In particular, we wanted to commend and note concerns about the points below:
We applaud the numerous measures the president highlighted that government will implement to ensure that all taxpaying entities pay a fair share of taxes. The establishment of a taskforce composed of various government urgencies to curb tax related malpractices is necessary. Tackling tax malpractices requires concerted efforts by different government agencies. However, there is a need to ensure that the taskforce is a permanent establishment and is supported with all the sufficient human and financial resources.
Zambia like many African countries is faced with the challenge of illicit financial flows. We urge government to enact the Ethical Industries Transparency Initiatives (EITI) Bill and give a clear process and framework on how and when this will be done. It is our considered view that the EITI law will provide the necessary legislation for the release of beneficial ownership information for companies planning to invest in Zambia. This will enhance transparency surrounding the operation of large corporations and has the potential to enhance tax revenue collection.
Road Infrastructure Projects
The president’s directive to suspend the signing of new road contracts is laudable. Although many parts of the country are in need of improved road infrastructure, Zambia’s prevailing economic situation cannot support massive road construction projects throughout the country. There have been delays to complete some road projects largely on account of delayed funding. This move will ensure that the ongoing road projects are prioritized for financing and will help to ensure timely completion of these road projects.
It has been reported there is corruption in road construction. In 2012, the late President Michael Sata directed the Road Development Agency (RDA) to report to the State House and not Ministry of Works and Supply in order to ensure efficiency, transparency and address corruption challenges. To this effect, there is need to ensure that concrete measures are put in place aimed at addressing corruption in road construction.
Cost of Running Government
It is commendable that President Lungu has announced measures aimed at strengthening fiscal management. These measures include limitation on local and foreign travels for ministers and other senior government officials, postponing the establishment of a national airline, suspending the creation of new missions abroad and reviewing the size of the current missions abroad. Many stakeholders including ActionAid Zambia have been calling on government to exercise fiscal prudence particularly regarding foreign travels and operations of missions abroad. For instance, in the 2013 Auditor General’s Report, enormous financial irregularities were cited attributed to the operations of missions abroad. However, we appeal to government to put in place stringent measures that will serve to enforce restrictions on foreign and local travel of ministers and top government officials including Presidential entourages.
The directive to revise electricity tariffs to ensure cost recovery has the potential to boost private sector investment in the energy sector. However, given the harsh economic conditions there is a need to ensure that the revision is fair and does not adversely affect poorer households and small businesses who cannot afford to pay by either taking a phased approach or by banding electricity tariffs to ensure those can afford to pay more do. The already high cost of production for the businesses community has drastically increased in the current economic climate and the abrupt increment of electricity tariffs could impact growth prospects for emerging small businesses. We further urge government to consult widely before coming up with these measures and to ensure that effective analysis of the implications of these changes is undertaken to inform policy choices on this. It is also important for government to communicate as best and as clear and honest as possible the implications of these changes for ordinary citizens to prepare themselves to cope with these changes.
Whilst it is commendable that government is looking at means to diversify the economic base from mining and to stimulate the agriculture sector, it is questionable whether this has the potential for the economic growth to challenge the rising inequality and poverty levels in Zambia. Without a clear roadmap to develop the sector and ensure adequate links to markets, agriculture for the majority will continue to be at a subsistence level. Government also needs to start exploring other economic options to diversify the economy including expanding the manufacturing base to help support Zambia to become a net exporter.
Further, ActionAid believes that in terms of fiscal expenditure, there is still scope to rationalize expenditure by revisiting other infrastructure projects that can be de deferred to further reduce government expenditure.
Finally, ActionAid notes that most of the measures outlined were not explicit. It is imperative that government now provides a clear road map on the measures alluded, including specific timelines and targets to achieve the measures.