partners. Key among the external partners is the International Monetary Fund (IMF), with which we have been engaged in intense discussions based on programmes and targets we set for ourselves under the Economic Stabilisation and Growth Programme. A lot of progress has, thus far, been made, with key structural and regulatory reforms implemented. Based on the spending plans presented in the Medium Term Expenditure Framework (MTEF) and the Budget I am presenting today, the Government will continue to engage the IMF in October, 2017, to set an agreeable macro-economic framework that will take into account our spending and financing plans over the MTEF period and provide a platform for concluding the programme.

 

PART III

 

THE 2018 BUDGET

 

Sir, I now present the 2018 National Budget, which lays out the various expenditure and revenue measures aimed at attaining the Government policy objectives.

 

Mr Speaker, in 2018, the Government proposes to spend K71.6 billion or 25.9 per cent of the GDP, of which K49.1 billion or 68.5 per cent will be financed by domestic revenues and K2.4 billion or 3.4 per cent by grants from various co-operating partners. The balance of K20.1 billion or 28.1 per cent will be financed through domestic and external borrowing.

 

Sir, in line with the 7NDP, the allocations in this Budget are targeted at addressing the five strategic areas of economic diversification and job creation, poverty and vulnerability reduction, reduction of developmental inequalities, enhancement of human development and creation of a conducive  governance environment for a diversified and inclusive economy.

 

The 2018 Budget by Government Function

Function                                                                 Allocation (K’Million)             Percentage of

                                                                                                                                   Budget        

 

General public services                                           25,898,031,580                            36.1

 

External Debt Payment                                      7,268,795,020

Domestic Debt Payment                                    6,972,268,026

Local Government Equalisation Fund               1,078,428,000

Zambia Revenue Authority                                  848,664,000

Compensation and Awards                                  303,363,990

Public Affairs and Summit Meetings                   235,305,460

Constituency Development Fund                         218,400,000

 

Defense                                                                     3,498,217,240                              4.9

 

Public Order and Safety                                            2,144,570,440                              3.0

 

National Identity Documents                                 37,249,430

 

Economic Affairs                                                   17,258,329,480                            24.1

 

Road Infrastructure                                          8,660,314,680

Farmer Input Support Programme

(e-Voucher)                                                      1,785,000,000

Strategic Food Reserves                                   1,051,200,000

International Airports                                          940,500,000

Arrears for FISP and FRA                                  441,000,000

Rural Electrification Fund                                   251,331,670

 

Environmental Protection                                           951,352,080                              1.3

 

Climate Change Resilience                                  457,574,620

 

Housing and Community Amenities                          816,262,640                              1.1

 

Water Supply and Sanitation                              564,508,860

O/W Lusaka Sanitation Project

(Millennium Challenge)                                       239,000,000

Markets and Bus Stations                                     17,822,620

 

Health                                                                      6,781,558,820                              9.5

 

Drugs and Medical Supplies                            1,200,227,400

Health Infrastructure                                           274,580,400

Medical Equipment                                               51,561,610

 

Recreation, Culture and Religion                               451,160,740                              0.6

 

Education                                                               11,561,643,204                          16.1

 

School Infrastructure                                           740,060,456

Student Loans and Scholarships                         557,000,000

University and College Infrastructure                 321,865,420

Skills Development Fund                                    176,698,000

 

Social Protection                                                      2,301,259,752                              3.2

 

Public Service Pension Fund                            1,060,550,000

Social Cash Transfer                                            721,180,000

Food Security Pack                                             140,000,000

 

Total                                                                       71,662,385,976                          100

 

General Public Services

 

Sir, I propose to spend K25.9 billion on general public services. Significant outlays under this category include K7.3 billion and K7 billion for external and domestic debt repayments, respectively.

 

Mr Speaker, in our resolve to fiscally empower our local authorities and ensure equitable distribution of resources, I have allocated K1.1 billion to the Local Government Equalisation Fund (LGEF), ...

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … representing a 21.5 per cent increase on the 2017 levels.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Sir, in the same vein, I have allocated a total of K218.4 million to the Constituency Development Fund (CDF) to support projects at the community level.

