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NATIONAL ASSEMBLY HANSARD 01 AUGUST 2019 45-76

PARLIAMENT OF ZIMBABWE

Thursday, 1st August, 2019

The National Assembly met at a Quarter-past Two o’clock p.m.

PRAYERS

(THE HON. SPEAKER in the Chair)

ANNOUNCEMENTS BY THE HON. SPEAKER

PROPOSED AMENDMENTS TO THE STANDING ORDERS

THE HON. SPEAKER:  I have the following announcements

Hon. Mliswa – [HON. T. MLISWA:  I have consistently supported the

President and I even garnered more votes than some ZANU PF Members of Parliament.  Imimi maingotenderera muchiita bhora musango!] – Order, order, can you cool down Hon. Mliswa?

         First announcement, I have to inform the House that the Committee on Standing Rules and Orders has circulated proposed amendments to the Standing Orders through the Members pigeonholes.       Hon. Members are kindly requested to make their submission which should be deposited in Counsel to Parliament’s Office by the end of business on Thursday, 15th August, 2019.

PETITION RECEIVED

     THE HON. SPEAKER:  I have to inform the House that on

Thursday, 18th July 2019, Parliament of Zimbabwe received a petition from Mr. B. Mahwerera of the Zimbabwe Sugar Cane Growers

Association, requesting that Parliament, through the Ministry of Industry and Commerce reviews the division of proceeds on ratio formula which governs the sharing of revenue proceeds between sugar cane out growers and millers.

         The petition has since been referred to the Portfolio Committee on Industry and Commerce. 

PRESENTATION OF THE 2019 MID-TERM FISCAL POLICY

REVIEW AND SUPPLEMENTARY BUDGET STATEMENT

THE HON. SPEAKER:  As announced yesterday, the Hon.

Minister of Finance and Economic Development will today present the

2019 Mid-Term Fiscal Policy Review and Supplementary Budget at

1445 hours.

THE MINISTER OF LANDS, AGRICULTURE, WATER, CLIMATE AND RURAL RESETTLEMENT (HON. RTD. AIR

CHIEF MARSHALL SHIRI):  Mr. Speaker Sir, I would like to unreservedly apologies for the remarks I made yesterday.  I realise they must have caused some injury to the dignity of the Hon. Members.  To that extent Mr. Speaker Sir, I would like to withdraw my statement.

Thank you Mr. Speaker Sir.

HON. CHINOTIMBA:  On a point of privilege Mr. Speaker Sir.

THE HON. SPEAKER:  Be brief because we are chasing time.

*HON. CHINOTIMBA:  Mr. Speaker, my point of privilege is that every time and then when the Zimbabwe President who resoundingly won the election in 2018 is coming into this august House, Members of the opposition walk out or abscond and yet the next day they will come here demanding cars from Parliament of which the money is being availed by the President of the country.

So, my point of  privilege is that there is supposed to be an order that says that if a Member of Parliament engages in a mass demonstration which is what they have done right now, it is a mass demonstration not coming into Parliament.  They should not absent themselves when the President is coming.  It does not pay for us to say we have a country and yet we are taking this country for granted.  It is a challenge because the people out there think that we are not serious in doing our work because they have virtually run away from the President who is the Head of State and Government and won resoundingly in the 2018 election.

I am happy to say an independent MP – yes, he is an independent, but he has realised that there is a President although what he says is not so pleasing.  Hon. Mliswa realises that there is a President in this nation.

That is why I stood up.

Currently, we were just talking about our cars.  That is the debate and the noise about cars comes from the left, clamouring for the cars but when the President is coming, they do not want to come yet they expect the President to sign so that their cars can be procured.  We cannot run away when the President is coming.  So, they should not be entitled to benefits.

If they have a problem with the President, they should go to the courts.  When we are in Parliament, we should do our Parliamentary duties.  I thank you Mr. Speaker.

THE HON. SPEAKER:  It is unfortunate that the Hon. Members of the main opposition party here in Parliament have decided to boycott this session in which His Excellency the President will be in attendance.

There are two issues that we need to put on record.  The first one is that

His Excellency the President is Head of State and Government and Commander-In-Chief of the Defence Forces.

Now, there is some lack of understanding when we say the President is Head of State.  The President is Head of State because he is an embodiment of the sovereignty of the people of Zimbabwe without any exclusion or discrimination.  His uncontested position as Head of

State has been recognised by the United Nations and the International

Community, let alone the African Union.  We have not heard of any country under the sun that has not recognised His Excellency President Mnangagwa.  So therefore, there is misdirection in terms of the opposition in their unwarranted behaviour.

Secondly, in terms of section 116 of the Constitution of Zimbabwe which I shall quote, the Legislature of Zimbabwe consists of Parliament and the President acting in accordance with the Constitution, which means His Excellency the President institutionally is part of this august

House and that position has got to be respected and cannot be contested.

Accordingly, as head of this institution, I rule that the Hon. Members from the opposition shall not be allowed to attend Parliament today, including after his Excellency has gone – [HON. MEMBERS: Hear, hear.] – Relatedly, their allowances for today shall not be paid accordingly, so I have ruled.

Hon.T. Mliswa and Hon. Kwaramba having stood up.

THE HON. SPEAKER:  Are you rising on the same matter?

HON. KWARAMBA:  No.

THE HON. SPEAKER:  Can you be quick.

HON. KWARAMBA:  Thank you Mr. Speaker Sir.   As the Chairperson of the Zimbabwe Women Parliamentary Caucus, I would like to applaud the Minister of Information, Publicity and Broadcasting Services for the two boards that were announced yesterday.  The inclusion of women is highly appreciated.  It is my wish that other boards and Ministries follow the same.  Thank you.

THE HON. SPEAKER:  Thank you Hon. Kwaramba.  I think the Hon. Minister of Information has adhered to the constitutional provisions - Sections 17 and 56, and also adhered to the Corporate Governance Entities Act accordingly.  I hope that her colleagues will follow suit.

HON. T. MLISWA:  Thank you Mr. Speaker.  Mr. Speaker Sir, it is one’s ideology and constitutionalism that makes us understand who we are.  Whether you are independent or not, I am bound by the founding principles of this country which is the Chimurenga War, because of that, my parents were part of it. I can never be astray but maintain those founding principles, stand for them and protect them.  Hon. Chinotimba was correct in saying what he did but with due respect, he cannot say ndakadhakwa.  I think it is important that it be withdrawn because I do not even take alcohol, I do not take any drugs, I am a very sober person.  I could behave that way but it is because of my passion and my belief in what I stand for.  That cannot be mistaken for the fact that I am drunk.

Mr. Speaker Sir, let me also recognise and appreciate Hon. Shiri’s remarks.  It is real magnanimity for him to do that.  It is not many leaders of his level: he was a commander of the liberation struggle, ZANLA in the Tete Province, that he can stand up and make such an apology.  That is something that has humbled me and because of, that I would want to be schooled by him on how to do things.  I do not know if he can agree to be my mentor, though late but I think that is something I have never thought a man of his stature would stand up to do that.  There is a lot that we can learn from him.

Finally, Mr. Speaker Sir, let me notify the House that Hon. the late, Elliot Richard Mujana who was a Member of Parliament in this august House is no more.  That is why I was late.  He will be buried in Mt. Darwin, in Chesa.  Maybe other Members were not privy to that but I

think that the notice I have given makes them understand.  He was a

Member of Parliament for Mt. Darwin Central at the time, Elliot Richard Mujana.  I thought I should announce that.  He will be buried at Chesa, tomorrow at 2 p.m.  I am sure you all join me Mr. Speaker and other Members to convey condolences to his family. May his soul rest in peace.  Thank you.

THE HON. SPEAKER:  Thank you very much.  Hon. Chinotimba, in the spirit of being honourable, can you withdraw the statement.

*HON. CHINOTIMBA:  Mr. Speaker, to be honest, I did not say my colleague honourable is drunk - I said, although he speaks as if he is drunk.  I did not say he is drunk but if it has caused discomfort, I withdraw.

*THE HON. SPEAKER:  Thank you.  In Shona, what you said

Hon. Member we say, regai kurova imbwa makaviga mupinyi.   Hon. Members, business is now suspended, when you get the bells ringing, please come back in time and resume your seats.  Thank you.

Business suspended at 1420 hours.

House resumed at 1427 hours.

His Excellency, the President E. D. Mnangagwa in attendance.

MOTION

FINANCE BILL: 2019 MID-TERM FISCAL POLICY REVIEW AND

SUPPLEMENTARY BUDGET STATEMENT

         THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE):

INTRODUCTION

  1. Mr Speaker Sir, I rise to present this year’s Mid-Year Budget Review, complying with Section 7 (2) (a) of the Public Finance

Management Act.

