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NATIONAL ASSEMBLY HANSARD - 15 NOVEMBER 2012 VOL. 39 NO. 2

Thursday, 15th November, 2012.

The House of Assembly met at a Quarter-past Two O'clock p.m.

 

PRAYERS

(MR. SPEAKER in the Chair)

ANNOUNCEMENTS BY MR. SPEAKER

2013 BUDGET PRESENTATION

MR. SPEAKER: I have to inform the House that the Hon. Minister of Finance will present the National Budget today at a Quarter to Three o'clock p.m.

POST-BUDGET WORKSHOP

MR. SPEAKER: Hon. members are invited to a Post-Budget Workshop on Monday 19th November 2012, at Wild Geese Lodge commencing at 08.30 am. The Parliament bus will depart from the Nelson Mandela entrance for the venue at 08.00 hours.

POST-BUDGET ANALYSIS MEETINGS

MR. SPEAKER: I also have to inform hon. members that Portfolio Committees will be conducting Post Budget Analysis meetings from Monday 19th November 2012, to Thursday 22 November 2012. Hon. members are advised that the schedule of the time and venues of their meetings during this exercise has been deposited in their pigeon holes.

WOMEN PARLIAMENTARY CAUCUS ANNUAL GENERAL MEETING

MR. SPEAKER: I also have to inform the House that all members of the Zimbabwe Women Parliamentary Caucus are requested to attend an Annual General meeting on Friday, 16 November 2012 at 1400 hours in the Senate Chamber.

Business was suspended at 1425hours and resumed at 1445hours.

2.45p.m.

MOTION

FINANCE BILL: BUDGET STATEMENT

THE MINISTER OF FINANCE: Mr. Speaker Sir, Section 103 of the Constitution of Zimbabwe read together with Section 28(1)(a) of the Public Finance Management Act [Chapter 22:19] obliges the Minister responsible for Finance to prepare and on a day which Parliament sits, before or not later than 30 days after the start of each financial year, Estimates of Revenue and Expenditure of Zimbabwe for that financial year in compliance with the mandatory provisions of our law, I beg leave Mr. Speaker Sir, that leave be granted to bring in a Bill in connection with the revenues and expenditure of the Republic of Zimbabwe for January to December 2013.

Mr. Speaker Sir, it is exactly 1 350 days since we commenced this experiment of a coalition Government which regrettably right from the onset, was born mired in the process of failure, cynicism, collapse, particularly in certain powerful quarters at home and abroad against the odds. This construct has lasted and indeed it is a tribute to the people of Zimbabwe in the political leadership that despite cerebral challenges that we have faced, the Government of National Unity has held out and we stand here today to redefine through this budget a new path and trajectory for our development in 2013. As I present this fifth and last budget of our inclusive Government, let me express my humble indebtedness and gratitude to the people of Zimbabwe, esteemed honourable members of parliament, my colleagues in Government, principals to the GNU for their patience, understanding, guidance, support and leadership offal to our programmes and policies in the last four years.

I must also right from the onset express my personal indebtedness and gratitude to the excellent hard working and competent staff that I have had at the Ministry of Finance starting with the Permanent Secretary in the Ministry of Finance, Willard Manungo right down to the office orderly. For years, this team has burnt the candle tirelessly and without complaint, producing world class documents and advice.

Honourable Speaker, I thank them most sincerely. I must say Mr. Speaker that, the path we have traversed in the last four years has been an incredible journey mired with hurdles, challenges, false starts, cul de sac and potholes. To put it simply, it has been an exceptionally difficult trying and tiring period. This was inevitable given the contested spaces and ideologies that we all occupied.

Despite this Mr. Speaker Sir, it is incontestable that somewhere along the line we found each other and meandered along a maze of insurmountable challenges centred around an isolated economy without any fiscal leg room with weak capacity, huge levels of poverty, debt and infrastructural decay. That connection allowed us to navigate programmes and policies in pursuance of the interest of the ordinary person, with little disputes that Zimbabwe is now in an inconsolably better standing than it was in 2008. The experience of this GNU also demonstrates the invariability of the contention that the social policies choices we make, our vision, our honest, our value systems, our craft competence, consistency inclusivity and transparency are the difference between failure and success. In simple terms, development and prosperity and under development and poverty are by products of the choices that we make.

On the contrary Honourable Speaker Sir, the pursuit of programmes and ideologies of exclusion, delegitimation, predatoriness, patronage and reign seeking, lead to poverty, under development and creativity and disintegration. Therefore, as we enter the shadow of an election year in 2013, the lessons of the last four years must guide our political leaders to place the people in their developmental challenges first, appreciating the primacy of peace-mindful that as a people, our only home and heritage is in Zimbabwe. Thus the 2013 national budget must play its part in prioritising the development aspirations of the people of Zimbabwe clearly articulated during this year's nationwide budget consultative meetings as well as in previous ones.

Mr. Speaker Sir, from Dotito to Chiendambuya, Insiza to Bubi, Tsholotsho to Lupike, our people feel that they have paid their dues. The ordinary people yearn for peace, security, development and the education of their people. They desire to see the leaders in Government resolve challenges around food security, provision of critical social and infrastructure services in health, education, water and electricity, creation of jobs and a guaranteed non-selective application of the justice and the rule of law.

Mr. Speaker Sir, the 2013 national budget seeks to play its part with regard to granting and fulfilling some of these legitimate aspirations. I will proceed to briefly touch on where we are coming from and where we are in 2012 and the purpose of this afternoon, where we seek to go in 2013. At the commencement of this GPA on the 16th of February 2008, this economy was faced with massive, drastic difficulties and challenges. This included cumulative economic contraction of over 40% between 2000 and 2008 resulting in drastic fall in GDP per capita of US$290 by 2008. Hyper inflationary environment with record rates of over 231 million per cent.

The total obliteration of our savings and investment portfolio, an industry that had capacity utilisation of between 2% - 10%. High unemployment levels estimated in excess of 80% and the disappearance of consumer goods in our supermarkets. We address these problems head on as an inclusive Government through the medium of policies that we crafted together in 2009, chief among those was the Short Term Emergency Recovery Programme. Mr. Speaker Sir, over the output period 2009 - 2011, we gave seen our economy grow by a factor of 9.4% and if you look at the graph that you see on the computer, the red line Hon. Speaker, reflects the growth rate of Zimbabwe with the green line reflecting the average world output, the red dots reflecting the growth and advanced economies.

So in the short period 2009 - 2011, Zimbabwe has in fact had the fastest growing economy in the world. Mr. Speaker Sir, the basis of this growth has been on the basis of mining and quarrying which contributed 45.5% and agriculture which contributed 21.9%, manufacturing 6.8% and construction 4.6%. Also as part of the macro economic achievements in the last three years has been single digit inflation, capacity utilisation of at least 50%, moderate increase in our investment and savings portfolio of between 9% to 25%, increase in aggregate demand, increase in agricultural growth rate from minus 5.8% in 2008 to 37.6% in 2009. This is where we are coming from.

Mr. Speaker, the developments in 2013, have been slow and disappointing. The 2009/2011 rebound, has clearly deserarated in 2012 plunging the economy into what I described in my midterm statement as a long winter of despair characterised by low business investor confidence. Some disequilibrium in the economy, little growth and employment, declining social indicators and generally, a lackadaisical business as usual mentality. You will recall Hon. Speaker, that in my midterm statement, I revised my micro-economic growth rates from minus 9.4% to 5.6%. Regrettably, honourable members, now that we have available final output figures for 2011 and tentative output figures to July of 2012. We have to revise downwards our projection for 2012 to 4.4% and with great respect a reduction and revision of GDP growth rate from 9.4% to 4.4% is drastic by any standard.

The 2013 outlook also looks less blighted by miscellaneous factors that include a deeper global outturn, the continued capital deficit, financial sector instability and poor business climate. At the graph, you will see an upward hike of our growth rate in respect of the periods between 2009 and 2011. From 2012 all the way to 2018, you will see a tapering off of that growth rate on an average matrix of 5%. The challenge we have Mr. Speaker Sir, is to refocus that growth trajectory from the flat outlook that it has between the years 2012 to 2018 to a sub-spiked trajectory such as the one we had between 2009 and 2011. It is critical that we do this Mr. Speaker. Our average per-capita income in Zimbabwe at the present moment is US$370 and to get to US$2 000 which is the threshold used by the World Bank to determine whether a country is in poverty or not at the slow growth rates of 5%, it will take us until the year 2027 which is why this economy needs double digit growth rates.

The fact of the matter therefore is that we have not entered into sustainable paths to recovery and most regrettably is the overwhelming evidence of stagnation and reverse. The sub-optimal equilibrium fuelled by low aggregate demand and low productivity under-pinned by the five binding constraints on our economy, namely electricity supply, expensive and unavailable finance, fragile and embarrassing balance of payment position, our politics and our deep poverty, they need to be addressed. We have two options; the first is the retention of the status quo characterized by uncertainty and total subordination of the economic agenda to princeton politics.