 

Hon. Mwiimbu, please, take note.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati:

 

Economic Affairs

 

Mr Speaker, the Economic Affairs function plays a major role in our quest to achieve a diversified economy that delivers more jobs for our citizens. Accordingly, I propose to spend a K17.3 billion or 24.1 per cent of the Budget on it.

 

Sir, a significant allocation under this function is K8.7 billion for road infrastructure ...

 

Interruptions

 

Mr Mutati: Mr Speaker, I repeat: A significant allocation under this function is K8.7 billion for road infrastructure construction and rehabilitation. This will include the continuation of the Link Zambia 8000, C-400 and L-400 projects. To complement these efforts, the Government will rehabilitate and upgrade feeder roads across the country through the Rural Connectivity Project.

 

Mr Speaker, in order to improve airport infrastructure in the country, K940.5 million has been allocated for the construction of the Kenneth Kaunda and Copperbelt international airports.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Once completed, these investments will reposition Zambia as a regional air transport hub.

 

Sir, to facilitate the provision of agricultural inputs to 1 million beneficiaries, I have allocated K1.8 billion to the Farmer Input Support Programme (FISP), which will be implemented through the e-Voucher system.

 

Mr Livune: Question!

 

Mr Mutati: That will be good for you.

 

I have also allocated K1.1 billion to the maintenance of our country’s strategic food reserves at 500,000 metric tonnes.

 

Mr Speaker, in order to make rural areas attractive for investment and promote rural industrialisation, the Government will continue with its Rural Electrification Programme (REP) to ensure access to electricity in rural areas. Accordingly, K251.3 million has been allocated for rural electrification. May I add that this programme will be further funded by our co-operating partners. Therefore, there will be lights everywhere.

 

Hon. Government Members: Hear, hear!

 

Education and Skills Development

 

Sir, I propose to spend K11.6 billion on education and skills development. This money will be spend on, among other programmes, infrastructure development, student loans, teacher recruitment and procurement of school requisites.

 

Health

 

Mr Speaker, I propose to spend K6.8 billion on health, of which K1.2 billion is for procurement of essential drugs and medical supplies, representing a 56 per cent increase over the 2017 allocation. The balance will be used to finance health infrastructure, medical equipment and staff costs, including the recruitment of medical personnel.

 

Housing and Community Amenities

 

Sir, I propose to spend K816.3 million on housing and community amenities, of which K564.5 million is for water supply and sanitation. This allocation will supplement the expenditure by commercial water utilities.

 

Public Order and Safety

 

Hon. Members: Hear, hear!

 

Mr Mutati: Mr Speaker, I have allocated K2.1 billion towards the maintenance of public order and safety.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Key interventions will include the recruitment of security personnel, continued rehabilitation and construction of infrastructure, and the modernisation of operations of law enforcement agencies.

 

Social Protection

 

Sir, to reduce vulnerability and inequalities among our people, I have allocated K2.3 billion for social protection-related expenditures. Significant provisions under this function include K1.1 billion for the Public Service Pension Fund (PSPF) and K721.2 million for the SCT scheme. The allocation to the Food Security Pack (FSP) has been doubled to K140 million.

 

Other Functions

 

Mr Speaker, the remaining functions of Defence, Environmental Protection, and Recreation, Culture and Religion have a combined total of K4.9 billion.

 

Revenue Estimates and Measures

 

Sir, the mobilisation of resources to support the 2018 Budget will focus on enhancing tax administration through improved taxpayer services, risk management, enforcement and compliance. This is necessary to ensure that resources are mobilised in a cost-effective and non-distortive manner. Taking various demands into account, the Government had to find a balance that would provide fair taxation and, at the same time, garner sufficient resources to deliver public services and spearhead development. The details of revenue and borrowing are as shown below.

