At the Second Special Cabinet Meeting held on Monday,15th February, 2016 at Mulungushi International Conference Centre, Cabinet made the following decisions:
- Taxation: Re-designing of the Taxation Regime for Mining Operations
Under this Item, Cabinet approved the proposed tax measures which are aimed at sustaining operations in the mining industry, securing jobs for the citizens as well as collecting more tax revenue in times of relatively high copper prices. The specific measures to be introduced are as follows:
(i) varied mineral royalty rate for copper based on the prevailing copper price;
- flat mineral royalty rate of five (5) percent for other base metals, industrial minerals and energy minerals; and
- flat mineral royalty rate of six (6) percent for precious metals and gemstones.
Cabinet also approved the suspension of the ten (10) percent export duty on ores and concentrates for which there are no processing facilities in Zambia and to remove the variable profit tax on income from mining operations but maintain the corporate income tax at 30 percent.
This review in the taxation regime is deemed necessary to sustain continuous operation of existing mining companies and avert the continuation of suspension of mining operations and job losses.
- Pensions: Review of Retirement Benefits for Former Presidents and other Constitutional Office Holders.
Under this Item, Cabinet approved the establishment of a Leaders Contributory Pension Fund for the President and other Constitutional Office Holders and other leaders, with the following attributes:
- it will be a Defined benefit scheme, under which a formula to calculate the benefits will be used;
- the Rate of contribution for members to be 12% of Total Emoluments;
- Government contribution to be made at a rate to be recommended from time to time by Government Actuary;
- the contribution period to be in line with the period of service;
- the Indexation Rate to be equal to the increase in the Consumer Price Index (CPI);
- there should be an option to commute 20% of the total pension; and
- Accrued Rights to be maintained, for those serving under the existing terms and conditions, who will have an option to either join the new scheme or remain with the current conditions. This entails that they can either transfer their gratuity into the scheme or they can choose to remain on gratuity until the end of the contract.
The contributory fund will cover the President, Vice-President, Speaker of the National Assembly, Chief Justice, Judges, Ministers, Deputy Ministers, Members of Parliament, Secretary to the Cabinet, Deputy Secretary to the Cabinet, Attorney General, Auditor General, Solicitor General, Secretary to the Treasury, Special Assistants to the President, Investigator General, Director for Public Prosecution, Director General Anti-Corruption Commission, Commissioner Drug Enforcement Commission, Permanent Secretaries, Defence and Service Chiefs, Chief Executive Officers of Grant Aided Institutions and Directors on Contract, as indicated in the Report attached to the Memorandum.
- 3. Financial and Monetary Affairs: Contraction of a loan amounting to US$ 30,000,000 to be contracted from the African Development Bank for the Skills Development and Entrepreneurship Project – Supporting Women and Youth.
Under this Item, Cabinet approved the contraction of a loan from the African Development Bank amounting to US$ 30,000,000 to support the implementation of the Skills Development and Entrepreneurship Project – Supporting Women and Youth.
The need for this loan arises from the fact that Government is unable to finance the Project from tax and non-tax sources. The loan is an Enhanced Variable Spread Loan (EVSL) which is highly concessional with an interest rate of approximately 1.02 percent (Floating Base Rate of 0.480 + Funding Margin Cost of (-0.06) + Applicable Lending Rate of 0.60), a repayment period of 15 years and a grace period of 5 years. Additionally, the loan has no charges.
- Financial and Monetary Affairs: Design, Manufacturing and Supply of 144 Prefabricated Modular Steel Bridges Project Credit Agreement.
Under this Item, Cabinet approved the contraction of a loan from the Export-Import Bank of United States of America amounting to US$ 73 million to support the implementation of the Design, Manufacturing and Supply of 144 Prefabricated Modular Steel Bridges Project which is intended to improve access countrywide, particularly in rural areas and spur development.
There is need to contract the loan in order to provide the resources required for the implementation of the project. The loan has an interest rate of six months LIBOR (85bps) plus Margin of 1.50 percent per annum, commitment fee of 0.125 percent, a repayment period of 8 years and a grace period of 2 years. These terms, particularly the interest rate and fees are favourable compared to the terms currently prevailing on the market. Further, the loan provides 100 percent financing with no strenuous advance payment commitments from the Treasury.
