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SENATE HANSARD 14 FEBRUARY 2018 27-23
PARLIAMENT OF ZIMBABWE
Wednesday, 14th February, 2018
The Senate met at Half-past Two o’clock p. m.
(THE HON. PRESIDENT OF THE SENATE in the Chair)
ANNOUNCEMENTS BY THE HON. PRESIDENT OF THE SENATE
ADVERSE REPORT RECEIVED FROM THE PARLIAMENTARY
THE HON. PRESIDENT OF THE SENATE: I have to inform
the Senate that I have received an Adverse Report from the
Parliamentary Legal Committee on Statutory Instrument No. 79 of 2017 gazetted during the month of August.
REAPPOINTMENT AS CHAIRPERSON OF THEMATIC
THE HON. PRESIDENT OF THE SENATE: I also have to inform the Senate that Hon. Sen. Makore has been reappointed as the Chairperson of the Thematic Committee on Gender and Development –
[HON. SENATORS: Hear, hear.] –
LEAVE TO MOVE SUSPENSION OF PROVISIONS OF STANDING ORDERS NUMBER 50, 61 AND 128
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, I seek
leave of the House to move that the provisions of Standing Orders
Numbers 50, 61 and 128 regarding the automatic adjournment of the
Senate at Five Minutes to Seven o’clock p.m. on sitting days other than a Friday and at Twenty Five Minutes past One o’clock p.m. on a Friday; private Members’ motions taking precedence on Thursdays after Question Time and that Question Time shall be on Thursdays and stages of Bills respectively, be suspended in respect of the Appropriation
(2018) Bill [H. B. 8, 2017.] and the Finance Bill [H. B. 1B, 2018.] Motion put and agreed to.
SUSPENSION OF PROVISIONS OF STANDING ORDERS
NUMBER 50, 61AND 128
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, I now
move that the provisions of Standing Orders Numbers 51, 61 and 128 regarding the automatic adjournment of the Senate at Five Minutes to Seven o’clock p.m. on sitting days other than a Friday and at Twenty Five Minutes past One o’clock p.m. on a Friday; private Members’ motions taking precedence on Thursdays after Question Time and that Question Time shall be on Thursdays and stages of Bills respectively, be suspended in respect of the Appropriation (2018) Bill [H. B. 8, 2017] and the Finance Bill [H. B. 1B, 2018].
Motion put and agreed to.
BUSINESS OF THE HOUSE
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): I again rise to move that Orders of the Day, Numbers 1 to 3 be stood over until Orders of the Day, Numbers 4 and 5 on today’s Order Paper have been disposed of.
Motion put and agreed to.
FINANCE BILL [H. B. 1, 2018]
Fourth Order read: Second Reading: Finance Bill [H. B. 1, 2018.].
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, the
purpose of this Bill is to give effect to the revenue measures which I announced in the 2018 National Budget Statement presented to the Parliament of Zimbabwe on 7 December, 2017. The measures seek to achieve the following, that is just in summary:
- Consolidate the gains realised by local industry through enactment of appropriate support measures;
- We seek to promote power generation;
- The measures seek to promote mineral beneficiation;
- They also seek to enhance revenue collections and improving efficiency in tax administration;
- We also seek through these measures to provide relief to taxpayers, mainly through a moratorium on the collection of interest and penalties on outstanding taxes; and
- We are also, through this Finance Bill, seeking to amend other statutes such as the Indigenisation and Economic Empowerment Act [Chapter 14:13], the Exchange Control Act [Chapter 22:05], and the Bank Use Promotion Act [Chapter 24:24]. Support to Industry
- Madam President, the ‘New Economic Order’, prioritises high productivity in agriculture with a view to support and sustain other sectors of the economy, particularly manufacturing.
- This is to be built through linkages between anchor companies and out-grower farmers or small to medium enterprises in the provision of technical and support services that include agronomic advice and marketing opportunities.
- Madam President, the Bill therefore seeks to support the concept of anchor companies by granting a 150% deduction on any expenditure related to technical and support services incurred by a taxpayer who is an anchor company providing inputs, agronomic advice and marketing opportunities to a group of outgrower farmers and small or medium enterprises.
- Madam President, in recognition of the energy deficiency within the country, Government extended a number of fiscal concessions towards power generating projects. Recognising the growth trajectory expected under the new economic dispensation, this Bill seeks to promote investment in additional power generation projects by exempting such projects from corporate income tax for the first five years with effect from 1st January, 2018. Thereafter, a corporate tax rate of 15% will apply.
- Madam President, in order to promote mineral beneficiation within the country, and mindful of the investment that has already been made by some mining houses towards attaining milestones in the agreed road map, the Bill proposes to further defer implementation of the export tax on unbeneficiated and semi-beneficiated platinum to 1st January, 2019.
- The Bill also proposes to reduce the export tax from 15% to staggered rates ranging from 0% for refined precious metals to 5% for PGM concentrates.
- This measure Madam President, will however, not apply during the first five years of projects that commence operations on or after 1st of January, 2018.
- The Bill thus seeks to extend the same concept of an export tax for lithium concentrate at a rate of 5% of the gross value and unbeneficiated dimensional stones such as black granite at staggered rates ranging from 0% to 5% depending on the level of beneficiation.
Revenue Enhancing Measures
- Madam President, in order to raise additional revenues, to fund critical Government programmes, the Bill proposes the following measures:-
- We are seeking to implement a virtual software based Tax Management System for some classes of taxpayers to facilitate the electronic recording and transmission of business transactions to
- Devolve the responsibility for collecting development levies, which had been taken over by the Ministry responsible for lands, to the appropriate Rural District Council.
- Apportion prepaid expenses in the period in which they are incurred for purposes of determining taxable income. This measure has the effect of denying taxpayers the opportunity to claim deductions on the prepaid expenses, which was of course prejudicing the fiscus;
- Levy 3% on gross takings by bookmakers in order to mobilise resources to upgrade community recreational centres; and also
- Define ‘equity’ so that includes issues and paid up share capital, unappropriated profits, reserves, realised reserves and interest free loans from shareholders with a view to minimise tax liability through manipulation of financial statements.
Tax Relief Measures
- Madam President, in order to provide relief to taxpayers of various classes, the Bill is proposing the following measures:-
- We are proposing an amnesty on interest and penalties for outstanding taxes that have accrued prior to 1st December, 2017. This is for taxpayers who come forward and settle their obligations within the period ending 30th June, 2018. This proposal recognises the economic challenges experienced over the past decade which have resulted in a number of companies failing to meet their tax obligation.
- Secondly, we are seeking to grant exemption of registered buyers of tobacco from the requirement to withhold 10% tax in order to ease the tax burden on tobacco farmers that are experiencing viability challenges. - Removal of the 5 cents tax on intermediated money transfers and automated financial transactions with a monetary value of US$10 and below, in order to reduce the cost of transacting using such alternative payment forms. We are seeking to encourage Madam President the use of electronic transfers away from cash based transactions.
- Review the VAT withholding rate from 10% to 5% of the value of taxable supplies, in order to minimise cash flow challenges on VAT registered operators.
- Grant relief to VAT registered taxpayers who were required to pay VAT on capital equipment that would be deemed to have been disposed in cases where, through a change of the law, previously taxable supplies become exempt from VAT.
- Exclude locally contracted debt from the prescribed debt to equity ratio of three to one, on condition that the Parties involved are unrelated in order to support capitalisation on struggling companies.
- Review the capital allowances for staff housing and schools, hospitals, clinics and nursing homes constructed by holders of Special Mining Leases from US$10 000 to US$25 000; and US$150 000 respectively. This measure will assist to uplift the living standards of mining communities and also retain skilled labour force.
- Compel local diamond producers to grant a price discount to domestic beneficiation firms, which is equivalent to the value of the royalty forgone by Government.
- Align the income tax relief on Export and Foreign Remittance Incentives to the date of introduction of the scheme, that is, June 2016.
- Repeal interest on penalties in order to give relief to taxpayers.
- Align the effective date of the Health Levy to the date of promulgation of the Finance Act, in order to avoid retrospective collection of the levy.
Efficiency in Revenue Administration
- Madam President, importers have taken advantage of limited
ZIMRA administration capacity to monitor Bonded Warehouses, hence generate fraudulent documentation which purportedly shows that proprietors would have been provided space and bond surety for imported goods, thereby prejudicing the fiscus of revenue.
- In order to countervail this malpractice, the Bill proposes to provide for Private and Public Bonded Warehouses whose proprietors will be allocated Business Partner Numbers to facilitate monitoring of importations into such warehouses.