 

Resource Envelope for 2018 Budget

 

Source                                                                            K’Million         Percentage of GDP

 

Domestic Revenue and Domestic Financing               60,240.31                         21.8

 

Domestic Revenues                                                         49,087.02                         17.7

 

            Tax Revenue                                                        41,139.78                         14.9

 

                        Income Tax                                              20,337.61                          7.3

 

                                    Company Income Tax                 6,115,94

                                    Personal Income Tax                 

                                    (including PAYE)                      10,264.02

                                    Withholding Tax                         3,957.64

 

                        Value Added Tax                                  12,369.47                            4.5

 

                        Customs and Excise Duties                      8,097.70                           2.9

 

Customs Duty                               3,302.25

Excise Duty                                  4,744.83

Export Duty                                      51.62

                                                                                                     

Other Tax Revenue                                      334.00                           0.1

 

Non-Tax Revenues                                                  7,947.24                        2.9

 

            Mineral Royalty                                           3,527.74

            Other Non-Tax Revenues                            4,419.50

Domestic Financing                                                       11,153.29                            4.0

 

Foreign Grants and Financing                                   11,422.08                            4.1

 

Project Grants                                                    2,438.30

Programme Loans                                              1,425.00                             

Project Loans                                                     7,558.78

 

Revenue Measures

 

Rationalisation of Tax Reliefs

 

Mr Speaker, I propose to discontinue five-year tax holidays provided under the Zambia Development Agency (ZDA).

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: In their place, I propose to grant accelerated depreciation for capital expenditures by qualifying investments in priority areas. I also propose to remove the allowable deduction for contributions to approved pension funds of K255 per month, as there is already relief given at the time one gets their lump sum payment and annuities.

 

Strengthening of the Tax Base

 

Sir, intellectual property, such as trademarks, patents and brands, are assets that can be traded. However, such trades are currently not taxed, unlike other properties, such as shares, mining rights and land. I, therefore, propose to introduce a 5 per cent tax on the transfer of intellectual property.

 

Mr Speaker, to cast our tax net wider, I also propose to impose a 5 per cent property transfer tax on the value attributable to a Zambian asset in cases where indirect ownership or control of a Zambian asset changes outside the Republic. If a Zambian asset is sold abroad, I also must get some tax.

 

Sir, the record of the PF Government in delivering infrastructure to the people is unmatched.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: To assist in mobilising funds for the Infrastructure Development Fund, I propose to introduce an excise duty of K2 per 50 kg of cement.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Let me repeat.

 

Sir, the record of the PF Government in delivering infrastructure to the people is unmatched.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: To assist in mobilising funds for the Infrastructure Development Fund, I propose to introduce an excise duty of K2 per 50 kg of cement.

 

Mr Speaker, in 2004, the Government introduced a presumptive tax for individuals operating public service vehicles (PSVs) based on sitting capacity. However, the amounts have not been adjusted since. I, therefore, propose to adjust the presumptive tax rates upwards by 50 per cent.

 

Interruptions

 

Mr Mutati: Mr Speaker, the Commissioner-General can charge a base tax where there is insufficient information on which to estimate tax payable by a business. Currently, the base tax is K150 per annum and has been since 2008. I, therefore, propose to adjust upwards the base tax rate from K150 to K365 per year, meaning K1 per day.

 

Mr Speaker, it is international practice to treat related parties the same way under certain rules,   such as transfer pricing. Accordingly, I propose to mandate all businesses to disclose their related parties for income tax and property transfer tax purposes.

 

Sir, in order to provide further clarity, I propose to revise the definition of residence for persons other than individuals as well as the definition of management or consultant fees.

 

Mr Speaker,   in   order   to prevent revenue leakages through misallocation, I propose to:

 

1. align at 125 per cent the excise  duty  on methylated spirits, denatured alcohol and undenatured alcohol of heading 2207; and

 

1. introduce registration of all importers of methylated spirits and denatured alcohol.

 

Sir, I also propose to increase the customs duty on unmanufactured tobacco and tobacco refuse to 25 per cent from 15 per cent. This will harmonise the tax treatment with all other types of tobacco that currently attract a customs duty of 25 per cent. I further propose to introduce specific excise duty on manufactured tobacco and provide a separate tax classification for tobacco other than ‘manufactured’ which is currently classified together with cigarettes.

 

Support to Business Growth and Diversification

 

Sir, diversification from overdependence on mining is key to attaining economic resilience. I, therefore, propose to:

 

1. remove customs duty on various inputs used in the manufacturing of stock feed and fish feed; and

 

1. exempt unprocessed and semi-processed tobacco from Value Added Tax (VAT).

 

Mr Speaker, in my last address, I introduced a surtax on selected imported products that were locally produced in order to support the growth of the domestic industry. In line with this policy, I propose to extend the number of items on which the surtax applies and to remove raw materials that were erroneously put on the surtax schedule. I also propose to reduce the customs duty on bricks used in the formation of furnaces from 15 per cent to 5 per cent to reduce the cost of manufacturing.

