The 2018 budget season has been well underway for some time now. My business partner and I were lamenting at the fact that we missed the bus in terms of getting Financial Insight (Fi) into one of the strategy committees on the budget at Ministry of Finance (MoF). It must have been the wine because I was sure we collected a business card or two at an unnamed function one evening. Needless to say, our desire to be a part of the national budgeting process was answered when Secretary to the Treasury Fredson Yamba published the 2018 to 2020 Green Paper . The secretary pointed out that “In over seven years, this is the first time that a green paper is being availed to the public for scrutiny, commentary, and refinement”. If this is not transparency then we don’t know what it is. What was odd though was that after two days of being available on the MoF website, only 273 visits were recorded to the website. We won’t even calculate what percentage that is of the connected Zambian public. We will blame it on the lack of internet bundles for now (our founder has jokes).
On a serious note though, the secretary points out some very interesting points that premier companies will be watching closely. For starters, the Green Paper focuses on sustaining economic growth and development through the continued implementation of the Economic Stabilisation and Growth Program (ESGP). This Zambia plus initiative is the reason behind some of the fiscal pluses the finance team has recorded. In case you forgot, they got us back to single digit inflation and stabilized the currency. But premier companies already know that. What they will be excited about however is the fact that there is a medium term plan that is being put in place to further dismantle public debt. Suppliers and buyers alike will be excited about this as this is one of the ways many premier companies have been hoping to unlock value.
Premier companies will also be feeling a pinch of de ja vu when they discover that the four key industries still stand in their plans for growth: agriculture, tourism, manufacturing and mining sectors. We say this because, these are the same areas Industrial Development Corporation (IDC) has been working very hard to build. Further evidence of consistency no doubt.
However, what we believe must not be ignored is the coming Medium Term Debt Strategy which will be published soon by the ministry. The document intends to reveal what measures will be put in place to ensure that the national debt remains in sustainable levels. The reason why premier companies need to keep tabs on this is because for the longest time, many have felt crowded out when attempting to take on certain instruments in the market due to overwhelming government participation. Furthermore, the ministry believes that this strategy will ensure that the fiscal deficit will be reduced to no more than 3 percent of GDP by 2020 (in 3 years’ time literally).
With the second phase of the electricity tariff increment coming into effect in September 2017, premier companies should expect the continued reduction of subsidies to the electricity sector. However, the cost of service study currently being conducted by the energy regulator should bring predictability in terms of tariff revision which will allow for premier companies to forecast working capital costs for electricity.