With great respect to the Minister of Defence over there, I call this the crocodile scenario -(Laughter)-

This entails a continued reproduction of the enclave economy and further impoverishment of our people. Mr. Speaker Sir, if you look at our social indicators and I will just give you three critical social indicators. The first is the figure of our infant mortality where in 2011, 90 out of a 1000 babies are dying at child birth. The second figure I want to give you is that of our maternal mortality rates where 96 out of a thousand or 960 out of 100 000 mothers are dying at child birth. The third figure Mr. Speaker, it is the figure of our life expectancy which stands at 41 years.

The figure of our infant mortality and the figure of our life expectancy by any description Mr. Speaker, it is soft genocide. We have to address this. The second option we have is one that requires a major paradigm shift by all of us and the pursuit of a united common vision under a stable democratically political dispensation. This scenario, the cheater scenario demands a graduation from the current status quo of vicious cycles of exclusion into virtuous cycles of inclusion amongst movers and shakers. Central Mr. Speaker Sir, will be the pursuit of growth that is sustainable, cross sectoral and go poor. In the short term, the cheater scenario requires the pursuit of rigorous programmes of public reforms that include payroll management, strengthening public finance management systems, dealing with the infrastructure and technological deficit, restoring the land market and reducing financial sector vulnerabilities.

In this Budget, we deliberately choose to pursue the cheater scenario. In the pursuit of this dream, we all need to see and agree on this direction, understand the difficult steps requires, persuade fellow Zimbabweans that the journey is worthwhile and provide the necessary leadership to pursue the same.

I want to move quickly to carry out a review of the economy, what happened in 2012. As I have said because of endogenous and exogenous factors, we have seen a downward spiral of our economy in 2012. The figures that are unrolling on the computer screens are figures of the revised macro-economic framework for the year. The nominal GDP had to be revised from 11.9 billion which is a good figure, it is close to $12 billion to 11.4 %. Real GDP growth rate, 4.4% as I have said. The only figure which we are doing well is the inflation that we have maintained at 5%.

Coming down to the key components of the real economy, I will not spend a lot of time on inflation but allow me to move to agriculture. There are three stories that are emerging in agriculture. The first one is the exposure and the lack of protection and buffers that we have vis-à-vis a bad agricultural season or a bad rainy season. So, we had a bad rain season in 2011/2012 resulting in us among other things losing a third of our total maize crop from a figure of around 1.5 million metric tonnes to a mere 900 000 metric tonnes . As a result of this, we had to revise our agricultural projections from 5.8% projected growth-rate in 2012 to minus 5.4% but if you look at the graph that is there, the projected growth rate from agriculture in 2012 is now 4.6%.

The reason for this is two-fold. First is the fantastic performance of tobacco, not so much in terms of output because in terms of output terms, our target was 150 million kilograms. What was sold at the tobacco auction floors was 144.5 million kilogrammes, but because the quality was so good, it retained at an average price of 366 cents a kilogram. Therefore, we had a record crop in terms of tobacco income in excess of US$530 million.

The second rebound was the cotton crop despite the prices and difficulties we had in price setting. The price eventually settled at between 35 cents to 41c and we actually saw massive deliveries from a projection of 255 to actual deliveries of 350. So this in fact has saved agricultural season but there are other bad stories. The first one of these is the issue of livestock. As a result of the drought situation, particularly in the southern part of the country, Matabeleland South, Matabeleland North, Midlands, Masvingo and Manicaland, the mortality rates of our animals reduced from the average 5.5% to figures of between 1 and minus 3%.

Furthermore, calving rates also declined to under 45% from the normal 65%. A more positive story is on poultry, chickens. As a result of increased investments, broiler old day chickens production in the first half of 2012, increased by 12% from the same period in 2011 and you will see from my revenue measures that we are going to protect this industry because we strongly believe in the local industry's capacity to feed the people of Zimbabwe .

Then finally on the depressing stories, wheat is another crop that has been on the decline. In its hay days, Zimbabwe could produce 1 000 metric tonnes against the country requirements of 450 000 tonnes. As a result of a number of factors, the production has gone down and we expect production in 2012 to be around 17 000 metric tonnes - this is not withstanding a competitive price.

In respect of the 2013 hectarage, Hon. Speaker, there has been as expanded hectarage in virtually every crop whether it is maize, wheat, soya beans, sorghum and in particular tobacco. So the expectation next year is that everything being equal, with good rains - we should actually have an upward rebound in every sector of the agricultural sector.

I come very quickly to the review of the mining performance. Hon. Speaker Sir, as I will point out later on, mining is going to be the anchor driver of this economy in the output period all the way to 2018. Capable of generating $14 billion annually but there are certain things which we have to do which I will announce in my Policy Measures. As of 2009 mineral exports rose to 230% by the end of 2011, mineral exports accounted for 47% of total exports, led by Platinum 43%, gold 28% and diamonds 20%. I give on that graph the expected output for 2013.

We expect deliveries of at least 17 tonnes - it is a good figure in that it is going up. In 2009 it was a mere 5 tonnes, but Zimbabwe used to produce 50 tonnes of gold. So, that is our target - coal 2million, nickel 10, platinum 12, chrome 282. The disappointing thing as we keep on saying over the years is asbestos where there is zero production and I think, it is imperative that we sort out our challenges in Zvishavane.

Hon. Speaker, let me move very quickly to manufacturing. Manufacturing has seen a downward decline in 2012 and many of you have read the CZI Report that was launched last Wednesday. It speaks of one word and one password - deindustrialisation. Capacity utilisation has fallen from the figures of in excess of 60% that we had achieved to a mean figure of around 50%. Due largely to number one - the high cost of finance and its availability, obsolete machinery, power challenges, lack of domestic linkages, lack of domestic demand particularly due to the invasion of cheap imports from South East Asia. That is a euphemism for a certain big country.

Investment in the sector also remains very subdued with only few firms investing. So, the growth projection in 2012, Hon. Speaker Sir, is a mere 2.3%. The basis of any modern economy must be manufacturing - there are certain corrective which we are taking to reverse the decline in the manufacturing sector and I will announce them later on.

On lines of credit, we had ZETRAF which is a $70 million dollar fund. It has disbursed around $50 million and it is not exhausted. We had DEMAF $40 million - with DEMAF, $16.2 million projects have been approved; $12.2 million has been disbursed of which $9 million has been disbursed to Bulawayo or Matabeleland. There are some bottlenecks and bureaucracy which have been associated with DEMAF and we seek to address these in round two of DEMAF which I will address later on.

Allow me to speak on tourism. Tourism is a low hanging fruit and we are paying attention to it. We expect this sector to grow by 4% in 2013 and in 2013 we are hosting the 20th Session of the United Nations World Tourism Organisation. We are treating this function as a beauty contest where Zimbabwe can parade her virtues. So, we are leaving no stone unturned to ensure that we are totally and thoroughly prepared for this event.

However, Mr. Speaker Sir, taking advantage of this conference we will be depending on our capacity to overcome other challenges which include negative perceptions in some of the major source markets, reinvestments in uplifting some of the tired tourism facilities and infrastructure. There are also a host of self induced police distortions and own goals that create some poison perceptions of Zimbabwe - within and outside Zimbabwe. And allow me Hon. Speaker to deal with some of them because these fields affect not just confidence in our tourism, in our investment but in Zimbabwe in general. And there are things that we can deal with without resource to a lot of resources.

Number one is the siege mentality conflict hate speech and intolerance reflected in our media; number two is the perceptions of a Police state as reflected through endless and meaningless roadblocks that are breeding all kinds of bribes. Mr. Speaker, I live in Enterprise Road - 11 km from Harare and in that 11kms, I have to pass through on a day to day basis, at least four roadblocks. I drove to Bulawayo the other day - there were 18 - I counted 18 roadblocks. I do not think this is helpful to Zimbabwe.

Another thing which we can do without a lot of money is the state of dirt, litter and general uncleanliness in our towns and growth points - including Hon. Speaker, the existence of potholes, leaking pipes, overflowing sewerage and public street lighting that never works. The third thing which again affects Zimbabwe are the high levels of corruption at every level of our society - making Zimbabwe's score -1.7 on the Global Perception Index. Another challenge is decayed and dilapidated state or some of the critical infrastructure and public facility. One example being the Beitbridge Border Post if you go there, it looks like the same port that Moffat and Rhodes crossed in 1890. Another challenge Hon. Speaker is the incessant reports of assault on tourism asserts - for instance, the invasion of conservancies, poaching and slaughter of valuable wild stock, unlawful commercial activities in places like Manna Pools or Sinamathela National Parks.

