Zambia and the BIG words we use by Kampamba Shula

Zambia having being colonized by the British led to Zambia obviously becoming an English speaking country. Zambians on average speak very good English however this ability to use big English words has proven a stumbling block in Zambians actually addressing some of its challenges.

For example, it is not uncommon to hear reports saying Zambia must “diversify” from mining to agriculture or statements like Zambia must enhance “diversification” from mining to agriculture. To diversify or diversification is on average a big English word. If we are to break this down in simple terms we would say to “diversify” is to do something different from what you are currently doing. The question we must ask then is, what mining do Zambians really do? Which big mines in Zambia are owned by Zambians aside from the minority stake owned by government? Why do people say Zambia must diversify from mining to agriculture when in truth most of our people are farmers already in agriculture. May the reason be because we have chosen to use the big word “diversification” instead of using a simple word many people would understand?

Zambia has for a long time struggled with what is called the problem of corruption. Why do we assume that everyone in Zambia actually knows what the word “corruption” means? If this doesn’t make sense to the reader please consider the translation of the word “corruption” in a local language of your choice. Then consider if this local language translation has a positive or negative connotation.

Considering in truth that many people do not really understand the word corruption beyond simple “bribery”, Why do we have an institution in Zambia called the Anti-Corruption Commission?. In mathematics two negatives make a positive. The words "Anti-Corruption" is supposed to be two negatives making a positive except corruption is not negative when translated in a local language. There is a difference when you call the Zambia police force the Zambia police service. There is a difference when you call the Zambia prisons service the Zambia corrections service. Same reason ZRA must be called the Zambia revenue service not Zambia revenue authority.

Quite recently Zambia declared Gold a "strategic asset". There is no standard definition of a strategic asset and no one knows what it means but it gets the crowd going. Sometimes in Zambian we use big words unnecessarily.

Until we begin to realize that the words we choose to use limit the parameters of our solutions we will be going around in circles. As Einstein said "We cannot solve our problems with the same thinking we used when we created them"

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Why declaring Gold a Strategic Asset is a problem by Kampamba Shula

Zambia is moving to amend gold-mining rules in order to treat the metal as strategic asset. Cabinet agreed to amend the Mines Act to align it with a policy set last October to recognize gold as a strategic mineral. That requires production by artisanal miners to be bought through the state-owned mining investment company ZCCM-IH Plc. Cabinet’s May 20 approval to modify laws and regulations stemmed from a proposal from the mines minister. 

There is no standard definition of a strategic asset in the context being specified by the ministry. According to strategic management, Strategic assets are anything rare and valuable that a firm owns. This definition does not prove very helpful in our analysis in this context.

The only reference of a strategic asset that makes any sense in this context is with regards to portfolio management of investors. Gold has been used as money to a greater or lesser extent for much of the history of civilisation. As a store of wealth and, a hedge against systemic risk, currency depreciation and inflation, gold has historically improved portfolios' risk-adjusted returns, delivered positive returns, and provided liquidity to meet liabilities in times of market stress.

THE Bank of Zambia (BOZ) [1]says preparations to start keeping gold as an alternative foreign reserve with a mining firm have advanced. BOZ is currently preparing to house gold as an alternative foreign reserve as the metal is not kept the same way as currencies. The issue at hand was where the final purification would be done. The strategic importance of an asset relative to a given set of asset classes and risk policy is traditionally evaluated in the context of asset allocations for optimised portfolios on the Markowitz (1959)[2] mean-variance (MV) efficient frontier. The optimised allocations are presumed to be a measure of the asset’s importance and role in improving portfolio reward-to-risk.

There have been some studies that have found an important role for gold or its surrogates in a strategic asset allocation. Such studies are almost always based on a relatively large return premium for gold. Strategic asset allocation typically focuses on asset classes rather than individual assets. For this reason institutional investors may consider that investment in gold should properly be considered in the context of a basket of well diversified investable commodities.

The context in which Gold has been declared a strategic asset is an important consideration. In Zambia, declaring gold as a strategic asset has led many to presume that gold should now become the preserve of Zambians only. Whilst this view has its merits, the flipside is if gold is made as a preserve for Zambians only then it will become difficult for small scale gold miners to source finance and partnerships from foreign partners to help them mine at a large scale.

As economist Milton Friedman once said, “There is No Such Thing as a Free Lunch.” The first rule, which is always true, is that there is scarcity, and scarcity necessitates trade-offs. The second, which is almost always true, is that when someone offers you something “for free,” he expects something in return. There is a trade-off that has to be accepted by all stakeholders, failing to recognize this trade off will inevitably lead to inaccurate conclusions. 

[2] Markowitz, H. (1959) Portfolio Selection Efficient Diversification of Investment. John Wiley & Sons, New York.

[1] BoZ ponders gold reserve, Daily Mail, Nancy Mwape, April 22, 2020

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Sales tax: The Mongu Rice Story

Sales tax: The Mongu Rice Story

In a land far away there once was a restaurant called the Le Zambi. This restaurant has a lot of people in the neighbourhood who depend on it and as such the people appoint Bossano 1 and a team of “honourables” to help run the establishment. This restaurant is run by Bossano 1. Bossano 1 appoints a lady Eminem with a very nice accent to manage the financial affairs of the restaurant. This restaurant has over the years incurred a lot of debt which was used on rehabilitation and other “Infrastructure” related issues.

Every Friday a group of big buyers visit the restaurant and order a table of Mongu rice usually with chicken. The big buyers always split the bill according to who has eaten/drank the most fairly. After each meal a waiter sent by Lady Eminem always gives the big buyers a receipt showing how much is to be paid. The Receipt always includes a 16% tax on the meal called VAT.

The group of big buyers who we shall call “the Dons” supply the Mongu rice to the restaurant and then proceed to go buy a finished meal at the same restaurant. For every a sack of Mongu rice to reach town each of the big buyers contributes according to their business.

 The Dons include many people chief among them a man called bashi mine the miner, bashi mabala the farmer, bashi tamanga the trader and ba shofelo the driver. So for example if Ba shofelo uses one of his trucks to move the rice from the village to town he proceeds to give Lady Eminem an invoice of his costs including a 16% tax called VAT. When he orders a meal at Le Zambi Lady Eminem will deduct the tax she was supposed to pay Ba shofelo (input VAT) from the tax ba shofelo is supposed to pay for the meal (output VAT). Note the 16% from the transport and the meal do not automatically cancel out. Lady Eminem does the same for bashi mabala the farmer who supplies the rice and bashi tamanga the trader who connects everyone together. Bashi Mine is special, he is not involved in supplying Mongu rice but has people on the ground who help remove stones from the Mongu rice. Bashi Mine has a deal with Bossano 1 where he sells some of these stones in the backyard of the restaurant. For every stone sold bashi mine is entitled to a refund from Bossano for the labour and equipment used since Bossano 1 has no equipment of his own. Stones have Zero Rate VAT. So when Lady Eminem gives the bill to bashi mine he charges her the VAT for his services of removing the stones but she cannot charge him VAT for the meal since stones are zero rated.

