Budget proposals of the six East African states—Kenya, Uganda and Tanzania, Rwanda, Burundi and South Sudan—indicate they are pursing different aspirations and directions to recover from the Covid 19 pandemic that has ravaged their economies for more than one year.
Kenya and Rwanda are looking for ways how to regain lost jobs, Tanzania is investing in infrastructure projects and Uganda is trying to manage a debt-ridden economy by promising haphazard interventions and investing more in security.
Burundi is still trying to recover from internal armed violence that has been made worse by the European Union sanctions whereas South Sudan is still lamenting on lost oil revenues as a result of reduce oil prices due to Covid 19.
Kenya
Kenya’s economic growth last year fell from 5.4 percent to 0.6 percent—the lowest since 2012— as Covid-19, locusts, and floods combined to deal a heavy blow on multiple job-rich sectors including tourism, manufacturing, and agriculture.
The country is seeking a 6.6 percent growth this year through the measures that can return as many people as possible to earning after the Covid-induced disruption that killed jobs and cut pay.
Mr Uhuru Kenyatta’s government has unveiled a Ksh3.6 trillion-budget increasing allocations and tax incentives to key job-creating sectors including agriculture, manufacturing, and tourism to lift the economy from the worst performance in 12 years.
Treasury Cabinet Secretary Ukur Yatani said they will expand economic activities in key growth sectors and address unemployment, poverty, and income inequalities—all of which have worsened in Covid-19 environment.
Kenya’s allocation to manufacturing, which accounts for thousands of formal and informal jobs, rose by Sh2.2 billion to Sh20.5 billion while that on housing programme more than doubled to Sh13.9 billion from Sh6.9 billion.
The Treasury is also investing Sh2.3 billion to the tourism sector to help it recover from an economic fallout caused by the coronavirus.
Kenya’s tourism sector was hit hard after the government banned all local and international flights in March, resulting in low tourist traffic at hotels and animal parks.
In another move aimed at boosting jobs, the Kenyan Finance Minister said the tax rebates enjoyed by employers who offer one-year internships to at least 10 university graduates have been extended to include graduates from technical and vocational education and training (TVET) institutions.
The Treasury extended its quest for creating additional jobs by allocating Ksh3 billion towards the Kazi Mtaani programme that was unveiled last year to offer casual jobs to the youth —handing a lifeline to thousands of young people.
The funds will support youth empowerment and employment creation for another year. The programme has engaged about 100,000 youth since launch last year.
The Treasury’s push for jobs has also been extended to the community scouts programme with a Ksh1 billion allocation. The programme currently engages 5,500 youth under Kenya Wildlife Service. Kenya has further allocated Ksh2.6 billion for supporting liquidity of firms to boost recovery from Covid-19 disruptions.
Kenya is also maintaining a protectionist stance on local manufactures to shield them from cheap imports while at the same time giving them access to cheap imported raw materials.
Manufacturers of baby diapers have been handed another year to access inputs for the manufacture of the products duty-free to improve local production and create jobs.
Similar tax safeguards were extended to the agriculture sector where the overall budget was raised to Sh73.9billion up from Sh62 billion in the current year.
Uganda
Uganda, which has become heavily indebted with increasing youth unemployment, plans to increase revenue collection and safeguard the government from the constraint of increasing public debt as major policy interventions.
According to the Ministry of Finance budget details, Uganda’s debt will peak at 51.4% percent by end of June 2021.
Mr Yoweri Museveni’s government is banking on Emyooga programme, which is intended to encourage people to save and start their own income-generating activities.
The programme aims to lift 68% of Ugandans from subsistence to commercial orientation through savings. So far it has been rolled out to more than 4.3 million Ugandans.
Museveni says they are introducing another programme called the parish model and the Ministry of Finance, is allocating Ush460 billion as a revolving fund under the programme.
Apart from these two programme there is little effort to jump-start the economy that has been badly battered by the Covid 19 pandemic except for the one trillion shillings stimulus package through Uganda Development Bank to caution small and medium enterprises and the Ush500 billion through Uganda Development Corporation, which majority of the business community and manufacture say they cannot access.
