BILL WATCH 53/2011 [28th November 2011]
The 2012 Budget
Note: Budget for Constitutional and Referendum but No Budget for Elections
The Minister of Finance, Hon Tendai Biti, presented the 2012 Budget Statement in the House of Assembly on 24th November, taking just over two hours to deliver his speech, at the end of which he tabled the Estimates of Expenditure for 2012. [See Budget Highlights below.]
The Minister of Constitutional and Parliamentary Affairs, Hon Eric Matinenga, then moved the adjournment of the debate, explaining that members and especially portfolio committees needed time to look into the Budget Statement and analyse the Estimates. The House of Assembly accordingly adjourned until Thursday 1st December, when debate will continue. From Monday 28th November to Thursday 1st December portfolio committees will conduct their post-Budget analysis and prepare reports to be presented to the House when debate resumes.
The Budget on the Internet
The full texts of the Budget Statement and the Estimates of Expenditure [the “Blue Book”] can be downloaded from the Ministry of Finance website at http://www.zimtreasury.org/downloads/. Both documents are in PDF format: the Budget Statement is 4.1MB, and the Blue Book is 1MB. [If you do not have suitable Internet access, both documents are available on request from veritas@mango.zw]
Budget Highlights
No funds for elections: The Minister has not allocated any funds for the holding of the next general election – an indication that at this stage a general election in 2012 is considered highly unlikely by all sides [this is in fact a Government-approved Budget, not just the Minister of Finance’s budget]. Addressing a Confederation of Zimbabwe Industries post-budget meeting on 25th November the Minister said it would be almost impossible to hold an election next year because of the political situation. The issue was political than budgetary; if an election was called resources for it would have to be found. [Note: When listing the themes on which the Budget would focus, the Minister mentioned support to “election preparedness, including the Voters Roll” as a component of “monetizing the GPA provisions”.]
Budget for Constitution-Making Process and Referendum: The Minister said that “to facilitate adoption and approval of the new Constitution, which is currently at its finalisation stage” he proposed allocating $30 million towards “completion of the constitution-making process and the Referendum”.
A pro-Poor Budget: The Minister emphasised that the intention of the Budget is to focus on “attaining both growth that is pro-poor, broad based across all sectors, and a pattern of growth that moves us towards structural transformation”. There will be a $20 million Jobs Fund aimed at reducing unemployment.
Cash budgeting to continue: The watchword will continue to be that the government can only spend what it earns.
Revenue projection boosted by expected diamond revenues: The Budget Strategy Paper framed in August estimated revenue of $3.4 billion for 2012. But the decision by the Kimberley Process on 1st November to approve sales of Marange diamonds resulted in an upward adjustment of projected revenue by $600 million to $4 billion, with a corresponding expansion of estimated expenditure. The Minister said half the additional $600 million would go to infrastructure development, and half to recurrent expenditure, including paying Government arrears to service providers [$17 million], student grants [$25 million] and the constitution-making process and referendum [$30 million].
State wages bill still disproportionate: The Minister bemoaned the fact that a high and disproportionate share of Budget expenditures has to go to wages [57%]
Expenditure – Selected Figures
[All figures to nearest million]
Total projected expenditure: This is $4 billion, made up of:
• Constitutional and statutory appropriations: $352 million [see below for details]
• Vote appropriations: $3.648 billion [see below for selected individual votes]
Constitutional and statutory appropriations [“cons and stats”]
These amounts must be paid out of the Consolidated Revenue Fund [CRF] by virtue of appropriations already made by the Constitution and Acts of Parliament mandating payments from the CRF for specific purposes. As such they do not have to be approved by Parliament again during the current Budget exercise, but they must be covered by revenue. Examples of cons and stats are: the salaries and allowances of the President, the Speaker of the House of Assembly and the President of the Senate, the judges and other constitutional appointees such as the Public Protector and Comptroller and Auditor-General; State service pensions; and war veterans and ex-political prisoners pensions. Pension-related payments account for the bulk of cons and stats. Amounts listed under this heading include:
President’s salary and allowances: $97 000
Speaker’s and Senate President’s salary and allowances: $150 000
State service pensions: $178 million
Commutation of State service pensions: $$51 million
War veterans and ex-political prisoners pensions: $91 million
Allocations
[These and all the other “vote appropriations” in the Estimates of Expenditure require the approval of the House of Assembly and enactment into law by the Appropriation Bill. They include the majority of State employment costs.]
President and Cabinet Office: $172 million, including:
Foreign travel expenses: $25 million
State residences: $14 million
Prime Minister’s Office: $19 million, including:
Foreign travel expenses: $7 million
Education and Higher and Tertiary Education: $1.15 billion all told, covering:
Education: $707 million
Higher and Tertiary Education: $296 million
Health: $346 million
Defence: $318 million
Home Affairs [including Police]: $308 million
Police: $274 million
Registrar-General: $18 million
Agriculture: $227 million
Public Service: $126 million [mainly employment costs]
Justice and Legal Affairs: $111 million
This includes the Prison Service [$83 million] and the Attorney-General’s Office [$4 million], but not the Judicial Service, which comes under the separate vote for the Judicial Service Commission.