  1. The Review seeks to update this august House and the nation at large on macroeconomic developments during the first half of the year. On the basis of developments to date, the Review further outlines an updated Macro-Fiscal Framework, which underpins the proposed 2019 Supplementary Budget.
  2. To the extent possible, contributions receivedfrom various stakeholders in Government, private sector and civic organisations, including critics, are acknowledged and appreciated in the crafting of this Review. Mr Speaker Sir, there is a saying by Michael Bassey

Johnson (a writer)that “a bitter critic is the sweetest corrector”.It is, therefore, incumbent upon all of us to be tolerantof different views and freely participate in the reconstruction of this economy.

  1. What is important is to remain steadfast in implementing key reforms, hence the themefor this Review: ‘Building a Strong

Foundation for Future Prosperity’.

  1. Allow me, Mr Speaker Sir, to contextualise this Review by recapping the key tenets of and progress on the Transitional Stabilisation Programme (TSP), which continue to guide our interventions as we move towards Vision 2030.

TRANSITIONAL STABILISATION PROGRAMME

IMPLEMENTATION PROGRESS

  1. Mr Speaker Sir, the first half of 2019 was marked by a major shift in policy management by breaking from the past and focusing onaction in line with our thrust on Results Based Management.As a result, the period witnessed implementation of boldand fundamental fiscal and monetary policy measures (what has become to be known as austerity measures), which were supported by structural and governance reforms.
  2. Relentless commitment to full implementation of these reforms, void of policy reversals and inconsistencieshas, as intended, set a solid stabilisation base for triple “S” growth – strong, sustained and

shared growth.

  1. Mr Speaker Sir, allow to briefly highlight some of the progress made under the TSP before turning to the Supplementary Budget.

Stabilisation

  1. During the first half of the year, TSP reforms first and foremost continued to focus primarily on containing the twin fiscal and current account deficits, which over the years instigated instability in the economy.
  2. To Government’s credit, we have put in motion an irreversible process for rebuilding a stable, strong and democratic macroeconomic environment. The fiscal and current accounts are now balanced and under control, while the tools of monetary policy have also been activated – thus representing an essential and complete toolkit for dealing with various macro-economic challenges facing the economy.
  3. In support of the achievements scored under stabilisation, suffice to give the following fiscal, monetary and current account results.

Fiscal Outturn

  1. During the first half of the year, the Budget remained on track in line with the fiscal consolidation objectives and targets.

Revenues

  1. Monthly revenue collections for the first six months generally performed above targets by an average of $139.9 million to give cumulative revenues of $4.99 billion, against a target of $4.15 billion, giving a positive variance 20.2%.

Monthly Actual Revenue vs Target 

 

Source: MOFED

 

Expenditures 

 

  1. On the other hand, total Government spending for the period January to June 2019 wasZWL$4.2 billion against a target of ZWL$3.7 billion, which is ZWL$532 million over-expenditure

(15%).

 

Monthly Actual Expenditure Vs Target

 

Source: MOFED

 

Expenditures

 

  1. The negative variance is a result of inescapable and unforeseen expenditures on both current and capital heads, arising from higher than anticipated inflation, exchange rate fluctuations, drought and

the devastating Cyclone Idai. Accommodated critical inescapable expenditures were related to the following:

  • Cushioning allowance of ZWL$63 million to civil servants that was paid from January to March;
  • Cost of living adjustment allowance (COLA) amounting to

ZWL$400 million implemented starting from April;

  • Implied Pension Review of ZWL$62.1 million;
  • Implied NSSA Review of ZWL$3.6 million;
  • Filling of critical posts requiring ZWL$58 million;
  • Cyclone Idai mitigation, with ZWL$61.8 million;
  • Subsidised mass public transport of ZWL$30.9 million up to June Social protection and infrastructural programmes.

Budget Balance

  1. For the half year period, a budget surplus (savings) of ZWL$803.6 million was realised.

 

Budget Outturn: ZWL$m

 

Jan

Feb

Mar

Apr

May

June

Total

Total Revenues

487.6

606.7

832.3

822.0

932.2

1,310.8

4,991.7

Total Expenditures & Net Lending

385.2

521.3

577.0

695.3

857.9

1,151.1

4,188.0

Budget Balance

102.4

85.4

255.3

126.7

74.3

159.8

803.6

Source: MOFED

 

  1. The above surplus/savings clearly reflect entrenchment of fiscal discipline in line Ministries and Government Departments.

Domestic Debt

  1. Mr Speaker Sir, in 2018, we witnessed a dramatic increase in domestic debt, fed by fiscal deficits of above ZWL$2 billion primarily financed by the issuance of Treasury Bills and Central Bank overdraft.
  2. However, over the period January - June 2019, significant fiscal adjustments culminated in domestic debt containment. The high impact measures included:
    • Zero recourse to Central Bank financing, including the overdraft; Restructuring of overdraft facility, cash advances and Treasury

Bills held by RBZ into long-term marketable instruments;

  • A stop to any Treasury bills issuances for ZAMCO;
  • Issuance of Treasury bills only for budgeted expenditures; and Honouring of TBs maturities.
  1. The total Treasury bills issued amounted to ZWL$230 million, sorely for budget support and cash-flow management.
  2. Consequently, Mr Speaker Sir, adherence to sound fiscal and monetary policy reforms allowed containment of domestic debt stock which stood at ZWL$8.8 billion as at end June 2019 down from ZWL$9.5 billion as at 31 December 2018.

 

Stock of Domestic Debt (Jan 2018 - Jun 2019)

 

 

  1. Mr Speaker Sir, going forward, Government borrowings for Budget purposes will observe the new TBs Auction Framework in order to promote transparency and the rebuilding of market confidence.
  2. Furthermore, while a firm base for economic stabilisation has been set, it requires further and continuous refinement, which becomes a priority during the second half of the year and beyond.

Current Account Balance

  1. The current account, for the first time since the adoption of the multi-currency regime in 2009, registered a surplus in the first quarter of 2019.
  2. A surplus of US$196 million[1] was registered in the first quarter of 2019 compared to a deficit of US$491 for the same period in 2018, constituting a major improvement in the current account.
  3. This reflects a sharp contraction in imports through import management, against a moderate increase in exports in line withand export promotion measures under implementation.

 

Current Account Balance 

 

Source: RBZ

 

  1. Mr Speaker Sir, attainment of a fiscal surplus, combined with a current account balance during the first half of the year constitutes a firm roadmap to confidence building much required by this economy.
  2. Furthermore, now that we have introduced our own local currency, this has not only restored monetary policy but also created scope for enhanced competitiveness of our exports.

Prices

  1. Mr Speaker Sir, as the famous Economist Milton Friedman said:

“Inflation is taxation without legislation”. The story of Zimbabwe’s inflation has visible scars in our lives and deserves proactive and appropriate attention.

  1. On the other hand, we are aware that inflation is caused by running of huge budget deficits, financed through monetisation which creates high money supply growth - Simple!
  2. Hence, elimination of fiscal deficits will curb money supply growth and therefore, inflation.
  3. In our case, for a prolonged period of time, Government was running high fiscal deficits, which were monetised through issuance of TBs and overdraft at the Central Bank. These deficits translated into a significant and uncontrolled expansion of money supply which ended up chasing foreign currency in both the formal and parallel markets.

Parallel Exchange Rate and Monthly Inflation

 

Source: ZIMSTAT

 

  1. The unbridled demand for foreign currency, especially at 1:1 exchange rate between the bond note and the US Dollar, quickly became unsustainable. This prompted the decision to liberalise the exchange rate in February 2019.
  2. The liberalisation of the exchange rate, combined with ongoing fiscal consolidation reforms rolled out since October 2018 and a complementary tight monetary policy, have managed to contain excessive money supply growth, which had been the main driver of

inflation.

  1. Government measures to contain fiscal deficits by capping borrowing from the Central Bank, non-issuance of TBs, as well as stringent expenditure control measures, have significantly restrained money supply growth.
  2. As a result, the exchange rate fluctuation has largely dissipated with movement towards convergence between parallel market and interbank rates. This is critical in our fight against speculative practises and inflation.

Parallel and Interbank Exchange

Rate

 

 

Month on Month InflationOutlook to Dec 2019.

 

Source: Macroeconomic Working Group (MOFED, Zimstat & RBZ)

 

  1. Therefore, going forward, it is imperative thatwe pursue and further strengthen our fiscal and monetary policies and also remain responsible enough to ensure that factors such as wage increases and money supply remain under check.