 

Mr Speaker, risk management is a crucial part of any business. As such, any undertaking to cover risk of the insured and the insurer must be cost-effective. To reduce the cost of insurance, I propose to remove the insurance premium levy on reinsurance.

 

Sir, to discourage the use of inefficient electrical appliances and encourage the use of alternative sources of energy, such as solar and gas, I propose to increase customs duty on electric geysers and stoves to 40 per cent from 25 per cent.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, to promote the use of electronic payment devices and make it easier to collect and monitor taxes, I propose to remove the customs duty on point-of-sale machines and subscriber identity module (SIM) cards.

 

Streamlining of the Penalty Regime

 

Sir, I propose to introduce penalties in the VAT, Customs and Excise Acts for taxpayers who fail to furnish records upon request or fail to issue tax invoices. 

 

Submission of Tax Returns and Payments

 

Mr Speaker, I propose to change the due dates for submission of VAT returns from the 16^th to the 18^th of every month in order to differentiate this date from the date for submitting withholding VAT returns, which also falls on the 16^th of every month. I also propose to provide for the same due date of the 14^th of every month for submission and payment of withholding tax to ease compliance and improve tax administration.

 

Housekeeping Measures

 

Mr Speaker, I propose to make amendments to the Income Tax, Property Transfer Tax, VAT, Customs and Excise, and Skills Development Levy Acts in order to update, strengthen and remove ambiguities in certain provisions of tax legislation so as to make tax administration more effective. These measures are revenue-neutral.

 

Non-Tax Revenue Measures

 

Sir, in order to improve service delivery of public broadcasting and promote growth of the media industry, I propose to:

 

1. introduce a landing rights charge at the rate of K3,150 per television channel that has less than 35 per cent local content, except for educational and scientific channels;

 

1. increase the television levy to K5 per month. I further propose to change the current collection through electricity bills to a subscriber management service licensing system.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: With all the digital devices, we have better quality and better everything.

 

Sir, the levy will no longer be on the electricity bill.

 

Mr Speaker, in line with the strategy of moving towards a prosperous smart Zambia, I propose to migrate all motor vehicles to the electronic number plate system at a reduced fee of K500 from the current re-registration fee of K975.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: This system will enhance security, enable easy payment of various road user charges, such as road tolls, and renewal of driver’s licences online.

 

Sir, in order to ensure that the Government collects the much-needed revenue on a cost-reflective basis, I propose, Hon. Kambwili,  to revise upwards the fees and charges collected by various Government institutions that have not been revised in a long time.

 

Mr Speaker, the total …

 

Mr Kambwili: Like what?

 

Mr Mutati: Landing rights, which are currently K2.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, the total net revenue gains from the various measures I have proposed above is K2.9 billion.

 

Sir, the tax and non-tax revenue measures that I have announced today will take effect on 1st January, 2018.

 

PART IV

 

CONCLUSION

 

Mr Speaker, with the launch of the 7NDP, our country has renewed its commitment to the attainment of the Vision 2030 goal of being a prosperous middle-income country by 2030. We must learn from our past challenges if we are to charter the desired path to our destination. We must strive to foster unity of purpose in advancing our nation’s interests and the wellbeing of our people.

 

Mr Speaker, we must remain resolute and patriotic, never allowing our sight to slip from the development goals we have set for ourselves.

 

Sir, let me assure this august House that our future is bright and secure under the able-leadership of His Excellency, Mr Edgar Chagwa Lungu.

 

Hon. Government Members: Hear, hear!

 

Mr Kambwili: Question!

 

Mr Mutati: Mr Speaker, let me repeat.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: I assure this august House that our future is bright …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: …and secure …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: …under the able leadership …

 

Hon. Government Members: Hear, hear!

 

 Mr Mutati: … of His Excellency …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … Mr Edgar …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: …Chagwa …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … Lungu.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: Mr Speaker, with His Excellency’s vision and determined guidance, …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … we are on course …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … to making our great nation …

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: … a prosperous and more inclusive society.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: The PF Government is, however, cognisant of the fact that this is not an easy path. There are risks and challenges at every turn.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: We must, therefore, remain …

 

Mr Speaker: Order, hon. Minister!