Other legislative changes proposed in the Bill seek to: -
- Amend the definition of financial services to include banking institutions which had erroneously been removed from definition of financial institutions for purposes of exemption from VAT.
- Regularise the exemption of diesel imported for use in approved power generation projects from carbon tax, NOCZIM Debt Redemption and Strategic Fuel Reserve levies, with effect from 1 January, 2017.
- Remove the requirement for a contract to be concluded between ZIMRA and agencies appointed to collect presumptive taxes.
- Regularise the reduction of platinum royalty rates to 2.5% for all platinum mining companies in line with the Government commitments in some of the Special Mining Lease Agreements.
- Make minor amendments and corrections to the expedited procedure for the recovery of tax debts, including the securing in advance through a “provisional attachment order”
of any moveable property that may be sold in satisfaction of taxes due.
Amendment of Other Statutes
The Bill also seeks to amend the following Statutes: -
- Indigenisation and Economic Empowerment Act [Chapter 14:13] to among other issues, restrict compulsory indigenisation threshold of 51/49% only to those enterprises engaged in the mining of diamonds and platinum (and this is pending the formulation of a Diamond Mining Policy and
Platinum Mining Policy) and also replace the autonomous National Indigenisation and Economic Empowerment Board with the National Indigenisation and Economic
Empowerment Unit within the Ministry responsible for the Act;
- Amend the Exchange Control Act by embodying the “Amnesty in Respect of Illegally Expatriated Property” which was earlier published on 4 December, 2017 by the Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations, 2017;
- Amend the Public Finance Management Act [Chapter 22:19] by giving statutory recognition to the position and functions of the Office of the President and Cabinet;
- Amend the Banking Act [Chapter 24:20] by, among other things, permitting a bank to purchase its own shares or the shares of any associate, or to make any loan or advance on the security of its own shares or the shares of any associate, provided the prior written approval of the Registrar of
Banking Institutions is obtained;
- Amend the Bank Use Promotion Act [Chapter 24:24] to among other things facilitate and widen the acceptance of payment for everyday transactions otherwise than by cash, for example, by RTGs and other electronic means.
The amendment also prohibits differential pricing based solely on the mode of payment, increases the amount of cash that may be held by individuals outside the banking system, and provides a mechanism for the freezing of bank accounts, subject to judicial oversight.
Finally, an amnesty for the banking of hoarded cash is enacted for the period 1st January, 2018 to the 31st March, 2018.
- Parliamentary Pensions Act [Chapter 2:02] to provide, among other issues, the annual pension of a former Speaker, Deputy Speaker, President of the Senate or Deputy President of the Senate who served at least one full term in that Officer; and
- Parliamentary Salaries, Allowances and Benefits Act [Chapter 2:03] to provide, among other issues, for the prescription of specific allowances and services and facilities for a former Speaker of the House or President of the Senate who has served at least one full term in that Office.
Madam President, with these remarks, I now move that the Bill be now read a second time.
HON. SEN. B. SIBANDA: Thank you Madam President, first of
all, I thank the Minister for his presentation. I have got a few remarks or questions. I applaud the decision to endeavour to increase industrial productivity. However, I also notice that we have a productivity centre in this land which has been lying semi-idle. I believe that the activation of the productivity centre would contribute positively to the overall growth of productivity in industry. The spill off from productivity, I am sure everybody appreciates from industrial productivity, every one of us appreciates that it would be significant and it would inject impetus to this economy.
That is my first contribution; my second contribution would be in the form of a comment and a question. Maybe I did not understand the Minister. The Minister talked about an eventually 15% corporate tax on those who invest in energy, maybe I did not fully understand him, but if that is the case, please clarify. My question is, if those who invested in energy generation eventually pay a 15% corporate tax, what happens to those who were already in the business by the time this Act comes into play; correct me if I am wrong Minister.
My third comment is on amnesty on interest for those who have not paid their VAT or corporate tax up to date. I applaud the Minister for that, I know a number of businesses have gone under not because they were totally unable to pay the corporate tax, but because they have had extra charges that include interest and penalties placed on their initial account which had not been up to date.
My fourth comment is on the Indigenisation Act where diamonds and platinum have been reserved for the 51%:49%. I agree with that minerals resources once depleted are not recoverable and sure, we all agree that mineral resources fall into various categories which are different. However, I am saying maybe the lesson that we learnt as Zimbabweans is to be slightly pro-active, if we had done this a few years ago, we would not be where we are economically. We would have raised more investment and that comment applies generally to our reaction time to suggestions.
Minister, I want to talk a bit about price differentiation. We all meet this in our daily lives, yesterday we spent a lot of time talking about this but the bottom line is, it is a manifestation of the state of the economy. I for one used to be a significant business person in Harare. I am aware that the businessman is in a very invidious position because of the state of the economy; you are thinking about your business tomorrow, you are trying to service your accounts today and you really do not know what will happen to you the next day. That is precisely why people have a regime of charges.
I think as a nation we must agree that the faster we address our economic situation, the better for this challenge. It will not go away, we cannot wish it away. Minister, I remember last year I was asking you if we can safely say we can denominate the bond against the US$ and say we give it a value that we determine. You assured me that the bond would remain at par, but the practice is the bond is not trading at that level, the bond is unavailable – [HON. SENATORS: Hear, hear.] – The bond will not trade at that level in this global village. We have experienced this and I think we forget too easily. That is what happened to the Zimbabwean dollar, we tried to peg it at $3 to the US$ and it moved to 6, 10 - because we attempted to do the uneconomically viable act.
My last comment is on hoarding of cash, Minister, I know all of us particularly our age, when we grew up, we knew that money is found at the bank. It is a regrettable symptom that money is now found under mattresses. We knew a few groups of traders in this land that used to keep money under mattresses. That did not include the Blackman; he would rather hold it in cash in the bank or in the form of cattle. Today, people are keeping money, particularly foreign currency because it is a survival skill. I am not in any way condoning it but I think the earlier we accept and the earlier we accelerate our economic recovery, these things disappear naturally. You will remember Minister what happened soon after we formed the GNU, price stabilised, the informal money market disappeared, the banks became liquid - you could go to the bank and get your forex but it was because of a confidence factor that had filtered into our economic system. Minister, I know and I sympathise with you and may be for a long time, that it is critical, very critical, imperative that we get this economy right. I am sure that a lot of your proposals are attempting at that. However, it is very important that the proposal is followed by act, so that the desired results are achieved.
Madam President, I thank you for the opportunity – [HON. SENATORS: Hear, hear.] –
*HON. SEN. MUMVURI: Thank you Madam President, I stand
up to add my voice on the Finance Bill that was brought by the Minister.
The previous speaker has highlighted a lot of the things I wanted to say. He used quite a lot of jargon and I am going to say a few things to ensure that the electorate we represent understands it. Firstly, he mentioned measures that need to be taken to enhance revenue collection. In my opinion, agriculture as mentioned by the Minister is the backbone of our economy. As we can see, there has been no enough rainfall this season. If the Government has realised that agriculture is the backbone of this economy, then we should be more serious about irrigation. If you go to Rushinga and Mt Darwin, there is no agriculture that is taking place and currently there is no grain that can be salvaged for people to get food. I think we should have put water bodies that should be in existence for people to be able to engage in irrigation. I think that would go a long way. The only solace we have is that last year we were able to harvest quite a lot, but what I think is that irrigation should be done in all areas. In Rushinga and Mt Darwin there are no existing water bodies, but there are dams like Sengwa Dam that were pegged a long time ago as was done at Tokwe-Mukorsi but nothing is happening. A case in point is the Semwa Dam to serve Rushing and Mount Darwin.
On the issue of power generation of electricity, we want to thank the Government for its initiative. Part of Kariba South has come on board, but what we wanted was to proceed with what is taking place on this initiative so that we do not engage in load shedding as power generation leads to the development of the nation.
I heard that ZESA employees are requesting for salary hikes and that this is based on collective bargaining that was done in 2012. ZESA is not against this but what we need to realise is that if they increase tarrifs, it will raise the cost of electricity. Some of the arguments that they are giving will cost us and I do not think it is possible.
Hon. Sen. Sibanda spoke at length on the issue of revenue enhancing measures. The issues of ZINWA electronic transfers that you are mentioning should be practical and not a talk show. Deputy Minister Mukupe once went to the border areas and he came across quite a number of issues that are happening. Most machinesare not working, they are using the manual system. It is the manual system that causes corruption because people bring in goods that are not accounted for. I think this should be taken seriously to ensure that the electronic system functions. This will reduce corruption.