This becomes a problem for Lady Eminem, because after calculating how much everyone should pay and how much she should pay them, she occasionally pays a lot of money to bashi mine to refund him for removing stones. Now at another table in the restaurant sits a group of people called the “honourables” and these guys pretty much call the shots alongside Bossano 1. These guys make the rules in the restaurant.

For example the honourables made a rule that every bill should have 16% tax. This was the VAT bill of 1995. The honourables also included what is called a VAT schedule which is a list of people among the Dons who should be charged less VAT because of their standing in the community. For example Doctors, Church pastors who eat Mongu rice never pay VAT as well as Mealie meal millers and some transporters and other special people. Everyone else usually pays.

Lady Eminem proceeds to sit at the honourable table and convinces them to change the bill. She proposes scrapping VAT and replacing it with Sales tax bill format. With this Sales Tax bill Lady Eminem will not have to pay Bashi mine for removing stones as this bill is non-refundable. Lady Eminem proposes a Sales tax of 9% for locals and 16% for imports.

This means for every bag of Mongu rice supplied to the restaurant bashi mabala, bashi tamanga and ba shofelo will not get refunded the tax when they buy a meal of Mongu rice with chicken. The Dons begin to worry as this means they will have to pass on the cost to other people in community. This pass on of costs is cascading tax and leads to inflation, generally high prices of food in the restaurant etc.

Lady Eminem proposes the new Sales tax bill but leaves out the schedule of listed items that should include who should not be taxed eg. Church pastors, Doctors and special goods. So now everyone begins to worry in the restaurant.

Some guy with round gogos walks into the restaurant and orders macaroni la finkubalieri with a glass of munkoyo. This guy calculates that the high prices/inflation will not be caused by the sales tax but by the “worry” that people have on the sales tax. Behind the scenes, he moves from table to table to try and convince the team of Lady Eminem and honourables to include a schedule list of non-tax items. If this guy with round gogos fails then most likely prices will begin to increase come july 1st. But he is just a guy with round gogos, you can make your own conclusions.

Note: According to Official record mr round gogos does not exist. All characters fictitious

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Currency reserves in metals: The bad guy tales

Can't fathom why people ignore the fact that Nixon decoupled all global currencies off gold in 1971. The only US president to resign for shady stuff.
When I say Zambia lets back the Kwacha in copper people look at me strange like the USA and Roman empire didn't back in metals. 🤦‍♂️
But let's slow it down.
Let's start with Rome. In the early days of the roman republic (500BC) for the first 178 years, there is no evidence of big inflation. They were using Gold and silver coinage whilst small denominations were made out of copper and bronze.
Then some bad guy by the name Hannibal of carthage started to trouble Rome in what was called the second Punic war and to pay for this war, the Romans did "deficit" spending by taking coins from taxes, melting them and adding base metals like copper so they could mint more coins. This caused big inflation and inflation was one of the factors that brought the roman republic into a dictatorship, the Roman Empire.
Despite this the early Romans enjoyed a long period of basically no inflation because they used sound money, gold and silver. It was the debasing money for war spending that led to problems.
Personally i think the Romans are original bad guys because their moves to debase were slick. Firstly they had a cheating method of whenever they walked into govt offices they would clip their coins and take a piece out.After a while they would melt these clippings and make more money. Secondly the Romans had another trick called revaluation here they would take a coin and just give it new stamp e.g take a K1 coin and stamp K100. These guys were specialists in cheating....I applaud such...👏👏
Now lets rock with the United States from the 1700s Up until the world war one US had low inflation, high levels of precious metals in its coinages and treasury notes were backed by Gold at a one to one ratio. From there the US debased its currency more and more to pay for world war two, the korean war and then the vietnam war until finally the link between gold and the US dollar was severed completely in 1971. 
After world war two, IMF was formed at the bretton woods summit to push for global financial stability. IMF gave the world an offer it couldn't refuse, IMF said back your national currency reserves in dollar or in metals. The US had just come out of world war two flexing so it was obvious who had the influence. You can guess what the nations of the world chose, they backed in dollars. So IMF said everyone will back in dollars and the US will back in gold and everyone was cool. 

Now here comes a real shady bad guy, US president Nixon who was known for criminal activities like wiretapping and spying on the competition (watergate scandal) but his greatest crime came on August 15th 1971 when he severed the last ties between the dollar and gold ending the bretton woods system. These were his words:
"I have directed secretary connolly to suspend all convertibility of the dollar into gold all other convertible assets, except in amounts and conditions determined to be in the best interest of the United States"
Nixon pulled the most shady move ever and the world just watched and agreed as we all moved to a fiat system. This was a bad guy move, to be impartial it must be applauded 👏👏. Nixon later resigned, not for the gold issue but because he was facing certain impeachment for his shady moves in the watergate scandal.
In summary all I am saying is African countries like Zambia, Zimbabwe and DRC Congo need to back our currencies in metals. Yes its cheating on a moral scale but its perfectly within IMF articles. 
Some will say but Zambia is christian nation we dont cheat. The same coin that Jesus was given when asked on tax was made of copper at 1/4 probability. Jesus said "Give to ceasar what belongs to ceasar"...he didnt say nothing about how you got what you gave to ceasar.
"History Doesn't Repeat Itself, But it Sure Does Rhyme " - Mark Twain

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The Tokota Theorem – A Sociological and Economic Approach to Youth Crime

It is Russian Novelist, Fyodor Dostoevsky, who once said “The degree of civilization in a society is judged by entering its prisons”. Following this rationale my latest paper operates on the assertion that the state of youth in a nation is reflected by youth in prison. A nation’s youth in prison constitutes those who are deviantly criminal and those who are criminally deviant. Deviant is not necessarily criminal, but sometimes it is. This paper is directed at youth crime and applies a sociological and mathematical approach of “deviant utility” using an interpretive sociological model based on constructs by Weber’s (1978) interpretive sociology, Durkheim’s (1982) social fact and consciousness, Lombroso’s (1876) Criminal man and a mathematical theorem based off Becker’s (1974) “Crime and Punishment: An Economic approach”. 