Another challenge is our people and the issue for environment - in particular deliberately setting veld fires and massive environmental degradation - these are things that we can resolve very easily. So, the things we address in this Budget as far as tourism is concerned Hon. Speaker, is the issue of A) accessibility and I am pleased to note that Air Zimbabwe has resumed its flights. The issue of tourism branding, the issue of tourism corporate agreements; the issue of error in connectivity and on this score I am also pleased to note that many of the international airline brands are coming to Zimbabwe KLM and Emirates to name a few. The issue of visa realignment - another major area of concern - there is an uneven and unequal visa regime that is prevailing in this country. If you come particularly from the South - there is a different Visa regime - India and China. So, we need to realign this, the issue of decongestion of border posts, the issue of tourism satellite accounting, the issue Hon. Chamisa of e-tourism. How do we incorporate technology into our tourism and then of course the issue of domestic tourism protection to do what Minister Mzembi is doing. These are issues that we are promoting in this Budget. One of the things that we are also doing as part of revenue measures is that we are continuing for a further six months the rebate on the importation of tourism capital goods including motor vehicles.

On the financial sector, this is a sad area honourable Speaker, Sir, our banking sector continues with a regime of high interests rates that range between 15% to 35% on the US dollar. The absence of e-banking, debit cards, credit cards, the absence of rates on savings. You will see that these are issues that I will address later on but let me just refer you to a pie chart which will come shortly on the screen which shows the breakdown of the loan component in Zimbabwe. The loan to deposit ratio is around 75% but if you look at the breakdown of the loan component, it is disappointing. Whilst it is pleasing to note that manufacturing and agriculture - agriculture 19%, manufacturing 17%, they are consuming the bulk of our bank assets. Individuals come at number 3 with 15%, distribution 17% and mining 9%. I think it is sad for any economy with great respect honourable Speaker. It is sad for an economy like Zimbabwe that the third head for bank landing has to be individual lending because individuals lend to buy debt capital for example flat screen television and conspicuous consumption. We have to create bankable assets that will enable banks to lend to real economy which is why we need to address one of the key issues - the issues of the securitized long leases on land.

Another disturbing issue for the banking sector is the increasingly high levels of nonperforming loans which at the present moment stand at 9% up from 3% in January. The problem is not systematic, it is restricted to about 8 of our banks and we are trying to address that. I will move very quickly honourable Speaker, Sir, to the issue of our stock market, the Zimbabwe Stock Exchange and say that we are pleased to note that as of October 2012 market capitalization of the ZSE is now around US4 billion dollars from the low level of about US$3 billion dollars in January of 2012. I am also pleased to advise that a lot of these portfolios actually involves foreign investors, so, there is a rebound of confidence in the Zimbabwe Stock Exchange. We are still continuing to carry out reforms in our markets which include major amendments to our securities Act which has been gazetted which we hope we can start debating in this House next week. We also hope to operationalise the Stock Exchange Automation and the CSD by February 2013. We are also in the process of demutualising, we want the Zimbabwe Stock Exchange to be privatized to the extent that 51% of it will be owned by the state entities like NSSA by DC and then the stock brokers themselves and other investors. This is the trend worldwide.

I also want to give a report on the performance of insurance and pensions. The total gross premium written amount in 2012 increase from US192.9 million dollars in January to US$231,2 million dollars. Insurance houses are important as a hub of savings. In South Africa you have the capital of insurance companies exceeding billions and because of that they are able to lend cheap money into the economy. It is important that we build a stock of pensions, it is important for our people who are retiring or falling sick during their prime but it is also important as a driver for domestic savings mobilization.

Another disturbing thing which we will have to deal with honourable Speaker, is the issue of financial inclusion. There was a recent FINSCOPE survey launched in March 2012 which reveals that 38% of Zimbabweans are served by a formal financial institution and that 77 000 Zimbabweans have access to one banking branch. Mr Speaker, Sir, 40% of the population is financially excluded from both informal and formal financial products. Only 24% of the population has access to a bank account.

So, most of us we are putting our money in all kinds of anatomies, 27% of the adult population keep their savings at home instead of using financial service products. Mr. Speaker, 51% of the rural adult population is financially excluded yet 65% of our people live in rural areas and there is an economy in the rural areas - if you take tobacco we have created over hundred thousand producers. If this figure is correct it means those producers are not in savings yet it is a lot of money, this year alone income from tobacco was in excess of US$550 million. In the last two months alone we have given farmers US$54.2 million in respect of deliveries for last year and this year. That money surely should be captured and put in our banking activities. So, the issue of financial inclusion needs to be addressed.

I come to the disturbing review of our current account, our imports and our exports. Exports in 2011 are projected to be US$4.49 billion which is a major improvement from the 2010 figure of US$3.317 billion. The major contributors of our exports shipments are minerals at 64%, tobacco 19.4%, agriculture, 9.1%, manufacturing 7%, horticulture 0.3% and hunting 0.2%. The declining of our manufacturing is reflected by the fact that it is now contributing to 7% of our total exports. Not so long ago, it used to be number 2 producing over 30% of our exports. The disturbing thing is our imports. Our imports this year will be close to US$7 billion as of end of October 2012, they were US$6.5 billion. This represents 8.6% of our GDP. So 8.6% of our GDP is just going towards imports. If you look at the ratio our imports and our exports, it is 3:1. For every dollar that is coming into Zimbabwe by way of export earnings US$3 are going out. This are huge figures, you are talking of US$7 billion, it is not sustainable, we are running a feja feja economy, it is not sustainable. We have to ensure that we deal with supply side reform so that our people are able to produce and that we are able to keep what we are producing and not the current situation where you go to a supermarket like Pick and Pay in Greendale and virtually every product there including tomatoes is coming from South Africa. So, part of the thing that this budget is going to do is to address the supply side

deficit.

I now come to the issue of revenues very quickly, hon. Speaker, we had to revise our budget from US$4 billion to US$3, 6 billion in the first half of the year. The reason being that in the first half of the year, we had revenue shortfalls of -US$240 000 of which diamond shortfalls on their own are -US$229, 7 million.

In the output period that is to say in the third quarter, the period we are under at the present moment; Revenue collections have amounted to US$902, 3 million against a quarter target of US$976, 9 million giving a short fall of 74 million dollars. The graph you see on your screens, it is a graph that shows the original revenue target. The revised target and the actual collections and you will see that shaded green is actual collections. We are underperforming both in terms of the original target and the revised target. So even in the revised target of 3,6 billion dollars, we are not going to meet it to the end of the year. We expect that our revenue output to the end of the year will be 3, 5 billion dollars. So this is a challenge because what it does is two things and what it means is that we starve ministries and programmes and the hon. Ministers hear will testify to that kwashiorkor, we have not been funding your programmes. It will also mean that it will create another thing, the issue of arrears, we have been accumulating arrears throughout the year because we have not been servicing our debts and the arrears we have created as of today is the sum 260 million dollars. That means we have made fiction of the principle of cash budgeting because we are not supposed to get deficits, that means we have made fallacious, the principle of 'we eat what we are killing'. We have now begun to eat in the future because this 260 million dollars has to be paid next year when we have consumed it this year. It also means that we are killing a rat but consuming an elephant and that is not sustainable, hon. Speaker.

Mr. Speaker Sir, this is one of my favourite graphs and it shows our revenue where our money is coming from and you can see from this graph that the big boss man continues to be V.A.T followed by direct taxes, individuals and companies. Normal tax structure, direct taxes should be 50%. Customs duty is disturbing hon. Speaker, it is a mere 10% which is around 289 million dollars but if you go back to the figure of imports that I have given you, it is about 7 billion dollars. So if you take 10% or 289 million as a percentage of 7 billion, you get 4,8%. So our customs revenue is a mere 4, 8% of our imports, yet our average tariff is between 5% and 40%. So the figure of customs duty should be at least at the very minimum of 20-25% of 7 billion dollars which is a lot of money. So this is something that we intend to address.

On Expenditure, hon. Speaker Sir, 73% of our income went to wages of the total amount collected that is 1, 2 billion dollars. You can see the serious crowding out effect. We were able to reserve US$270 for operations and around 300 million dollars for capital expenditure. I will revert to these figures because they mean something when I discuss the macro economic framework.

On Capital expenditure hon. Speaker, we are pleased to say that we were able to ring fence and protect certain capital expenditure which is of importance to our people, this includes the amount of money that we have spent in water and dams, dams like Mtchabezi, Lora dam Wenimbe dam and of course the huge Tokwe-Mkorsi project.

In education, we were able to construct infrastructure at places like Lupane University where we have constructed and completed the administration block and the faculty of agriculture; at NUST where we have completed their Grand hall and some laboratories. We are also constructing, hon. members, homes of residents at Bindura State University and Midlands State University. We have also put significant amounts of money into roads; we have also put significant amounts of money into health infrastructure and schools infrastructure.