We once went with our Committee to the borders and we witnessed the same thing. We were assured that if electricity is available, they can scan a vehicle from far, but what we realised is that nothing was happening at those scan machines. This issue is continuously talked about, but we are made to understand that if this happens, a lot of revenue will be realised.
There was also the issue of the three tier pricing system that is a challenge currently. We talked about it Minister, in your absence.
There is a motion that was moved by Hon. Mawire. We debated it a lot. We need your assistance because what is taking place is the issue of the black market and it is taking place right under our noses. It is happening at Eastgate and Road Port very close to the precincts of Parliament.
Why is it that this is not being brought to an end?
When a question was posed, it also came out that there is a Committee that was set up headed by Vice President Chiwenga. I am happy that you also talked about removing the 5% that is charged when one uses a point-of-sale machine. You even gave the threshold because if you do not charge the point-of-sale machines, there will be more uptake of this method of payment in rural areas. For example, groceries that cost $7 end up at a cost of $12, when using the swipe but if you pay using Unites States dollars or bond, it can cost around about $7. These are bread and butter issues affecting those people in the rural areas. I think this Bill should address these issues and if it does, we realise our economy will progress well. My question is, why is it that the informal market is still in existence? Hon. Sen. Sibanda once mentioned that issue. So I am supporting because that is where the root cause is that is causing challenges. With these few words, I hope the issues that I have mentioned, I hope they will be considered in the Bill. Our nation has a bright future. I thank you.
HON. SEN. MARAVA: Thank you Madam President. I would
like to thank the Minister for visiting Senate and bringing this seemingly good news. Madam President, I also want to welcome the tax relief measures that the Minister has brought into the House. I picked a few which I found highly useful especially for the community of Zimbabwe – the one on Value Added Tax (VAT) and the relief on capital equipment.
Madam President, without capital equipment, all our talk will just be day dreaming. We talk of production, income, offshore investments and so forth, but with relief on capital equipment, it means that our productive sector will be very useful. We can produce for the nation and this will enhance yields or high productivity. It will also end up giving us positive benefits especially in our industry and commerce. Madam President, the employment problem that we have in Zimbabwe will also be solved somehow to a certain extent if our capital equipment is imported at lower costs.
Madam President, repeal of the interest on penalties of tax arrears is a welcome move, but I think it is a welcome move not to the generality of Zimbabwe, but to a few people or institutions whom I would not exonerate from corruption because you would find that such people who have been fighting the systems before and finding themselves in a position of being able to fight additional costs or additional punishments will tend to continue with the same trend.
I welcome the importation of diesel which will be at a cheaper cost especially meant for the strategic points in our country, like the Minister has mentioned. It is a very welcome issue because we do have strategic points which must not cry of any shortages as they are not a want but a need for the nation. My question to the Minister is, I would like a bit of clarity as to which account or which institution of the country will be burdened with the transferred costs of this cheaper diesel because as the Minister knows, there is no credit without debit. I would like to know where these costs would be transferred to and who will burden those costs because it is a matter of shifting them. It is not a matter of erasing them.
Finally Madam President, there has been talk about review on benefits for the top brass of Parliament who have served for one term. There is very loud silence about the benefits of a parliamentarian who has served for one term. I felt that this thing cannot pass our noses without mentioning it. There is no top brass of Parliament without the structures of Parliament which include the parliamentarian himself.
There is a lot but I want to end there.
HON. SEN. RTD. GEN. NYAMBUYA: Thank you very much
Madam President. I am going to make three brief points. First of all, let me start by congratulating the Minister on the measures he has announced by way of trying to address the serious position which we are facing as a nation. I appreciate and sympathies with the Minister in that he has got very little space to maneuver. There is very little in terms of capacity at short term to try and address this serious issue.
So in all fairness, I think he has done a great job. We all know and appreciate that as a country, we are spending more than we are getting. In other words, we are living beyond our means and this is manifested by the fact that our budget deficit has increased. I think the Minister’s own forecast is talking about the possibility of a US$2 billion budget deficit and that is one of the reasons why we are experiencing the current challenges which we are facing.
As I have said, the measures which he has announced are quite bold and substantive to the extent that we need to give the Minister the room and space for him to executive what he has just announced. I just wish if we could improve on one or two areas. Firstly, on the issue of reducing what we eat to what we gather, I think all of us as a nation must participate in it. There is no point in talking about that and then we do exactly the opposite. We have got that disease as a nation. We want other people to tighten their belts whilst we loosen our belts. We must walk the talk as a nation.
I also want to encourage the Minister to look at other models in terms of ease of doing business. He has announced a number of measures which he would like to see implemented this year. One of my worries is our ZIA. If I compare it to other investment centres in Africa especially with the one for Rwanda, I think our ZIA is very much incapacitated. It does not have teeth. Investors come into this country and they go round in circles to the extent that some of them are put off by this rigmarole and bureaucracy which the founder of bureaucracy actually meant to improve doing business. But, in our case we are now using it as a means of slowing down business.
So, Hon. Minister, my strong recommendation is to give ZIA the teeth. If ZIA has approved an investment, everybody else should fall in line and ensure that investor is assisted to quickly set up shop. I also would like to make a point on dead capital which we have in this country. We have dead capital in some respects. Some parastatals which we have are dead and yet they have got the potential. I am aware that the Minister is doing something about it and I think we need to expedite the process of privatising those parastatals which can do better in private hands.
To a large extent, I think land has been dead capital unless and until we give value to the 99 year leases so that they become transferable and they become bankable. I would also like to commend the Minister on the measure he has taken to make the energy sector lucrative. Energy is a vital component of enabling that the economy ticks. One of the most important investments in this country that changes the face of this country and changes the face of Africa is Batoka.
Batoka is going to generate 2 400 megawatts. It is going to satisfy our needs in terms of energy and it is going to enable us to export revenue to the region and beyond, and we will earn revenue forever and ever. I really like to see this project expedited so that we quickly get on with it. It is a green project and it is renewable and one of the best ever things to do.
The energy sector has had its fair share of corruption and problems and a case in point is this Gwanda debacle which we are witnessing. I hope we achieve closure to it so that investors will know that when we detect something which is wrong we act on it, clear it and then we move on with our lives. With those few points Madam President, I wish to thank you.
HON. SEN. TAWENGWA: Thank you Madam President. I
would like to applaud and thank the Minister for tabling the Finance Bill in this House. I note that it is not punitive but very accommodating, progressive and I would believe that even businesses welcome this Bill.
I want to state a few issues that I have noted although I am very much aware we will be going to the Committee very soon but generally, it is investor friendly. It encourages investment and therefore production and of course eventually exports. We cannot remain a consumer country whereby we keep on consuming without any exports.
In this Bill, the opening clauses are not conforming to the actual clauses in the Bill itself. So, you will have to look at that later on. It is on the first three pages. Minister, you referred to the export of the 5% on the export of uncut stones which include marble and granite. Members here are aware that we discussed the issue of granite at length, whereby communities are not benefiting from stones found in their areas. If the Minister can clarify if Rural District Councils (RDCs) and communities are going to benefit from that five percent.
Hon. Marava referred to the issue of pensions for Members of
Parliament in terms of duration. The Bill refers to the duration of those who have served for two terms, those are the ones who will benefit from Pensions and those ones who will have served one term will get gratuities. The question should be why is it that one who has served for one term qualifies for gratuity and the Presiding Officers qualify after one term for pensions. Can the Minister clarify on that one?
You also mentioned the issue of hoarding cash; what is acceptable to be kept by individuals or businesses overnight and you said this has been increased from US$75 to US$200. Madam President, at a business level capacity, say for example one of these large supermarkets, they have ten points of sale at any given time and they need to keep a float which is needed for change. I witnessed this in Masasa whereby somebody had US$100 bill. That person was a foreigner, he tendered that bill and they wanted change. There was no change because there was no float within that organisation. Does this really work for these big supermarkets; may be individuals? We know things are tough and there is a problem of cash. I think there is need to think seriously regarding this issue. Well, we will deal with the other issues when we are in Committees. Thank you Madam President.
*HON. SEN. CHIMHINI: Thank you Madam President. I
believe all of us have heard of the Bill that has been brought by the Minister which shows that there is an intention to improve the state of the economy. I want to seek clarity on three questions from the Minister. First and foremost, we have shops that are charging value added tax at 10 or 15%. I do not know whether the money that has been collected by the retailers is being remitted to Government because it can be deducted from source but if one is not using a machine which is traceable, how then can we tell that you are receiving that amount?
