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Report on the Civil Society Budget Forum, Mbabane - 27 March 2003
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2. The day's proceedings
2.1 WELCOME REMARKS
His Excellence, Mr. James McGee – American Ambassador
The U.S Ambassador, Mr. James McGee in his welcome remarks highlighted the importance of the budget forum saying it goes a long way in improving the budgetary process of government. He stated that the economic development is one of the priorities of the country; thereby inputs towards improving the national budget are of great value. The ambassador encouraged attendants to continue supporting the forum and mentioned that the embassy was pleased to host the forum in its premises.
In conclusion, the ambassador apologised for not going to be present throughout the session. He read a statement, which served to brief the forum on the war between the coalition forces and Iraq.
2.2 OPENING REMARKS
Dr. Solomon Dlamini – Chairperson ECAS.
Dr. Dlamini on behalf of ECAS, also welcomed attendants to the forum and expressed appreciation to the American Cultural Centre for hosting the forum in their premises free of charge. He hoped that the good relations would continue, and the venue would be available in the future. Dr. Dlamini in addition acknowledged that it is a difficult time for the United States and the world community, hence appreciating the update on the war in Iraq by the U.S. Ambassador. In relation to the forum, he hoped for fruitful discussions.
Dr. Dlamini also welcomed the Honourable Minister of Finance Mr Majozi Sithole. He then explained that the day’s proceedings were aimed at assisting the ministry to improve its future budgets so that the country could realise the vision 2022.
2.3 HIGHLIGHTS OF THE 2003/04 BUDGET
Honourable Minister of Finance, Mr. Majozi Sithole
The Minister firstly apologised for coming late. In his official presentation thereafter, he highlighted some of the key economic issues of the budget and then summarised the entire budget. These include
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Employment, Growth and Tax Incentives,
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The Government Budget and its Financing,
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Fiscal Restructuring Project (MTEF and PSMP),
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Trade Liberalisation,
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HIV/AIDS
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National Events.
Employment, Growth and Tax Incentives
The Minister stated that creating employment for the over 25% unemployed is the most critical issue facing the country today. He said 2002 did see some improvements, as there was 1.3% employment growth, mainly because of new investments and increased infrastructural works. Other measures include broadening efforts to promote the development of small businesses, the introduction of tax breaks to deserving industries and provisions of factory shells with subsidised rentals. Swaziland Investment Promotion Authority (SIPA), General System of Preferences (GSP) and the African Growth and Opportunity Act (AGOA) also played a key role in the drive to attracting both foreign and domestic investments. The Minister also highlighted that the tax incentives for the manufacturing sector were revised in 2000 in order to give the country a competitive edge in attracting foreign and domestic investments. This comes as a result of the fact that it has been said in some quarters that the budget did not do enough to ease the tax burden on business. (See Annexure 1)
The Government Budget Deficit and its Financing
The minister stated that one of the key aspects of the budget is the size of the budget deficit, which is usually expressed as a proportion of GDP. He said the figure is significant and acts as a signal to the state’s public finances as well as an indicator that government was spending beyond its means, thereby incurring additional debt and running down cash reserves. He stated that Budget reserves provide up to 5 months. Concerns of the country include:
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HIV/AIDS
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RFM issue where money is not used well
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Orphans
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Scholarships
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Agriculture
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Dam construction
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Investment Climate.
In order to address the debt policy problem, the Minister proposed preparation of a debt policy paper both external and domestic debt, to guide governments borrowing. ( see annexure 1)
Fiscal Restructuring Project, PSMP and MTEF
The minister informed the forum that government would implement the Public Sector Management Programme (PSMP) that will help reduce the wage bill which has become untenable. This will include the building of a much more efficient public service and the adoption of more efficient government investments decisions. In addition government is restructuring its fiscal system through the Fiscal Restructuring Project. The initiative aims to
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Firstly focusing on diversifying of tax base in order to reduce Swaziland’s heavy reliance on diminishing SACU receipts. This will include replacing the existing sales tax with a comprehensive value added tax.
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Secondly, it aims at strengthening the administration of all taxes through more effective boarder controls, stronger enforcements, application of top of the range technology and merging of the customs and excise department with the department of taxes to establish a semi- autonomous Swaziland Revenue Service Department.