A lot of our money this year also went to housing, where we had a disbursement of 30,958 million dollars. On the modernisation on ICT, we have continued with our programme of converting from expensive set light technology to fiber optic technology and this year alone, we have spent 26 million. So what I am saying is that despite the austerity, we have at least ring fenced amount spent to capital.

We have also spent huge amounts of money on social expenditure and you will see this hon. members in the budget. I also want to acknowledge the role that our partners and donors have played in our economy. We have received from partners different amounts, if I may start with the total amounts were in excess of 300 million dollars and in the budget statement, I give a breakdown of the different countries that have made contributions which includes the likes of Australia, Germany, Norway, Sweden, the United Kingdom and Switzerland. Again, China is also playing an important role, particularly in our infrastructure; you know the finance we have received. I also want to acknowledge in particular two areas of support which we have received hon. Speaker Sir, in respect of the health transition fund, a total amount of 435 million dollars which has enabled us to provide essentially free maternal new born child and health nutrition, medical products, human resources and healthy policy planning and financing. The target of course is to deal with issues of maternal mortality and infancy mortality with a view to achieving millennium development goal number one. Let me also acknowledge the support we have received from the education transition fund, 51 million dollars which has enabled us hon. Speaker Sir, to purchase 22 million text books, GIS mapping for schools, capacity building for school development committees and 3 215 brail books and the pleasing thing is that at lower education we have reduced the ratio of text books to pupil from 15 to 1/1, although I was told by Minister Coltart, that we have not been able to look after these textbooks very well.

Mr. Speaker Sir, I now want to move to the meat of the budget statement. This budget statement has been demand driven in that we have carried out extensive consultations across the country. We have received written submissions that are in excess of 220 and we have carried out interviews, town hall meetings that are well in excess of 100. These are the people who told us that we need to address the political environment; people told us that they are very uncertain over next year. People complained about the high cost of money, the absence of savings, people complained about foreign direct investment and its absence thereof. People complained about deindustrialisation, our uncompetitive production structures, they complained about the absence of fiscal space. There is a huge demand and a huge expectation but there is low fiscal space, the cake is just too small when those that have to be fed are many.

People also complained about infrastructure and bottlenecks. They complained about agriculture in terms of the absence of irrigation facilities, inconsistent funding, electricity challenges, absence of markets and damaged roads that we find in the districts. In particular, Rural District Councils (RDC) made a plea to this Government that we should give them education and health grants because they (the RDC) subsidize us as the Central Authority. They also asked for road equipment because the roads are in a state of dilapidation. People complained about Zimbabwe's external debt, low levels of business confidence, lack of unemployment, discord and lack of effective policy implementation in Government. We are long on talking but short on implementation. These are the issues that we had there. Therefore, in crafting this Budget, we have tried to address these issues.

Mr. Speaker Sir, one issue that is out there and is a time bomb is youth unemployment. We have no option but to address head on, all obstacles and challenges that we encounter in the road towards sustainable rapid economic growth. Compounding this problem, where we have difficulties, is that Zimbabwe does not enjoy the benefits of a normal fiscal diamond. A normal fiscal diamond has four legs, the first leg is that you depend on your revenues and the second one is that you depend on your capacity to borrow on international markets, which we do not have. The third leg is that you depend on Foreign Direct Investment, which we also do not have. The fourth leg is that you depend on Overseas Development Assistant that comes direct to the budget. With the current status quo, where money comes into Zimbabwe but does not come direct to the Budget, if you look at our Vote of Credit, it is zero. The end result is that this economy is depending largely on its own resources so the percentage of our own Budget to Gross Domestic Product (GDP) is 32 percent, which is the highest in Africa, higher than South Africa, which is on 29 percent. What this means is that, our people are overtaxed and we are trying to get water from a stone, which science says is impossible, that is a challenge we have.

Mr. Speaker Sir, the multitude of challenges facing our economy, as I have said before, requires a fundamental rethink of the state economics and development in Zimbabwe. Only a mad person repeats the same thing over and over again. In response to the problems that we are facing, this Budget and Cabinet have developed a 15-Point Road Map that, in the Short-Term will seek to reverse the current slow-down in growth and refocus the economy on a higher growth trajectory that is inclusive, sustainable, sectorial and pro-poor.

Hon. Speaker Sir, if you were to ask me, what are those components of the Cheetah option, they are the following 15-Point Plan, which we are going to implement in 2013. This is the fresh trajectory which we are adopting in 2013. The first thing, is macro-economic stability, no country can grow without macroeconomic stability. Macroeconomic stability refers to the economic vitals of an economy, just like temperature and blood pressure is to a human being. Consolidating the gains of the last 3 years by guaranteeing a stable macroeconomic environment is therefore critical.

Hon. Speaker Sir, the second thing is the revenue base, the cake is too small, and so we have to find means of expanding it. The third thing is expenditure control, how do we live within our means, how do we eat what we kill, in particular, how do we prevent the accumulation of domestic arrears. On number 4 on this 15-Point plan, is the attraction of Foreign Direct Investment. This economy has reached a standstill stalemate position, so we need injection of capital to restart this economy.

The fifth thing, is the issue of industrial competitiveness and there are two things at hand, that is, let us improve our business environment and let us also address the issue of our skewed current account which is 35 percent of the Gross Domestic Product. Most importantly, let us look at the basis of the country's industrialization agenda through the support to the programme of spatial development initiatives, raw material beneficiation, value addition, product diversification and job creation through the support of anchor productive sectors of the economy. This is an important issue, 90 percent of our industries and economic activities are based on extraction. We grow tobacco, 90 percent of it gets out of the country, we mine diamonds, platinum, chrome and 90 percent of it is going outside Zimbabwe. This also include cotton, we make the best cotton in the world, but most of our shirts 'Comrade Made' are written Made in China at the back of …[Laughter]. The issue of industrialization is important, in any event, that is the only way that we can deal with the enclave and poverty in the rural areas. It is something that we are paying attention in this budget.

On number 6 is the issue of Savings Mobilisation, you can talk about Foreign Direct Investment but you also need your own resources. Creating the environment for mobilization of domestic savings is important and I will speak about the measures we are taking this year. Number 7 is agriculture and food security. A nation must be able to feed itself. This includes the issue of financing agriculture, land tenure system, livestock, marketing, irrigation, research and extension services. We are bestowed with a variety of important minerals, platinum we are number 2, second only to South Africa, we have world standards of gold, we have an entire 575 km stretch of granite called the Great Dyke with all kinds of minerals. Half of our country is under coal, we now have methane gas, and how do we leverage this? As I said before, this will be the anchor industry of our economy in the next 5 years up until 2018.

On number 9 is the issue of the Social Services and Social Safety nets. We have to improve the health service delivery and offer adequate support for education. We have to address rural poverty and strengthen social safety nets focusing on clean water and access to power social services. On number 10 and very critical is the Development Budget. In our consultations, there were two things that were on the top of the pile, the first one was education and the second one was electricity. Depending on where you were, if you were in the urban areas the major complaint was on finance and in the rural areas it was on agriculture. Therefore, the development budget that deals with the challenges in electricity, water, roads, railways and so on is critical.

The next issue is debt relief. We are implementing the Zimbabwe Accelerated Debt and Development Strategy and we have made a lot of progress such that we are now negotiating the Zimbabwe Accelerated Reengagement Economic Program (ZAREP). It is not about repaying our debts because we do not have the capacity, but it is about dealing strategically with our arrears so that we can access the huge funding that is in IFI's. I was in Tokyo a month ago at the Annual Meetings of the World Bank. The new World Bank President has put 75 billion dollars for Africa this year. We cannot access it because of these arrears.

Number 12 is the Reform Agenda, Parastatal Reform, Labour Market Reforms, Pension Reforms, Security of Tenure, triple P's and the creature called the State Procurement Board, we keep on talking about these things but no reform. The thirteenth issue which is important for any country, is the peace and mission building agenda. We need political stability, we need peace and you cannot have peace unless you pay for it. Next year we are going to pay for the referendum, we are going to pay for the elections and we are going to support constitutional commissions that support our democracy, the Gender Commission, the Human Rights Commission, the Media Commission, the Anti-Corruption Commission, to name a few.

Then number 14, Honourable Speaker is the issue of youths and women. These are important constituents and as you will see in our write up, in the main, they are innocent bystanders to the processes of economic reproduction in this country. If you make these majority population innocent bystanders, you will create social problems. So it is no longer an economic issue; it is also a political issue.

Then lastly, the issue of small and medium enterprises, number 15, there are three things here. How do we convert the informal sector into the formal sector? Number 2, how do we strengthen and deepen SMEs so that they can graduate to fully fledged industries? Number 3, how do we deepen the role of cooperatives? So these are fifteen things and this is our fifteenth point plan.