Secondly, we have a deficit budget but at the moment we are talking about the Debt Assumption Bill which means that the Government is adding more debts. What strategies do you have to ensure that our debt is not increased because we seem to be in the habit of introducing Debt Assumption Bills for parastatals that are not performing well?
Thirdly, Hon. Minister, I would like to find out; what have you put in place as regarding ministries that you allocate amounts of monies, these ministries year in and year out overspend without Government’s approval? What measures have you taken to put to an end such behaviour because from the onset, they overspend well knowing that they are not going to be stopped and that no measures will be taken against them? I thank you Madam President.
+HON. SEN. KHUMALO: Thank you Madam President. I have
queries on three areas, maybe I am misunderstood. I would like to ask the question again. Sometime back, those people who used to live in the reserves ….
*THE HON. PRESIDENT OF THE SENATE: Order, may I
request that you debate in English. The Minister does not understand Ndebele very well.
HON. SEN. KHUMALO: The issue is on rural district councils, maybe I did not understand what was said. We used to pay for our vehicles at the rural district council and that money was useful to the council. It is now being paid at town offices, are they going to remit it to rural district councils so that they can get that profit which they used to get before?
On the ZINWA issue, we are saying we want productivity in agriculture. Sometimes, ZINWA does not provide water regularly and this affects production. I am mixing languages because I was not prepared to speak in English. ZESA is charging high prices to ordinary people who are doing agricultural business and the Minister is talking of more production. ZESA costs are very high for rural farmers. What arrangement has the Minister put in place to ensure that there will be no power cuts for continuous production in rural areas. I thank you.
*HON. SEN. MASHAVAKURE: Thank you Mr. President, I
have two things. Firstly, it is the issue of the enhancement of revenue collection which is required by the Minister of Finance and Economic Development. We can do that through saving the money that we will be having. For example, in other countries such as China, a lot of companies are set up there because the workers are paid low salaries but in Zimbabwe, it is known that if you go to the City Council, to ZESA, to the President’s Office or even at Parliament, if you are a sweeper you get a minimum of $700. A qualified teacher and other teachers are paid
$500. I am saying that our systems as we try to rationalise Government’s workers, we should rationalise the salaries that the workers get and people should not be paid because of an institution such as ZESA or ZINWA.
An Hon. Member earlier on spoke about ZINWA, in one of the Committees, we were informed by some stakeholders that ZINWA are intense in revenue collection but not service delivery. They do not have the capacity to construct dams or to sink boreholes, but once you have your borehole, they want to collect revenue from your borehole. And, should it break down, they do not actually repair it. That system of doing business makes our country expensive.
I urge you to look at the pricing system of the country so that we can be competitive in the region as regards Botswana, South Africa and such other countries. We were given other examples. One can have tiles made for less than $2, which is 10 Pula in Botswana. If we were to do that, we would be able to save in terms of the money that we would have collected and we will be able to run away from the issue of this perennial budget deficit. I urge you Hon. Minister to do something about this issue so that we can become a competitive destination in terms of our salaries and prices.
Lastly, there are people that are saying that they are buying currencies on the parallel or the black market and that is why the cost of goods is high. But, I still believe that all people that are getting their finances from the black market, the big question is, where are the people that are running the black market getting the currencies that they are using. If I go to my bank on a daily basis, week in week out, there is no money but these money changers have all the currencies ranging from the dollar, pula and rand? I urge you Hon. Minister as the Ministry, Treasury and the Reserve Bank to investigate the source of the funds that they use. It is not coming from outside the country but if it was coming from outside the country, we would say this was a foreign direct investment, but bond notes are a local currency. Where are they getting that money from? Please, get to the bottom of this and expose the culprits that are involved. It is high time that you name and shame them so that your system can become normal. I thank you.
HON. SEN. MOHADI: Thank you Mr. President. I would like to thank the Minister for presenting the Finance Bill in this august House.
But, as an extension to what the Hon. Member has just said about money laundering, I had this suggestion that, can we not have an Act or a law pertaining to these people who are selling monies everywhere so that we can bring sanity to our country.
Apart from that Mr. President, I also want to mention on the exchange rate where you will find that officially, we are told that the US dollar is equivalent to the bond note but physically, you would find that it is not, even if it is cash. Furthermore, when we talk about the exchange rate of the bond note to the South African rand, you will find that these days the rand is equivalent to the bond note. I do not know what is taking place and this has destroyed our people in the communal areas, especially those who are living nearer to South Africa because, their exchange rate has just been brought to nothing at the end of the day.
Also, I would like to give a comment because most of the issues have been said. On ZIMRA, Minister, you will find that our ZIMRA offices, especially at the border towns, are a sorry sight. They have roofs falling on them. I know that you had budgeted something for the rehabilitation of ZIMRA offices but, it is rather delaying because most of the ZIMRA offices are at the border areas and they are just at the entrance where foreigners and people coming from other countries will end up receiving Zimbabwe as economically bad because what they see at the border at the ZIMRA offices is not pleasing. I wish we could speed up the processes of rehabilitating those ZIMRA areas.
Lastly Mr. President, I would urge the Minister, when he talked about productivity and talking about agriculture as the backbone of our economy, if ever there are resources, they should be speeded up so that agriculture is done in a smart way so that we can produce, especially looking at the low veld areas where they only produce through irrigation systems and dams. If these could be speeded up? With these few words, I support this Bill fully. I thank you Mr. President.
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): Mr. President, I want to thank all the Hon. Senators who have contributed and I take on board almost all their contributions. The contributions are very pertinent to the budget statement and to the trajectory that we have launched and I want to thank them very much for their insight into our challenges and also insight into the solutions that we are proffering in plotting our path out of our current challenges.
I need to say from the outset Mr. President that, most of the challenges that we are facing are legacy/historical challenges. But, we have to face them head on – we cannot wish them away and some of these challenges are basically touching on inefficiencies, malpractices and perhaps corruption in the past, leading to losses in state enterprises. We are now faced with the losses and rather than spend too much time in the past, I prefer to plot a path into the future and expend my energy addressing how we should look at the future. Precisely, that is what the Budget Statement is about. It is forward looking and not looking to the past.
Let me have the opportunity now Mr. President to respond to the questions asked. Hon. Sen. B. Sibanda, I agree with you entirely with respect to all the contributions that you have made. With respect to the productivity centre, this is an aspect that comes and falls under the Ministry of Labour and Social Services, and I will find out why this productivity centre is not taking off. I know the Zambian one is operational and I think these where established about the same time that we did. So, I need to acquaint myself fully with the productivity centre in Zimbabwe and understand what its challenges may be.
With respect to investments into energy, what we are basically saying is in order to encourage investments into irrigation; we are saying any investments into irrigation will be exempt from corporate tax. I think I gave the period of five years and thereafter, the corporate tax will be reduced. I think the current corporate tax may help me and should be around 25% or thereabouts. We are now saying after the five years, these investments will attract 15%. This is again to encourage investments into power generation.
As you know we have a policy to encourage independent power producer, whether thermal, solar, wind or hydro. In this respect, we are saying you are all welcome to invest in this sector, to enter into power purchase agreements with the national power company in order to sell or offload your power into the national grid and also if you want to export, you will be given a licence to export. If you also want, you can produce your power for a localised area to supply dedicated customers and then you have to enter into arrangements with Zimbabwe Transmission and Distribution Company to will your power to the customer. This is what we want to encourage.
I am happy to say that we have one or two hydro projects which are going to benefit under this incentive. We have a company which has now cumulatively in the Honde Valley, I think five projects, cumulatively now producing around 26/27 mega watts from hydro and this is a private sector company. Sometime in October or November last year, I commissioned a 1,5 mega watt hydro power station undertaken by Old Mutual. These are the investments that we are encouraging as we go forward. We can never have a situation where we have enough power. I say so because currently, we have a deficiency when our economy is depressed. When it takes off, as I am sure it is going to do, I have put my head out that we are going to grow this year at 4,5% growth and it could be conservative. Now that increased growth, require power in order to further propel it to greater heights.
I think you welcome the waiver on interests and penalties, and I think this is very good in order to give relief to the tax payers. On indigenisation, we did the correct thing. One piece of legislation which was acting as an obstacle to the operating investment climate for both domestic and external, was the indigenisation threshold of 51/49% threshold. We realised that this was an obstacle and we have since reduced and confined the 51/49% only to limit it for now to diamonds and platinum. The rest of the economies, whether extractive sector or otherwise, anyone or any nationality is welcome to invest.