This Tokota Theorem draws on the notion of the born criminal with assertion that many might find disturbing, we are all criminals. Every man, however pure and honest he may be, is conscious now and then of a transitory notion of some dishonest or criminal action. But with the honest man, exactly because he is physically and morally normal, this notion of crime, which simultaneously summons up the idea of its grievous consequences, glances off the surface of the normal conscience, and is a mere flash without the thunder. With the man who is less normal and has less forethought, the notion dwells, resists the weak repulsion of a not too vigorous moral sense, and finally prevails; for, as Victor Hugo says, “Face to face with duty, to hesitate is to be lost.” 

This model for the “Tokota Theorem” is based on sociological constructs of the degree of socialization which we have incorporated with a mathematical model to explain deviance bordering on criminality to inform proper diagnosis and prescribe proper solutions in the policy space. According to Reckless & Dinitz (1968) there is a need for the development of an effective self-concept measure which can assess the direction toward or away from delinquency or deviant behavior generally. There is need also to develop measures of other self-factors which control directionality. When such factors are uncovered and when they are effectively measured, then it should be possible to chart workable programs to prevent delinquency and to re-enforce the components of self which enable the youth to be an effective conformer. Our model specifically differs from Becker’s (1974) model by our inclusion of born criminals, socialization and awareness of social opportunity as sociological research has shown that such factors affect the degree of criminal deviance. 

This paper recommends a proactive approach to manage crime with broad recommendations to increase funding to the Zambia correctional system. The most eccentric recommendation from this paper is that to reduce youth gangs and youth crimes in peri-urban communities the Zambia Correctional system in collaboration with other stakeholders should set up reformation centres in these areas and prevent crime before it actually takes place by giving youth different aveunes for socialisation, recreation, awarness of social mobility and strong social identity. The rationale for this is not based on any moral or altruitistic sentiments but from the rational model of reducing the derived utility from deviance. 

To make sure the “Tokota Theorem” is not a mere academic exercise it will form part of an active advocacy tool kit which will be presented by the author to parliamentary committees in Zambia hopefully aiming to change the narrative of how crime is proactively handled in the country. Afterall, was it not Karl Marx who famously said in his “Eleventh Thesis on Feuerbach” that "Philosophers have hitherto only interpreted the world in various ways; the point however, is to change it". 

You can download the paper the link below.

https://www.researchgate.net/publication/327537100_The_Tokota_Theorem_-_A_Sociological_and_Economic_Approach_to_Youth_Crime

https://www.researchgate.net/profile/Kampamba_Shula3/publication/327537100_The_Tokota_Theorem_-_A_Sociological_and_Economic_Approach_to_Youth_Crime/links/5b979666458515310578363b/The-Tokota-Theorem-A-Sociological-and-Economic-Approach-to-Youth-Crime.pdf?origin=publication_detail

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The John Mwanza Formula – Comparative static analysis of tax revenue, compliance and evasion in Zambia by Kampamba Shula

The Private Sector in Zambia and the Government have for a long time been at loggerheads with regards to tax rates and revenue. Government wants more revenue which usually tends to support suggestions for increasing tax rates. This tendency can best be explained by the “Law of the instrument” a phrase from Abraham Maslow’s The Psychology of Science, published in 1966 which says “if all you have is a hammer, everything looks like a nail”. The Private sector on the other hand have been searching and looking for ways to convince Government to reduce tax rates and stimulate growth which will lead to higher revenue. The Private sector has recently stressed the effects of tax evasion on Tax revenue loss. This apparent catch 22 motivated a more critical look at the factors affecting tax revenue in Zambia.

In this paper I proposes how tax rate cuts can increase revenues by improving tax compliance whilst reducing tax evasion especially in a substantially informal economy like Zambia. In this paper, a theoretical model of tax evasion, inspired by Gary S Becker’s Crime and Punishment: An Economic approach, is briefly presented. A renewed mathematical approach called the “John Mwanza “ Formula is introduced extending into comparative static analysis discussing tax evasion, compliance, complexity and even tax audit probability all in the vein of formulating a model that can at the margin gives us a clearer structure of the rather daunting task of increasing tax revenue whilst lowering tax rates.

You can download the working paper below.

http://www.zambiachamber.org/?p=486

Download via Academia.edu

Download via Research Gate

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Zambia Budget Review: Revenue and Expenditure (2004-2014) by Kampamba Shula

1.          Trend analysis

1.1.       Revenue

1.1.1.      Overview

·         The highest revenue collections in the past 10 has been from Valued added tax followed by PAYE then by Customs, Excise and Trade Taxes.

·         Revenue collection of the broad forms of taxes improved dramatically after 2010 as can be seen from the graph above.

·         Mining tax which was royalty based increased dramatically in 2010. This was on account of an exceptional performance of mining tax revenue.

·         Domestic borrowing was low from 2003 to 2010 but has steadily increased over the last 5 years. External financing grew exponentially in from 2010 to become the second highest contributor to budget revenue in 2013.

1.2.        

1.3.       Expenditure

1.3.1.      Overview

·         Over the past 10 years General Public services accounted for the bulk of expenditure at 29%. It was followed by Economic affairs (25%) and Education at 18%. Health followed not so closely at 10%.

Review

·         Economic affairs (Purple) increased substantially compared to General public services(Blue) over the last 10 years.

·         Defence spending has steadily increased over the last 10 years with greater expansion especially over the last 5 years.

·         Education expenditure has constantly increased over the past years with sharp increases over the past five years.

·         Health expenditure on the other hand actually experienced a decline from 2009 to 2011 but showed good growth from 2012 to 2014.

·         Housing, Social protection and environmental protection have been relativel stagnant. Public order and safety showed good expenditure growth however.