Before I go to the actual measures, let me address the macro economic framework for next year. We project growth rate for next year to be 5%. We project revenues to be a mere $3.8 billion. Honourable Speaker Sir, this is a disaster. Our Budget for 2012, was $3.6 billion which on the basis of the current performance as I have already indicated, we are going to receive $3.5 billion. It is our intention and I will explain this, to adjust the cost of living for civil servants in January of next year based on the inflation point. If you do this Honourable Speaker, you will get a total employment bill of $2.6 billion. So that means if you subtract $2.6 from $3.8 which is the total envelop, you are virtually left with nothing.

That nothing is as follows; number one, it is $700 million that will go to Ministry operations. Now, if you consider that in 2011 we have already spent around $300 million dollars for operations plus $260 million. In other words the $700 million is equal to what we have already spent even though we have not paid, then we have got a disaster because next year we have got the extra additional challenge of a referendum and an election. So kuchava nekugedageda kwemeno.

Honourable Speaker Sir, the assumptions we have of this 5% growth rate are the following:

1. A normal rain season.

2. The take off and implementation of the measures we are

proposing, which we creation of freshmoney for industry, social services and so forth, are we able to deliver?

3. The third thing that we are counting on is the continued firming

of international commodity prices that is the sustained demand on our platinum, on our gold and on our diamonds.

However Hon. Speaker, there are down risks and I will quickly summarize them; the threat of a poor rain season and the collapse in international commodity prices. However the biggest risk to this economy in 2013 remains that of a violent and contested election. Any reproduction even on a small scale of the fraticism and friction we saw in 2008 will virtually collapse the lasting foundations we have tirelessly re-laid in the last 45 months. It will be a case of two steps forward and twenty steps backwards. Political crisis place a premium on development, we cannot afford to carry on this cyclical path of permanent conflict temporarily suspended by short periods of peace. We can do better, which is why we are encouraged Hon Speaker Sir, by the messages of peace that are coming from our leaders. The challenge is that all of us must walk this talk.

I now come to the measures, Hon. Speaker, distinguished Members of Parliament. If you look at the summary of our fifteen point plan it can be summarized in four issues that we are focusing on. The first one is agriculture and food security, the second one is social and pro-poor service, the third one is infrastructure and the fourth one is industrialization and employment creation. I am going to summarize a few of the major issues that we are focusing on and I will leave colleagues and everyone else to read the budget because it is very detailed but in areas where there are such important policy measures I regret to say that I will have to read, particularly the section on financial services and revenue broadening.

As I said, the first thing that we have to deal with is agriculture and food security. We have allocated a total amount of $159.4 million to agriculture in 2013. Part of this money Hon. Speaker Sir will cover animal and disease control, extension services, training and research services, title surveys, strategic grain reserve, livestock main scheme, irrigation development and agriculture in-put scheme to vulnerable sectors. Part of the things that we seek to do in 2013, include the following:

1. Livestock rebuilding and drought mitigation and in this regard the

Government has put in $10 million of which $3 million has already been disbursed. I am also pleased to advise Hon. Made that Old Mutual has kindly offered us $7 million line of credit that will be used for restocking the livestock in Matabeleland.

2. The second issue is irrigation development; you will see that I will

mention Old Mutual a lot because they have been very good people this time around. On irrigation development, as I said, part of the complaint in the provinces is that the issue of irrigation development is critical. Other programmes include land development programmes, title surveys, compensation for some immovable improvements, land information management system, national assessment for productivity and land use, the entitle surveys then land information systems as I have said, extension services Cde. Made, and national assessment for productivity and land utilization.

Mr. Speaker Sir, you will also see in this statement that Government

has in fact finalised a land policy which is still to be adopted by Cabinet and some of the things that are addressed in this land policy are the following issues:

1. Finalisation of the fast track land reform programme and the land

audit. Defining the judicial framework governing property rights in particular the restoration of the land market i.e. that long lease. This is critical, development of human capital infrastructure, biological capital and research including taking into account climate change. Steering the use of technology including ICT, establishing reliable and consistent private sector models of financing, establishment of the commodity exchange and this is something that we have given the resources. The commodity exchange has to be established next year. This business of farmers selling to the GMB and waiting for six months to get paid is inefficient. Farmers, like they do with tobacco must take their commodity to a market and get paid there by a method that encourages clear price determination, supply and demand. So this is something that cabinet has spent a lot of time dealing with then of course, the issues of compensation, supporting agricultural training and extension service. We are walking the talk. We are giving priority to the key issue of social delivery.

Allow me Hon. Speaker to move to the issue of SMEs. On SMEs, this is what we are doing:

(1) We are establishing designated cluster zones;

(2) We are financing SEDCO restructuring and recapitalisation

(3) We are establishing incubation centres on lines of credit to the SMEs given the decline and de-industrialisation and the closure of the big companies. It is important that we deal with the issue of SMEs.

What we are doing Hon. Speaker is that we have found fresh money in the following: the Old Mutual and CABS are going to put $10 million lines of credit to SMEs with the CBZ putting $10 million. So there will be $20 million lines of credit for SMEs.

Can I move Hon. Speaker to the issue of youth unemployment? Allow me to read a little bit. Mr. Speaker Sir, a key consideration of empowerment is the recognition by the Inclusive Government that up to 70% of Zimbabwean population is youth that is to say people under the age of 35 years. The majority of these persons are unemployed, with youth unemployment in Zimbabwe being four times higher than that of adults.

Regrettably, youth unemployment is no longer just an economic issue, I have made this a point. This is why the world is giving attention to this issue and I make reference to a plethora of resolutions and conventions which includes youth UN Millennium Declaration, UN Resolution promoting youth employment, UN Resolution containing policies and programmes involving the youth, the Ouagadougou Declaration of Head of States of September 24 among other things. They are all listed there. Part of the weaknesses of our past policies has been the under respect of vocational training. The kind of curriculum which we have in Zimbabwe gives too much attention to what I call for lack of a better word Westminster, a humanities education. The modern trend is that we must vocationalise our education and give specific attention to engineering and vocational education.

So part of the few which we are doing in this budget, is actually to reinfence those colleges where our children are being taught in schools. Not all of them can be accountants, doctors and so forth. This is something that we are paying attention to. Connected to youth is also the issue of women empowerment and for the same reasons as youth, this is an important tax sector. There are three things that are critical here. It is women empowerment through the women's development fund, it is implementing the national gender policy and it is also advocacy programmes vis a vis campaign materials in particular on gender rise.

Let me move very quickly Hon. Speaker Sir, to the issue of ICTs. I mention ICTs because they are important in our economy. We are going to focus on the following:

- Fibre optic backbone structure;

- Mobile teledensity

- Broadcasting transmission infrastructure

- ICT for education i.e. E-Education

- E-governance in particular e- governance application including on- line visa applications, online passport applications, online application for registration of companies, trademarks, patterns and industrial designs.

We are also focusing on a number of innovative projects. One of them is the issue of ICT kiosks which we hope will spread ICT accessibility throughout the country. We are also focusing on the issue of technology cities i.e. the integration of libraries into our ICT system.

You can see that I am focusing on the economic components. Allow me to move to industrialization. Mr. Speaker Sir, there are three things that we have to address. The first thing is the issue of attracting foreign direct investment. I have already made the point of the balance which we have achieved between indigenisation and foreign direct investment, and I am pleased to advise that the Minister of Youth, Indigenisation Hon. Kasukuwere and the Minister of Investment and Economic Planning are in the throws of finalising amendments to the two of the Investment Act and the Empowerment Act to achieve this balance. So foreign direct investment is critical.

The second issue which I have spoken of is the issue of finance. This is what we have done for 2013. We are maintaining ZETRAF, we are maintaining DEMAF, and they have not been exhausted. But, once DEMAF is exhausted, and by the end of the year, we hope that $20 million will be disbursed and in the first quarter of 2013, the outstanding $20 million will be used up. Once that is done, we then move to DEMAF 2 which is another $40 million in the first quarter of next year. So there will be DEMAF 2.

I am very indebted to the African Import and Export Bank, the AFROEXIM Bank in particular to its bank president Mr. Zhum Eccra, who has agreed to give a fresh round of assistance to ZETRAF. So whilst ZETRAF 1 will continue, which is $70 million, there will be ZETRAF 2 in 2013 to the tune of $70 million. This, we hope will be able to deal with the supply of bottlenecks that have made people put applications and eventually give up. There are also other lines of credit Hon. Speaker that are in the market. This includes as all of you know, the 500 million pula facility that we have signed with Botswana. The negotiations which we are currently taking out with South Africa, which I hope before the end of the month we will be able to make some strong announcement.