Out of Uganda’s budget of 44.7 trillion shillings, government will be collecting 22 trillion shillings as revenue. But of the 22 trillion 15 trillion is for debt financing. And the remaining 7 trillion shillings will largely go to paying salaries and allowances.
Uganda has to deal with a bloated public service (537 Members of Parliament, 80 Ministers, hundreds of Presidential Advisors and parallel government agencies like Operation Wealth Creation, anti-corruption unit in president’s office, etc.) in addition to investing heavily in security (about 7 trillion shilling)
Yet, besides Covid 19, Uganda is gradually losing the regional market. Uganda’s goods have been rejected by Rwanda ever since the latter closed its border. In the period between August 2019 and August 2020, cumulative export earnings from Rwanda, according to Bank of Uganda, fell to just $5.1m from $131.8m in the same period between August 2018 and August 2019.
For more than three years now, Kenya has been rejecting Ugandan commodities on account of low quality standards and safety risks. The commodities include; poultry products, beef and beef products, sugar, maize, fruit juices and pharmaceuticals.
In just a year, Uganda lost sh1.7trillion as a result of Kenya’s blockade on the former’s milk exports.
In South Sudan, unidentified gunmen continue to attack Uganda’s cargo trucks, which has created fear amongst Ugandan traders there. Many are likely to abandon the Sudanese market.
Presenting the National Budget for the financial year 2021/22, the designated State Minister for Planning, Mr Amos Lugoloobi, said domestic revenue for next financial year is projected at Ushs22.425 trillion, equivalent to 13.8 percent of GDP, compared to a projected outturn of Ushs19.432 trillion, equivalent to 13.1 per cent of GDP in FY 2020/21.
This is partly why Museveni’s government is introducing numerous taxes albeit confronting the second wave of the Covid 19 pandemic.
The increase in tax collections will be realized from new tax measures and administration reforms, improvement in the level of economic activity and increased efficiency in tax collection by Uganda Revenue Authority.
The country is reforming taxation of rental income to remove the incentive for non-individual rental taxpayers to claim unrestricted deductions which significantly reduce their tax contribution, reducing rates of depreciation for some classes of assets, discontinuing the concurrent deduction of initial allowances and depreciation in the first year of use of qualifying assets.
Kampala is also reviewing the capital gains tax regime by allowing for the effect of inflation and providing tax relief for venture capital investments, broaden the scope of taxation of plastics to cover all plastics.
The other policy, according to the Finance Minister is to rationalize the excise duty regime on telecommunication services by scrapping the excise duty on Over the Top (OTT) and introducing a harmonized excise duty rate of 12.0 per cent on airtime, value-added services and internet data excluding data for provision of medical services and the provision of education services.
Further, Uganda is introducing an export levy of 7 per cent on the value of fish maw exports and imposing an export levy of 5 per cent and 10 per cent on processed and unprocessed gold and other minerals respectively.
Besides Uganda Revenue Authority (URA) collecting taxes, the Finance Minister said the capacity of local governments to collect revenue will be enhanced through training and ICT infrastructure.
URA has also been compelled to enforce tax compliance using the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) and Digital Tax Stamps; enforce enhanced licensing requirements for clearing and tax agents, and bond operators; improve detection of smugglers using non-intrusive inspection equipment, and close all bonded houses for imported sugar for re-export to avoid undeclaration and misclassification.
Government estimates the administrative measures will generate about Ush800 billion in revenue collections.
Tanzania
Tanzania will be spending Tsh34.88 trillion (about $15 billion) mostly on recurrent expenditure Tsh22.1 trillion), development expenditure (Tsh12.78 trillion) and debt servicing (Tsh10.48 trillion), according to the country’s Finance and Planning Minister Philip Mpango.
Tax revenue is estimated at 12.9 percent of GDP in 2020/21 from the likely outturn of 12.1 percent in 2019/20. Government expenditure is projected at 22.1 percent of GDP in 2020/21.
Budget deficit (including grants) is estimated at 2.6 percent of GDP in 2020/21 which is below the target of 3.0 percent of macroeconomic convergence criteria as agreed in the East Africa Community.
Tanzania intends to finance the construction of central railway line to standard gauge; construction of Julius Nyerere Hydropower Project (2,115 MW), construction of Crude Oil Pipeline Project from Hoima (Uganda) to Chongoleani, Tanga (Tanzania) and strengthening Air Tanzania Company Ltd.