Source: Ministry of Finance

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2015 Budget Review and Analysis by Kampamba Shula

2015 Budget
1.1. Economic developments in 2014
• Current estimates are that the Zambia economy will create 120,000 new formal sector jobs mostly from the private sector.
• Preliminary projections are that real GDP growth will be higher than the projected 6.5 percent for this year. This will be mainly driven by a good harvest in the 2013/2014 farming season, increased electricity generation, investments in private and public infrastructure and growth in manufacturing as well as in transport and communications.
• The Treasury took measures to consolidate the fiscal position. These measures included actions to contain the size of the public sector wage bill and streamlining of expenditure towards priority programmes. As a consequence, the end year budget deficit is expected to be within the programmed level of 5.5 percent of GDP compared to 6.5 percent in 2013.
• Inflation was contained within single digits over the first nine months and was 7.8 percent in September 2014 from 7.1 percent in December 2013. The slight increase was due to the depreciation of the Kwacha, mainly in the first half of the year, and the pass-through from upward adjustments in fuel prices and electricity tariffs.
• The first half of 2014 experienced a rapid depreciation of the Kwacha against major currencies, reaching a high of K7 per US dollar in May. This partly arose from a reduction in the supply of foreign exchange to the market, particularly from the mining sector, and subsequent speculative behaviour. In response, the Bank of Zambia tightened monetary policy through a number of measures, including adjusting upwards the policy rate, increasing the statutory reserve requirement and extending its application to Government and Vostro accounts.
• The tight liquidity conditions came at the cost of a temporary rise in interest rates which constrained access to credit. Having achieved relative stability in the foreign exchange market, the Bank of Zambia has, since July 2014, eased liquidity conditions. As a result, the daily average overnight interbank rate reduced to 12.8 percent as at end-September 2014 from 25 percent at end-June 2014.
• During 2014, trading activity on the Lusaka Stock Exchange (LuSE) increased, reflecting improved investor sentiment and participation on the local bourse. Market capitalisation increased by 8 percent to K62.9 billion while the All-Share index rose by 17 percent to 6,620.9 by end-September 2014.
• To comply with the LuSE listing requirements, Government will itself reduce its shareholding in ZCCM Investments Holding Plc to 60 percent from 87 percent.

• The overall Balance of Payments is expected to register a surplus of US $486.0 million in 2014 compared to a deficit of US $344.9 million in 2013. This surplus is attributed to improvements in both the current and financial accounts. Higher copper export volumes and the receipt of Eurobond proceeds account for the expected improvements.
• Consistent with improvement in the overall Balance of Payments position, gross international reserves are projected to increase to US $3.2 billion at end-December 2014, representing 3.6 months of import cover, from US $2.7 billion or 3.0 months of import cover recorded at end-December 2013.
• The stock of Government’s external debt as at end-September 2014 was US $4.7 billion. This represents an increase of 34 percent from US $3.5 billion as at end 2013. The increase in the external debt stock was mainly on account of the US $1 billion Eurobond that was issued in April as part of programmed financing in the 2014 budget. The total external debt service for the first nine months of 2014 amounted to US $126.2 million which is less than 3 percent of the domestic revenues.
• Zambia’s domestic debt including arrears as at end-September 2014 stood at K21.9 billion representing an increase of 5.6 percent from K19.7 billion as at end-December 2013. The increase was largely on account of programmed financing for the 2014 Budget.

1.2. Macroeconomic Objectives, Policies and Strategies for 2015
The Government in 2015 will continue to focus on industrialisation together with job and wealth creation, so as to reduce poverty and inequality on a sustainable basis. This will be achieved by investing in sectors that have been identified to best promote employment for our youthful population, significantly increase productivity in the economy by empowering our workers with the requisite skills for the 21st century, contribute to higher and inclusive economic growth, and develop the rural areas to narrow the urban-rural divide. These include the agriculture, tourism, manufacturing and construction sectors.
The specific broad socio-economic policy objectives for 2015 will be to:
(a) Achieve a real GDP growth rate of above 7.0 percent;
(b) Achieve an end year inflation rate of no more than 7.0 percent;
(c) Increase international reserves to at least 4.0 months of import cover;
(d) Raise domestic revenue collections to at least 18.5 percent of GDP;
(e) Contain domestic borrowing to no more than 2.0 percent of GDP;
(f) Accelerate the diversification of the economy, and continue the drive to create decent jobs, especially for the youth; and
(g) Accelerate implementation of interventions in the health, education and water and sanitation sectors.
1.3. 2015 Budget

In 2015, Government proposes to spend K46.7 billion or 24.6 percent of GDP. This will be financed from domestic revenues of K35.1 billion which is 75.2 percent of the total Budget and 18.5 percent of GDP. Grants from cooperating partners of K1.2 billion or 2.6 percent of the total budget will complement domestic revenues. Domestic borrowing is projected to be 2.0 percent of GDP translating to K3.8 billion while K4.2 billion is a combination of foreign programme and project financing. The balance of K2.4 billion is earmarked proceeds from the 2014 Eurobond.

1.3.1. 2015 Expenditure Allocations by Function

1.3.1.1. General Public Services
• K12.0 billion or 25.8 percent of the budget has been allocated for General Public Services. To ensure that Government meets both its domestic and external debt obligations, K2.9 billion and K2.4 billion have been provided respectively. Other notable expenditure allocations under this category include K669.4 million for grants to Local Authorities of which K586.8 million is for the Local Government Equalisation Fund.

• To ensure the continuation of infrastructure development in the newly created provinces and districts, K500 million has been provided in 2015. Further K210 million has been allocated for the Constituency Development Fund.
• The constitution making process has continued keenly and in earnest, as the Government discusses the matter with all interest groups it has allocated K29.3 million towards this process.