Inflation Rebasing

  1. The change in currency regime from multicurrency to Zimbabwe Dollar has definitely impacted on the base for calculation of CPI indices and hence inflation. Given this transition Zimstat will defer publication of year on year inflation while building up data of prices in mono-currency for a period of 12 months to February 2020. This

will ensure that we compare like with like in terms of currency regimes.

  1. This is in line with what was done in 2009 after the change of currency regime, whereby Zimstat resorted to only gazetting month on month inflation. Year on year inflation publication will therefore resume afterFebruary 2020, alongside with month on month inflation publication.
  2. In the interim, stakeholders are encouraged to focus more on month on month inflation as barometer for price developments.

GDP Growth

  1. Owing to negative natural conditions, which badly affected a number of sectors particularly agriculture and power generation, coupled with inflationary pressures, foreign currency shortages prevailing and limited external financial support, have been major drawbacks to growth stimulation in the first half of 2019.
  2. In view of these headwinds, the revised 2019 GDP growth is expected to be negative.Treasury will, therefore, keep tracking key developments in the economy with a view of making appropriate adjustments to sectoral growth profiles.

FISCAL FRAMEWORK& SUPPLEMENTARY BUDGET

  1. Mr Speaker Sir, in view of recent economic developments, it has become necessary to update and align the Macro-Fiscal Framework with fiscal and monetary policy pronouncements made by

Government between January and June 2019.

  1. Resultantly, the Mid-Year Review provides an updated 2019 Fiscal Framework with projected total expenditures of ZWL$18.62billion, against anticipated revenue collections of ZWL$14.1billion.
  2. The projected expenditures are, inclusive of a proposed

Supplementary Budget of ZWL$10.85billion.

 

Supplementary Budget Framework (ZWL$m)

 

2019

Original Budget

Supplementary

Budget

Revised

Budget

Revenue and grants

6,199

7,861

14,060

Expenditure and net lending

7,765

10,854

18,620

Current expenditure

5,728

5,824

11,552

Employment costs

4,050

1,506

5,556

Interest payments 

351

160

511

Foreign

24

206

230

Domestic

327

- 46

281

Goods & services

719

3,740

4,459

Current transfers

608

418

1,026

Capital expenditure and net lending

2,037

5,030

7,068

Overall balance (commitment basis)

-1,566

- 2,993

-4,560

Source: Treasury

 

Supplementary Budget

  1. The 2019 Supplementary Budget proposesadditional provisionsand reforms mainly related to the following areas:
    • Stimulation of production, targeting agriculture, industry and other productive sectors;
    • Food security including;
      • Grain procurement to mitigate the effect of drought conditions;
      • Funding for the 2019/20 Summer Cropping Programme
    • Welfare of civil servants and pensioners;
    • Social services delivery and social protection;
    • Infrastructure and utilities;
    • Constitutional requirements including transfers to provincial councils and local authorities andsupport for governance institutions;
    • Supporting structural and governance reforms;
    • Support for Government operations; and
    • Respective revenue measures including tax thresholds adjustment.
  2. The supplementary expenditures being proposed are, however, designed in a way that they are in line with increased revenues, and will be implemented without compromising fiscal discipline and upsetting set fiscal targets.

Welfare of Civil Servants and Pensioners

  1. The 2019 Budget provided for ZWL$4.05 billion for compensation of employees consistent with the objective of containing the wage bill to sustainable levels and capacity of the budget.

  1. However, developments during the first quarter led to interim cushioning allowance of ZWL$63 millionbeing awarded to employees with a COLA ofZWL$400 million effective April 2019. The cost of living adjustment also implied a review of pension and related benefits costing ZWL$133 million.
  2. Over and above the reviews in the first half, the continued inflationary pressures led Government to award a once off cushioning allowance in July of ZWL$143 million.
  3. The supplementary Budget proposes to accommodate all the above commitments, moving employment cost Budget allocation from

ZWL$4.1 billion to ZWL$5.9 billion.

Cushioning of Pensioners

  1. The prevailing inflationary environment is also imposing great hardships on vulnerable pensioners. Therefore, proposed adjustments in compensation of employees will also be cascaded to pensioners.

Government Operations

  1. The 2019 Budget provided for ZWL$1.017 billion for goods and services. Taking into account inflation and exchange rate developments in the economy, a supplementary budget of ZWL$2.8 billion is being proposed, covering requirements for all ministries through their respective Votes.

Stimulating Production

  1. During the last half of 2019 and beyond, production and productivity enhancement in all sectors will receive due attention to complete the transformative framework of the TSP. This will entail deepened focus on improving competitiveness, investment mobilisation underpinned by the current re-engagement efforts that are aimed at resolving the external debt overhang and improving relations with other nations.

Agriculture and Food Security

Preparations for the 2019/20 Farming Season

  1. Cognisant of the prevailing severe drought and the need to revive the agriculture sector, Government will extend support towards the agriculture sector during the 2019/20 agriculture season, while nurturing the private sector to play a greater role in subsequent years.
  2. As a result, the 2019 Mid-Term Review is setting aside ZWL$1.67 billion towards support of strategic crops of grain, soya beans and cotton under the following programmes.

Vulnerable Households Input Support Scheme 

Grain Inputs

  1. Government policy commits support to vulnerable households through an appropriate inputs scheme. For the 2019/20 agriculture season, the Supplementary Budget is proposing an additional ZWL$437 million for grain inputs (maize, sorghum and pearl millet). The Scheme will also include sugar and soya beans seed.
  2. The inputs will comprise of seed, compound D and top dressing, all for a targeted area of 640 000 hectares.

Cotton Inputs

  1. A number of households in dry areas make a living out of cotton production. To sustain recovery in cotton production, ZWL$213 million is being set aside towards inputs for cotton for a targeted area of 200 000 hectares.
  2. Beneficiaries of the Programme will be selected based on their repayment track record and their delivery record to COTTCO.

Special Maize and Soya Bean Programmes

  1. Ordinarily, agricultural programmes outside the Vulnerable Inputs Support Scheme are best supported by private financing given budgetary constraints. However, given last year’s drought, the capacity of our “infant” farmers has been compromised, necessitating further Government support through loan financing arrangements, which include private sector players.
  2. As a result, Government is extending the Programme for another year to restore food security. The Programme targets 210 000 hectares under maize and 30 000 hectares under soya beans at a cost of ZWL$2.8 billion.Accordingly, the Supplementary Budget is making an additional provision of ZWL$1.03 billion to kick-start the programme.
  3. However, to close the loopholes during the forthcoming agriculture season, Government is adopting a targeted approach, which select exclusively farmers with a track record of honouring their loan obligations from previous Programmes and have a history of producing high yields.
  4. The selection of farmers will be done in a transparent way and measures will be put in place to recover all the loans.

Domestic Grain Mobilisation

  1. For the 2018/19 season, maize and other small grains output is expected at 852 000 tons, significantly below the annual national requirements of approximately 1.8 million tons required for human consumption.
  2. It is, therefore, prudent that Government prioritise local grain purchases in order to replenish stocks at GMB. However, in order to incentivise farmers to deliver, Government has reviewedmaize producer prices upwards from ZWL$726 per ton set earlier. GMB has also opened additional collection points in various provinces of the country to enhance grain mobilisation and reduce transport costs to the farmer.
  3. This Supplementary Budget, therefore, provides ZWL$630 million for local grain purchases and logistics.
  4. To complement this, Government gazetted Statutory Instrument 145 of 2019 which bars any other person or institution other than GMB from buying maize from farmers.

Grain Importation

  1. Mr Speaker Sir, with a large grain deficit, Government has established necessary arrangements for grain importation and effective distribution.
  2. Towards this, the Supplementary Budget proposes to set aside ZWL$624 million, enough to cater for requirements up to

December 2019.

Mining

  1. Mining remains our major source for export earnings, GDP and employment. During the first half of the year, the sector contributed

US$1.3 billion, which is 68% of the total exports of US$1.9 billion.

  1. The sector accommodates 45 000 formal employees. Furthermore, the sector provides a source of livelihood to over a million small scale and artisanal miners involved in gold and chrome mining.
  2. The sector, which experienced recovery during the first quarter of 2019, apparently faced headwinds during the second quarter, as evidenced by output losses in most major minerals such as gold, platinum, palladium, diamonds, nickel, chrome and coal. The major constraints are being imposed by foreign currency shortages and the intermittent electricity supply.
  3. However, given the resilience and potential of the mining sector, current setbacks are temporary with expected recovery in the short term on the back of firm international prices and envisaged improvements in power and forex supply.
  4. Furthermore, Government, in line with the thrust of opening up the economy to private investment, has concluded a number of investment agreements with investors.
  5. These investments, will, however, take some time (up to 10 years of production) to give visible net benefits in view of long gestation periods for mining projects.
  6. Government will, therefore, in the second half of the year unveil a comprehensivestrategy and roadmaptowards a US$12 billion

mining industry by 2023. The attainment of this milestone is not an event but a process, which is well underway with concrete start-ups and expansion of projects in a number of minerals, which include platinum, gold, ferrochrome, coal and hydrocarbons, lithium, diamonds, iron ore, among others.