We however, under the amendments Mr. President still have a reserved sector for our people because we believe that businesses like hair dressing saloons, bakeries, retail and wholesalers, we have the capacity for our people to operate in those sectors. But even there, we are saying those who are already in there and are foreigners, will remain provided that they register and tell us that they are already operating, and that they comply with our laws, bank their money, obtain trading licences and so on.
We are also saying in the area, for instance of gold panning, there cannot be any justification for anyone to come from abroad to pan gold in our country. So, that is closed totally to our citizens. Now, in the area of diamonds and platinum, this is only pending formulation of a
Diamond Policy and I want to say that already my colleague the Minister of Mines is formulating a Diamond Policy. The state of affairs is that we consolidated it under the Zimbabwe Consolidated Diamond Company. That is the only company now apart from Murowa Diamonds which is 100% owned by RioZim, but we consolidated.
As we have consolidated, we find of course that in most of the claims the alluvial diamonds which are easier to mine are depleted. We now have to obtain specialised equipment to start conglomerate mining and also to explore for kimberlites. We are also advised that there may be other diamond deposits elsewhere outside the Chiadzwa area. For this we need of course to come up with a diamond policy that will clearly chart and give us a roadmap on how we are going to handle the exploitation of this resource.
The policy may also entail that for reasons of expertise and technology, we may need to consider going to bed with a world class diamond company. That again will be debated I am sure when the policy is formulated. We had the privilege Mr. President to accompany our President on the national visit to Botswana yesterday. We visited their diamond trading company which has state of the art technology in terms of sorting, cleaning, polishing and they actually sort according to sizes, shapes and colours. All done by the machines and we have agreed that we will send some parcels to them so that they assist in the polishing and also the sorting so as to add value to our diamonds.
I think that the diamond policy will also have to address whether we can link up and for temporary or in the short medium term, use the facilities that we found in Botswana for polishing and sorting our diamonds. They are already doing so for other countries like South Africa, Canada and Namibia. I think that discussions will be opened up with a view to pursuing that. So, the indigenisation threshold of 51/49% while confined to diamonds and platinum is just because we are expending formulation of a policy on this issue.
Mr. President, Hon. Sen. Sibanda raised a perennial issue since we do not have our own currency. I think for as long as we do not have our own currency, we are going to continuously have to harp on price differentiation, three tier pricing systems and so on. The explanation is very plain Mr. President Sir, for as long as we do not have sufficient foreign currency to meet our needs, I do not think we can entirely forget and rule out the operation of a black market. Currently, because of the measures that we took to enhance local production to raise the capacity utilization by our own local companies which are into import substitution, it has raised the demand for foreign currency. In others words all those local companies which are into import substitution, your Cairns and a number of those companies which are producing to meet local demand - are not exporting but they require foreign currency for capital equipment, raw materials and so on. That has raised the demand while maintaining the only 5 items which earn foreign currency for the entire economy for fuel and so on.
The solution which is not a one day event but a process is to diversify our exports, to increase our exports, especially to attend and look after those companies which are into export earnings. This is precisely what we did with the introduction of the bond note. The bond note is intended to encourage, incentivise exports and thereby also reducing the costs of production - which in this country is still very high. We are providing for instance tobacco farmers, 12.5%, for gold miners we are also doing the same and so on. The question always arises as to the availability of bond notes, may be of US$ which are found in the black market. It is very difficult to know where the leakages are but I can just give an example. Currently in order to encourage gold production and I need to point out here that from 2013, our gold production was at 12 metric tonnes. We have since moved this through the various fiscal incentives that we are offering to gold miners, reducing royalties and so on.
We have since moved the production to 24.8 metric tonnes as of last year and it is our intention to further push it to 30 or so tonnes this current year. Now, to do that, we have been encouraging - apart from the issuance of bond notes as an incentive for exporters; what we have also been doing is we have been paying artisanal miners about 70%, originally we are paying US$100 for $100 worth of gold delivered. We then negotiated with them to reduce the US$ component to 70% while paying the 20% to 30% in bond note. This is all in cash and we pay something like US$15m per week. So, sometimes it is not difficult to find out what could be the source of some of the money that could be on the market. When we reduced it from paying 100% in US$, we found that there was a fall in deliveries to Fidelity, suggesting now smuggling or selling it illegally to other purchasers. So, those are issues that we have to balance.
As I see it, some of these problems are a result of our success and I think we need to take them in our stride. I think that answers Hon. Sen.
- Sibanda. That answers the issues about confidence. I agree with you, it all boils down to confidence ultimately. Currently, through the new political dispensation, there has been renewed confidence, certainly the mood, the goodwill is there and I think as a country we have to ride on that goodwill so that we can use the goodwill generated amongst our people to move to the next level. We hope that through our policies we can receive their maximum support so that we do not falter. We are going to accelerate our economic reforms.
We are going to move full throttle on economic reforms so that we take advantage of the goodwill that has been generated by the recent leadership changes. We are going to certainly address the issue of state enterprises and I want to say that I am aiming to take a paper to Cabinet by mid-March that will spell out, recommend to Cabinet for approval which state enterprises must be collapsed, which must privatised, which ones we are going to invite technical partners to enter into joint venture with us, which ones must be strengthened even if they are doing badly, which must be strengthened in terms of management because of their strategic nature.
I am happy to say Mr. President that some work has already been done in that respect, for instance the National Railways has already concluded US$400m investment joint venture and I believe some rolling stock has already been provided which will be commissioned shortly. So, I am very optimistic that we will move with our reform agenda more expeditiously than ever before. It all boils down – I agree with the Hon. Senator to confidence and that confidence and trust must be earned and it is earned through actions, through implementation of what we say. It is only when people see that we are implementing what we say, it is only then that they will sit back and restore confidence in the Government.
Hon. Sen. Mumvuri thank you very much. Hongu agriculture musimboti we economy yedu. Pamusana peizvozvo mubudget iyoyo takati isusu tinofanira kugadzirisa nyaya yediridzo. Each year for the next 10 years, we are committing ourselves resources to develop 200 hectares under irrigation for each of our administrative districts and I think we have got something like 63 of them, for the next 10 years and this is outside the bigger irrigation schemes like Tokwe Mukorsi, Osborne and Dande et cetera, this is outside that. We are targeting communal old resettlement and A1 farmers. When we undertake this project, I think it will change the face of agriculture in the next 10 years.
With respect to water bodies, we do have something like 10 thousand water bodies already in the country. Some of them may be silting but we do have them already. What has been a problem in the past is that they have not been connected to the field edge of the farm. We just construct the dams and we stop there, we do not use and utilise and connect the water to the farmer. I want to say Mr. President that with respect to Kushinga I think that on the Sengwa Dam to my knowledge a team has already moved on the ground, if it has not already moved, certainly plans are afoot to start the construction of Sengwa Dam which is – I thought it was in Mt Darwin but I think it is Kushinga as well.
Power generation, thank you very much for your comments on power generation, I have already alluded to our policy to allow independent power producers. You have mentioned of course Kariba Dam extension which the first phase completed December; the second phase will be completed by end of March and will be commissioned in April. All told it will now add 300 megawatts to the national grid by the completion of the second phase.
Hon. Senator Mumvuri, you raised the issue about ZIMRA and Beitbridge and electronic transfer. We are fully conversant with the challenges that ZIMRA is facing. Some of them, we have been addressed but the point I want to make is that those challenges cannot be addressed overnight. Some of them require resources and others require change in management which we have been grappling with for the past two years.
We started with a forensic audit. When you are trying to reform an organisation you cannot do it blindly. You have to have a scientific approach. So we started with a forensic audit which was undertaken by two audit companies. They exposed a lot of corruption, a lot of malpractices in the organisation and through that audit, we retired or some of the managers had to resign on their own. Certainly, the top echelon left and we had to decide whether we should go further, but we ran the risk of ending up without any ZIMRA. So, we knew that we are preserving an element which may not have been desirable, but for good reasons there was no way we could collapse the organization. So we carried that way in the hope that we will infuse new management and also change the habits, attitudes and mindsets of those who are working in ZIMRA.
So, there are no problems of ZIMRA that I do not know. The only thing is - how do you resolve them? They are not resolvable overnight. They require time. Some of them, for instance, we have had to introduce a cargo tracking system. What was happening is that some of the fuel tankers were declaring at Forbes and Beitbridge Border Posts that they were destined for Zambia and DRC when in fact it was not so. So they would not pay duty. They then dumped their cargo here and we have instances where cargo was dumped in Chitungwiza, replaced with water and when it got to Chirundu, the tanks were full of water. So, those are matters which are being investigated and these are issues we can only address scientifically.