1.3.1.2. Economic Affairs

• Government proposes to spend K12.7 billion or 27.3 percent of the total budget to support the economic sectors and lays the basis for further prosperity for our people. In this regard, an allocation of K5.6 billion has been set aside for road infrastructure, including the Link Zambia 8000 and the Pave Zambia 2000 projects.
• Diversification from maize remains paramount in attaining more inclusive growth and economic independence. In this regard, K254.9 million has been allocated towards the E-Voucher System which will allow farmers more flexibility of choice in the inputs they receive. A further, K1.1 billion has been allocated to the Farmer Input Support Programme (FISP). In 2015, it is expected that 1,000,000 farmers will access inputs through the E-Voucher and FISP programmes.
• Government will continue promoting private sector participation in grain marketing by limiting grain purchases by the Food Reserve Agency to the 500,000 metric tonnes required for the strategic food reserve. In this regard, Government has provided K992.9 million for strategic food reserves.
• To promote irrigated agriculture and increased access to water resources, Government has allocated K164.5 million towards the construction and rehabilitation of dams to achieve our target of an additional 17,500 hectares under irrigation by 2016.
• To promote livestock and fisheries, Government has allocated K307 million for livestock disease control measures and aquaculture development.
• To address the challenges posed by the ever growing demand for electricity, Government has provided K600 million to ZESCO for power generation, transmission and distribution. A further K70.7 million has been allocated to increase the number of rural communities across the country connected to the national grid under the Rural Electrification Programme.
• To continue nurturing the entrepreneurial spirit Government has allocated K123.7 million to various empowerment funds that cater for the youth, women and SMEs
• Government has allocated K100 million for the establishment of a sovereign wealth fund. Going forward, a significant propotion of the dividends from state-owned enterprises that will fall under the Industrial Development Corporation will form part of the fund.
1.3.1.3. Education and Skills Development
Government proposes to spend K9.4 billion or 20.2 percent of the total budget in the education sector. In an effort to reduce the pupil teacher ratio, 68 percent of this amount will go towards the recruitment of 5,000 teachers and sustaining the current establishment. Government has also provided K1.1 billion for infrastructure development for early childhood, primary and secondary education.
K650 million has been allocated to commence construction of additional student accommodation at the University of Zambia, Copperbelt University, Mulungushi University and Evelyn Hone College, and to continue the construction of new universities. The new Universities that are earmarked for completion in 2015 are Paul Mushindo, Chalimbana and Palabana.
Government will embark on the construction of King Lewanika and Luapula Universities in 2015.Robert Kapasa Makasa, Mukuba and Kwame Nkrumah Universities are almost completed.
A further K79.6 million has been allocated towards the construction of nine trades training institutes across the country of which three will be completed in 2015 in Isoka, Kalabo and Mwense. In addition, K28.5 million has been allocated towards the procurement of research and development equipment as well as the commencement of the construction of a National Science Centre in Chongwe, a Fisheries Centre in Samfya and a Mineral Research Centre in Solwezi.
To address the challenges facing our vulnerable school leavers to access tertiary education at our colleges and universities, Government has raised the allocation to bursaries by 27.9 percent to K200.2 million from the 2014 allocation of K156.5 million. The cost of publicly provided tertiary education per student is among the highest in the SADC region.
1.3.1.4. Health
In line with Government’s objective of providing equitable access to quality health care, Government has allocated K4.5 billion or 9.6 percent of the overall budget in 2015 to the Health Sector. Of this allocation, K268.2 million has been allocated for the construction and rehabilitation of health infrastructure in various parts of the country.
An allocation of K753.5 million has been set aside for the procurement of essential drugs and medical supplies. K52.5 million has been allocated for the net recruitment of over 2,000 health personnel.
1.3.1.5. Housing and Community Amenities
Government has allocated K798.7 million for housing and community amenities, of which K541 million will be for the rehabilitation and construction of water supply and sanitation infrastructure in the rural, peri-urban and urban areas.
1.3.1.6. Public Order and Safety
K2.2 billion has been allocated to maintain public order and safety. Key interventions will involve modernisation of our security wings; recruitment of security personnel including immigration and prison officers; rehabilitation of prison infrastructure; and construction and rehabilitation of staff houses.
1.3.1.7. Social Protection
Government has provided K1.3 billion for social protection of which K805 million is for the Public Service Pension Fund, K180.6 million for the social cash transfer scheme and K50 million for the food security pack. The allocation to social protection translates to 2.7 percent of the overall expenditure in 2015.
1.3.1.8. Other functions
K3.7 billion has been allocated to the remaining functions of Defence, Environmental Protection and Recreation, Culture and Religion. Of this amount, K3.2 billion is for Defence.
1.3.2. Revenue Estimates and Financing
The proposed revenue measures have been framed in the context of Government’s aim to consolidate its fiscal position and make the tax system simpler and more effective. This entails, inter alia, accelerating the modernisation of tax administration and restructuring the current mining tax regime in order to capture more resources to address public expenditure needs.

1.3.2.1. Revenue Measures

• Government proposes to double the presumptive tax payable by these operators. This measure will raise additional revenue of K3.8 million.
• Government proposes to increase the specific duty rate on refined edible oil to K2.20 per kilogram from 85 Ngwee per kilogram in order to bring it at par with the ad valorem rate of 25 percent charged on imported refined edible oil
• In order to stimulate the local manufacturing industry and sustain employment in the sector, Government proposes to increase customs duty on explosives to 25 percent and on roofing sheets to 30 percent.
• Government proposes to increase excise duty on imported un-denatured spirits of alcoholic content of 80 percent or higher by volume to 125 percent from 0 percent. This proposed measure will only apply to importers who are not licensed to manufacture excisable products while the licensed manufacturers will continue to account for excise duty at the point of sale of the manufactured potable spirits at the current excise duty rate of 60 percent.
• Government proposes to remove the 5 percent customs duty on aviation fuel in order to reduce costs in the aviation industry. As a result of this measure Government will forego K6.3 million in revenue.
1.4. Changes to the Mining Fiscal Regime
Government and the mining companies, Government proposes to redesign the mining fiscal regime by replacing the current two tier system with the following simplified mining tax structure:
a) 8 percent mineral royalty for underground mining operations as a final tax;
b) 20 percent mineral royalty for open cast mining operations as a final tax;
c) 30 percent corporate income tax rate on income earned from tolling; and
d) 30 percent corporate income tax rate on income earned from processing of purchased mineral ores, concentrates and any other semi-processed minerals, currently taxed as income from mining operations.
The proposed changes to the mining tax regime will not apply to mining of industrial minerals. The expected additional revenues, in 2015, as a result of these new measures are estimated at K1.7 billion.

Analysis

The 2015 Budget is in line with the Medium term expenditure framework (2015-2017). The contentious issue arising from this budget is most prominently the Wage Freeze. In September 2013 the Zambian Government approved a harmonious increase of wages for civil servants. The increase was as much as 100% for some civil servants. The wage increase was much anticipated but its size was larger than predicted. To balance this out the Government introduced a wage freeze on the salaries of civil servants for 2 years.There have been calls from people in the media and others to drop the wage freeze.In truth and in free market legality the Government was not supposed to impose a wage freeze. But a closer look at the fiscal position indicates that Government cannot actually afford to drop the wage freeze right now after the unilateral increase in 2013. Unions will continue to fight the wage and they should (its their job) but the wage freeze might only be dropped in 2016.

The mining fiscal regime change is a bold move towards royalty taxes and its success will hinge on the Zambian Governments ability to actually monitor and evaluate the effectiveness of the new tax system.

Debt levels of $4.7 billion and K21.9 billion for external and domestic debt remain within international standard thresholds. This however should not undermine the need for greater fiscal management.

