By Betty Wilkinson*
A lot meets the needs. What is missing, and highly relevant to other countries in Africa? Three key topics: gender; aspects of economic inclusion; and informal to formal growth
At first glance and generally, the proposed Zambia 2023 budget is very sound and thoughtful. It increases options for investments, shifts some taxation and decreases taxes for low-income earners, invests in school and health infrastructure and staffing, expands community development funds and social cash transfers. Consistent with the 8th National Development Plan, the budget addresses devolution and key growth steps in agriculture, manufacturing, mining, and tourism. Many of the overall commitments to change made by the government are being met, including addressing pension, local debt, and other payments. IMF and other funding arrangements are incorporated, and key investments in technology and infrastructure are on the agenda. It is trusted that cell phone expansion for use and national land use planning with conservation will be a basis for success.
The budget reviews are pretty uniform in praise, but there are some gaps. What can be done to drive more successful and inclusive national growth, here and across Africa? There are three key budget gaps: gender, selective inclusive growth drivers, and the informal to formal transition.
The Zambia 2023 budget lacks a gender analysis with application of the findings to the budget and expected results, something the UN has promoted across the continent.[1] Without this assessment and its application, how will this budget improve livelihoods on a sustainable basis for women and girls, particularly as these are rarely mentioned? The second gap is inclusive growth, which has six steps according to a recent IMF paper which are not sufficiently considered. What is missing? The third gap is private sector strategy and growth options for the over one million informal microenterprises, a common issue across the continent. How can Zambia and its neighbours improve business establishment, growth, and resources for informal enterprises in a situation where there is insufficient data, challenging licensing, weak market information, and gaps in financing options?
The first overall gap is ensuring a gender relevant budget. The gender budget analysis and incorporation of that thinking into the budget discussions is missing. Given the importance given by the UN and multiple countries across Africa, many countries on the continent are incorporating gender responsive budgeting, most recently in Malawi, Nigeria, and Gabon. Gender responsive budgeting was assessed for Zambia to use in 2019, and methods were shared by the Clerk of the Parliament in an August 2020 meeting with Parliamentarians. Regrettably, since that time it appears that this commitment has not been met. There are very few mentions of women in the budget or the effects on them in the budget speech and analyses, despite females being 51% of the total population. Addressing this will bring Zambia into the mainstream and encourage other countries.
Inclusive budgets to ensure no one is left behind are critical in Zambia and globally. It is the second budget gap. A recent IMF working paper[i] suggests the following steps to ensure inclusive national budgets which are missing in the 2023 budget: (i) ensure lower civil service employment budgets; and (ii) ensure subsidies are carefully targeted and wherever possible targeted to be removed over time as families improve their circumstances.
The first area for inclusive economic growth is the civil service value for money and improvements in planning, reporting and quality of inputs. This is a hot topic for many, and urgently needs to be addressed if more people are to be hired and national income to increase. Business networks are mentioning strong concerns about the government service delays and significant rules and processes which slow economic growth. The recent release of very low education pass rates indicates a real need to address the efficiency challenge. Funds for supervision and better civil service performance are mentioned in the budget, but not overall civil service timely and transparent work planning and monitoring of results, along with regular public disclosure of spend and achievements.
The second area mentioned in the IMF paper that is missing in the Zambian budget, and a sensitive one, is more open consideration of subsidies. It is important to share what subsidies exist, how to target subsidies and track their impact better, and how to enable households to grow out of the need for them (a number of local research papers have been done proposing sensible methods for this). This requirement the case for social cash transfers as well. Also called ultrapoor programmes, research from the Innovations for Poverty Action[2] research teams globally show clearly that transfer recipients, if also provided with other steps in a cluster such as business training, one time investment grants, and community cohesion, graduate sustainably out of poverty within three to five years, and the effects persist for many years. However, these programmes do not include all of the essential elements, and thus household sustainability may become too slow.
The third budget gap is to enable private sector empowerment by openly addressing the challenge of informal enterprise conversion to formal businesses. Job growth requires private sector growth. Research indicates that 90% of businesses and a similar ratio of total employment in Zambia and within Africa is informal, and there is little to no data on them. Informal businesses do not pay taxes or become protected from bad behaviours in industries. With the high population growth rates, how are we making it easier for businesses to register, grow, pay taxes, innovate, and hire people? There is no budgeted system of sensible, affordable, and effective transition from informal enterprises to formal businesses to get services, borrow, employ others, and pay taxes in affordable amounts.
What is known[3] in Zambia and generally true across Africa is that informal enterprises are small, run more by women then men by about 10%, tend to be young or old entrepreneurs with lower education levels, and are engaged across all sectors but particularly agriculture, construction, and trade. There is also tradition behind such engagement. Owners struggle with lack of skills on documentation of businesses and ability to borrow and understand markets better.[4] As the budget provides for credit guarantees, how can we enable the financial service providers to get working capital loans into the hands of the over 1 million informal businesses that won’t qualify? The trade-off must be formalization with benefits of access to money, resources, and information, in ways that are easy to engage in and use, which then pay taxes and engage with other businesses more profitably.
The three gaps above are recognized by both the government and the public. Most of them can be addressed using innovative and open methods. The challenge is to recognize their importance and then agree on actions which will be actively implemented, reported on publicly, and addressed in the context of the resource allocation and implementation processes.
*Betty Wilkinson is a high level financial sector development and inclusion professional with public finance, gender, agriculture expertise
[1] https://undp.medium.com/african-countries-lead-the-way-on-gender-responsive-development-financing-259cfd738610 blog “African countries lead the way on gender-responsive development financing” dated 27,4,2022 authors Orria Goni, Luckystar Miyandazi, Ankun Liu Programme Analyst, Ana-Maria Beldiga, Finance Hub and Lucy Martin.
[2] https://www.poverty-action.org/impact/ultra-poor-graduation-model
[3] An Analysis of the Informal Economy in Zambia 2008 – 2012 – 2014, Central Statistical Office Ministry of Labour and Social Security, 2018.
[4]Deciphering African Informal Economies, WIEGO Think Piece on African Informal Economies, Kate Meagher, Dept. of International Development, London School of Economics.
[i] IMF Working Paper 21/83 Public Expenditure and Inclusive Growth – A Survey, prepared by Younes Zouhar, Jon Jellema, Nora Lustig, and Mohamed Trabelsi, March 2021