We have also introduced CCTV, but the major challenge is infrastructure especially at Beitbridge. I am happy to say, Mr. President, that just this morning we approved in Cabinet an award to Zim Borders Consortium who are going to do a $170 million expansion of the border area, to include the total infrastructure at Beitbridge which will include the accommodation that we give to ZIMRA. It also will include addressing some of the non core issues that have to do with the town itself – sewer ponds, storage dumps and things like that. So, I am happy that this is going to take off and the sooner it will take off, the better.
We have to move faster on modernising the border post because as Hon. Members may be aware, the Kazungula Bridge is now under construction. It provides an alternative route from South Africa from the south to the north. We are going to have to compete so that we still become either the shorter or the more efficient route through which goods and services can pass through our country. This also will of course include the dualisation of our Beitbridge - Chirundu highway. I am also happy to say that indications also show that there will be something that will take off in the area of dualisation with effect from end of March. So, we keep our fingures crossed that this will be so.
Mr. President, the Hon. Senator made reference to the manual system. Yes, the asycuda system collapsed in December, but fortunately, we have been supplied through the African Development. We have now sorted out that problem and it should be sorted out by end of this March. So, in the mean time maybe they are still using the manual system but in fairness to ZIMRA, we must say that in 2017, they collected above the targets we gave them. Notwithstanding the challenges that they are facing in terms of management and otherwise, they have been able to meet and surpass the targets that we gave them. So, as far as I am concerned, I think the reform of ZIMRA is on course and I would want Hon. Members to understand that reform of institutions is not a one day wonder.
I think Hon. Sen. Mumvuri, I have already responded to the issue about the three tier pricing system. As long as there is more demand on forex you will always find that you will not kill the black market entirely. We can try to regulate it, to try and minimise it, but it will be very difficult to kill it entirely. The solution eventually is to increase production, to increase exports, to make sure that we formalise the channels through which remittances from the diaspora flow into our market.
I thank you very much for commenting on the elimination of the 5c tax that we were imposing on mobile and electronic transactions. We have now removed it for any transactions of $10 and below. This is so because the bulk of transactions are within that range of $10 and below. I also need to say to the House that the future is in electronic transfers the world over. There will always be room for cash based transactions. Normally in most countries, 10% to 15% of the transactions will be
cash. In our situation it is 16%. So, the problem we are facing is not one of shortage but an inefficient circulation of cash.
The point raised by Hon. Sibanda that it is all under the pillows where in the past it would be in cattle, this time it is under the pillows. Some of it still remains in cattle but the bulk of it is under the pillow. Now, we can only get it out of the pillow not through intrusion into the privacy of our citizens, but through restoration of confidence so that they come and bank into the commercial banking system and then the money will circulate.
There has also been some improvement on that. I do not have the figures, but there has been some improvement. Some banking is now taking place, but I am not in a position to say exactly what the amounts are, but suffice to say about 85% to 95% of transactions in the formal sector are now electronic, and we are talking here of last year. Of the total value of transactions, $97 billion of them, about 96% of it was in RTGs electronic form. So, I think that we have used also some of our difficulties with respect to cash shortages to push forward the reforms, the adoption and acceptance of the electronic form of payment. As we increase in connectivity, we should find it that more and more people even in the remote areas will be going electronic. In fact, I must say that most businesses which refuse electronic payments will find that they are out of business and as a result, it has forced many businesses basically to accept the electronic system.
Hon Sen. Marava, I am amused that you refer to my attendance here as visiting the Senate. – [HON. MARAVA: I was welcoming you.]- Thank you very much. You welcome the exemption that we are giving. Let me take the opportunity Mr. President Sir, just to publicise that capital equipment is duty free. This is because we recognise that the manufacturing mining sectors have collapsed. So, we want to encourage investments into capital equipment.
I also need to point out that even the importation of most raw materials is duty free. This is just for the information of Hon. Senators. You also welcome the repeal on interest and penalties on arrears. The only difference I have with you is that you seem to think that the failure to pay taxes could be attributable to evasion or corruption. It may be, but I think the majority of cases is basically businesses which are facing viability challenges and it is for this reason that we decided that we intervene to assist them so that they do not collapse.
One of the reasons that is collapsing businesses and I will come to it later, is the labour laws rigidity. It takes time, effort and money to start a business. Most businesses start to make money and when things are good you expand and employ more people. When things turn for worse, there should be the flexibility to downsize the operation without having to end up spending a lot of time in the courts. That is where we need to work very hard so that we have labour law flexibility to allow companies to downsize as the need arises and wait for better times that will lie ahead.
Mr. President, let me just explain the point and I do not know whether it was in reference to this. We did allow duty free importation of diesel. This was only confined to three critical projects. The Kariba
South project during its construction, we allowed duty free importation of diesel because of the importance of that project to power generation. I also allowed duty free importation for the setting up of chrome fines mining in the Kwekwe area by African Chrome Fields.
This is because the information we have is that about 70% of our chrome ore is in the form of chrome fines and we do not have the technology to mine it as well as to refine it. So, for that reason, I allowed this company, African Chrome Fields duty free importation because they have to move from one valley to another where there is no electricity and this duty free diesel is to power their generators. Eventually, we also agreed that they will set up a refinery in the country. Currently, chrome fines are exported for refinery in South because that is where the facility is.
We are encouraging this company to set up a refinery in Zimbabwe and I think I have been assured and I am optimistic that a refinery will be built by August this year. We also agreed during the drought period especially affecting the Zambezi River, that we have an emergency diesel power generation in Seke, at Dema. That project which did not quite take off, we had also allowed and it operated for a short period because its electricity is more expensive than the one generated in Kariba. We also allowed duty free importation of diesel during the time it was operating. Those are the instances that I am aware of. The importation was regulated through CMED so that we keep an eye on what the volumes are and where the diesel is going.
With reference to the amendments to cater for pension for the Presiding Officers of the National Assembly and of the Senate, let me explain it this way. The current position is that MPs who serve for one year and I am talking of MPs from the National Assembly and the Senate, one term you are entitled to a gratuity. If you serve for two terms, then you are entitled to a pension. Generally, the nature of a pension is such that it is a life time thing and we have to ensure that you have served at least a sufficient period of time to justify a pension. We have considered ten years a sufficient period of time to justify a pension.
The nature of our Parliament, in total I think we are about 400 or so MPs. If all of us, every five years change, clearly the fiscus cannot sustain if we have to pay it by way of a pension. We will not sustain that payment until all those MPs die or what have you. So clearly, I want Hon. Senators to understand that the measure is in the interest of the economy. We cannot afford a one term period to justify a pension. Presiding Officers, we are just talking about four and again because they do not go for an election, the certainty of their coming back is also not quite guaranteed.
Hon. Sen. Nyambuya, thank you very much for your comments and I agree with you entirely that we have to walk the talk and we are doing our best in that regard. I must confess that reducing the wage bill is my worst headache. It is not easy more particularly when you are talking about retrenching people and so on. It is the most difficult task.
In the budget, we have retired something like 3 188 youth officers. These were basically youth officers whose job description was not satisfactory and they did not have the qualifications. So, these have been retired or retrenched.
Overally, my approach to addressing the issue of the deficit is to grow the cake, to increase the revenue base so that the wage bill will ultimately be a good proportion within a bigger cake. That is the approach that we are taking as well as of course, we have frozen a lot of the posts except for critical posts. We are also trying to achieve efficiencies in the way we run the civil service. We have also taken a decision to make those who have reached the retirement age to go on retirement. I think that will assist and help to inject new blood into the civil service and to create openings for younger officers who may be oppressed in their systems.
You raised the issue of ZIA. I agree with you. We have been reflecting on this issue about the lack of teeth by ZIA and the sense I have in the light of the new dispensation is that the enquiries that we are now receiving are overwhelming and it becomes very clear that we must put our Act together. It is a matter that we have been discussing to see what mechanism we can put in place on handling the enquiries that are coming from investors. I think that we should be able to do so in the next month or so.
Currently, we have a sense of being overwhelmed. The goodwill that has been generated by the recent changes in leadership is important for us that we come up with measures that will cope with those increased demands.
