Stakeholders weigh in on 2022 budget pronouncements

Lusaka, Kitwe
A WELL executed 2022 budget is going to spur growth in critical sectors of the economy such as agriculture, mining, tourism and manufacturing, among others.
During the budget presentation on October 29 this year, Minister of Finance and National Planning Situmbeko Musokotwane said economic transformation will entail shifting resources to activities of high productivity.
Dr Musokotwane spelt out plans, visions and objectives which will stimulate growth in key sectors of the economy to drive the nation’s development agenda and create job opportunities.
In the mining sector, Government’s desire is to ramp up production.
The new dawn administration wants existing mines to produce more copper by facilitating the opening of new mines through policy interventions.
Government plans to promote diversification and value addition on other minerals such as gemstones, manganese and gold.
In next year’s budget, a major policy shift in the mining sector is the reintroduction of deductibility of mineral royalty tax (MRT) as an expense to encourage investments in the industry.
For the agriculture sector, Government wants to improve productivity by ensuring the sector is highly mechanised.
Government proposed to zero-rate value added tax (VAT) on selected agricultural equipment and accessories in next year’s budget.
These include manure spreader, balers, combine harvesters, commercial sprinkler irrigation systems, animal feed grinders, pelleting machines and sprayers, among others.
Government has also proposed to remove the 10 percent export duty on maize effective this month although the statutory instrument has not yet been promulgated.
To boost livestock production, Government has proposed to remove the five percent customs duty on importation of cattle breeding stock.
Further, to address shortage of day-old chicks, the State has suspended the five percent customs duty on imported grandparent or parent stock of day-old chicks for a period of 12 months effective this month.
Customs duty on importation of refrigerators has also been extended to December next year to support agro-processing.
In its efforts to revive the tourism sector, which has been adversely affected by COVID -19, Government has proposed to slash visa fees by 50 percent.
It has also extended the 15 percent corporate income tax rate on income earned by hotels and lodges on food and accommodation to December next year.
Other incentives include the extension of the waiver of customs duty on safari game viewing vehicles, tourist buses and coaches.
Government is also keen on promoting the growth of the manufacturing sector, and various incentives have been introduced to alight it on the growth trajectory.
Manufacturers importing raw materials which cannot be sourced locally will also be exempted from paying import duty.
Government is optimistic the aforementioned incentives in various sectors will place the country on the right path of becoming a middle-income economy by 2030.
However, the budget has attracted diverse reactions from stakeholders, with some people supporting the steps while others are sceptical.
On mining, Association of Mine Suppliers and Contractors (AMSC) president Augustine Mubanga feels changes made to the MRT structure will reduce government revenue.
“Our position is that this will reduce revenue to the Government. This move is on the assumption that the mines will invest more and increase production, so we only hope that the mines will be transparent and declare profits at the end of the day,” Mr Mubanga said.
He said Government should have introduced 40/60 percent trade-offs, whereby 40 percent is deductible and 60 percent is non-deductible as that would have covered up in instances where mining firms make investment pledges that they fail to fulfil.
Mr Mubanga said if a mining company promises to invest US$2 billion but pump in US$1 billion, Government would then adjust to 50 percent deductible and 50 percent non- deductible MRT.
Green Party leader Peter Sinkamba said Government’s desire to see increased production in the copper mining sub-sector can only materialise if issues surrounding Konkola Copper Mines (KCM) and Mopani Copper Mines are resolved.
Mr Sinkamba said to attract new investors in the mining sector, Government should proactively resolve issues at KCM.
As for Shippers Council of Zambia (SCZ) chairperson Berry Mwango, Government needs to sort out the railway sector to help manage transportation of copper once production increases.
He said the railway sector remains ideal in transporting heavy cargo as Government plans to ramp up production in the mining industry.
Under the agriculture sector, stakeholders are concerned that over 50 percent of the sector’s budget allocation goes towards funding input subsidies.
The players in the sector contend that the trend has only benefited a minority group of farmers.
They argue that this has been done at the expense of developing other sub-sectors in the industry such as horticulture, textile, fisheries and livestock.
Indaba Agricultural Policy Research Institute (IAPRI) executive director Chance Kabaghe said Zambia’s policy direction of only supporting the cultivation of maize has adversely affected other sub-sectors such as horticulture.
Mr Kabaghe said there is a need to promote diversification in the sector.
“One way to grow the sector is to move away from agriculture, which thinks that maize is the only crop which needs more allocation in the national budget each year. We need to walk the crop diversification talk,” he said.
IAPRI research director Anthony Chapoto has called on the Government
to avoid putting all resources in one programme if the sector is to economically thrive.
Dr Chapoto said the agriculture sector is likely to fail to meet its objectives if priorities are skewed towards inefficient subsidies programmes.
On the other hand, Zambia Association of Manufacturers (ZAM) said the 2022 budget resonates well with calls for increased value addition and positions the sector as the key driver of the economy.
ZAM chief executive officer Florence Muleya said other incentives such as the reduction of corporate income tax (CIT) from 35 percent to 30 percent for manufacturing companies will result in the decrease in the cost of doing business.
“Regionally, the CIT in Zambia is on the higher end. For example, comparing Zambia with Botswana, where the CIT is a flat rate of 22 percent makes investment in Zambia less favourable,” Ms Muleya said.
She also said the reintroduction of the tax holiday where dividends on profits and profits on exports are zero-rated for 10 years and reduction of the threshold for a Zambian to invest in theMFEZ from US$100,000 to US$50,000 will attract investment in the areas.
Policy Monitoring and Research Centre executive director Bernadette Zulu said there is need to review the Public Private Procurement Act to ensure it favours investment in the manufacturing sector.
Mrs Zulu urged Government to consider continuing with dismantling of arrears for local manufacturers and suppliers, which will provide liquidity for re-investment.
Zambia Institute of Policy Analysis and Research (ZIPAR) executive director Herrick Mpuku said incentives in the manufacturing sector should also target performance-based activities such as export expansion, youth employment, investments in research and development, training and high-technology products.
Hotel and Catering Association of Zambia president Christopher Nsenge is impressed with the path Government has taken to revive the tourism sector.
“All these incentives in next year’s budget are welcome and I am sure a number of establishments will benefit from them,” Mr Nsenge said.
But the Tourism Council of Zambia (TCZ) said the 50 percent reduction in visa fees will have little impact on reviving the sector, which has been adversely affected by coronavirus.
TCZ chairperson Vincent Mupwaya said the 50 percent reduction in visa fees will have minimal impact on the sector.
Mr Mupwaya said Government could have instead introduced a 100 percent waiver on the fees to cushion the high cost on tourism travels exacerbated by COVID-19.
He said for tourists to travel to other countries, they need to conduct COVID-19 tests and obtain certificates, which are costing more than US$60 or €50 in some countries.
“Just flying into South Africa, you need to pay about K1,500 for a COVID test plus the air ticket and a few South African rands again for COVID-19 tests when coming back from that country,” Mr Mupwaya said.

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