Gold Mobilisation Facility

  1. Government is putting in place a Gold Finance Facility to capacitate Fidelity Printers and Refiners to be able to buy gold from all gold producers. Government shall ensure that there is only one system to be used by Fidelity Printers and Refiners for purchasing gold.
  2. The current system is that 55% of gold sales proceeds are retained by the gold producers in their Nostro accounts and 45% is paid in

Zimbabwean dollars.

Manufacturing

  1. Resuscitation of the manufacturing sector is imperative as production and productivity is the cornerstone for growth. To facilitate the revival of the local industry, Government has developed a new National Industrial Development Policy supported

by a Local Content Strategy to develop the manufacturing industry into a modern and diversified sector in the region.

Infrastructure and Utilities

  1. With regards to infrastructure and utilities, an additional ZWL$1.3 billion is being proposed to cater for various projects in the energy, transport, water, public amenities, social services, irrigation and other infrastructural projects.
  2. This gives a total infrastructure budget of ZWL$2.5 billion, constituting 35.4% of total capital development budget.
  3. Mindful of the budgetary constraints, Treasury will be issuing a Vaka/Yaka Zimbabwe Infrastructure Bond during the second half of the year, to mobilise private sector funding for some of our budgeted ongoing priority projects.

Energy

  1. Drought has reduced hydro-electric generation at Kariba Dam, reducing power supply to unsustainable levels as reflected through severe load shedding.

 

 

 

  1. The current electricity supply situation retards all our stabilisation gains and require urgent interventions to improve power supply to our productive sectors.

Power Supply Strategy

  1. In the short term, power supply deficit can only be met through power imports and hence it is urgent that Government capacitates ZESA to mobilise requisite resources through appropriate and cost recovery tariffs implemented through a differentiated scale.
  2. Therefore, Government has approved the following electricity tariff measures for immediate implementation:
  • The electricity tariff for Non-Exporting businesses be increased from an average of ZWL9.86c/kWh to an average of

ZWL45c/kWh (approximately USc5/kWh);

  • The electricity tariff for domestic consumers be increased from an average of ZWL9.86c/kWh to an average of ZWL27c/kWh

(approximately USc3/kWh), which is subsidised;

  • The electricity tariff for Agriculture consumers be increased from an average of ZWL9.86c/kWh to an average of ZWL27c/kWh

(approximately USc3/kWh), which is subsidised;

  • Maintain the tariff for ferrochrome smelters and other miners at US$0.067/kWh and US$0.0986/kWh, respectively, and ensure that the resources are ring-fenced in a Special Account solely for purposes of importing electricity; and
  • ZESA be allowed to bill all other exporters and foreign currency earners in foreign currency and ensure that the resources are ring-fenced in a Special Account solely for purposes of importing electricity.
  1. The responsible Ministry and the Zimbabwe Energy Regulatory

Authority (ZERA) will give the necessary implementation details.

  1. In addition, other urgent measures for sustainable power supply evolve around the following areas:
    • Demand management through rapid role out of pre-paid and smart meters and embracing energy saving technology;
    • Speeding up ongoing reforms including restructuring of ZESA to improve efficiency and management of the parastatal; and
    • Implementation of planned medium to long term projects.

Power Generation Projects

  1. Government is prioritising implementation of major energy generation infrastructure projects in the country such as the Hwange units 7 & 8 Expansion Project, Kariba Dam Rehabilitation and

Batoka Gorge Hydro-Electric Project.

  1. To support ongoing works at these projects, an additional provision of ZWL$42 million is being proposed, targeting counterpart funding and equity for ZPC for the project.
  2. In addition, Government will soon launch the Renewable Energy Policy and Biofuels Policy which seeks to create a well-balanced energy mix as a strategy to climate-proofing of energy infrastructure in the country, taking advantage of our resource endowments in solar, coal, gas and hydro.

Rural Electrification

  1. Eight institutions were electrified during the period under review, against a target of 14, with most projects having stalled due to shortage of materials, particularly transformers, conductors and auto-reclosers. Overall progress on schools and clinics electrified now stand at 65%.
  2. With regard to solar mini grid systems, a number of rural institutions were electrified, bringing the total to 422.

Water and Sanitation

  1. Through the Budget, Government is up-scaling interventions in the sector by addressing identified deficiencies in existing water infrastructure, as well as expanding availability of water sources through construction of new dams and boreholes.

Dams

  1. Substantial progress relates to Marovanyati, Causeway, GwayiShangani, Chivhu, Bindura, Tuli-Manyange and Silverstroom

Dams.

  1. To support all ongoing works on all dam projects, it is proposed that an amount of ZWL$140 million be set aside. Proposed allocation for other water projects amounts to ZWL$27.6 million.

Transport and Communications

Roads

  1. The strategic choice we made to upgrade our trunk roads from gravel to bituminous surfacing, as well as rehabilitation of feeder roads under the Road Development Programme continues to offer benefits and relief to road users and communities across the country. 99. To cater for increased costs under the Road Development Programme, an additional amount of ZWL$284.2 million is being proposed to year end.

Social Services Infrastructure

Schools Infrastructure

100.Construction of seventeen rural schools under the First Education

Project started in 2013 with co-financing from the OPEC Fund for International Development (OFID) covering construction of buildings, equipping the schools with furniture, computers and associated equipment.

  1. The construction works are now expected to complete during the third quarter of the year.
  2. The process of procurement of furniture, computers and associated equipment is already under way. For the electrification of the schools, discussions with the Rural Electrification Agency indicate a requirement of ZWL$13 million to connect all the schools to the National Grid.
  3. In this regard, we propose an additional allocation of ZWL$26.6 million for the project, covering electrification costs for the targeted schools as well as Government’s counterpart funding for the project.

Innovation Hubs

104.Construction works on the innovation hubs at five institutionsare now expected to be complete for commissioning during the second half of the year.

  1. The institutions have already started the tendering process for procurement of laboratory equipment, which will ensure proper interface between industry and universities research, essential for the economic development of the country.

Health Infrastructure

  1. In order to strengthen the referral health system, critical in the delivery of health services, Government is rehabilitating and upgrading health infrastructure as well as constructing rural health posts.
  2. To date, four posts, namely Dundwe, Minda, Kairezi and Gumbochuma are now in the final stages of completion and expected to be open to communities in the third quarter of 2019.
  3. Furthermore, construction of Dongamuzi, Munemo, Chiromo and Mbuyamaswa Rural Health Centres is on-going and expected to be completed before year-end.

109.With regards to district hospitals, progress has been noted in the refurbishment of Mvurwi, Kadoma and Ndanga District Hospitals where waste management and laundry facilities were upgraded whilst the wards received a facelift.

  1. Works on the construction of Lupane Provincial Hospital will soon commence, following approvals from the Procurement Authority of

Zimbabwe (PRAZ), with the contractor expected on site in August

2019.

  1. Refurbishment of Mutare, Gweru, Masvingo and Gwanda Provincial Hospitals, targeting upgrading theatres, general and maternity wards was completed during the first half of the year.
  2. With regards to central hospitals, refurbishment works for the medical gas reticulation system, theatres and incinerators at Mpilo and United Bulawayo Hospitals have been completed.
  3. Following a fire outbreak which affected Mbuya Nehanda Maternity Hospital at Parirenyatwa Group of Hospitals in February 2019, refurbishment of wards and installation of new theatre equipment has been completed and the hospital is now fully operational.

114.Other interventions made to date include rehabilitation and equipping of Chitungwiza School of Nursing and Dental Training School as well as procurement of diagnostic and therapeutic equipment from India.

  1. The Ministry of Health and Child Care has also completed the tendering process for procurement of ambulances. In this regard, an amount of ZWL$68 million in additional funding is proposed to complete the procurement process that targets acquisition of 100 fully equipped ambulances.

Transfers to Provincial Councils & Local Authorities

  1. It is a Constitutional requirement to set aside 5% of revenues for allocation to Provincial and District Councils. Against the ZWL$310 million allocated in the 2019 Budget disbursements to date stand at ZWL$120 million. These are to local authoritiesimplementation of basic infrastructure projects at community level.
  2. Following the review in the revenue projections to year end, and consistent with the Constitution, the original allocation for InterGovernmental fiscal transfers is being reviewed upwards to ZWL$703 million which will be distributed to the benefiting institutions in line with the current formula.
  3. The increased funding should provide impetus to our devolution agenda as well as facilitate implementation of priority and impactful projects at the local level.