Hon. Sen. Nyambuya made reference to dead capital. Of course you are talking about state enterprises. Mr. President, there is a lot of dead capital in this country. The communal land is dead capital, the land under the Land Reform, until we give the 99-Year Leases, is dead capital. All our houses, we bought them cash, there are no mortgages, that is also dead capital. So, the extent of the dead capital in this country is enormous. That is why we now have interested people from outside who want to come and set up a mortgage company in order to encourage people who own these assets, motor vehicles furniture to borrow money to start up businesses on the security of those properties, for example motor vehicles, cars and so forth.
If we compare our country with other countries, we are the least mortgaged nation in the world in the sense that I have mentioned that we own cars, furniture, houses, properties and also land which is free from encumbrance. It is important that, that capital should be utilised and leveraged to bring in more resources for the development of our country. Hon. Sen. Nyambuya mentioned Batoka, yes, you are quite right, this will turn out to be the cheapest in terms of tariffs. I think we are talking of about US$3.5 04 per kilometer an hour. You must know that it is a joint venture with Zambia. The World Bank have given us resources to upgrade and update the feasibility study and we are having a meeting in Livingstone on Friday to see whether we can expedite the conclusion of the feasibility study.
Mr. President, there is a lot of interest from investors. We will not have any problem once the feasibility study is completed to secure funding because in terms of viability, it is second to none in the area of power generation. You mentioned the Gwanda solar project, these are issues we are looking into, to see how we can breathe new life into these projects.
Hon. Sen. Tawengwa, I thank you for the comment that we have come up with an investor friendly environment both for domestic and foreign. I want to emphasise on domestic investment because the structure of most economies worldwide is that at least 90 to 95% should be domestic investment. In other words, the economy should be in domestic hands. It is that 90% which will go out to look for that five percent or ten percent in terms of the needs of the economy for technology, capital and managerial skills and so on. So, I look forward to a stronger and entrepreneurial class in Zimbabwe which can identify Zimbabwe’s needs and connect Zimbabwe to foreign investors, for their expertise, capital and for their market. So, I want to emphasise the point about domestic market. We have to encourage exports as well and this is why there are export incentives through the issuance of bond notes.
I think we must also pat ourselves on the back because exports from last year have expanded; 36% from the previous year. We want to attribute this to the fact that we have this export incentive facility which is operational.
I think I have already answered the hoarding of cash. Basically it is a problem of trust and confidence. If people do not trust that when they put their money in the bank they can get it the next day that is what causes inefficiency circulation of money. We hope that as trust is restored, these things can be things of the past. On stones, at the moment the money is coming to the fiscus. For now, we are trying to encourage beneficiation and there are some companies which we have an agreement and understanding where they say we are looking for machinery and investments, can you give us more time and basically we are saying, we are postponing the imposition of the five percent. On the issue raised by the Hon. Senator about local communities, those are issues that come under the community ownership schemes. It is something outside what I am talking about.
Hon. Sen. Chimhini talked about the 15% VAT, I cannot give you a straight answer, my hope is that ZIMRA is collecting it. When it is levied, it is a ZIMRA tax which should go to ZIMRA but whether there is an efficient transfer or not of that 15% to ZIMRA that remains problematic. What I can say is that the amendment is providing letter for introduction of a virtual tax management system. What this will do is to connect, certainly starting with the big tax payers. It will have a menu which will allow automatic deduction and transfer at the till to ZIMRA. In other words, if it is 15%, automatically, as the till is run, it will be automatically deposited to ZIMRA but that is for another day. But we already have put an enabling provision in the law so that when we are ready, we can introduce it.
I made reference earlier, Hon. Sen. Chimhini about the fact that I am going to bring a Bill here, ZISCO Steel Debt Assumption. It is basically to clean up the mess of the past and we cannot avoid it if we want to go forward. Like in the case of ZISCO Steel, the investor we are attracting and with whom we hope to start operation by end of March, 2018, basically said he wants a free field an unencumbered asset. So, to do it, we had to clean up a balance sheet of ZISCO Steel and take it over as central Government. I hope that through new inflows of investments, new activities, taxes will increase and then that will capacitate fiscus to be able to retire a lot of these liabilities in the future. In the ZISCO Steel one, another investor is also going to take over our debt to KFW which is a Germany financial institution provided that we remain guarantor. So, we are agreeable to that, they are going to invest into the coke ovens and they are undertaking to pay off that debt. Those are some of the innovative measures that we are undertaking in order to allow us to move forward.
With respect to what we do to line Ministries, I think at the moment we are going to see less and less of over expenditures because clearly, we are also living from hand to mouth and because of that, we do not have the money for them to spend and where they do spend, we will not give the money to operate and it is really their problem. But, I want to say this Mr. President that, we have set up and strengthened the Accountant General’s Department. It now has two units – one unit which is dedicated to reading the Auditor General’s reports and following up on all the complaints that are made in the report so that they are rectified with the line Ministries. Also, that systems are put in place in order that, whatever is complained about will not happen again.
We also have another dedicated unit under the Accountant General’s Office to read the financial statements of parastatals and State owned enterprises, just to keep an oversight on their performance continuously and not wait until the horse has bolted.
Another measure that we are also introducing is to set up in each line Ministry an internal auditor and to set up an internal audit department again under the Accountant General’s Office so that the internal auditors of line Ministries will report on a daily basis to the Principal Internal Auditor in the Ministry of Finance and Economic Development. That way, we think that the finances of Government will be in a better and sound condition. What we have to thrive to do is to prevent and not wait until a misconduct has been committed.
Hon. Sen. Khumalo, this is a matter which is not covered in this
Bill but, it is a matter that I want to promise to follow up. You raised the issues about vehicle licences where in the past they used to be paid to rural district councils. Now, I think that there were some changes and the rural district councils lost those incomes. It is something that I think we are going to discuss because my view is that, vehicles which stay in a particular town, Marondera for instance, should pay their licences to Marondera and Marondera Town Council should benefit from that income and also use it maybe for road network in that town. So, I think that these are issues of policy which I will certainly want to take up.
You also raised other issues to do with the cost of doing business and in this case, you were particularly targeting farmers – whether it is water, the price of water or the price of electricity. These are matters which are under active consideration under the ease and cost of doing business. We do not have very easy answers but it is a matter that we are addressing. I did address some of it in the way of reducing the excise duty on diesel, paraffin and petrol. This was to help to reduce the cost of production and we will continue as we go forward, basically looking at this issue about the cost of doing business.
Hon. Sen. Mashavakure, I have already alluded to the issue of the labour laws’ rigidity and the need to make it flexible. The costs of labour in Zimbabwe are very high. In fact, we are a very expensive area in terms of production compared to our neighbours and some of the reasons of course are that when we migrated from our Zim dollar to the US dollar, the mindset was that of Zim dollar and we equated literally the Zim dollar to the US dollar. Now, to get us out of that situation, it is going to be very difficult but it is a matter that we are seeking to address. And, the issuance of bond notes as an export incentive, it is intended to help reduce the cost of doing business in the sense that it helps quite a lot towards working capital for those companies which are into the export business.
Mr. President Sir, just to give you some comparison with respect to our cost structure, Ethiopia, which has about 116 million people, their average wage is $50 if not less. An engineer who has graduated is paid $100 per month and at most, $150 per month. Now in our case, and I think that Hon. Sen. Mashavakure mentioned it - a person who sweeps the floor is $400. So, you can imagine that if you were an investor looking at Ethiopia and Zimbabwe, where would you go? You will go to Ethiopia because it has a larger market, it has a lower cost of production and you can make your money because at the end of the day, the export markets are the same and so on. So, these are issues that we have to address and to address them collectively. So, we have to address the issue of our competitiveness as we go forward.
I have already answered Hon. Sen. Mashavakure about the black market. The answer may not be satisfactory but I think that I am nearer the truth in that the reality for as long as all of us want foreign currency, is not there – and, we end up doing funny things. Basically the black market is the result of the shortage of a very important asset, in this case, foreign exchange.
Hon. Sen. Mohadi, thank you very much but I have also answered you with respect to this muddy business of three-tier pricing system but I think that we are going to remain with this problem for some time but, as we enhance and increase our confidence, I hope that these issues will become less and less. You mentioned about ZIMRA officers and I think that I have already stated the award that we approved this morning to expand Beitbridge border post as well as to do some other non-core though for the town so that Beitbridge expedites smooth movement of people, passengers and goods. So, I hope this will be the case. So with those remarks Mr. President Sir, I think I have done justice to this.
I now move that the Bill be now read a second time.
Motion put and agreed to.
Bill read a second time.
Committee Stage: With leave, forthwith.
FINANCE BILL [H. B. 1B, 2018] House in Committee.