We also have a $50 million facility from the Republic of Angola. I am going to speak about additional measures on this point when I speak to the financial sector. As I have indicated, this budget takes great care of cluster development. It is important that we deal with this partial development initiative and at cabinet level, we have agreed to set up an inter-ministerial committee that comprises of the following ministers. The Minister of Trade because he is at the epicenter of industrialisation, The Minister of Local Government, if we have to send industries to growth points and rural areas then industries and investors would know the kind of security with regards to land. The Minister of Transport and Infrastructure Development and the Minister of Energy in particular are important because roads and electricity are important.

The Ministry of Finance is important in respect of dealing with fiscal incentives to make those businesses go there. Then of course, the Ministries of Investment Promotion and the Ministry of Indigenisation for obvious reasons but if we are to get out of the enclave, the issue of cluster initiative, the issue of beneficiation is very important.

Allow me to move to the issue of finance sector measures and this is a component of our 15. Plan. Notwithstanding an incontestable general health in the financial service sector, there are a number of procedural paradigmic and structural issues in the banking sector. These include under capitalisation of some of the smaller banks, corporate governance issues, and corrosively high interest rates and absent or meaningless rates on deposit high bank charges, low rates of financial inclusion under strict supervision and surveillance, limited capitalisation of E-banking and ICT platforms. The complete absence of a developmental state mindset particularly amongst foreign owned banks and I must express my regrets at the lack of strategic thinking within the foreign owned banks in Zimbabwe.

You can be a foreign owned bank in Zimbabwe but being a Zimbabwean bank that just happened to be foreign owned. But, if you are a foreign owned bank in Zimbabwe and then you have foreign owned operations, we have a problem. Unfortunately, the behavior of our foreign banks, it is the latter and I for one I am extremely mortified and mystified.

The issue of absence of Central Bank's lender of last resort, the under-capitalized Central Bank with a capital balance sheet, the relatively high levels of non-performing loans, limited access to off-shore lines by the sector and an imperfect banking market dominated by four banking institutions with 80% of all the deposits.

Mr. Speaker Sir, in the past four years, in the past 46 months, we have refused to regulate on anything. We have refused to control anything but where you have a monopoly, where you have oligopolistic tendencies, then you have market failure and where you have market failure, a regulation is inevitable. So, I can advise that we are now moving in to regulate this sector and this is what we are doing.

1) This is what we have already done. We have revised upwards

2) the capitalization requirements.

3) We have ordered the 70% repatriation into Zimbabwe of accounts.

4) We have enacted a new Deposit Protection Act

5) As Cabinet Members we have approved detailed amendments to the Bank use and Promotion of Unlaundering Bill which are going to come to this august House very soon.

Further, as hon. members know, we have crafted major amendments to the Banking Act which will be brought to this Parliament soon and they will deal with the following issues

1) Corporate governance and under corporate governance, we intend to deal with the following issues Mr. Speaker Sir;

a) Limiting individual shareholding in a financial institution

b) Mandating the disclosure of banks' ultimate beneficial shareholders because what you sometimes have is that the individual shareholder hides in a motley of corporate vehicles, shelf companies, trusts and so forth but when you piece the corporate banks, it is the same individual, moyondizvo.

So we are going to address this. I actually wanted to say gushungo but I know you do not own a bank and Minister Mpofu is not here. -( Laughter)-

Mandatory appointments of risk management and corporate governance committees, mandatory appointments of compliant officers and internal auditors

2) Strengthening the troubled bank resolution framework by

a) Increase in the number of mandatory stress tests.

b) Increase in the power of the Registrar of Banks, so we need the Central Bank to carry out these mandatory stress tests

c) It is the further protection of the public through the establishment of a banking Ombudsman. We want to establish this individual whose function is to see and protect the consumer vis-à-vis the issues of bank charges, the issues of interests both on deposits and on lending.

d) The establishment of a credit bureau.

I want to speak on interest rates. Mr. Speaker Sir, what is happening in our banking sector is what my friend Hon. Chamisa has referred to as voodoo banking. It is a practice of where people put their money in the banks but you are called to say mari yako yapera.

So, what we propose to do is the following;

We propose for deposits, for any term deposit of US$1 000 and above, held over a period of at least 30 days, that should attract a minimum of 4% interest per annum. So on deposits of $1 000 and more for a period of 30 days, it should attract a mandatory minimum. If you want to give 12%, that is fairly good. I know that Nigel Chanakira would want to do this. That is fine, you can do that.

However to the extent that most of our people are earning a salary that is below the poverty datum line, it is our direction that no bank charges will be levied on any deposit of $800 and below. No bank charges will be levied on any amount that is $800 and below. We are also saying, Mr. Speaker, one of the things that affect us is the absence of E-banking.

So, what we are proposing is that once you are an account holder, it does not matter whether it is current account or a savings account, a bank must mandatorily, peremptorily, obligatorily issue a debit card. So, a debit card should be issued without application. We are not talking of a credit card. We are talking of a debit card. In this regard Mr Speaker, we are also going to lay out in 2013 a platform of E-banking. It pains me that you go to a middle class mall like Sam Levy's Village and the majority of those shops do not have Point of Sale machines where debit cards are being used. That is not all, it is particularly in certain shops owned by our friends from there.

So, we are going to lay out Mr. Speaker, this platform that makes it an inconvenience to carry cash like in most countries that you carry your debit card. If there is $5 there and you use it, we are going to roll it out.

I want to deal with the issue of lending interest rates and bank charges. What we have set out in this Budget is the following; that the Central Bank and the Banker' Association are going to sit together to craft a Memorandum. This Memorandum, they are going to reach an agreement on the manner in which the lending rate is defined provided that the lending rate must have an upper limit/cap of not more than 10% which you deposited. So, the gap between your deposit rate and your lending rate should not be more than 10 points.

So if your minimum deposit rate is 4%, your lending rate cannot exceed 10%. However, in arriving at this formular, banks will also take into account the cost of money.

Secondly, this Memorandum will also deal with the issue of bank charges. At the present moment, it is a mandatory $2 in some small accounts and we expect that this Memorandum will deal with the issue of bank charges. We are seriously concerned with the issue of bank charges Mr. Speaker.

If you look at the financials that were produced by banks as of the end of the half term, 55% of bank income was non-interest income. Banks must make money from selling money and not from non-interest income.

So to address this issue we have to address the monster called bank charges but we do not want to be seen to be capricious. We have asked them to negotiate with the Central Bank the Memorandum of Understanding. Once they agree on that Memorandum of Understanding it is that which we will convert into a Statutory Instrument.

Mr. Speaker Sir, 40% of internally generated money supply in this economy comes from two institutions, NSSA and Old Mutual. So what it means Hon. Speaker is that if the cost of money that is being generated by NSSA and the Old Mutual is high it also automatically means that onward lending by banks will also be expensive. So it is not enough to try and curb interest rates at demand side, it is also important to deal with them at supply side.

We have entered into negotiations with NSSA and the Old Mutual and we have reached an agreement that will be codified in a Memorandum of Understanding that in respect of those resources that they are going to lend to the banking sector from the insurance and pension business, and I want to underline this because they can get money from elsewhere. For instance CABS has been getting money from other international organisations. We are talking of money that is generated here from our pensioners, from our workers, that is the money we are talking about which is 40%. That money cannot be on-lend for more that 10% at the bank level, not from the Old Mutual point of view.

What the Memorandum will then seek to address is the ratio now of what does Old Mutual and NSSA get. Is it 7% and what does the bank margin get, is it 3%. To ensure that this becomes a reality we are going to ensure that the aforementioned bank Ombudsman, the Central Bank and the two institutions themselves, NSSA and the Old Mutual are able to trace where their money is to avoid a situation where a greedy bank can get this money at 7% and then sell it at 15%. So I want to express my gratitude to the leadership of Old Mutual Jonas Mushoshwe and his team and the leadership of NSSA Mr. Chagonda and Mr. Matiza and Mr. Vera for agreeing to this thing.

Mr. Speaker Sir, one of the challenges which we have is mortgage finance. The average mortgage rates are been issued in Zimbabwe and a lot of money has been disbursed. CABS has disbursed over $90 million and CBZ former Beverly Building Society has disbursed about $57 million but the problem is that this money is expensive. It is between 13% and 15% and many events unlike old mortgages which were 25 years this money is 10 years. So we have to create a stock of mortgage finance in this Zimbabwe. To do this we are re-establishing PUPS (Paid-Up Payment Shares). These were introduced in Zimbabwe through Statutory Instrument 308 of 1986 with a view to enable Building Societies to raise long term funding for periods of up to two years.