Cyclone Idai

  1. Cyclone Idai is the latest natural disaster in a succession of climatic shocks to affect the country and caused severe flooding in Chimanimani and Chipinge Districts whilst other districts affected include Buhera, Makoni, Masvingo and Mutare Rural.
  2. Mr Speaker Sir, I wish at this juncture, to commend Zimbabweans from all walks of life, including development partners for the tremendous support towards our recovery efforts.
  3. To sustain ongoing efforts in restoring damaged infrastructure and livelihoods for affected communities, an amount of ZW$414.3 million in additional funding has been set aside in the Budget.

Support to Utilities

  1. In line with the thrust of non-accumulation of arrears and taking into account market developments, a supplementary budget of ZWL$120 million is being proposed towards utilities such as telephone, water and rates, electricity and vehicle hire as well as office accommodation.
  2. Settlement of Government arrears to these utilities is also a way of capacitating and capitalising them.
  3. Mr Speaker Sir, it is also disconcerting to note accumulation of arrears to ZESA by corporates, households and other entities, irrespective of sub-optimal tariff levels obtaining, and therefore urge all users to be responsible and pay up for services received. This also refers to various outstanding consumer obligations to local authorities.

Social Safety Nets for Vulnerable Groups

  1. The adverse macro-economic environment caused by drought and cyclone requires Government to support vulnerable groups with support mechanisms that allow them to withstand the negative shocks to their livelihoods.
  2. According to the Zimbabwe Vulnerability Assessment 2019 Livelihoods Assessment, 59% (about 5.5 million people) of the rural population will be food insecure during the peak hunger period.
  3. In terms of support to these groups, Government has so far distributed 189 000 tons of grain in support of 757 000 households. The beneficiaries are in both rural and urban areas. The following table gives cumulative grain distribution by province for the period

January to June 2019.

 

Cumulative Grain Distribution by Province Jan- Jun. 2019

National 

Number of Households

Cumulative

Distributions

Manicaland

 80,285

 24,558.53

Mashonaland Central

 70,080

 21,209.00 

Mashonaland East

 65,627

 19,755.89

Mashonaland West

 84,552

 19,756.71

Masvingo

134,719

 37,016.06

Matabeleland North

 51,810

 11,807.05

Matabeleland South

 68,380

 16,202.65

Midlands

176,290

 34,766.75

Bulawayo

 12,968

     990.05

Harare

 12,269

   2,979.83

Total

756,980

189,042.52

 

  1. Government has identified and scaled up social safety net programmes under health, education and social protection, which will see the initial budget increasing from ZWL$267.6 million to

ZWL$1.135 billion, broken down as follows:-

  • Social Protection:     ZWL$811.9 million;
  • Health Care:              ZWL$250.4 million; and
  • Education:                ZWL$72.9 million.

Urban Mass Public Transportation System

  1. Government introduced an Urban Mass Public Transportation System as a safety net to cushion the public from increases in transport costs resulting from fuel price corrections after the introduction of the interbank foreign exchange market. This was also partly triggered by extortionate and exploitative behaviour by some public Transport Operators.
  2. In order to increase access and coverage, resources amounting to ZWL$104 million have been provided in the context of this supplementary budget.
  3. Going forward, Government is pursuingthe establishment ofa MassRapid Transit System, which is a coordinated public transport network facilitated through railways and road transport for both urban and rural commuters. In that regard, appropriate investigations and studies are under way.

DEVELOPMENT PARTNER SUPPORT

  1. Development Partners continue to complement Government efforts towards the implementation of development programmes and projects across various sectors of our economy. Government acknowledges the immense support from the international community during the aftermath of the devastating Cyclone Idai, which led to loss of lives and livelihoods as well as destruction of infrastructure, especially in Manicaland Province.
  2. During the first quarter of 2019, a total of US$117.8 million was disbursed by Development Partners, of which US$71.2 million was from Bilateral Partners and US$46.6 million was from Multilateral

Partners.

  1. A total of US$641.2 million is projected to be disbursed by

Development Partners in 2019, of which US$490.7 million is from

Bilateral Partners and US$150.5 million is from Multilateral Partners.

  1. The development assistance sectoral breakdown for 2018 and projections to 2019 year-end are as follows:

 

Sectoral Disbursements

Sector

 2018

Actual 

(US$)

2019

Projections

(US$)

Health

359,736,560

347,985,764

Humanitarian

69,932,139

52,274,240

Agriculture

27,279,476

33,655,275

Capacity Building

21,532,659

28,965,258

Governance

59,793,297

68,670,362

Water Supply & Sanitation

9,733,549

15,779,105

Education

29,867,898

27,988,276

Basic Social Services

37,558,456

35,478,171

Transport

9,855,864

7,399,182

Multi – Sector

8,735,541

9,683,142

Power/Energy

10,386,840

13,287,358

TOTAL

644,412,279

641,166,133

Source: Ministry of Finance, Development Partners

 

Support for Governance Reforms

  1. The2019 Budget recognised the importance of transforming all governance systems which include, Rule of Law, Freedoms of

Expression and Association, Respect for Human and Property Rights, and Zero Tolerance to Corruption, among others.

  1. Accordingly, the 2019 Budget allocated ZWL$76.7 million to institutions mandated to promoting good governance targeting capacitation of those Constitutional institutions mandated to promote democratic principles. These include the:
    • Zimbabwe Electoral Commission;
    • Zimbabwe Gender Commission;
    • Zimbabwe Human Rights Commission;
    • Zimbabwe Anti-Corruption Commission;
    • Zimbabwe Judiciary Service Commission; and
    • National Peace and Reconciliation Commission.
  2. The Supplementary Budget, therefore, proposes to make additional allocations of ZWL$125.5 million to the above institutions for purposes of enhancing their capacity in promoting good governance practices.

Structural Reforms

  1. Mr Speaker Sir, in support of the demand side objectives, structural reforms remain a key pillar of our reforms. Details on progress made under various public enterprises, ease of doing business and labour market flexibility, among others are in the main Statement.

Indigenisation and Economic Empowerment Act

  1. Mr Speaker Sir, Government, through the 2018 Finance

Amendment Bill amended the Indigenisation and Empowerment Act and platinum and diamonds are now removed from the reserve list and shareholding will depend on negotiations with investors.

  1. Subsequently, the Indigenisation and Economic Empowerment Act will be repealed and replaced by the Economic Empowerment Act, which will be consistent with the current thrust “Zimbabwe is Open for Business”.

Offshore Financial Services Centre (OFSC)

  1. It will be recalled that in my 2019 National Budget Statement, I advised that Government will consider exploring the possibility of setting up an Offshore Financial Services Centre (OFSC) as part of efforts to develop the financial service sector, through provision of opportunities for global investment.
  2. A lot of research has to date been carried out, which reveal that offshore financial service centres promote foreign direct investment, domestic investment, export development &promotion and national branding, among others.
  3. Other economies that have successfully embraced offshore financial service centres regionally and internationally include, Mauritius, the Cape Verde, Kazakhstan and Switzerland, among others. These countries have grown to become financial hubs attracting a lot of investment.
  4. The financial services centres in the countries cited above have been set up over periods ranging from three to fifteen years.
  5. Zimbabwe is strategically located to host a regional and international financial hub, given its accessibility and good connectivity, which are some of the attributes necessary for successful setting up of an OFSC. The adoption of our local currency is also a positive step towards attaining a stable currency, to attract investors.
  6. In order to nurture confidence in the financial services sector, thereby attracting the much needed investment, establishing an OFSC is a guaranteed milestone towards achieving this.
  7. However, implementation of an OFSC should be preceded by introduction of a number of economic reforms to promote efficient functioning of the financial system.
  8. Mr Speaker Sir, I undertake to provide periodic updates to stakeholders on the progress towards setting up Zimbabwe’s Offshore Financial Service Centre.

Dry Ports

  1. In addition, Government is also considering establishment of dry ports within Zimbabwe borders. These ports maximise Zimbabwe’s potential as a transit regional economy and also facilitate efficient and cost effective supply of essential imports into the economy.

REVENUE MEASURES

  1. Mr Speaker Sir, the revenue measures that I am proposing seek to review the incentives that have already been put in place in support of the local industry and the productive sectors, enhance revenue generation capacity and avail relief to taxpayers through adjustments of tax rates, taking into account the recent economic developments.
  2. The measures also seek to align existing legislation to policy pronouncements.

Support to Industry

Clothing Manufacturers Rebate

  1. In order to close loopholes observed in the utilisation of the

Clothing Manufacturers Rebate, I urge ZIMRA to undertake a comprehensive Post Clearance Audit of the Facility, so as to inform

Government on appropriate measures to address the malpractices.  