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Thirdly the project aims at improving public expenditure policy and management through measures that include three- year budgeting under the Medium Term Expenditure Framework (MTEF). The framework seeks to bring about greater transparency and accountability in the management of public funds as well as placing a greater emphasis on outputs and performance rather than on inputs into government operations, as in the past. For example, external travel and delegation sizes needs to be reviewed, as well as corruption. There is also a need to close all loopholes on the tendering bill and have a policy on parastatals. (See Annexure 1)
Trade Liberalisation
The Minister stated that a further key aspects of the budget sets out the implications on the government about the growing liberalisation of world trade. The Minister said both the Cotonou Agreement and a recent South Africa – European Union Trade and Development Cooperation Agreement (TDCA) mean that Swaziland must reduce tariffs by 2012, eliminate tariffs with the EU. This will drastically reduce Swaziland’s custom receipts and have a negative impact of the budget, which is largely financed by SACU receipts. (See Annexure 1)
HIV/AIDS
The minister stated that the prevalence of HIV/AIDS is a key factor in the prospects for the country’s economic development. By 2010, without AIDS life expectancy would have been 62. However, with AIDS life expectancy he said is projected to be 27 years of age. Furthermore, an increased incidence of HIV amongst 15-24 year old still shows that a lot still has to be done in bringing the epidemic under control. The minister said he was pleased that NERCHA was awarded $56.7 million from the Global Fund for HIV/AIDS pandemic, TB and Malaria over a five-year period.
National Events
The minister lastly mentioned that many events will take place in 2003, which will require considerable budgetary resources. These events include
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Global 2003 Smart Partnership International Dialogue to be held in August,
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Under 17 African Youth Football Championship to take place in May 2003,
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Forthcoming national elections planned for late 2003,
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The presentation of the draft constitution
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The double celebration of the 35th Independence anniversary and the king’s birthday in September 2003.
2.4 PRESENTATION BY MR. M HLOPHE
FSE/SCCI
Mr. Hlophe introduced his presentation by mentioning that he was not representing his organisations, FSE/SSCI. His remarks were independent. He said the 2003/04 national budget is good and has a clear vision as it focuses on priorities such as HIV/AIDS, education and social infrastructure. Furthermore, He appreciated the Ministers sentiments on NEPAD, AU and NDS. Mr. Hlophe however said he was wondering if the minister comes from a team that shares his sentiments. He wondered if the country is committed politically to vision 2022.
He highlighted that the two systems of governance continue to be a problem in the country such that one wonders if the sentiments expressed can be pursued without the interference of the other government. He said bad governance in the country is at its peak and has seen workers in the street twice during the mass stay away. Hlophe described governance presently in the country as a worst-case scenario that was highlighted in the original NDS document.
Mr. Hlophe also wondered how government would generate cash flow and where money for the king’s jet would come from. He went on to ask the minister why he was deliberately quiet on the Jet issue.
In conclusion, Mr. Hlophe said he was pleased that government was on the verge of controlling external travel. He said the control should not only be for civil servants but should apply to everybody, including the king’s delegation.
2.5 PRESENTATION BY PROFESSOR F. OJO
UNISWA
Professor Ojo in his presentation highlighted
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Global and regional developments
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Domestic developments,
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Fiscal situation,
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Budget outturns
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Budget estimates.
In Global and regional developments he expressed the vulnerability of the Swazi economy to the RSA market saying it is exposed to external shocks and influences. He then discussed the major global and regional developments. They include:
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Regional intergration
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AGOA
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RSA-EU Free Trade Agreement
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NEPAD
Furthermore, he summarised domestic developments. They include
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HIV/AIDS pandemic
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Employment generation
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Poverty alleviation
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Food Security
The fiscal situation, budget outturns and budget estimates were also briefly highlighted. (See annexure 2)
2.6 PRESENTATION BY MR. MNDZEBELE
CANGO
Introducing his presentation, Mr Mndzebele stated that the ‘civil society in review of the budget is not sophisticated but concerned largely with issues that impact on the grassroots. He said that the striking features in the 2003/04 budget include the following:
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The stinginess in providing budgetary amounts in the different areas characterised as priority for the financial year.
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Failure to locate amount allocated for HIV other than the pledge mentioned, that will come from the Global Fund for HIV/AIDS, Malaria and TB.
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The disappearing of the budget line for newly established Children’s Unit in the Ministry of Health
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Failure to notice resources that have been reserved by the state to address the food shortage faced by the over 230 000 people and investment for exploring and promoting alternative crops.
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The ever-growing budget for the Public order, Safety and Defence.
(See annexure 3)
In conclusion Mr. Mndzebele said that civil society continues to call for a more participatory budget development to bring into perspectives the views of the people, not just the bureaucrats. He also urged government and parliament to revisit the estimates and harness them to address the concerns of food security, HIV/AIDS, Poverty and employment creation.
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