The PUPS were designed to mobilize private sector funds for housing by enhancing Building Society competitiveness in attracting deposits. The condition precedents were that at the end of each financial year each building to map up a quarter 25% of the mobilized funds for low income housing. So if you bring in PUPS it means you are bringing in immediately 25% of mortgage finance. What we are doing is we are giving the old tax-free status to these PUPS but we are also, and this will be important to commercial banks, amending this Statutory Instrument. In the past it used to apply to Building Societies only. We are also amending it so that any commercial bank that wants to issue PUPS can do so and have the same tax free benefit. So banks can engage in mortgage finance.

Mr. Speaker Sir, it is critical that we deal with the issue of mortgage finance and indeed housing because we are creating 2 - 3 generations of lodgers. If the money supply increases which we hope it will increase then we expect the duration of mortgages to increase from the current 10 years to bit of 15 - 20 years and of course the interest around 10 - 13%.

Hon. Speaker, we have had our own adventures and misadventures with Treasury Bills in the last two months. I do not think that it is fair for the blood pressure that some of us have suffered so they are measures that we are taking in the budget statement which I am not going to read but we are also strengthening Hon. Speaker the issue of deposit protection and on insurance companies we are increasing the minimum capital levels of insurance companies from $500 000 for Life Assurances companies to $2 million, for Life Insurance Companies of $300 000 to $1,5 million, for Composite Insurance Companies from $800 000 to $3 million. From Non-Life Insurance Companies from $400 000 to $1,5 million, for Life Reinsurance Companies from $400 000 to $1,5 million and for Funeral Assurance Companies $4 million to $1,5 million. We have given an accommodative period to 2014 to comply. The full details will be in the budget.

I want to come, Hon. Speaker to social services and to the capital budget starting with the health sector.

Mr. Speaker Sir, the total amount we have allocated under the column social and pro-poor service is the sum of $407 015 000.00 of this we have allocated to health the sum of $175 300 000.00. Part of this money Hon. Speaker will go towards the establishment of district hospitals. Part of the complaint we had in our consultations was that they were some districts which actually had two district hospitals but some districts without a single hospital. So what we have done in this budget is to actually ensure that there is a district hospital per district. We have also allocated resources towards the rehabilitation of hospitals in every province. So to give you an example, Manicaland - Rusape General Hospital, Chipinge General, Mashnaland Central - Concession, Mt Darwin, Mashonaland East - Makumbe District and Mutoko District, Mashonaland West - Banket and Chegutu Districts, Masvingo - Chiredzi General and Mwenezi District Cde Bhasikiti, Matebeleland North - Binga, Victoria Falls and Nyamandlovu, Matebeleland South - Beitbridge and Filabusi, Midlands - Mvuma, Kwekwe and Shurugwi. So that is what we are doing.

Hon. Speaker Sir, we have also spoken in Cabinet about the increased demand of provincial hospital facilities for both Harare and Bulawayo. Both Harare and Bulawayo demand exceeds supply. So we have set aside resources feasibility studies of provincial hospitals in Harare and Bulawayo. In Bulawayo, there is an interim measure of ensuring that Ekusileni Hospital can get on its feet if the shareholding issues are resolved but what we have done is if that is resolved, we will have a new provincial hospital. The other things which we have done for this budget for health is to finance the usual things, we have set aside money for drugs in respect of chronic illness for example ARVs, tuberculosis, drugs for blood pressure. We have also set aside money honourable Deputy Prime Minister for cancer. We have also set aside resources.

On education, as I indicated, we have done three things. We have set aside US$95,290 million for teaching and learning materials, students support to tertiary institutions, schools and supervision, rehabilitation and upgrade of primary schools and upgrade of tertiary institutions. Some of you will ask how much are we spending on education, the total amount including wages is actually a United States billion dollars representing 27% of the total budget. The Dakar Declaration says we must spend 20%, we are in fact spending 27%. I want to highlight some of the things we are doing - when we carried out consultation honourable Speaker, we had person after person standing up saying there are no schools, saying there are no schools in resettlement areas. So pupils are going to school in barns which barns are collapsing and killing pupils. So, we have set aside resources for the construction of schools in resettlement areas.

The second priority honourable Speaker, is the issue of special grants to schools. We have been very poor in this regard so we will be providing grants to schools.

The third issue which Minister Coltart was very insistent upon is the rehabilitation and in some cases the reconstruction of libraries. Some of us speak better English than many white people because of libraries. So, we have invested a lot of money into libraries. The biggest thing which we have done honourable Speaker is that on revenue measures, we have increased the excise duty on tobacco and alcohol. However this extra increase in excise duty for tobacco and alcohol will be rephrased, protected and will be guaranteed towards education. The three areas - number one, the vocational training institutions, I have referred to above. Number two, the Ministry of Lower Education and number three the Ministry of Higher Education. We estimate for instance that on alcohol alone, we will raise US$11 million to the end of the year, so that is an extra US$11 million.

Honourable Speaker Sir, on rural development, last year we put a lot of money into REA for the self evident reason of the transformative impact of electricity. We have also done that this year. We have also put money into boreholes water management but what we have also done this year, we paid special attention to roads and the demand by local authorities that we must capitalise them by empowering them with road grading equipment. So, what we have done is the following:

Through ZINARA, we are providing a sum of US$40 million that will go towards the purchase of road equipment. I am pleased to say that the tender has been approved although the State Procurement Board being what it is, has granted the main component of the contract to a certain Chinese company and the engineers at ZINARA are saying we do not want this equipment because it has failed us in the past. So, I hope as Government, we can resolve this issue quickly. Treasury will then put US$20 million to create a US$60 million fund for the purchase of this equipment for rural district councils. Those of you who know rural areas know what I am talking about. Honourable Buka, you know your little roads, 5 kilometers of tar and that that is the 5 kilometers of tar zvinonzi zvigwishu zvaFlora - (Laughter) - I want to speak on the question of roads. The rehabilitation of our roads is key, clearly the Zimbabwean Government does not have the capacity to fund road construction. So, we have put significant resources to roads about US$238 million which is 11% of the total infrastructure budget.

However the main source of funding for our major has been PPP BOTs, this is the model which we have used in securing funding for the rehabilitation of the Plumtree to Mutare road. We have also secured funding for the dualisation of the Harare to Plumtree road. The rehabilitation that is taking place will continue and those of you who have travelled on this road, will see and you will agree with me the excellent work that the contractors are doing. The rehabilitation work will continue. We will continue using our own resources, using our own resources, we will continue with the dualisation of the Harare to Marondera road. Those of you who travel on this road will appreciate how well our engineers are doing. I make this point to put into context the travel we are having with the little dam at Manyame River in Norton. It has taken six years in construction and I am sure Christmas 2014 will come and those people will be pretending to work. It is a disaster. The game changer for roads in this country is self evidently Beitbridge to Chirundu and indeed the rehabilitation of the Beitbridge border post. We cancelled in September 2009, the contract we had awarded to a South African company called Sike because of financial closure. We are pleased to advice that the Development Bank of Southern Africa has now agreed to come in and support the rehabilitation and construction of Beitibridge Border post together with the ancillary facilities which will include houses for workers and new bridge across the Limpopo river. As I speak, I said the game changing investment in roads will clearly be Beit bridge to Chirundu and in this regard they has been a lot of interest and we hope that the investors we talk to can walk the talk. This is a defining project and I think it to be a proud moment if we are able to send relevant contracts during the life of this inclusive Government.

On housing, we continue to support housing. Housing is critical. One of the things that we have done is to create prescribed acid status in the sum of $45 million. We hope that this amount of money Hon. Mutsekwa will be put to good use in 2013. We have also, Mr. Speaker, CBZ Bank which has kindly agreed to set aside the sum of $10 million which will be used as a mortgage finance exclusively for civil servants. However, this will only be first time home owners so we cannot have multiple home owners. The total amount as I have said which we have set-aside for the capital projects is $350 814 310. I have effectively dealt within the issue of infrastructure and the issue of social services.

Allow me Mr. Speaker to deal with two issues. The first one is leveraging of the mining sector. On the mining sector as I have indicated before, this sector has the capacity of growing exponentially to such an extent that you are able to get revenue of $14 billion pay and by 2018. There is a graph there that shows the capacity of this industry but there are certain things that we gave to doom. Number one, we have two finance explorations in this country. In this regard we have set-aside resources for exploration in the 2013 budget. Number two, gold. We are losing a lot of money and a lot of gold because Fidelity Refineries is not capitalised. It is important to capitalise Fidelity Gold Refineries so that we can refine our gold here.

On Platinum, all our Platinum is being refined in the Bushveld region of South Africa. So what we are saying on Platinum is that we need, the Government through the Ministry of mines NPR's the Minister of Finance to talk to the three Platinum mines, Unki, Mimosa and Zimplats to construct a platinum refinery in Zimbabwe.

On diamonds, I will speak about them later on but the key thing that the Government has agreed on is the enactment of the Diamond Act, the enforcement of 100% Government ownership of diamonds, the immediate separation of diamond mining from marketing, the promotion of value addition and issuance of directive prohibiting exportation of unpolished diamonds.

