The purpose of the modern budget is not to create a citizenry begging for favours at the master’s gate. The new vision is to turn the citizen into a master of his life – to own property and capital.
THE National Budget is not just about numbers. It is a document of vision which communicates the economic development agenda and priorities of the government in office.
Numbers on their own would be pointless, mundane and predictable. It is the ability to give meaning to numbers that makes the budget a living document for a period. This is why national budgets necessarily have a theme, so that the numbers are anchored on a vision intended to drive the country forward.
A national budget generally has two sides – estimates of revenue (otherwise called government income) and proposed expenditure. In simple terms, one part explains where and how revenue is created while the other explains where and how that money will be spent.
The first plan of action is obviously how Government will raise money: whether to tax the corporate bodies and people, and at what rates? Borrowing locally and abroad is another option. The third option is to create money by expanding productivity. The second course of action concerns the priority of what is to be financed.
In the old days the budget had to balance – it was a given. Money raised through taxes needed to equal expenditure. That logic proved futile as national needs became more complex. Governments could not be expected to protect the borders, pay health workers, soldiers, policemen and teachers simply by taxing the working population.
Even worse, without an active private sector allowed to trade locally and internationally, the space for government income becomes thin. When sources of income are narrow for government, borrowing becomes a viable option both through the central bank and international institutions.
Again, without enough income to repay the loans, the budget will allocate funds away from local use and into repaying loans. Here in Zambia, for ex[1]ample, free services were offered in health and education. However, budgets premised on providing free services will fail to deliver if there is not enough income to support free services. What is free to the citizen must first be procured for the citizen by Government. So, Government itself must be in a position to afford free services.
Naturally, it became difficult to sustain or let alone continue budgeting under those principles of the 1970s and 80s, especially without a real private sector to enhance government income. Income for Government comes from tax and some non-tax revenues that are charged for various services. While it is expected that expenditure must increase, it is also imperative to expand and modernise how Government collects its income.
Raising money for government equally requires vision. For example, creating the Zambia Revenue Authority (ZRA) in 1994 was intended to ensure the government income was collected from as many sources as possible; and set the country on a path to begin saving some of its income as part of its sovereign reserves.
The modern budget is not expected to balance but tailored to exploit and benefit from the three capitals. These are natural capital, material capital and mental capital or human capital as it is also known (see also Friedrich List 1841; David Levi-Faur 1997).
In other words, land with all its endowments (natural capital), capital itself (material capital such as machinery and tools used to produce) and labour (mental capital which especially includes ideas). Over reliance on one form of capital is not the best form if budgeting. It is here we must understand that liberalisation was about turning each citizen into a resource – mental and financial, in every conceivable sector.
Removing overdependence on government, reducing the strain on its limited resources by creating and empowering a private sector that can drive commerce better than the government can.
Thus, the role of Government – through the budget – is not anymore to control, but to enable. By extension, privatisation was meant to reduce Government inefficiencies in the economy by transferring the redundant natural capital into private hands, local and international.
The government also distributes its resources in a manner that makes sure that the have-nots have something from the haves. This is the welfare function of government.
The success of many a country depends on which of the capitals is prioritised. Most African countries prioritise natural capital as a source of income because of our endowment of resources such as copper, diamonds and gold, among others. But because of little funding into material (technology) and mental capital we benefit only a portion of what we can gain from our natural capital. Of course, there are many other factors at play but until mental and material capital are prioritised, growth will be painfully slow and stale in some cases.
In this regard, the Ministry of Technology and Science is an arrowhead and anchor to grow other sectors. We must equip the mental and material capital of Zambia for the competitive world, we now live in. After all, it is technology in the 1970s that broke down geographical borders to make finance accessible and cheaper. We can now send and receive money anywhere in the world within a matter of hours. This same financial technology (fintech) is driving the likes of Airtel and MTN money to compete with banks in the money arena. The template for how technology and finance can move a country forward already exists.
We need only embed it with both material and human capital – where entrepreneurship becomes the multiplicative factor so that growth is assured. Japan for example, invested in what was called the copy-cat strategy by which they studied the technology from the Unites States of America (USA) in the 1950s and 60s until they had developed their own capacity to become the second biggest economy in the 1980s and 90s.
Japan remains a pre-eminent master of technological supremacy and exports this technology globally as material and mental capital. They channeled investment and budgets to build their economy and the results showed. What Zambia has done well from a budget stand point is to segregate between growth sectors and support sectors.
Growth sectors are those that are funded so that they can yield income and con[1]tribute to national growth. Support sectors are those still in their nascent stage and cannot feasibility support themselves.
Some sectors, such as welfare cannot be taken off the budget, because they have a redistribution function. However, Government is at liberty to create more commerce-based sectors (through ministries) to drive development than dependence.
The purpose of the modern budget is not to create a citizenry begging for favours at the master’s gate. The new vision is to turn the citizen into a master of his life – to own property and capital.
This is where the public-private function comes alive. So, the spending must be done with a vision to grow the economy and its citizens as agents of increasing growth. As we await the next budget reading, it is not so much where the money is directed, but about which capital will be granted the most opportunity to allow economic growth to our benefit.