Clauses 1 to 39 put and agreed to.
On Clause 40:
HON. SEN. MUMVURI: If we are paying attention to detail, I want to draw your attention to Clause 40 (d) subsection (j), we have to say “…members of …” not “…members if the Committee on the
Standing Rules and Orders …”
THE CHAIRPERSON: Yes, thank you Hon. Senator. That is a typographical error. Thank you for being so observant. That is a grammatical correction. Thank you.
Clause 40 put and agreed to.
Clauses 41 to 46 put and agreed to.
Schedule put and agreed to.
Bill reported without amendments.
Third Reading: With leave, forthwith.
FINANCE BILL [H.B. 1B, 2018]
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): Mr. Speaker Sir, I now move that the Bill be read the third time.
Motion put and agreed to.
Bill read the third time.
APPROPRIATION (2018) BILL [H.B. 8, 2017]
Fifth Order read: Appropriation (2018) Bill [H.B. 8, 2017].
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, the
purpose of this Appropriation Bill is to give effect to the main Estimates of Expenditure for the year ending 31st December 2018 which I tabled to this august House on 7th December, 2017. Section 3 of the
Appropriation Bill is charging the Consolidated Revenue Fund with a sum of US$4 607 896 000.00 and this relates to the 2018 Vote Appropriations.
Section 4 of the Appropriation (2018) Bill is charging the Retained
Funds with the sum of US$412 566 000.00 and this is relating to the 2018 Vote Appropriations. This gives Madam President, a total charge on the Appropriation Bill of US$5 020 462 000.00.
In this regard, the Vote Appropriation presents an opportunity to contribute to a comprehensive and coherent phased strategy for addressing the widening macro-economic imbalances, guided by the policy direction given by His Excellency, President E. D. Mnangagwa, during his widely acclaimed inaugural address on 24th November 2017.
Madam President, the Vote appropriations seek to ensure realization of the overall objectives of programmes and projects under implementation by Government under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset) as well as the Interim Poverty Reduction Strategy Paper (IPRSP) for 2016-2018.
The 2018 Budget policy measures include among others:-
- Enhancing production across all sectors of the economy through giving greater and more urgent attention towards the supply side interventions;
- The policy measures seek to strengthening social safety nets in support of vulnerable groups in line with the objectives of our Interim Poverty Reduction Strategy Paper (IPRSP) for
2016 to 2018;and also
- The policy measures seek to contain expenditures,
particularly employment costs in order to re-orient the thrust of fiscal expenditures towards infrastructure development, particularly in the energy, water, transport and ICTs subsectors.
Madam President, Section 6 (1) of the Bill will empower the Minister of Finance and Economic Development to transfer funds already approved by Parliament between Votes in respect of a function or responsibility transferred between ministries and departments during the course of the fiscal year.
Section 6 (2) of the Bill allows discretion to the Minister of
Finance and Economic Development to transfer funds from the
Unallocated Reserve which appears on the Ministry of Finance and Economic Development Vote to any other Vote, as and when the need arises in order to meet inescapable expenditures.
In addition, and if necessary, the Ministry of Finance and Economic Development can vary the amounts so transferred by taking back any surplus for reallocation to other ministries to meet demands that may arise. Madam President, I accordingly move that the Bill be now read a second.
HON. SEN. B. SIBANDA: Thank you Madam President, I have got a few comments, you are the only Minister here - who will defend the Appropriations to individual Ministers in prior answers to the Finance Bill, and you indicated that there are some areas you are not familiar with? I thought it would be better if individual Ministers came to account for their past expenditure and how they will handle future expenditure. Does their absence underline the peripheral constitutional role of the Senate in terms of financial matters? Secondly, I see there is a lot of retention funds and I do not want to refer to them individually but I assume that retention funds in Government technology is carried forward funds. I am also working on the assumption that every quarter each ministry reports to your Ministry in terms of utilization of funds. Why would we have close to half a billion dollars of money not utilised in any current year? That is if my observation is correct.
My last comment is, confirm that your office does in fact receive regularly, the quarterly reports from individual ministers. I thank you Minister and Madam President, I thank you.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, I thank
Hon. Sen. Sibanda for the contribution but just to say that the real reason why Ministers do not feel the need to come and defend is the nature of our budget which is just going to wages. There is basically nothing much that they can come to say and this is the area that we have to tackle to change that structure so that of the budget revenue, at least about 50% goes to wages and the rest to operations and capital expenditure. It is only then that I think Ministers can meaningfully come here to say no, this we are defending because we were given the money. Now, when we are giving all the money to wages, what do they have to say - very little.
So, I understand where you are coming from, but I want you to understand that collectively as a nation, we have to address the nature of the structure of the budget. Where there is spending, I know in some jurisdiction, in Tanzania for instance, only 30% goes to wages and 60% to capital formation. In our case, it is the other way round – 90% to wages and 10% only to capital formation. So, there is not much that anyone would want to say really, but we are working towards it. I hope that in the years to come, there will be some improvement on that score. Madam President, this is not just a problem of the central government; local authorities also have the same structure of budget. Also, State enterprises have the same structure of budget. It is like we are all living just for our wages and we do not worry about the generations to come, which is wrong. So, it is something that I think correcting it is not easy, Madam President, as I pointed out earlier.
So, we have had to be quite innovative in order to find money for infrastructures like Tokwe-Mukorsi completion. Right now, we are undertaking Gwayi-Shangani Dam. We are also undertaking Causeway and Marovanyati Dam and a lot of road construction that we have had to do through a lot of innovative measures so that we do not remain in a stand still position.
The retention funds are generally fines that we allow statutory bodies to levy and keep. I can mention for instance the Registrar General’s Department, when they charge for passports and other papers, they charge a fee and we have allowed them to retain. Only through the Finance Bill, we are now saying you cannot spend that money you are keeping anyhow. You must first prepare a budget and whatever money we allow you to keep; you must spend it towards meeting the budget.
Further to that, we have also insisted and this has been fully complied with; they used to bank all over the show, now they only bank all retention funds with the Central Bank and our Accountant General’s Department has a daily insight into what is going on there. The Minister has power in any event to use that money and appropriate it or transfer it to other inescapable expenditures because after all, these are just sub accounts of the Consolidated Revenue Fund. So, the money, I want to assure you, is well accounted for. I thank you Madam President.
Madam President, I move that the Appropriation (2018) Bill [H.B 8, 2017] be now read a second time.
Motion put and agreed to.
Bill read a second time.
Committee Stage: With leave, forthwith.
APPROPRIATION (2018) BILL [H. B. 8, 2017]
House in Committee.
Clauses 1 to 6 put and agreed to.
HON. SEN. B. SIBANDA: Mr. Chairman, two issues under the Defence Vote, sub-Vote for War Veterans. I am aware that we have a serious problems with payment of fees for war veterans children, some very intelligent and others with only the surviving spouse who is the mother. They are going through hell. Minister, is that provision reasonably sufficient to address arrears and also to address current needs?
My last question is, I notice you have appropriated 10.4% of the
Health and Child Care. If you can remember, what was the appropriation last year? Has there been a significant increase in moving towards Abuja? Thank you.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Thank you very much. I
am indebted to the Hon. Senator for the contributions because they afford me an opportunity to clarify certain positions. We are fully aware of our obligations to the welfare of war veterans. More particularly so, now that there has been a very positive agent for change in our country and they need to be supported and strengthened. So, to that extent, we are committing ourselves to do everything in our power to clear all arrears as well as if the monies are not sufficient under that Vote. We can take it as I have mentioned from the unallocated reserve. We are certainly committed to fully discharge our responsibility in that regard.
With respect to the health budget, it was amended in the National
Assembly. At that point, we had moved the percentage of the Health Vote from 5% to something like 8% to 9%. With the amendment, we had to add an additional US$60 million that will put us at around 10% to 11%. I want to commit the Treasury that in the 2019 budget, we will fully meet the 15% Abuja requirement on health. So progressively, we are getting there. What we would need to urge the Ministry is to see that there is efficiency in the manner that they run our health system and that they try to encourage a better morale among the staff. I am committing myself that in the next budget, there will be 15% allocation of the budget to health. I thank you.
Bill reported without amendments.
Third Reading: With leave, forthwith.
APPROPRIATION (2018) BILL [H. B. 8. 2017]
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): I move that the Bill be now read the third time.
Motion put and agreed to.
Bill read the third time.
On the motion of THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA), the Senate adjourned at Twenty Six Minutes past Five o’clock p.m.