In terms of Allocations, a bulk of the economic affairs, similar to last year is still going to the Roads sector. The introduction of the Local Government Equalisation Fund.will be interesting to see how it pans out.
It is motivating to see that the constitution process has been budgeted for, what is intriguing is to what level of the process will these funds move the draft constitution.
The doubling of presumptive tax on public service vehicles is reasonable and will help reduced "free riding". Other import duties on edible oils and roofing sheets will go a long way to help the local manufacturing companies.The removing of 5 percent customs duty on aviation fuel will also help improve the profitability of the aviation industry which should translate into better tourism packages and numbers of visitors.

The 2015 Budget did not address the 2014 inflation targets which according to our current trajectory Zambia will not be able to meet.In the 2014 Budget Zambia estimated and inflation rate of 6.5%, Inflation now stands at 7.8%.This is the reason even the 2015 inflation projections were revised upwards to 7%. Growth will be much in line with projections for 2014 and 2015 driven by the Governments ambitious infrastructure programme, Agriculture, manufacturing, transport and communications.

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2015_Zambia_Budget_Analysis

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VAT Rule 18 Analysis : The Amber Rose and Wiz Khalifa Example by Kampamba Shula

VAT Rule 18: Background and Current Affairs
Valued Added Tax Rule No. 18 has been in existence since 1997 with the intention of making Zambian exports competitive through VAT refunds on exports.
Under Rule 18, the requirement to obtain information from importers outside Zambia’s jurisdiction has proved impractical and results in delayed processing of VAT refunds.
According to a letter by Minister of Finance Alexander Chikwanda to President Michael Sata, seeking his guidance on VAT tax administrative Rule 18, he stated that the uncleared backlog with the mines was in excess of $600 million (K3.6 billion).
Against this backdrop, the Zambia Revenue Authority (ZRA) has amended Rule 18 of the Value Added Tax (VAT) General Rules of 1997 to safeguard Government revenue with effect from September 8, 2014.
ZRA commissioner general Berlin Msiska says Rule 18 affects exporters and the mining sector.
In 2013, the Zambia Revenue Authority (ZRA) amended the rule by way of Gazette Notice No. 26 of 2013 which adjusted all VAT returns to standard rate export sales until proof of compliance to the rule has been made in order for exporters to claim VAT refunds.
According to a letter written by ZACCI president Geofrey Sakulanda to Minister of Finance Alexander Chikwanda, ZACCI highlighted some of the challenges of VAT rule 18 for the minister’s possible consideration.
Mr Sakulanda outlined that prior to the 2013 amendment act, compliance to this rule had been by way of providing to the Zambia Revenue Authority ( ZRA), the documentation of invoices issued by the exporting company, duly completed export documents (Form CE20), release orders by ZRA confirming exit at the border and proof of payment into the company’s bank account.
However, Mr Sakulanda noted that the amended VAT rule 18, in part, particularly Rule 18 (1) (b), requires that in addition to the requirements above, an exporting company must also provide copies of import documents for the goods bearing a certificate of importation into the country of destination provided by the customs authority of that country as proof of export.
He argues that the amended VAT rule No. 18, has its own challenges.
Among such challenges is the requirement to produce copies of import documents for the goods, bearing a certificate of importation into the country of destination provided by the customs of that country as proof of export.
Mr Sakulanda stated that exports made to clients in the export markets on such terms that once a consignment is handed over to the client’s agents, the responsibility of the exporter is terminated and the exporter has absolutely no control over the consignment from that point and export invoices are based on the terms of sale.
“It is challenging to obtain information documents to prove importation in most of the export markets for Zambian products. This situation is even worse in one of Zambia’s key export destinations, namely Democratic Republic of Congo (DRC).
“Exporters are not in any way averse to complying with the law but need special consideration to find practical solutions to dealing with this challenge. This situation is detrimental, as it erodes competitiveness especially that our competitors in the regional markets do not require that similar documents to be produced,” Mr Sakulanda said.
VAT Rule 18: The Amber Rose and Wiz Khalifa Example (Ficticious)

(All Characters Ficticious)
A recently divorced couple by the name of “Wiz Khalifa” and “Amber Rose” have son called “Sebastian”.According to the prenupt they signed before marriage, in the case of divorce Wiz Khalifa is required to pay alimony and Child support (depending on custody court case) to Amber Rose per month. For the sake of this example, let’s put Alimony and Child support in one category and call it “VAT”.
Now according to the prenuptial, Whenever Amber rose buys stuff for their son Sebastian she is allowed to claim to be refunded (payed back) from VAT. One of the conditions in VAT is that Amber rose is supposed to provide receipts of every transaction which she buys stuff for Sebastian. This condition is sensible in theory but is a bit difficult to apply in practice. Amber rose can give her friend to take Sebastian to a movie when she is busy and her friend may lose the receipt on the way back. This makes it difficult for Amber to produce a receipt. This condition is difficult to apply so sometimes she usually doesn’t produce a receipt but still gets refunded VAT.
Sometime later, one of Wiz Khalifa’s friends tells him that he has been seeing Amber going to get a lot of expensive manicures, shopping etc. and suspects that the money is from VAT which is supposedly for Sebastian. What makes it worse is that Wiz Khalifa hears that Amber Rose has been seen chilling with a guy called Nick canon and spending money on him.This makes him angry. So this is what Wiz Khalifa decides to do, he enforces the rule that Amber has to provide receipts for every transaction on which she spends money on Sebastian. Similar to before, Amber is unable to provide receipts for some payments for Sebastian which she does through her friend. Wiz decides to hold any refunds until Amber can provide receipts of payments some of which she pays through other people who are not so mindful of the receipts. Therein lies the stale mate.
Now is Amber Rose legally entitled to refunds from VAT, yes. Is Wiz Khalifa legally allowed to withhold VAT until Amber provides receipts, yes. Now Wiz Khalifa legally has to pay Amber Rose the VAT refunds but he has a legitimate reason to ensure that Amber Rose actually spends the money on his son Sebastian.
There are two options
1. Wiz Khalifa can wait till the court case in which Amber Rose will invariably win that he has to pay her the Refunds
2. Wiz Khalifa will need to be level headed. He will legally request (subpoena) a trail of money payments from Amber Rose. This trail will detail for example which friends (yeah they get subpoenaed too) take Sebastian for a movie and where they put their receipts. Wiz Khalifa can then by form of subpoena find out exactly how much money is given to the friend for the movie and whether it corresponds to the amount Amber Rose Claims on VAT. This method is obviously harder because Amber Rose’s friend is not bound by the same legality.But unfortunately is the only logical course of action. In the long run Wiz Khalifa will have to give room for Amber Rose to find a way to comply her friends to product receipts.
Now in this story, Wiz Khalifa is the Zambian Government and Amber Rose is the Mining consortium. VAT refunds refer to the Value added tax refunds that the Zambian Government through ZRA is legally obliged to pay the Mines for exported goods. Now the condition that Amber Rose had to comply with to provide receipts for payments made for Sebastian is the condition that Mining companies must comply with by providing import certificates from the country to which they export.
The problem is that mining companies for example that sell copper to China would use a middle man in London. This middle man may use a future (financial agreement) to broker the deal. He doesn’t provide mining companies with import certificates which the buying party in China is supposed to provide.
There is a solution to this problem, Solution 2. The Zambian Government must legally request (Subpoena) all the Mining companies to disclose all the middle men they sell too. These middle men will then ALSO have to be subpoenaed to provide their end sources. The importing buyers will disclose which country they operate in and a memorandum of understanding will have to be signed with the customs authority in that country.In the long run mining companies will need to be given time and support so the can ensure that their middle men get copies of import certificates from the destination countries. It’s either this or VAT Rule 18 gets amended, Again.
As it stands now in a stalemate, the Government can either pay the Mines back the Vat Refunds or it can modify VAT rule 18 so that exports are Zero rated in the first place.But Zero rating is not really an option on the table so the Government will have to be smarter about the transparency.
That transparency is open to interpretation.

