A CHAT WITH MADAM EDITH NAWAKWI ON LOCAL ENTERPRISES AND POVERTY REDUCTION
By Alexander Nkosi
After reading the submission made by madam Edith Nawakwi on- dismantling of domestic arrears, supporting local enterprises and poverty reduction- my response is as follows:
1. DISMANTLING DOMESTIC ARREARS
The past 10 years domestic arrears have been building reaching K48.1 billion at the end of 2021. If we include outstanding ZESCO bills and fuel arrears, the figure was K79.9 billion. What this means is that we were accruing more arrears than we were dismantling. What is the current situation? In just 6 months of 2022, the stock of domestic arrears has started going down. Domestic arrears excluding ZESCO bills and fuel have reduced from K48.1 billion at the end of 2021 to K44 billion by June 2022.
Domestic arrears including ZESCO bills and fuel have also gone down from K79.9 billion at the end of 2021 to K76.4 billion at the end of June 2022. This is a good indicator because we have halted the increase and now working on bringing it down. It should also be noted that the allocation to dismantling of domestic arrears has increased from K2.8 billion in 2021 to K6.8 billion in 2023.
2. SUPPORTING LOCAL ENTERPRISES
I will highlight six initiatives government is implementing to support local enterprises:
Initiative One: Government has put the private sector at the centre of its economic rebuilding agenda. This requires that the private sector as a key partner is involved in the formulation and review of policies aimed at improvement the business and economic environment. The public private dialogue forum will help achieve this.
Initiative Two: Local entrepreneurs are at different stages . At the very basic level, small businesses and entrepreneurs at constituency level will be empowered through increased Constituency Development Fund (CDF) allocation which in essence is meant to stimulate economic activities at local level. People might be facing challenges in accessing CDF but this does not take away from the merits of the initiative.
In CDF there is a component of community projects which will be done by local SMEs, this will help them grow so that they can compete for bigger projects. There is also a component of economic empowerment for community groups. All these are meant to uplift entreprises at grassroot level.
Initiative Three: Entrepreneurs whose business ventures are bigger than what is being offered under CDF can access funds under the Citizens Economic Empowerment Commission where K397 million has been allocated in 2023 in addition to the K350 million allocated in 2022. This comes with training, business mentorship and market linkages across 7 entreprises being promoted. An additional K50 million has being allocated to support small scale mining.
Initiative Four: The fourth initiative is for those entrepreneurs that have outgrown empowerment funds and can deal directly with commercial banks. Government has cut down on domestic borrowing by K8.9 billion, a move which will trigger a reduction in interest rates and allow the private sector to borrow and invest. The World Bank and USAID are supporting government through trade facilitation projects aimed at promoting exports. Government has further stepped up economic diplomacy targeting joint ventures between local and foreign firms.
Initiative Five: Government spending has actually gone up. While the total budget has gone down from K173 billion in 2022 to K167.3 billion in 2023, this is largely due to a K33.1 billion reduction in external debt service. Spending on economic affairs, education, health, social protection, housing and community amenities, recreation, culture and religion- increased both in absolute terms and as a percentage of the total budget. There is also an increase in domestic debt service and dismantling of domestic arreas. This spending is good for the economy, it helps put money into the economy to support economic activities.
Initiative Six: A stable macroeconomic environment is key to the success of local entreprises. Inflation is way lower than it was in 2021 and kwacha has not only appreciated but stabilised around K15 to K16 per dollar. The price of fuel is high but there is no government that can address all problems at once. From January to August 2022, government lost about K11 billion from zero rating of VAT and suspension of excise and customs duty on fuel.
3. POVERTY REDUCTION
With regards to poverty reduction, about 70% of Zambians are employed in the agriculture sector and it is the source of income for most of the people in rural areas. Therefore any poverty reduction strategy should be designed such that it addresses constraints being faced in the agriculture sector. It should address low productivity and profitability.
Over the years we have focused so much on inputs neglecting agriculture extension which should essentially help farmers plan, implement and market their produce better. To this effect government has increased the agriculture budget to K11.2 billion, with the FISP budget increasing to K9.1 billion in 2023 from K5.3 billion in 2022.
To improve agriculture extension, in 2023 government has allocated K790 million. This will help in recruiting extension officers and supporting them with kits, tablets and transport and rehabilitating facilities.Government has also accessed USD300 million from World Bank to support farm block development and irrigation. This, coupled with increased CDF and social protection budgets will help bring down poverty levels.
No country can achieve everything in a single year, we are definitely making the right investments.
Thank you.