Suspension of Duty on Commercial Tyres

  1. In view of the gap in local production and also in the interest of ensuring safety of road users, I propose to ring-fence importation of 100 000 commercial tyres at a lower duty rate of 15% for a period of twelve months.

Electrical Manufacturers Rebate

  1. I propose to provide for additional inputs to the list of components that can be imported duty free under the Electrical Manufacturers

Rebate.

Customs Duty on Motor Vehicle Filters

  1. The country’s motor vehicle population has increased over the past couple of years. This presents an opportunity for companies to localize the manufacture of spare parts, thereby enhancing linkages within the motor industry value chain.
  2. I, therefore, propose to reduce the customs duty on selected raw materials used in the manufacture of motor vehicle filters.

Revenue Enhancing Measures

Taxation of E-Commerce Transactions

  1. Mr Speaker Sir, income earned in Zimbabwe by foreign domiciled satellite broadcasting services and electronic commerce platforms is deemed to be from a source in Zimbabwe for tax purposes.
  2. I, therefore, propose to extend the scope of revenues deemed to be from a source in Zimbabwe for tax purposes to include amounts received by or on behalf of a radio, television broadcaster or an electronic commerce operator domiciled outside Zimbabwe.

Excise Tax

  1. Mr Speaker Sir, in response to inflationary pressure and currency adjustment, I propose adoption of an optimal policy mix between specific and ad valorem excise taxes as follows:

Fuel

Ad Valorem excise duty of 45% and 40% per litre of petrol and diesel, respectively.

Alcoholic Beverages

Optimal mix of Specific and AdValorem excise duty structure as follows:

  • Spirits-40% of ex-factory cost plus ZWL$20/LAA;
  • Fortified Wines-ZWL$4/L;
  • Unfortified Wines-15% of ex-factory cost plus ZWL$3.5/L;
  • Other Fermented Beverages- ZWL$3/L; and
  • Opaque Beer Powder-ZWL$0.50/kg.

Tobacco

A combination Excise Duty of ZWL$50 per 1 000 cigarettes plus

20% Ad valorem on the ex-factory price.

Destruction of Seized Tobacco Products

Destroy all seized tobacco products, in line with the practice in other countries.

Taxation of Direct Fuel Imports

  1. Honourable Members would be aware that Government has approved the Direct Fuel Imports Facility, in order to minimise disruptions to the production cycle due to the fuel supply gaps.
  2. I, therefore, propose to levy excise duty on Direct Fuel Imports in foreign currency at rate of US$0.45 and US$0.40 per litre of petrol and diesel, respectively.

Tax Relief Measures

Employees’ Tax

  1. In order to cushion taxpayers against bracket creep and also stimulate aggregate demand for goods and services, I propose to review the tax-free threshold from the current ZW$350 to ZW$700, further widen the tax bands to a maximum of ZW$30 000, above which income is taxed at the marginal tax rate of 40%, with effect from 1 August 2019.
  2. Employees that earn in foreign currency shall, however, continue to settle their tax liability in foreign currency.

Intermediated Money Transfer Tax

  1. In view of the changes in the macroeconomic conditions, I propose to review the tax-free threshold from the current ZWL$10 to

ZW$20 and the maximum tax payable per transaction by corporates from the current ZWL$10 000 to ZW$15 000 for transactions with value exceeding ZWL$750 000.

  1. Furthermore, I propose to exempt additional transactions from

IMTT in order to eliminate double taxation.

Intermediated Money Transfer Tax on Mobile Money Transactions

  1. The current legislation obliges financial institutions to deduct intermediated money transfer tax on the transfer of money by any means other than by cheque in the following circumstances:
    • Between two persons; or
    • From one person to two or more persons; or
    • From two or more persons to one person.
  2. However, cash-in and cash-out transactions conducted through mobile money transfer platforms do not fall within the above criterion, hence the tax is not deductible.
  3. Consequently, the majority of illegal foreign currency transactions are being conducted through this platform, thereby evading payment of tax and sustaining parallel market activities.
  4. I, therefore, propose to levy tax on the transfer of money from

Mobile Money Transfer Agents to recipients.

Mining Fiscal Regime

  1. Mr Speaker Sir, I propose the following key measures in support of the mining industry:

Deductibility of Mineral Royalties

  1. In line with practices in other countries, I propose to allow mining royalties as a deductible expense in the determination of taxable income.

Mining Levies and Charges

  1. In order to support investment and production in mining, I call upon the Mining Sector Cluster on the Ease of Doing Business Initiative to finalise and implement agreed positions relating to streamlining fees and charges levied on mining operations.

Mineral Royalties: Gold

  1. In order to support gold production as well as maximise revenue flows to the fiscus, I propose to review the royalty regime for primary gold producers from a two tier system to a sliding scale royalty regime that is based on gold prices as follows:
    • Below US$1200 per ounce-3%; and
    • Above US$1200 per ounce-5%.
  2. I further propose to review the royalty rate on gold produced by small scale miners from the current rate of 1% to 2% of the gross fair market value, in order to minimise arbitrage opportunities.

Alignment of the Definition of Mineral

  1. The Mines and Minerals Act recognises dimensional stones extracted from quarries as a mineral. In this regard, quarry mining operations and licensing are governed in terms of the Mines and Minerals Act.
  2. I, therefore, propose to align the definition of mineral in the Income

Tax Act to that in the Mines and Minerals Act.

Removal of Duty on Solar Batteries

  1. Honourable Members would be aware that Government, in 2010, provided for duty free importation of solar panels and other solar related products, in support of the energy policy thrust on use of alternative, clean and renewable energy sources.
  2. In order to promote investment in solar energy, thereby reducing power demand on the already constrained national grid, I propose to remove duty on lithium-ion solar batteries.

Suspension of Duty on Motor Vehicles Imported for use by

Physically Handicapped Persons

  1. Mr Speaker Sir, in the unfortunate event of death of the beneficiary before expiry of the Suspension of Duty on Motor Vehicles Imported for use by Physically Handicapped Persons, the suspended residual duty becomes due and payable by the Executor of the Estate.
  2. In order to relieve the burden for payment of duty by beneficiaries of the estate, I propose to waive payment of duty on such circumstances.

FEES AND CHARGES

Review of Fees, Levies and Charges

  1. Honourable Members will be aware that upon adoption of the Real

Time Gross Settlement Dollar as part of the multicurrency system through Statutory Instrument 33 of 2019, all amounts expressed in United States Dollars were converted to local currency on a one-toone basis. Consequently, all Statutory fees, levies and charges are now quoted in local currency.

  1. However, depreciation of the local unit against major currencies has increased the cost of goods and services, hence the current level of fees, levies and charges is no longer reflective of the cost of providing Government services.
  2. In view of the foregoing, and in line with Section 78 (1) (r) of the Public Finance Management Act [Cap. 22:19], which empowers Treasury to prescribe the level of fees and charges for revenues accruing to the Consolidated Revenue Fund, I propose to review fees, levies and charges on Government services, in line with economic developments.

Tax Administration

Review of Monetary Amounts in Tax Statutes

  1. Mr Speaker Sir, I have already alluded to the fact that monetary amounts in various Statutes, including tax related legislation, were converted from the United States Dollar to the Real Time Gross

Settlement Dollar on a one to one basisthrough promulgation of Statutory Instrument 33 of 2019, hence no longer serve the intended purpose.

  1. I, therefore propose an upward review of monetary amounts in tax legislation.

Rate of Interest on Outstanding Tax Debts

  1. Mr Speaker Sir, non-compliance with tax legislation continues to deprive Government of funding to support critical areas such as infrastructure and social services. A number of taxpayers deliberately delay remittance of tax to Government in order to fund their operations.
  2. In order to discourage taxpayers from such practices, I propose to review the interest rate paid on outstanding debts from the current

5% plus Libor, to 25%.

Capital Gains Tax Computation: Specified Assets

  1. In order to ease the burden of compliance and also enhance revenue assurance for tax administration, I propose to charge a flat capital

gains tax rate of 5% on the gross capital amount, being the deemed gain accruing on specified assets acquired after 24 June 2019.

Legislative Amendments

Income Tax

Relaxation of Thin Capitalisation Rules

  1. Mr Speaker Sir, Government has availed loan funding to recapitalise strategic State Owned Enterprises. This support has, however, resulted in some of these companies exceeding the prescribed debt to equity ratio of three to one for tax purposes.
  2. In order to facilitate implementation of strategic Government projects, I propose to exempt from tax, deemed dividends accrued on account of debt contracted through Government facilities by State Owned Enterprises where such debt exceeds the debt to equity ratio of three to one.

