On Friday 27 September 2024, the Minister of Finance and Planning, Honourable Dr Situmbeko Musokotwane MP, presented the 2025 National Budget to Parliament. As always, expectations were high as the country emerges from a devastating period, having suffered a severe drought.
Having listened to the budget address and reviewed the text, the Zambia National Farmers’ Union (ZNFU) has offered their comments and reaction on the budget proposals.
“As farmers, we want to appreciate the efforts that go into the process of consultation, preparation, compilation, presentation and now feedback,” reads a statement from ZNFU.
In terms of key highlights, the Union noted the following;
That in 2025, the Minister of Finance and National Planning proposed to spend a total of K217,1 billion compared to K177,9 billion, and significant allocations will be made to the agriculture sector. This includes the Input Support Programme which has been allocated ZMK9,3 billion and targets over 1 million farmers. The strategic food reserve has been allocated ZMK2,4 billion and the Sustainable Agriculture Financing Facility (SAFF) had the opportunity to review the text and be backed by a ZMK852 million credit guarantee.
ZANFU noted the enhanced Constituency Development Fund (CDF) which has increased by ZMK5,5 million and of this increased amount, ZMK3,3 million will be utilised to improve feeder roads.
On the non-tax measure’s government proposed to introduce licensing fees for crop variety, basic and certified seed sales, and parental lines sales as specified:
- Crop variety licensing (royalties): 3% of net sales of certified seed for crop hybrids and 2,5% of net sales of certified seed for open pollinated varieties
- Basic and certified seed: cereals at ZMK35 per kg, legumes at ZMK45 per kg, cassava cuttings at ZMK110 per bundle, sweet potato vines at ZMK35 per bundle
- Parental lines: ZMK150 per kg
Against this background, ZANFU said in the statement their comments are as follows:
Budgetary allocations: The increase in allocations to FISP, FRA, SAFF and CDF are huge and at a time when the competing of government is pronounced, ZANFU commends government for prioritising resources towards national programmes which stand to benefit most farmers countrywide.
On the FISP they appeal to the government to revisit certain aspects that have not been working very well for farmers. One such area is the E-voucher where the budget has stated that come 2025, FISP will be 100% E-voucher. While the reasoning is justifiable, it is important to recognise that the E-voucher system has not been working well in practice and farmers have misgivings that all the challenges will be addressed by next year.
Their idea is that a longer phase-down period should be ideal so that where infrastructure is ideal, the E-voucher system is embraced organically. On SAFF, which aims to provide financing options to farmers through participating banks, partially guaranteed by the government, ZNFU’s main concern is the absence of incentives that would motivate farmers to utilise these financing options amid the current economic pressures. Currently banks are operating in an environment where their target is to maximise earnings from their normal funds as opposed to funds with stated conditions.
On CDF, the increased funding is laudable, and the farming community is elated that feeder roads will be prioritised because farmers have been yearning for well-maintained and motorable feeder roads for a long time. The Union also recognises that CDF funding is creating new business opportunities and linkages in the districts countrywide.
Hence local councils should become more creative in their resource mobilisation efforts and stop relying on agriculture levies which in our view should be abolished because farmers take a knock on producer prices because of council levies. Abolishing council levies will also improve the business environment by reducing the cost of doing business because currently imports of similar agriculture products do not attract council levies hence local producers are disadvantaged.
On taxes: The Union is concerned that the 2025 National Budget lacks any tax concessions to the private sector. Tax incentives are crucial for the farming community to survive at this juncture when any form of relief matters the most because farmers have had crops wiped out, are selling animals out of desperation to service some of their needs or because of stock feed challenges and have huge debts!
Despite the need for tax relief to encourage borrowing through the sustainable financing facility and the anticipated Bank of Zambia drought facility, the Ministry of Finance and National Planning opted not to propose any tax concessions in this budget. The Union made submissions for tax relief measures which, if granted, would assist farmers to navigate the challenges at hand. Instead, the government introduced revenue-generating measures such as raising of the corporate income tax on non-traditional export earnings profits from 15% to 20% among other measures.
It is important to appreciate that tax concessions reduce the financial burden on businesses by lowering taxes on inputs, profits, or specific operations.
This allows companies, including farmers, to retain more of their revenue, which they can reinvest into production. Lower production costs can enhance profitability and encourage businesses to expand. Further, tax incentives make it easier for businesses to secure financing. For instance, if farmers are taxed less, enhanced profitability may improve their creditworthiness, encouraging banks and financial institutions to provide loans. This is particularly relevant in Zambia where small and medium enterprises (SMEs) and the agricultural sector struggle to access affordable finance.
Restructured debt: With the successfully restructured debt, the farming community was hopeful that the created fiscal headroom resulting from the debt restructuring would be a good opportunity to incentivise the agriculture sector to stimulate expanded and increased production.
Fees: On the measure involving licensing fees, specifically targeted at the seed industry which is one of the success stories of the agriculture sector, the proposed measures have potential to slow down the growth of the seed industry, stifle new investments and uptake of certified seed.
ZNFU said what also remains to be clarified by the Ministry of Finance and National Planning is the status of the incentives that were extended by Cabinet on August 3, 2024, as communicated by the Ministry of Information and Media which excerpts reads:
“… These tax measures include among others, zero rate VAT on the importation of selected equipment and machinery used in the development and establishment of electricity generation, transmission and distribution projects for the period 1st July 2024 to 31st December 2033; suspend customs duty and zero rate VAT on the supply of generators, and components and auxiliary items for solar power equipment for the period 1st July, 2024 to 31st December, 2027; exempt the importation of equipment and machinery for the manufacturing of fertiliser for VAT purposes; and suspend customs duty on the importation of irrigation equipment accessories for the period 1st July, 2024 to 31st December, 2027…”
In conclusion, the Union is of the view that the proposed 2025 National Budget is progressive on funding towards national programmes, but falls short on balancing the financing elements through a fairer mix of policy incentives towards the private sector who create jobs through tax concessions that would stimulate production and increase the appetite to take up available finance.
All this happening after the devasting drought effects and unprecedented power supply loadshedding should be enough ground for re-setting the 2025 National Budget to bring it in line with the aspirations of farmers, because agriculture has the capacity to improve income earning opportunities to most people that are trying to make ends meet currently.
The Union remains hopeful that the discussions on the 2025 National Budget will be introspective and accommodate the necessary viewpoints to make it more responsive to the concerns highlighted in this reaction.