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Medium Term Expenditure Framework (2015-2017) Review and 2015 Budget Projections by Kampamba Shula

Medium Term Expenditure Framework (2015-2017) Review and 2015 Budget Projections

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1.1.       Introduction

The 2015 – 2017 Medium Term Expenditure Framework (MTEF) has been formulated with the overall objective of enhancing the benefits to citizens from the positive economic growth that has been achieved over the past few years. This is in line with the spirit of the Revised Sixth National Development Plan (R-SNDP) which is “people-centered economic growth and development”.

Government will focus on ensuring that growth is inclusive and propoor so that the benefits of a stable macroeconomic environment, positive economic growth and single digit inflation bring about improved standards of living for the Zambian people. This will be done by stepping up both human effort and financial resources in areas that have a direct impact on the improvement of individuals’ quality of life, such as education and skills development, health care, agricultural support, citizen empowerment, employment creation, provision of public infrastructure and social amenities. With these interventions the Government is confident that inroads will be made in creating jobs, raising incomes and reducing poverty

1.2.       MACROECONOMIC OVERVIEW

1.2.1.      Developments in the Global Economy

Global economic growth is projected to strengthen to 3.6 percent in 2014, from 3.0 percent in 2013, led by the advanced economies. The United States is projected to record growth of around 2.0 percent, due to a pick-up in domestic demand. In the euro zone, a turnaround from minus 0.4 percent in 2013 to 1.0 percent is projected in 2014, driven by Germany and the recovery in Spain and Italy.

Growth in Sub-Saharan Africa is expected to strengthen to 5.4 percent in 2014. Growth in South Africa is projected to improve modestly as the result of stronger external demand, which will be dampened by the effects of labour strife especially in the mining sector. Commodity-related projectselsewhere in the region are expected to support higher growth.

1.3.        

1.4.       Developments in the Domestic Economy

In the domestic economy, real GDP growth is projected at 6.5 percent in 2014, down by 0.2 percentage points compared to 2013. This growth is expected to be driven by the, mining, construction, and energy sectors and the favourable performance recorded in the agricultural sector in the 2013/2014 farming season. The overall budget deficit in 2014 is projected at 5.1 percent of GDP, lower than the 5.5 percent factored in the 2014 Budget. It is projected that total revenues and grants will reach 19.0 as a percent of GDP while expenditures are projected to reach 24.1 percent of GDP. Despite the increase in the inflation rate, maintenance of single digit inflation rate remains feasible, premised on measures taken to limit the slide of the Kwacha and a reduction in food prices as the 2013/2014 season’s harvest comes on market.

In the foreign exchange market, the Kwacha depreciated by 13.6 percent in the first half of 2014 to close at K6.2601/US$ as compared to a depreciation of 5.3 percent in the first half of 2013 when it closed at K5.4172/US$. The depreciation of the Kwacha was attributed to a combination of international and domestic factors. The continued relatively lower copper prices in 2014 compared to 2013 on the international market, and their consequent impact on the country’s Balance of Payment (BOP) position resulted in negative investor perceptions of the Kwacha. Domestically, liquidity levels and the comparatively high Rand purchases on the inter-currency segment of the market using the US dollar, contributed to the dollar being scarce.

1.5.       Macroeconomic Framework, 2015-2017

Government policies will continue to focus on creating jobs and reducing poverty and inequality on a sustainable basis. This will be achieved by investing in sectors that have been identified to best promote employment, significantly increase productivity in the economy, contribute to higher and inclusive economic growth, and develop the rural areas. These include the agriculture, tourism, manufacturing and construction sectors. Additionally, for inclusive growth, emphasis will be placed on investing in the social sectors.

The specific broad socio-economic policy intentions during the MTEF period will be to:

1) Achieve an average annual real GDP growth rate of above 7 percent;

2) Maintain single digit inflation;

3) Increase international reserves to 4 months of import cover by end 2017;

4) Raise domestic revenue collections to over 18 percent of GDP;

5) Contain domestic borrowing to less than 2 percent of GDP by 2017

6) Accelerate the diversification of the economy;

7) Continue to promote Zambia as an investor friendly destination and continue with structural reforms aimed at reducing the cost of doing business; and

8) Accelerate the implementation of interventions in the health, education and water and sanitation sectors.

1.6.       Medium Term Expenditure Forecasts

·         Total expenditures (excluding amortization) are expected to increase from K44.3 billion in 2015 to K54.1 billion in 2017 which will translate to an average of 22.8 percent of GDP over the period.

·         Expenses are projected at an average of 16.5 percent of GDP. The other major spending allocations will be on assets at an average of 6.1 percent of GDP. Liabilities are expected to decline to an average of 0.2 percent of GDP as a result of Government’s efforts to control expenditure commitments.

·         In view of the gap between expected revenues and expenditures, Government expects to incur an overall fiscal deficit of 4.4 percent of GDP in 2015, 4.1 percent of GDP in 2016 and 3.2 percent in 2017

1.7.        

1.8.       Revenue

The Government plans to enhance domestic revenues by implementing, among others, the following policy and administrative measures:

·         Stiffen sanctions for tax evasion. This measure is intended to enhance the disincentive for tax evasion and ensure that all economic actors recognize the negative effects of tax evasion and are compelled to fully meet their tax obligations.