Capital Gains

  1. In order to reduce the cost of capitalisation, I propose to exempt gains accruing from the transfer or disposal of shares to the

Sovereign Wealth Fund from capital gains tax.

Tax Incentives for Special Economic Zones

  1. Government in 2017, availed a number of tax incentives for the benefit of companies engaged in export oriented industrial activities.
  2. Government notes with concern that some non-exporting companies have been designated as Special Economic Zones in order to benefit from the existing preferential tax regime.
  3. Notwithstanding operating in a Special Economic Zone, companies are, however, not automatically entitled to benefit from the existing tax incentives, unless they meet the conditions prescribed in the Finance or Income Tax Act.
  4. From the foregoing, mining houses and other companies that produce for the domestic market cannot benefit from tax incentives under Special Economic Zones.
  5. Furthermore, in order to ensure that there is conformity to the constitutionally enshrined principles of fair taxation and for purposes of transparency and accountability, tax incentives shall be solely promulgated through the relevant tax legislation.

Value Added Tax

Provision of Back-Up Services on Fiscalised Devices by Approved

Suppliers

  1. In order to enhance the effectiveness of the Fiscalisation

Programme, I propose to allow existing licenced vendors to provide back-up service to devices supplied by operators that would have ceased operations.

Zero-Rating of Exports of Exempt Supplies

  1. In order to facilitate competitiveness of exports, I propose to zerorate exports of exempt fruits, vegetables and unmanufactured tobacco.

Exemption from VAT: Tobacco Not Sold on the Auction Floors

  1. Currently, tobacco not sold on auction floors is exempt from VAT. A number of taxpayers are, however, experiencing challenges in identifying the type of tobacco that is exempt from VAT since it is not specified in the VAT Regulations.
  2. I, therefore, propose to specify the types of tobacco that are exempt from VAT and are also not sold on the auction floors.

Interest on Delayed VAT Refunds

  1. I propose to align to the prescribed period within which interest is payable to the 30-day limit.

Customs Duty

Manufacturers Rebate

Food, Soap and Cosmetic

  1. In order to reduce the cost of production, thereby enhancing competitiveness of locally manufactured soaps, Government, in

2018, increased the list of additional raw materials under the Food, Soap and Cosmetic Manufacturers Rebate, where materials used in the production process are imported duty free.

  1. The legislation, however, provides for a suspension of duty of 5% on such materials, contrary to the intended result.
  2. I, therefore, propose to provide for a Rebate of Duty, where duty is entirely suspended.

Payment of Levies by Foreign Visitors

  1. Prior to de-dollarisation, foreign visitors were paying Carbon Tax,

Third Party Insurance and Road Access Fees in foreign currency.

  1. I propose continuation of payment of the above levies in foreign currency, in order to ensure convenience for such travellers.

Payment of Tax, Fees and Charges in Foreign Currency

  1. Mr Speaker Sir, for the avoidance of doubt, the only legal tender in the country is the Zimbabwean Dollar as pronounced through Statutory Instrument 142 of 2019, unless exemptions were specified therein.
  2. Therefore, in cases where exemptions have been issued, taxes shall also be payable in foreign currency.
  3. Fees and charges on services provided to foreign registered businesses such as airlines flying into Zimbabwe and haulage trucks transiting through Zimbabwe and services that include passports provided by the country’s foreign missions will also be collected in foreign currency.

CONCLUSION

  1. Mr Speaker Sir, it is said “History has demonstrated that the most notable winners usually encountered heart-breaking obstacles before they triumphed. They won because they refused to become discouraged by their defeats” (B. C. Forbes, Journalist, author, publisher).
  2. And indeed, during the first half of 2019, tremendous progress was made under the TSP notwithstanding the difficult environment.
  3. Milestones on the stabilisation front are so far very positive and now constitutes a strong base for the advancement of other reforms, particularly regarding supply stimulation, re-engagement and governance and other structural interventions.
  4. It is, therefore, now time to really focus on production, productivity, growth, poverty reduction and development, given that the fiscal and monetary policy issues are under control. The prospective investments in mining of US$12 billion, combined with tourism potential, industry reboot from a new position of a competitive domestic currency, infrastructure investments, all point to a bright

future for economic growth, job creation and development. The devolution agenda will galvanize the development thrust at the local level.

  1. These issues, therefore, constitute the reform agenda for the last half of the year and beyond.
  2. I, therefore, table the appropriate 2019 Supplementary Estimates of

Expenditure and propose their adoption [Refer to Annex. 1].

  1. Mr Speaker Sir, following observations and guidance by the

Parliamentary Budget and Finance Portfolio Committee and the Public Accounts Committee, it is my intention to later table relevant and pending financial adjustment bills for condonation.

ANNEXURES

Annexure 1: 2019 Supplementary Estimates of Expenditure

 Vote Appropriations

2019 Estimates

Original Estimates

Additonal Estimates

Revised Estimates

ZWL$

ZWL$

ZWL$

 Office of the President and Cabinet

294,700,000

499,565,000

794,265,000

 Parliament of Zimbabwe

145,000,000

98,937,000

243,937,000

 Labour and Social Welfare

81,201,000

1,083,995,000

1,165,196,000

 Defence, Security and War Veterans 

546,939,000

551,201,000

1,098,140,000

 Finance and Economic Development

273,593,000

1,204,884,000

1,478,477,000

 Audit Office

7,763,000

7,140,000

14,903,000

 Industry and Commerce

47,055,000

47,093,000

94,148,000

 Lands, Agriculture and Rural Resettlement

989,298,000

3,392,970,000

4,382,268,000

 Mines & Mining Development

15,445,000

9,600,000

25,045,000

 Environment, Tourism and Hospitality Industry

38,136,000

81,270,000

119,406,000

 Transport and Infrastructural Development

399,182,000

761,295,000

1,160,477,000

 Foreign Affairs

56,090,000

260,075,000

316,165,000

 Local Government, Rural Development and National Housing

179,886,000

694,467,000

1,132,322,000

380,842,000

44,771,000 517,822,000

155,608,000

45,192,000

53,495,000

16,011,000

17,912,000

27,638,000

279,278,000

5,202,000

3,335,000

2,463,000

8,089,000

6,403,000

14,321,000

2,000,000

10,488,000

2,000,000

278,749,000

458,635,000

1,201,528,000

1,494,527,000

488,188,000

73,807,000 874,363,000

284,988,000

58,634,000

85,301,000

94,898,000

36,012,000

60,549,000

313,522,000

11,672,000

5,900,000

6,833,000

23,048,000

43,155,000

25,154,000

4,533,000

29,492,000

3,616,000

 Health and Child Care

507,061,000

 Primary and Secondary Education

362,205,000

 Higher & Tertiary Education, Science and Technology Development

107,346,000

 Women Affairs, Community, Small and Medium Enterprises Development

29,036,000

 Home Affairs and Cultural Heritage

356,541,000

 Justice, Legal & Parliamentary Affairs

129,380,000

 Information, Publicity and Broadcasting Services

13,442,000

 Youth, Sport, Arts and Recreation

31,806,000

 Energy & Power  Development

78,887,000

 Information Communication Technology and Courier Services

18,100,000

 Judicial Services Commission

32,911,000

 Public Service Commission

34,244,000

 Council of Chiefs

6,470,000

 Human Rights Commission

2,565,000

 National Peace and Reconciliation Commission

4,370,000

 National Prosecuting Authority

14,959,000

 Zimbabwe Anti-Corruption Commission

36,752,000

 Zimbabwe Electoral Commission

10,833,000

 Zimbabwe Gender Commission

2,533,000

 Zimbabwe Land Commission

19,004,000

 Zimbabwe Media Commission

1,616,000

 TOTAL

6,493,947,000

10,076,835,000

16,570,782,000

351,114,000

511,000,000

 Debt Service: Interest Bill

159,886,000

 Pension

594,100,000

817,586,000

223,486,000

 Other Constitutional & Statutory Appropriations

394,432,000

720,632,000

 Total Expenditure & Net Lending

7,765,361,000

10,854,639,000

18,620,000,000

 Repayment of Loans

2,550,300,000

0

2,550,300,000

 Total Expenditure & Net Lending including Loan Repayment

                             10,315,661,000

                                10,854,639,000

                               21,170,300,000

 

 

Annexure 2:     Slides1-25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         *HON. CHIKUKWA:  Mr. Speaker Sir, I seek clarification that when they came up with this review of the budget did they consider that

         THE HON. SPEAKER:  Order, order, the Statement by the Hon. Minister of Finance and Economic Development has been long and exhaustive.   Therefore, it will be superficial to start debating it.   It is the suggestion of the Chair that you get copies of this delivery, study them and then next week you can make meaningful contributions. – [HON. MEMBERS: Hear, hear.] -   I call upon the Hon. Minister, accordingly to adjourn debate.

