BILL WATCH 47-2017 2018 National Budget

BILL WATCH  47/2017

[13th December 2017]

The 2018 Budget was Presented to Parliament on 7th December

Parliament Will Sit Again on Tuesday 19th December

Hon Patrick Chinamasa, back at the Treasury again with the title Minister of Finance and Economic Planning, presented the 2018 National Budget in the National Assembly on Thursday 7th December 2017.  The Budget Speech that he delivered [link] was a summary of the full National Budget Statement for 2018 [link], which was tabled together with the Budget Estimates for the 2018 financial year [the “Blue Book”] [link] and the 2018 National Budget Highlights [link].

Also made available was a Departmental Draft of the Finance (2018) Bill [link] [a Bill which goes beyond giving effect to proposals on tax, VAT, customs and excise duties and mining royalties.  It also provides for:

·        sweeping changes to the Indigenisation and Economic Empowerment Act, to open all sectors of the economy [except platinum and diamond mining] to investors of any nationality free of the current 51/49 indigenisation threshold in favour of Zimbabweans ownership;

·        three amnesties:

o   an amnesty in respect of funds and other property illegally expatriated before 1st December 2017 [previously announced by President Mnangagwa]

o   an amnesty in respect of the unlawful hoarding of cash by traders, parastatals and moneylenders in breach of the Bank Use Promotion Act, where the breach occurred before 1st December

o   a tax amnesty that will waive interest and penalties on arrears of taxes and duties that became due and payable before 1st December

Note:  the Budget Speech does not bring about these changes by itself.  The changes have to be implemented by way of gazetted Acts of Parliament or Statutory Instruments or, in some cases, administrative measures..

When will the Budget business be finalised by Parliament ?

At close of business on Budget day both Houses of Parliament adjourned until Tuesday 19th December.  The 12-day break was to facilitate the holding of the ZANU-PF party Congress and related preliminary meetings this week [Politburo 13th, Central Committee 14th, one-day Congress 15th December – a shorter programme than that planned before President Mnangagwa’s accession to the Presidency].  As the usual Post-Budget Seminar and post-Budget consultations by Portfolio Committees have not yet taken place, it is unlikely that there will be much progress on Budget business when Parliament resumes next Tuesday 19th December – the holiday season starts in earnest with Unity Day on Friday 22nd.  There is plenty of other work awaiting attention, particularly for the National Assembly. 

Moreover, President Mnangagwa may feel it appropriate to present the 2017 State of the Nation Address to a joint sitting of both Houses of Parliament [section 140(4)of the Constitution requires such an address at least once a year, and the last one was by President Mugabe in December 2016.]

The Budget Theme – “Towards a New Economic Order”

At the beginning of his speech the Minister said that the Budget had been formulated mindful of the urgent need to address challenges facing Zimbabwe - low business and investor confidence that has been making it difficult to attract inward investment flows and, therefore, unable to generate adequate foreign exchange necessary for supporting economic activity.  He proposed a range of measures to address our economic situation through the 2018 Budget by:

·        Restoring market confidence;

·        Instilling and upholding discipline in managing our public finances and the economy as a whole;

·        Ensuring policy consistency, clarity, credibility and predictability

He claimed that the Budget makes a bold statement on the adoption of a paradigm shift ‘Towards A New Economic Order’ drawing from the Inaugural Speech by President Mnangagwa on 24th November [link].

Ending his speech the Minister said that the Budget proposals reflected Government’s commitment to get our economy speedily back on track”.   He also stressed that the New Economic Order “requires the positive support and participation of all stakeholders including labour, business, civil society as well as our regional and international partners” and made a plea “that this support be accompanied by critical goodwill”.   

Comment:  Goodwill has been evident in much of the comment on  the Budget published so far.  But continued goodwill will depend on prompt implementation by Government.  Stakeholders will remember that in previous years budget promises have not been fulfilled in practice. 