- Financial and Monetary Affairs: Contraction of a Loan amounting to US$ 29.5 million from China Development Bank Corporation for the Mansa-Luwingu (M3) Project.
Under this Item, Cabinet approved the contraction of an additional loan from China Development Bank amounting to US$ 29.5 million to complete the Mansa-Luwingu Road Project as Government is unable to finance the project from tax and non – tax sources. There is need, therefore, to contract the additional loan in order to provide the resources required for the completion of the project. This is an additional loan with an interest rate of US$ 6 Months Libor Plus Margin of 4.5 % per annum, Commitment Fee of 0.5%, Front-End fee of 0.5, a repayment period of 10 years and a grace period of 3 years.
- Financial and Monetary Affairs: Contraction of a loan amounting to US$50 million from the African Development Bank for the Lusaka Sanitation Programme – Climate Resilient Sustainable Infrastructure Project.
Under this Item, Cabinet approved the contraction of a loan from the African Development Bank amounting to US$ 50 million to support the implementation of the Lusaka Sanitation Programme – Climate Resilient Sustainable Infrastructure Project. The loan will help increase access to sustainable sanitation services to Lusaka’s residents and strengthen Lusaka Water and Sewerage Company’s capacity to manage sanitation services. Government is unable to finance the Project from tax and non – tax sources. Thus, there is need to contract the loan in order to provide the resources required for the implementation of the project.
The loan has an interest rate of approximately 1.02%, a repayment period of 15 years and a grace period of 5 years. This loan is highly concessional with favorable terms and provides 100 percent financing with no requirement for advance payment commitments from the Treasury.
- Financial and Monetary Affairs: Contraction of a loan amounting to US$45 million from the African Development Bank for Cashew Infrastructure Development Project (CIDP).
Under this Item, Cabinet approved the contraction of a loan from the African Development Bank amounting to US$ 45 million to support the implementation of the Cashew Infrastructure Development Project (CIDP). The loan will contribute towards poverty reduction as well as improved household incomes.
The loan has an interest rate of approximately 1.020%, a repayment period of 15 years and a grace period of 5 years. It is highly concessional with favorable terms and provides 100 percent financing with no requirement for advance payment commitments from the Treasury.
- Boards and Committees: Appointment of Members of the Board of the
National Road Fund Agency.
Under this Item, Cabinet approved the appointment of members to serve on the National Road Fund Agency Board. The appointment is in accordance with the National Road Fund Agency Act No. 13 of 2002.
You may wish to note that the National Road Fund Agency has operated without a Board since the expiry of the tenure of office of the last Board in June 2013. It is therefore, necessary to make this appointment to ensure that there is provision of oversight and policy guidance to the Agency management.
- Legislation: Consequential Legislation following the enactment of the Constitution of Zambia Act, No. 16 of 2015 and the Constitution of Zambia (Amendment) Act, No. 17 of 2015.
Under this Item, Cabinet approved in principle to introduce Bills in Parliament in order to give effect to provisions of the Constitution of Zambia Act, 2015, and the Constitution (Amendment) Act, 2015 which require the enactment of legislation.
- Boards and Committees: Appointment of the Mining Licensing
Committee.
Under this Item, Cabinet approved the appointment members to serve on the Mining Licensing Committee in accordance with the provisions of the Mines and Minerals Development Act of 2015.
The Mines and Minerals Development Act of 2008 was repealed and replaced with the Mines and Minerals Development Act of 2015. The 2015 Act provides for the establishment of the Mining Licensing Committee to be responsible for various functions. It is hoped that the aappointment of the Committee will lead to expeditious granting of mining rights and non-mining rights in a transparent and inclusive manner to ensure benefits from the exploitation of mineral resources. The tenure of office for the nominees is for a period of three (3) years.