        THE MINISTER OF FINANCE AND ECONOMIC

DEVELOPMENT (HON. PROF. M. NCUBE):  Mr. Speaker, I move

that the debate do now adjourn.  Motion put and agreed to.

       Debate to resume: Tuesday, 6th August, 2019.

  Hon. Chidziva having walked into the House and taken a seat.

         THE HON. SPEAKER:  Order, order Hon. Member, I ruled that you are not supposed to be in here because of your boycott.  So may you kindly leave the chamber? – [HON. MEMBERS: Inaudible

interjections.] -

         The Hon. Member conceded the Hon. Speaker’s ruling and left the House.

ANNOUNCEMENTS BY THE HON. SPEAKER

NON-ADVERSE CERTIFICATE RECEIVED FROM THE

PARLIAMENTARY LEGAL COMMITTEE  

         THE HON. SPEAKER:  Hon. Members, I have the following announcements from the Parliamentary Legal Committee.  Non-Adverse certificate for Coroner’s Office Bill, I have to inform the House that the Parliamentary Legal Committee met on the 1st August, 2019 and considered the Coroner’s Office Bill.

The Committee is of the opinion that the Bill is not in contravention of the Declaration of Rights or any other provisions in the Constitution of Zimbabwe.

NON-ADVERSE CERTIFICATE RECEIVED FROM THE

PARLIAMENTARY LEGAL COMMITTEE

         THE HON. SPEAKER:  I have to inform the august House that the Parliamentary Legal Committee met on 1st August, 2019 and considered the Money Laundering and Proceeds of Crime Amendment Bill [H. B. 5, 2019].

         The Committee is of the opinion that the Bill is not in contravention of the Declaration of Rights and any other provisions of the Constitution of Zimbabwe.

ADVERSE REPORT RECEIVED FROM THE PARLIAMENTARY

LEGAL COMMITTEE

THE HON. SPEAKER:  I have to inform this august House that the Parliamentary Legal Committee met on 1st August, 2019 and considered the Education Amendment Bill [H. B. 1A, 2019].

                      The Committee is of the opinion that the Bill is in contravention of

Declaration of Rights or any other provisions of the Constitution of Zimbabwe.

NON-ADVERSE REPORTS RECEIVED FROM THE

PARLIAMENTARY LEGAL COMMITTEE

         THE HON. SPEAKER:  I have to inform the august House that the Parliamentary Legal Committee met on 1st August, 2019 and considered all Statutory Instruments that were gazetted during the month of July, 2019.

         The Committee is of the opinion that Statutory Instruments 146 to 159 are not in contravention of the Declaration of Rights or any other provisions of the Constitution of Zimbabwe. – [HON. MEMBERS:

Inaudible interjections.] –

Hon. Chinyanganya having walked into the House and taken a

seat.

         THE HON. SPEAKER:  Order, order Hon. Member, can you leave the House? – [HON. MEMBERS:  Ngaabude! Ngaabude!] -  Can you leave the House? – [HON. MEMBERS: Inaudible interjections.] -  Order, order.

         The Hon. Member conceded the Hon. Speaker’s ruling and left the House.

TABLING OF NSSA FORENSIC AUDIT REPORT

         THE MINISTER OF PUBLIC SERVICE, LABOUR AND SOCIAL WELFARE (HON. DR. KANHUTU-NZENZA):  Mr.

Speaker Sir, thank you for the opportunity to be able to present to you today the NSSA forensic report.

         Mr. Speaker Sir, the National Social Security Authority is the statutory body governed by the NSSA Act.  It operates social security schemes for the benefit of employees, current or retired on a compulsory basis for the purpose of providing social protection and security upon retirement. The role of the minister, my role and that of the Board and management is to safeguard the interests of the contributors to the Pension Fund.  They have a responsibility as provided by the Act to be accountable, transparent and above all, to ensure good corporate governance of NSSA.

The NSSA forensic audit report was commissioned by the Auditor General, Mrs. Chiri.  It covers the period of 1st January, 2015 and the 208th February, 2018. The final report, Mr. Speaker Sir, was presented to me and the newly constituted board in February, 2019.  Thereafter, Mr. Speaker Sir, the board identified key issues emerging from the NSSA forensic audit.

These issues, Mr. Speaker Sir, relate to corporate governance, investments, properties, ICT and human resources.  In all these key issues that I have mentioned there are some significant irregularities.  In view of that, as Minister of Public Service, Labour and Social Welfare in the spirit of maintaining transparency, I proceeded to engage a team of legal experts whose role was to provide council on each of the emerging issues from the forensic report.

Mr. Speaker Sir, the engagement of lawyers required a procurement process and due diligence.  This process of engaging lawyers took two months, hence the delay in tabling this report.  However, the findings of the legal experts will be absolutely material in assisting my Ministry and the board in ensuring that the issues raised in this forensic report are attended to in pursuit of good corporate governance, accountability and transparency.

Mr. Speaker Sir, the findings in this report and the annexure here presented will guide us in determining which issues are seen by the legal experts as criminal.  What is presented here would also help NSSA to determine issues that are purely management and may require disciplinary action.

Mr. Speaker Sir, the Ministry is working closely with the AntiCorruption Unit.  They have the report.  Internally I shall ensure that we follow best practices within the labour legislative framework.  The Ministry of Public Service, Labour and Social Welfare remains absolutely committed to maintaining transparency in protecting the interests of the contributors to the pension fund.  The forensic audit report therefore provides us with a framework to review the operations of NSSA so that we remain accountable and transparent to the people who have entrusted us with the money.

Mr. Speaker Sir, I hereby table the NSSA forensic report as promised.  The report is being printed and members will be able to get the copies and the annexures that are bound here in three copies.  This report, Mr. Speaker Sir, is presented to you in full as requested.  Thank you.

HON. CHINOTIMBA:  Kubhadharwa $25 ini ndakacontributa

10 years.

THE HON. SPEAKER:  Hon. Chinotimba can you allow the

Chair to speak.

HON. CHINOTIMBA:  Thank you Chair.

THE HON. SPEAKER:  Thank you, Hon. Minister for your exhaustive summary.  I want to believe that Members of Parliament will apply their minds to the report and contribute constructively on the way forward.  Thank you.

COMMITTEE STAGE

ZIMBABWE INVESTMENT DEVELOPMENT AGENCY BILL [H.

  1. 2, 2019]

Second Order read:  Committee Stage:  Zimbabwe Investment

Development Agency Bill [H. B. 2, 2019].

House in Committee.  

THE CHAIRPERSON:  Order please.  Hon. Members, order.

THE MINISTER OF INDUSTRY AND COMMERCE (HON. 

  1. M. NDLOVU): Mr. Chairman, I move that you report progress and seek leave to sit again. Thank you.

Motion put and agreed to.

House resumed.

Progress reported.

Committee to resume:  Tuesday, 6th August, 2019.

MOTION

BUSINESS OF THE HOUSE

THE MINISTER OF STATE FOR PRESIDENTIAL AFFAIRS IN CHARGE OF IMPLEMENTATION AND

MONITORING (HON. DR. GUMBO):  I move that Orders of the Day, Nos. 2, to 4 be stood over until Order of the Day, No. 5 has been disposed of.

Motion put and agreed to.

COMMITTEE STAGE

CONSIDERATION OF THE ADVERSE REPORT BY THE

PARLIAMENTARY LEGAL COMMITTEE ON THE

MAINTENANCE OF PEACE AND ORDER BILL [H. B. 3, 2019] Fifth Order read:  Committee: Consideration of the adverse report by the Parliamentary Legal Committee on the Maintenance of Peace and Order Bill [H. B. 3, 2019].

Question again proposed.

HON. MATARANYIKA:  Thank you Mr. Chairman.  I would

like to move a motion to withdraw the adverse report passed on the

Maintenance of Peace and Order Bill.  The Committee met on the 1st of August and considered the notice of amendments signed by the Minister of Justice, Legal and Parliamentary Affairs and resolved to withdraw the adverse report previously issued as the notice of amendments addresses the Committee’s concerns.  I so move Mr. Speaker Sir.

Motion put and agreed to.

Adverse Report accordingly withdrawn.

        House resumed.

        Progress reported.

       Adverse Report: With leave, withdrawn.

       On the motion of THE MINISTER OF STATE FOR

PRESIDENTIAL AFFAIRS IN CHARGE OF

IMPLEMENTATION AND MONITORING (HON. DR. GUMBO),

the House adjourned at Eleven Minutes to Five o’clock p.m. until 6th August, 2019.

 

 

 

[1] Current Account numbers are in US dollars.

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