Noteworthy Aspects of the Budget Statement

Creating a investor-friendly business environment

Under this head the Minister mentioned:

Amendments to the Indigenisation and Economic Empowerment Act:

·        to severely limit the application of the 51/49 Indigenisation threshold [under which Zimbabweans must own 51% of a business, with non-Zimbabwean ownership not to exceed 49%.  Once the Bill becomes law, this threshold will apply only to the extractive [mining] sector and for only two minerals, namely diamonds and platinum. 

·        to abolish the indigenisation threshold entirely in the economy generally – i.e. the rest of the extractive sector and all other sectors of the economy – and to open these sectors to investors regardless of nationality [except that entry to “reserved sectors” – sectors listed in a new First Schedule to the Act as reserved for Zimbabweans only – by non-Zimbabweans will require a special dispensation granted by the Government dependent on satisfaction of specified requirements such as promoting employment creation, technology/skills transfer and the creation of sustainable value chains]. 

[Note:  This abolition of the indigenisation threshold has been challenged by the Affirmative Action Group, which has insisted on the retention of an indigenisation threshold, albeit it with a reduced percentage for Zimbabwean ownership.]

Expediting the operationalisation of the three Special Economic Zones pilot projects, namely, Bulawayo, Sunway City in Harare and

the Victoria Falls, as well as diamond cutting and polishing in Mutare. [Note: The Special Economic Zones Act has been in place for months.]

Passing Bills for  Ease of Doing Business Reforms  The reforms that require Acts of Parliament depend on Parliament passing the necessary Bills already before Parliament at various stages – Insolvency Bill, Estate Administrators Amendment Bill, Shop Licences Amendment Bill, Public Sector Corporate Governance Bill.  The Minister said they would be fast-tracked.  [Note:  Fast-tracking the Shop Licences Amendment Bill may be delayed because the Parliamentary Legal Committee’ has given it an adverse report.]

The Public Procurement and Disposal of Assets Act would, the Minister said, become effective on 1st January 2018.

One-Stop Shop Investment Centre  The Minister acknowledged that Zimbabwe lags behind competitor countries in this respect and stressed the need for Zimbabwe’s Investment Centre to take steps to put an end to delays in the operationalisation of the One-Stop Shop initiative and to establish “a real ICT-driven” One-Stop Shop Investment Centre.

Honouring of BIPPA obligations  The Minister stressed President Mnangagwa’s commitment that foreign investments will be safe in Zimbabwe, that appropriate compensation will be paid for seized land protected under Bilateral Investment Promotion and Protection Agreements [BIPPAs] arrangements, and that all farmers from whom land was taken under the Land Reform Programme will be compensated in accordance with the Constitution.

[Note: The Constitution is not as generous as some farmers may be hoping – under section 295 of the Constitution, BIPPA beneficiaries will be compensated for land and improvements, others for improvements only.]

Estimates of Expenditure

The following table shows selected items only, from the Estimates of Expenditure as reflected in the Budget Highlights link

 

$

Total expenditure for 2018

5 330 000 000

Selected Vote Appropriations

Ministries

 

    Office of the President & Cabinet [including ....Central Intelligence Organisation]

231 974 000

    Parliament

57 277 000

    Labour and Social Service

213 407 000

    Defence, Security and War Veterans

420 364 000

    Lands, Agriculture and Rural Resettlement

497 381 000

    Local Government, Public Works and  ....National Housing

121 351 000

    Health and Child Care

408 910 000

    Primary & Secondary Education

905 553 000

    Higher and Tertiary Education, Science and  ....Technology

316 954 000

    Home Affairs and Culture [including ZRP]

435 471 000

Commissions

 

    Human Rights Commission

3 341 000

    National Peace & Reconciliation ....Commission

1 399 000

    Anti-Corruption Commission

3 351 000

    Electoral Commission [ZEC]

104 001 000

    Gender Commission

1 836 000

    Land Commission

6 412 000

    Media Commission

1 423 000

    Judicial Service Commission

18 979 000

National Prosecuting Authority

7 289 000

State Pensions

477 600 000

 

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