 

Just give me a minute.

 

Hon. Members, let the hon. Minister conclude in silence.

 

Interruptions

 

Mr Speaker: Order!

 

Continue, hon. Minister.

 

Mr Mutati: Mr Speaker, we must, therefore, remain fiscally disciplined for us to achieve the desired fiscal fitness. We must sacrifice and raise more of our resources to finance our development. We must borrow less and, when we have to borrow, it should be for projects that generate growth and enable us to repay. Let us ground our aspirations on a realistic understanding of our current financial position.

 

Sir, in the words of our founding father, we should, as a people, resist the temptation to turn diversity into adversity. We all have and seek common values. We have a common denominator and aspirations for basic minimums, and that is why we say “One land one nation is our cry”.

 

Hon. Government Members: Hear, hear!

 

Mr Mutati: We must rise above our differences like the eagle up in the sky, marching relentlessly to the attainment of the vision that we have set for ourselves, the Vision 2030. The 2018 Budget is a practical instrument that has defined practical measures …

 

Mr Mwiinga: Question!

 

Mr Mutati: … to diversify the economy, reduce poverty, create jobs and minimise inequalities.

 

Hon. Government Members: Hear, hear!

 

Mr Kambwili: Question!

 

Mr Mutati: In arriving at our destination, Mr Speaker, …

 

We are one.

 

Ms Chonya: Question!

 

Mr Mutati: We are one.

 

Hon. Government Members: Hear, hear!

 

Interruptions

 

Mr Mutati: Mr Speaker, the questions raised in this Chamber are, but the energy and glue that bonds democracy. So, it is important to continue to question so that, together, as leaders, we can provide leadership in unity without fear or favour.

 

Mr Speaker, I submit the 2018 Budget to the House.

 

Sir, I beg to move.

 

Hon. Government Members: Hear, hear!

 

Mrs Fundanga (Chilubi): Mr Speaker, I thank you for giving me this opportunity to be the first Member to debate the Motion of Supply moved by the Hon. Minister of Finance.

 

Mr Ngulube: Bekatilileniko, baletutuma.

 

Mrs Fundanga: Awe, nshiletutuma.

 

Sir, allow me to congratulate the hon. Minister of Finance on the able manner in which he has presented the 2018 National Budget.

 

Mr Speaker, the speech has covered important developmental issues that border on the economy of our country and require digesting and careful analysis by all hon. Members. It is, therefore, important that we defer debate on this Motion to Tuesday, 3^rd October, 2017, in order to give ample time to hon. Members of this august to study the Budget Speech.

 

Hon. Government Members: Hear, hear!

 

Mrs Fundanga: That way, hon. Members will come back to debate the serious issues in the speech more meaningfully and constructively.

 

Hon. Government Members: Hear, hear!

 

Mrs Fundanga: With those few words, I propose that the debate on the Motion moved by the hon. Minister of Finance de deferred to Tuesday, 3^rd October, 2017.

 

Mr Speaker, I thank you.

 

Hon. Government Members: Hear, hear!

 

Mr Ngulube: Ema sober aya!

 

Mr Speaker: Is the proposal seconded?

 

Mr A. Mumba (Kantanshi): Mr Speaker, I thank you for according me this opportunity to support the proposal by the hon. Member of Parliament for Chilubi Constituency that the debate on the Motion of Supply moved by the hon. Minister of Finance be deferred to Tuesday, 3^rd October, 2017. Hon. Members will agree with me that the issues contained in the Budget Speech have an impact on the life of every Zambian citizen. For this reason, it is important that more time is accorded to hon. Member s to carefully scrutinise the Budget that has been presented so that we can engage in meaningful debate on the issues raised in the speech. In this regard, I support the proposal to adjourn the debate on the Motion to Tuesday, next week.

 

Mr Speaker, I thank you.

 

Hon. Government Members: Hear, hear!

 

Question put and agreed to.

 

_______

 

Chief Whip and Acting Leader of Government Business (Mr Musukwa): Mr Speaker, I beg to move that the House do now adjourn.

 

Question put and agreed to.

 

_______

 

The House adjourned at 1639 hours until 1430 hours on Tuesday, 3^rd October, 2017.
 

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