The most important thing about mining is the following they are linkages. It is important to create what are called forward linkages. Forward linkages you are essentially talking about mineral beneficiation. For instance, ferrochrome can be used. We have a ferrochrome industry, diamonds, jewellery, Platinum, gold and so forth. We could produce steel polyandrous, base metal and so on.

We need a deliberate policy to encourage forward linkages i.e. value addition. Any easy linkage is a horizontal linkage. Horizontal linkages refers to mining industry procurement. In the past 60% of the mining sector used to be supplied by local mining procurement. Those figures have gone down. We want mining companies to procure internally. To support this measure we have put in extra tariffs i.e. penalties for any mining company that is going to procure a good that is locally available to encourage this horizontal linkage.

The most important form of linkage is spatial linkages and spatial linkages relates to beneficial partnership between the state, the private sector, the civil society, local communities and stakeholders. The challenge Mr. Speaker, is that most mining in Zimbabwe is small scale mining. The mine owner just go to rural area set up their mind and they have absolutely no relation with the community. They cannot even set up a school in that area. If you talk of Renco Mine they cannot even tare their own road either side if you go through Masvingo or through Chiredzi. Spatial linkages relate to synergetic relationship between the mine and, I think to a certain extent Zimplats is trying to do that, possible to some extent Bindura Nickel is trying to do that. We are trying to encourage this. This is very important.

Allow me to move the question of raising mobilisation before I speak on debt, and you can say that almost through. They are two issues that cabinet has asked me to speak on. The first one is ZIMRA reforms. As I have already indicated, there is complete mismatch between our customs revenue and our imports 4.8%. It is important that we address the following, the automation of Beit Bridge border post, the detaining of post-clearance audit, the strengthening of risk management measures, the curbing of abuse and SADCC rules of origin, the implementation of standard valuation methods for second-hand vehicles. The second issue that I've been asked to address is the issue of diamond revenues and budget shortfalls. Mr. Speaker, Sir, total diamond exports of up to October 2012 stood at US $563 561000 up from US $233 740 247. In other words, an increase of 129%.

Diamond exports up to 2 November or 30 October 2012 has been around $600 million. This $610 million will come from the following companies Mbada Diamonds $255 million, Angrim Diamonds $125 million, Diamond Mining Corporation $70 million, Marange Resources $53 million, Murowa Diamond $36 million, River Range $2.4 million, DTZ Osgio $2 million, Diamond Angel $113,000. Mr. Speaker Sir, Government is equal shareholder in Mbada, Angime and diamond mining Corporation while wholly owning Marange Resources.

Apart from being obliged to retain a 50% share in every gross sale Government is entitled to normal tax dues in the form of cooperate tax payee VAT and royalties. Regrettable as of October 2012 total dividends received by Treasury was a mere $41 million.

The same amount we received for the entirety of 2011 in spite and notwithstanding a 129% increase in output of diamond. Cabinet has taken a strong decision and we spent 2 hours discussing this issue in Cabinet on Tuesday, the conclusion of the Diamond Bill which must also define the revenue distribution matrix. How much does Government get from the revenue? Is it 20%, 32 percent and so on. Most importantly, it is critical that the Executive orders that have imposed sanctions against Zimbabwe should be lifted on our diamonds.[HON. MEMBERS: Hear, hear]- This is extremely important.

MR. SPEAKER: Order!

THE MINISTER OF FINANCE: Mr. Speaker Sir, we have proposed a host number of revenue measures and I am going to summarise a few of them. The first is some minimum protection we have given to our industries through protecting local products that include chicken, cooking oil, beverages, dairy products and meat products for obvious reasons. The second measures, which we have carried out are measures to protect the Current Account deficit including measures I have spoken of in respect of local procurement for the local mining industry. As already indicated, increase in Exercise Duty on alcohol and cigarettes and suspension of Duty on Motor Vehicles imported by Tourism operators.

Hon. Speaker Sir, we are also raising the non-taxable income of bonus to USD1000 with effect from the 1st of November 2012. We are also rationalising our fees, one of the complaints from business was that there were too many charges and taxes, EMA comes and collects, ZIMRA comes and collects and so on. One of the things we are doing in this Budget is to try and rationalize these various taxes and penalties. We are also proposing to rationalize the income tax appeal process, it is too lengthy and we are trying to streamline that. We are also deferring collection of VAT on certain capital goods. This was mentioned in many of our consultations.

Mr. Speaker Sir, we have had a problem with teachers. What has been happening is that Parents Development Associations and SDA's have been giving allowances to teachers to augment their income. Unfortunately, because it is income, in terms of the Section 8 of the Income Tax Act, ZIMRA has the right to follow them and say 'we want what belongs to Caesar.' What we are now saying is that, what used to belong to Caesar does not belong to Caesar anymore, we are now giving an exemption in respect of those benefits that are paid to teachers by parents and communities.

Mr. Speaker Sir, we have also liberalized the taxation to Small and Medium Enterprises. The final thing that I want to say is the issue of debt (ZADDS) - The Zimbabwe Accelerated Debt and Development Strategy. You will recall that Government adopted a 3-pronged strategy in Cabinet. I want to say that we have made a lot of progress since March of 2012. We got into a situation where the international community have agreed to re-engage with Zimbabwe. On the 21 st of October 2012, the World Bank and the IMF removed all restrictions against engagement with Zimbabwe. What we have started doing right now is to negotiate ZAREP. -[HON. MEMBERS: Inaudible interjections]-

MR. SPEAKER: Order! Order!

THE MINISTER OF FINANCE: Hon. Speaker Sir, on this point, I want to say that the African Development Bank has already mobilised the sum of USD525 million that will go towards Zimbabwe's arrear clearance once we conclude these agreements. The World Bank is also in the process of mobilizing a huge amount of money which I cannot disclose but I have disclosed in Cabinet. These are substantial amounts that we are talking about. The IMF AND WB are also sending a team early next year to look at our systems, the Central Bank and the Ministry of Public Finance management system to ascertain whether Overseas Development Assistance can now be channeled through the Government. They are also preparing what are called pre-arrear clearance grants. This is a respect and reward to the work that we have done over the last 3 years.

Mr. Speaker Sir, I will not speak about the peace process…-[AN HON. MEMBER: What about CDF?] - CDF is there, we have provided money for CDF -[HON. MEMBERS: Hear, Hear] - USD5million. I thought you were not going to ask on that one. Tinokupai, toziva kuti mune maelections next year. We will give you.

Mr. Speaker Sir, before concluding, let me express my gratitude to thousands of Zimbabweans who made input into this Budget throughout our countrywide consultations. There are some people like Oliver Baloyi of Masvingo and Chiredzi who reminded us in Masvingo this year that, pasina nhokwe hapana majuru, Stephen Dube of Bulawayo, Rudo Mpofu of Gwanda and James Masango of Bindura. These people have now become regular furniture in our meetings, I want to appreciate this group of committed Zimbabweans. Mr. Speaker Sir, those of us who have travelled the length and breadth of this country…-[HON. MEMBERS: Inaudible interjections]-

MR. SPEAKER: Order! Order! Hon. members.

THE MINISTER OF FINANCE: Those of us who have travelled the length and breadth of this country are well aware of the fatigue and despondency that afflict the majority of our people, many of whom fear next year and the election. Mr. Speaker Sir, as our Political Principals have said, it does not have to be like this. The year 2013 should be the year our political systems and processes demonstrate the political maturity of Zimbabwe's leadership and people, drawing lessons from the harsh experiences of the politics of destruction that we have seen in the past.

Mr. Speaker Sir, 2013 should be the year in which we liquidate our cyclical politics and convert the same into virtuous politics of inclusion. Furthermore, 2013 can and should be the year in which we complete our internal debt resolution and achieve double digit growth rates. The same year should be the year in which we address our crisis of misalignment and subordinate our politics to the development agenda.

Hon. Speaker, we have glossators, epistemologists, oncologists and even rocket scientists sitting over…-[HON. MEMBERS: Inaudible Interjections] - the capacity for cerebral engagement should just be as obligatory as it is desirable. I personally, hon. Speaker, have hope, great hope.

THE MINISTER OF CONSTITUTIONAL AND PARLIAMENTARY AFFAIRS: I move that the debate do now adjourn.

Motion put and agreed.

Debate to resume: Tuesday, 27th November, 2012.

On the motion of THE MINISTER OF CONSTITUTIONAL AND PARLIAMENTARY AFFAIRS , the House adjourned at Five O'clock p.m. until Tuesday, 27th November, 2012.

Last modified on Tuesday, 19 November 2013 13:02
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National Assembly Hansard Vol. 39 NATIONAL ASSEMBLY HANSARD - 15 NOVEMBER 2012 VOL. 39 NO. 2