Finance Minister Margaret Mwanakatwe says allegations of asset takeovers by the Chinese should be treated as “hogwash,” but added that external debt repayments will go as far as 2038.
And Ernst and Young tax partner Patrick Mawire has warned that the introduction of the Zambia Revenue Authority (ZRA) as an industry regulator will cause conflict with the authority’s role as a tax collector, prejudice taxpayers and subsequently make sales tax 10 times more difficult to administer compared to Value Added Tax (VAT).
Speaking during an Ernst and Young 2019 budget analysis breakfast meeting in Lusaka, Tuesday, Mwanakatwe said thinking about debt makes her “fail to sleep,” but assured citizens that there will be no Chinese asset take-over.
“Three years ago, when we borrowed, it was zero. Zero plus three was okay, but now, three plus three it’s done. That’s what we are having to deal with hence the pressure on our resources. Hence us saying, let’s reduce the pace of accumulation. Let’s also postpone some debts, let’s cut some and cancel some. That’s the area of debt. So, in looking at 2019, we will be able to manage that. How are we able to manage that? Revenue base extension is absolutely critical. We have seen that we need to apply our minds through that. The decision on sale tax was a tough one…So, when you hear that Zesco is now owned by the Chinese, [the] international airport is now owned by the Chinese, Zambia National Building Society (ZNBS) is now owned by the Chinese, that’s hogwash because any Chinese debt, if it is by-passed as a sovereign guarantee, no sovereign guarantee,” Mwanakatwe said.
“The debt of Zesco, if you look at Kafue Lower Gorge, that’s a Chinese debt, which has been put in a special purpose vehicle with no assets such as Zesco being put as collateral. So, it’s impossible for that to happen. The same with international airports; we are still constructing. We haven’t even gone into payment on the principle so how does someone come and take an asset from you that you are still constructing? ZNBC, again, special purpose vehicle, whose assets have not been attached. So, you can see the things that are making me stay awake at night. They keep me awake. So, as you go out, just treat these things as hogwash! We have looked into this and we have actually gone up to 2038 in terms profiling into the future so that we can see where there are traps and have a steady flow of how and when we can pay the debt. We have gone up to when we are likely to finishing paying debts so that we can see where there are rifts.”
Meanwhile, Mawire warned that the introduction of the ZRA as an industry regulator would cause conflict with the authority’s role as tax collector.
“We have seen how difficult it was to administer VAT; sales tax will then be ten times more difficult to administer! There will be more trouble to determine how to go about it. The only concern that we have there is that, currently, my dear colleagues from the ZRA will confirm, there is no separation between criminal investigations and ZRA and normal audits. That means that, for example, if I am a director, I’m responding to queries from the ZRA audit, it could well end in criminal investigations,” said Mawire.