Wednesday, 16 November 2016

The Good, The Bad, The Ugly & Not-So-Sure 2017 Budget Summary

On 11 November 2016, we had the 2017 budget presented by the new Minister of Finance Honourable Felix Mutati. This is perhaps the first budget in which the most important thing I wanted to hear was not the Pay As You Earn adjustments because I have been out of formal employment for over a year now. I was more interested on the impact of whatever pronouncements he would make on small businesses, or a start-up like the one I am in the process of setting up. So like I have done for the past few years, I present what I think were the interesting parts of the budget and as usual ignored quite a lot.

Let me begin by saying that the K64.5 billion 2017 budget begins with pretty much the same rhetoric we have heard year in year out and quite frankly it is becoming boring now. We are told that we need to diversify, agriculture is the 'holy grail' to our diversification agenda and this budget proved that. We are also told that the government aims to be prudent. The budget is spiced with low inflation aspirations, stable forex (which based on 2016, we need to put it in a straitjacket) and a warning of difficult times ahead. With that little preamble, I present to you the Good, the Bad, the Ugly and the Not-So-Sure 2017 Budget Summary.

The Good
  • In the first nine months of 2016, mobile users increased from 11.5 million from 10.9 million in 2015. This is quite impressive considering we are a population of about 15 million that is 77% of the population people with mobile phones.

  • It is about time the cashew nut industry was raised from its doldrums in Western Province. Government has launched the Cashew Nut Infrastructure Support Programme, valued at US$55.4million. The project will target 600,000 beneficiaries in Western Province.

  • Government will by the end of 2017 move to cost reflective electricity tariffs to attract private sector investment while maintaining the life line tariff to protect poorer households. It will further, implement the phased removal of electricity subsidies. We must brace ourselves for electricity to become more expensive. I just hope that this devilish loadshedding will end.

  • Youth Resettlement Schemes will be established through which land and start-up kits will be provided to the youth to enable them engage in agriculture and agri-business for their livelihood. If there is a place with no loadshedding, free wifi, and fuel is K5/litre sign me up.

  • Most of the land in Zambia is not on title as only about 200,000 parcels of land are on title. Government will in 2017 commission a pilot programme in Lusaka that will commence the process of titling all land in the Province. It is about time.

  • Government will in 2017 commence distribution of free sanitary towels to girls in rural and peri-urban areas. The minister should have even gone a step further by making them tax free.

  • Timely and quality statistics will be critical in order for us to monitor and evaluate the progress we are making. The minister implores all Government Agencies to compile and maintain credible statistics. The minister should have also told them that they should share the statistics. Does he know how painful it is to get data from government ministries?

  • If you needed any more evidence that the agriculture sector is the most loved, here it is. It has been proposed to increase the capital allowance for plant, equipment and machinery used in farming and agro-processing to 100 percent from 50 percent. Farmers should be mightily excited

The Bad

  • The key sectors have been identified for intervention as agriculture, industrialisation, tourism and mining. This is in the bad section because we now need to start asking the tough questions. Are we getting our policies right? Mining still accounts for 70% of export earnings what are the other sectors doing nkanshi. From the days of Kaunda we have known we cannot depend on the copper mines. But still here we are as dependent as ever.

  • There is yet again the creation of other funds. The Agricultural and Industrial Credit Guarantee Fund, Skills Development Fund and the Tourism Development Fund. The principle of these funds is awesome; however, often these funds rarely reach the intended targets. There are questions around the disbursing of funds and who actually receives it.

  • It's been proposed to increase the exempt threshold for Pay As You Earn (PAYE) from K3,000 to K3,300 per month and increase the top marginal tax rate from 35 percent to 37.5 percent. This will hardly make a dent on the low income earners. That additional exemption has been swallowed up by inflation. I feel even a K500 difference would have been worth talking about.

  • Customs duty on plastic shopping bags will increase from 25 percent to 40 percent. This is one tax I am a little disappointed was only increased by 15 percent. I would have loved it increased by say 50 percent. Supermarkets give plastics for everything, a toothbrush in its own plastic, toothpaste in its own plastic, imwe. No wonder our streets are littered with plastics because they are so cheap and carelessly dished out.

The Ugly

  • The annual inflation which reached a peak of 22.9% in February 2016 has declined to 12.5% in October 2016. The minister expects inflation to fall to single digit by year end (boza is not a good thing). How? Just how is inflation expected to reach a single digit by year end when fuel prices just sky-rocketed to close to 40% increase. Ask for forgiveness for lying.

  • Government to stop policies on export bans and it will refrain from using these instruments to regulate agricultural markets. My concern here is that so many subsidies go to the agricultural sector, aren't we just subsidising other countries? Until I am convinced otherwise this will remain in the ugly.

  • Excise duty on air time will increase from 15 percent to 17.5 percent. Just great, as if airtime and bundles are not already expensive. This will make us resume sending text messages instead of calling.

The Not-So-Sure

  • The theme of the 2017 Budget is "Restoring Fiscal Fitness for Sustained Inclusive Growth and Development”. This theme sounds like a PhD or master's degree thesis. I feel the words 'sustained inclusive growth' have been over used. Couldn't they have found an edgier theme like "Get Off Your Behind and Work"?

  • The minister announced that he wants to support the creation of 100,000 jobs. He was sharp here. He did not say what type of jobs are to be created. Is it low skilled jobs like sweepers, grave diggers, or formal high skilled jobs like astronauts, marine biologist or neurologists?

  • It will now be required that every person changing ownership of a motor vehicle to obtain a tax clearance certificate from the Zambia Revenue Authority. This will most likely make second hand vehicles more expensive and this is more administrative work.

  • Vehicle carbon tax has been revised upwards. Owning a car will further becoming a liability. There are just too many things to be paying on it. The expected increase in spare parts and now carbon tax.

This budget had one central theme which I can liken to the movie, 'Taken'. This is the government telling us that, "If you do not pay your taxes, we will find you and you will pay." It is about the government raising revenue and squeezing us for every ngwee possible. As always the people with the widest smiles are the people in agriculture, their incentives just keep getting better. Overall, I was rather disappointed in this budget because there was very little in it that inspired me, especially when it came to the diversification agenda. At this point I will not be surprised if once again next year we have a similar budget.

So what things in the budget would have made your The Good, The Bad, The Ugly and Not-So-Sure list?

I strongly encourage you to read the full budget here >>>

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