Youth Development, Indigenisation and Empowerment: $48 million, of which
Employment costs account for $30 million
Judicial Service Commission: $23 million [including $9 million for employment costs – salaries and allowances of magistrates and supporting staff]
Parliament: $18 million
Constitutional and Parliamentary Affairs: $10 million
[he amount allocated for constituency development funds remains the same as for 2011: $800 000.
Taxation Proposals
Income tax-free threshold: This is to be increased from $225 to $250 per month, effective 1st January 2012.
Income tax bands: Tax bands will be widened, starting at $250 and going up to $10 000, above which income will be taxed at the highest rate of 45%, effective 1st January 2012.
Bonus tax exempt threshold: This is to be raised from $500 to $700 with effect from 1st November 2011, i.e., it will be applicable to 2011 end-of-year bonuses.
Civil service allowances to be tax-free: Civil service incentives not already tax-free will be tax exempt, effective 1st November 2011 [allowances constitute nearly half of civil service incomes].
Customs and excise duties: Various adjustments to duties are proposed, both up [e.g., excise duty on cigarettes and customs duty on some imported finished products, such as selected motor vehicles and electrical goods, and fruit and vegetables in season] and down [e.g. customs duties on some imported raw materials]. There will be a rebate of customs duty on sporting kit and equipment donated to registered sports associations.
Royalties on precious metals: There will be an increase in gold [4.5% to 7%] and platinum [5% to 10%] royalties.
Cooperating Partner/Donor Assistance
The Minister estimated that for 2012 cooperating partner/donor assistance would be about $500 million. [In 2011 they pledged $618 million for 2011, of which $371 million had been disbursed by September, outside the Budget framework, mainly in humanitarian assistance rather than development assistance.] He said that the Government would continue to engage cooperating partners to increase and broaden support, “preferably by gradually shifting from humanitarian to development assistance” and “on the need to graduate from off-Budget support”. Like the 2011 Budget, this Budget does not list donor funding in the Ministry of Finance’s Vote of Credit [this was last done in the 2010 Budget].
Getting the Budget through Parliament
When it resumes on 1st December the House of Assembly will debate the Minister’s Budget Statement before considering the Estimates of Expenditure. The Estimates will be dealt with in a special committee of the whole House called the Committee of Supply. The Estimates are divided into parts called “Votes”. Each Vote lists the funds to be allocated to a particular Ministry or other accounting entity [e.g. the Judicial Service Commission or the Audit Office], giving a breakdown of the different classes of expenditure authorised. The House will consider each of the 38 Votes separately.
If the House approves both Budget and Estimates, it will then move on to consider the two Bills that give effect to the Budget: the Appropriation Bill, which will authorise Government expenditure for 2012 in accordance with the approved Estimates, and the Finance Bill, to give effect to those aspects of the Minister’s taxation proposals which cannot be implemented by statutory instrument.
Motion passed to “fast-track” Estimates and Bills: Immediately before the Budget presentation last Thursday afternoon the House approved a Government motion, proposed by Constitutional and Parliamentary Affairs Minister Eric Matinenga, suspending various certain Standing Orders to enable the House to fast track the consideration and approval of the Estimates, and the two Budget-related Bills. [This means the House’s ordinary rules about taking only one stage of a Bill on the same day, adjourning at 7 pm, not ordinarily sitting on Friday, adjourning at 1 pm on a Friday and allowing the Parliamentary Legal Committee 26 days to report on a Bill, will not apply.] It remains to be seen whether allowing fast-tracking will enable Parliament to get through everything that needs to be done on Thursday 1st and Friday 2nd December. If it does not, there will have to be a break of at least a week to allow ZANU-PF MPs to attend the ZANU-PF conference in Bulawayo from 6th to 9th December. Depending on progress, therefore, one or both of the Houses may have to sit during the week commencing Tuesday 13th December. [Note: The fast-tracking resolution does not apply to any other Bills, so there is no prospect of any other Bills, such as the lapsed and controversial Human Rights Commission Bill and Electoral Amendment Bill, being rushed through before the end of the year.]
Possible Resistance from MPs: MPs have become increasingly discontented about Parliament being treated as a rubber-stamp institution by the Executive. What can they do if not happy with aspects of the Budget? According to Standing Orders MPs cannot vote to increase allocations proposed by the Minister, but they are allowed to show their disapproval by reducing or omitting allocations for purposes not acceptable to them. Or they could refuse to approve the Estimates and the Bills, thereby forcing a re-think of the Budget. That would be unusual, but would not necessarily bring the business of government to a grinding halt at the end of the year. In accordance with the Constitution, there is provision in the Public Finance Management Act for limited temporary financing of government activities for the first four months of 2012 if the Appropriation Bill is not passed. There are indications from yesterday’s post-Budget workshop that although a motion was passed to fast-track the Budget bills the MP’s will refuse to do so and will want to take their time.
Role of the Senate: If passed by the House of Assembly, the two Budget Bills will be transmitted to the Senate. If the Senate does not want any amendments to the Bill and the Bill is passed as it comes from the House, it will go straight to the President to sign. If the Senate want to amend the Bill, according to the Constitution, as both Bills are “money bills” it cannot do so directly. It has to recommend its amendments to the House and the House must consider them, but is not obliged to accept them. If the House accepts the Senate’s suggested amendments, they will be incorporated before the Bill is then submitted to the President for assent.
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