- Legislation: Amendment of the Loans and Guarantees (Maximum
Amounts) (Amendments) Orders, 2014 and 2015
Under this Item, Cabinet approved in principle the amending of the Loans and Guarantees (Maximum Amounts) (Amendments) Orders, 2014 and 2015 in order to increase the:
- maximum amount of loans with maturity of more than one (1) year that may be raised outside the country from K60 billion to K160 billion;
- amount outstanding at any one time on loans raised within the Republic and payable over a period of not more than one year from K13 billion to K30 billion;
- amount outstanding at any one time on loans raised within the Republic and payable over a period of more than one year from K20 billion to K40 billion;
- total contingent liabilities at any one time in respect of guarantees given to persons ordinarily resident outside Zambia from K5 billion to K50 billion; and
- total contingent liability at any one time in respect of guarantees given to persons ordinarily resident inside Zambia from K2 billion to K30 billion.
It is necessary to increase the maximum amounts of both external and domestic loans that can be raised under the Act in order to allow the Minister of Finance to access both external and domestic loans amounting to K10.5 billion to bridge the financing gap in 2016 Budget and to provide development resources in the medium term. There is also need to bring the outstanding amount into conformity with the legal thresholds following the increase in the debt as a result of depreciation of the Kwacha by more than 40 percent since the beginning of 2015.
Cabinet also took note of the following:
- Economic Affairs: Outcome of the Visit by the International Monetary Fund (IMF) in November 2015.
Under this Item, Cabinet took note of the information that at the invitation of the Zambian Government, a team from the International Monetary Fund (IMF) visited Zambia from 11th to 20th November 2015. The team discussed recent macroeconomic developments which all seem to have deteriorated as well as the outlook for the Zambian economy in the medium term. The IMF team indicated that they stand ready to assist the Zambian Government in any way they can and are due to come to Zambia in March for a further review. It should be noted that the discussions were held in a cordial and frank manner, reflecting the change in the tendency by the IMF to prescribe policy to member countries, as well as the improvement in the analytical skills within the Government system.
- Agriculture: Land Allocation to Prospective Investors in Luswishi Farm Block.
Under this Item, Cabinet took note of the information that a total of 15,000 hectares of land in the Luswishi Farm Block in Lufwanyama District has been allocated to three prospective investors, namely Xantium Dairies Zambia Limited, Luswishi Investment Zambia Limited and Hybrid Poultry Farms Zambia Limited, who have been allocated 5,000 hectares each.
Xantium Dairies Zambia Limited will invest a total of US$ 18.9 million over 5 years in a dairy farm with 11,000 dairy cattle and a UHT milk processing plant. The Company will create 700 jobs and will operate an out grower scheme of not less than 250 smallholder farmers.
Luswishi Investments Zambia Limited will invest a total of US$ 20 million over 5 years with the capacity to produce 30,000 metric tonnes of wheat per annum and create 500 jobs. The investor will be engaged in mixed farming of a soya/wheat rotation, livestock production, fruit tree and vegetable growing and a milling plant.
Hybrid Poultry Farms (Zambia) Limited will invest a total of US$ 42 million in developing 6 breeding farms over 5 years, produce 21,840,000 eggs and 16,380,000 day old chicks annually and grow cereals for production of stock feed. The Company will create 350 jobs and will operate an out grower scheme. Currently, there is an investor called Global Plantations Limited (GPL), which was allocated 5,000 hectares of land in 2013, and most of it is cleared. The Company is producing sunflower, soya beans and irrigated wheat and have installed a 200,000 metric tonnes capacity oil processing facility in Ndola.
- Energy: Demands by Drivers of Fuel Tankers.
Under this Item, Cabinet took note of the information from the Ministers of Energy and Water Development, Labour and Social Security, Local Government and Housing, Home Affairs and Lands, Natural Resources and Environmental Protection on the issues that came out of the consultative meetings held with the Tanker Drivers’ Union and Petroleum Transporters Association of Zambia. The meetings were aimed at finding solutions to the Tanker Drivers demands.
Hon. Chishimba Kambwili, MP
Minister of Information and Broadcasting Services
(Chief Government Spokesperson)