·         Set up a multidisciplinary task force consisting of security wings and the Ministry of Finance to undertake spontaneous tax inspections to curb smuggling, illicit trade, under-declarations and corruption, particularly at border points, and related tax malpractices. The current investigative mechanisms for tax fraud have proved to be ineffective and therefore this raises the need for more robust ways to curb these vices. The creation of this structure will complement the efforts of the Mobile Compliance Unit.

·         Introduce measures to promote the production and consumption of goods which can be produced locally by Zambian companies.

Following the liberalization of the economy and the signing of trade protocols, Zambia’s external competitiveness has not been favourable resulting in the closure of many companies, loss of employment and the country becoming a net importer of almost all products.

	2015 Budget Projection		2016 Budget Projection		2017 Budget Projection
	Projected	% of GDP	Projected	% of GDP	Projected	% of GDP
I Revenue and Grants	35,874,923.60	18.9%	40,879,958.90	18.9%	46,280,275.00	18.9%
II Revenue and Budget Support	34,294,923.60	18.1%	39,299,958.90	18.1%	44,700,275.00	18.3%
III Revenue less mining	28,260,715.50	14.9%	32,010,629.80	14.8%	36,050,542.80	14.7%
IV Domestic Revenue	34,294,923.60	18.1%	39,299,958.90	18.1%	44,700,275.00	18.3%
Tax Revenue	25,227,605.60	13.3%	28,869,383.60	13.3%	32,795,522.70	13.4%
a. Income Tax	11,731,377.40	6.2%	13,464,276.80	6.2%	15,298,127.60	6.3%
Company Tax	2,395,602.20	1.3%	2,734,776.30	1.3%	3,086,731.10	1.3%
Pay As You Earn (PAYE)	7,408,869.50	3.9%	8,529,779.60	3.9%	9,728,580.50	4.0%
Other Income tax	1,926,905.60	1.0%	2,199,720.80	1.0%	2,482,816.10	1.0%
c. Value Added Tax (VAT)	6,576,733.30	3.5%	7,601,498.30	3.5%	8,760,346.10	3.6%
d. Customs and Excise Duty	6,858,906.40	3.6%	7,732,570.20	3.6%	8,655,161.30	3.5%
Customs (Import Tariffs)	3,260,288.10	1.7%	3,624,452.40	1.7%	4,018,345.10	1.6%
Excise Duties	3,598,618.30	1.9%	4,108,117.90	1.9%	4,636,816.20	1.9%
Export Duty	60,588.50	0.0%	71,038.30	0.0%	81,887.70	0.0%
Non Tax Revenue	9,067,318.00	4.8%	10,430,575.30	4.8%	11,904,752.30	4.9%
IV Grants	1,580,000.00	0.8%	1,580,000.00	0.7%	1,580,000.00	0.6%
Direct Budget Support	-	0.8%	1,580,000.00	0.0%	1,580,000.00	0.0%
Project Support	1,580,000.00			0.7%		0.6%

1.9.        

1.10.    Expenditure

	2015 Projection		2016 Projection		2017 Projection
	K’000	% of GDP	K’000	% of GDP	K’000	% of GDP
Expenses	32,183,922	17.0	36,431,835	16.8	38,526,774	15.8
Assets	11,720,479	6.2	12,887,531	6.0	15,195,685	6.2
Liabilities	382,029	0.2	354,068	0.2	354,068	0.1
Total Expenditure	44,286,431	23.3	49,673,434	22.9	54,076,527	22.1

Government overall expenditure policy for the period 2015 – 2017 will focus on prudent use of public resources to ensure the effective and efficient delivery of public services and development and maintenance of vital socioeconomic infrastructure. Government’s strategy, therefore, will be to constrain expenditure on non – priority programmes and directing resources towards programmes that will improve service delivery. This will entail, among other things, reorienting expenditures towards identified pro-poor growth programmes in areas of infrastructure development in education, health, agriculture and water supply and sanitation.

·         Government will focus on providing sufficient resources towards infrastructure development, particularly with the aim of completing projects already under construction

·         Government will constrain non – priority spending, vis-à-vis ublic service delivery, and focus resources on programmes outlined in the Revised Sixth National Development Plan (R-SNDP).

·         Efforts will thus continue with the scaling down of lower priority expenditure items which include, workshops, public functions, local and foreign travel and procurement of movable assets such as motor vehicles

·         Government will dispose of excess utility vehicles to rationalise expenditure on transport.

·         Government will also place emphasis on strengthening the egovernance project which is aimed at integrating and rationalising the information and communication technology systems in the public service.

1.10.1.   Personal Emoluments

Government’s objective on personal emoluments is to contain the public service wage bill within sustainable levels in order to create more fiscal space for developmental and service delivery expenditures.

In this regard, Government proposes to reduce expenditure on personal emoluments as a share of domestic revenues from 52.5 percent in 2014 to 45.8 percent in 2017. This translates to K16.6 billion or 8.8 percent of GDP in 2015 and K20.5 billion or 8.4 percent of GDP in 2017

1.11.    Allocations

1.11.1.   2015-2017 MTEF Functions of Government (As Share of Total Budget)

1.12.    2015-2017 Budget Projections

Function	2014 Approved Budget	2015 Projection	2016 Projection	2017 Projection	2015-2017 Average
General Public Services	25.1%	24.4%	25.4%	22.5%	24.1%
Defence	6.4%	6.4%	6.4%	6.3%	6.3%
Public Order and Safety	5.0%	4.9%	4.9%	4.9%	4.9%
Economic Affairs	28.0%	28.0%	28.4%	30.1%	28.8%
Environmental Protection	0.4%	0.4%	0.4%	0.4%	0.4%
Housing and Community Amenities	1.5%	1.6%	1.6%	1.5%	1.5%
Health	9.9%	9.7%	9.7%	9.8%	9.7%
Recreation, Culture and Religion	0.7%	0.7%	0.7%	0.7%	0.7%
Education	20.2%	21.2%	19.9%	19.9%	20.3%
Social Protection	2.8%	2.7%	2.8%	4.0%	3.2%
Total	100.00%	100.00%	100.00%	100.00%	100.00%

1.13.    2015 Budget Projections

Government proposes to spend

 K11.2 billion in 2015 on General Public Services,K12.9 billion in 2015 on Economic Affairs,K9.8 billion in 2015 on Education,K4.4 billion in 2015 on Health,K285 million in 2015 on Housing and Community Amenities

The remaining functions of defence, environmental protection, social protection and recreation, culture and religion will account for an average of10.6 percent of total expenditure over the medium term.

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