Tanzania says it is allocating more resources to rehabilitate roads, bridges, railways and other infrastructure damaged by floods.
The Finance Minister said Tsh2.1 trillion has been allocated for the standard gauge railway project, Tsh1.6 trillion for Julius Nyerere hydropower project at Rufiji River, and Tsh823.7 billion for railway, water and rural electrification.
Tanzania is emphasizing domestic revenue collection. This mean the Tanzania Revenue Authority intends to widen the tax base and create friendly environment with taxpayers by giving the taxpayer 30 days to prepare and submit their documents.
Like Uganda, the revenue authorities in Tanzania will use ICT systems to strengthen domestic revenue collection including local government authorities’ own source.
As the East African Community the six partner states have agreed to retain 25 percent duty on all imported iron and steel products for a further one year in a bid to spur local manufacturing.
Vegetable products, including potatoes, peas, and tomatoes coming out of the EAC region will be charged a duty rate of 30 percent for one year, protecting local farmers from stiff competition.
The new member states of the East African Community—Rwanda, Burundi and South Sudan—are still on the drawing table pondering what right move to make.
Burundi whose financial calendar begins in January and South Sudan were both given time by the EAC Council of Ministers to adjust the reading of their budgets in harmony with the rest of the partner states. Rwanda did not give reason for delaying the budget reading.
Rwanda
However, Rwanda’s proposed budget for 2020/2021 fiscal year was Rwf3.2 trillion. Rwanda’s Finance and Economic Planning Minister, Uzziel Ndagijimana said his government was banking on external borrowing to respond to the economic effects of the pandemic in the medium term.
Rwanda also prioritized job creation and entrepreneurship, dedicating at least Rwf16 billion to the sector.
Through different government projects, the National Employment Programme and private sector activities, there is a plan to generate at least 205,500 new jobs for Rwandans.
Government proposed to support 7,560 graduates of Technical and Vocational Education and Training (TVET) with start-up toolkits to allow them to create their own jobs.
RwandAir whose operations have been adversely affected by the virus was provided Rwf145.1 billion.
Burundi
Burundi’s economy is reeling from the impact of pandemic, years of violence and lawlessness under the deceased former president Pierre Nkurunziza and the European Union sanctions puts priority on areas such as “good governance, public health, agriculture and livestock (and) youth development.
Burundi’s parliament passed the government’s planned budget of 1.7 trillion francs ($869.7 million) for the financial year starting July, up 8% from expenditure for the current fiscal year.
Finance Minister Domicien Ndihokubwayo said 76.4% of the budget would be funded from tax revenues while the rest would be from aid.
Burundi which relies on exports of coffee and tea, is seen expanding at 3.6% in the next fiscal year.
South Sudan
South Sudan, whose budget deficit has increased from 25% to 37% due to the fall in oil revenues and Covid 19 pandemic, plans to increase its budget by 29% to fund a government that was expanded under a peace deal to end six years of armed conflict.
South Sudan plans to spend 268 billion South Sudanese pounds ($1.6 billion) for 2020-21, compared with 208 billion pounds in the previous fiscal year.
The leaked 2021 National Budget shows that the Sudanese government plans to increase the budget for the military and security forces. The budgets for health care and education will decrease.
The expenditure on the security and defence sector will reach SDG 201.5 billion, equivalent to one-third of all public revenues. The education budget will be reduced from SDG 14.8 billion to SDG 6.2 billion.
The budget of the Sovereign Council will reportedly increase by 126 per cent, that of the Council of Ministers by 782 per cent. The Peace-building Fund will receive SDG 13.3 billion.
Deputy Finance Minister Agok Makur said their budget is mainly to implement the peace agreement and partly to meet an increase in the government wage bill.
President Salva Kiir and Riek Machar, his deputy and former rebel leader, want to rebuild their oil-producing country after the men agreed a three-year transitional government in February. That marked the end of a civil war that claimed more than 400,000 lives since fighting started in 2013, and crushed the economy.
South Sudan’s oil production is about 170,000 barrels a day, less than half the output just before the war broke out. Oil is South Sudan’s economic lifeblood.
