the budget - where to look for the real story
TRANSCRIPT
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The Budget
Where to look for the real story
www.pwc.com
5 July 2012
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PwC
Agenda
1. The Budget is more than just a statement
2. Definitions and explanations of some the budget terminology
3. Some of the main provisions of the law relating to the budget
4. The expectations of the business community from the budget5. How the government responded to these needs
6. Overall implication of the budget on business
7. Where reporters should look for the real story
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The budget its more than just a statement
The Budget, these days, is not merely a statement of governmentreceipts and expenditure, but it has got a functional role to play
Budget is a fiscal tool in the hands of the government which iseffectively used for the accomplishment of various socio-economicobjectives.
Through the budget, the government decides funding for every aspectof the economy, where the money will come from, and how themoney will be spent.
It is a social contract between the elected government and the
electorate through which the government makes promises to thenation.
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Through the budget the government sets thecountrys economic agenda
The most important aspect of the government budget to business arethe government policies relating to the overall pace of economicactivity, economic development, employment, and price stability.
By adjusting spending and tax rates (fiscal policy) or managing the
moneysupplyand controlling the use of credit (monetary policy), thegovernment influences economic activity in the country whichultimately affects businesses
Government recognises that the private sector in Uganda is theengine as well as driver of economic growth
As a result of this the proposed public expenditure proposals as wellas proposed changes in laws and regulations contained in the budgetare mainly aimed supporting private sector growth and reducing thecost of doing business in Uganda
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http://economics.about.com/od/supply/http://economics.about.com/od/supply/ -
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The economy grew by only 3.2% the lowest rate ofgrowth in the last ten years!
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Budget terminology and definitions
Gross Domestic Product (GDP) - The monetary value of all thefinished goods and services produced within a country's borders ina specific time period.
It includes all of private and public consumption, governmentoutlays, investments and exports less imports that occur within adefined territory
Economic growth is the increase in the capacity of an economyto produce goods and services, compared from one period of time toanother.
The growth of an economy is thought of not only as an increase inproductive capacity but also as an improvement in the quality of lifeto the people of that economy
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Economic growth is not the same as as economicdevelopment
Economic development - generally refers to the sustained,concerted actions ofpolicymakers and communities that promotethe standard of living and economic health of a specific area.
It is the quantitative and qualitative changes in the economy
Economic development differs from economic growth in thatwhereas economic development is a policy intervention endeavourwith aims of economic and social well-being of people, economicgrowth is a phenomenon ofmarketproductivityand rise in GDP
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http://en.wikipedia.org/wiki/Policymakershttp://en.wikipedia.org/wiki/Communityhttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Economic_expansionhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Public_policyhttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Productivityhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/Productivityhttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Public_policyhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_expansionhttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Communityhttp://en.wikipedia.org/wiki/Policymakers -
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Monetary and fiscal policy, fiscal deficit andgovernment debt
Monetary policy - is the process by which the Bank of Ugandacontrols the supply of money, often targeting a rate ofinterest forthe purpose of promoting economic growth and price stability andinflation
Fiscal policy - is the use of government revenue collection(taxation) and expenditure (spending) to influence the economy.
The two main instruments of fiscal policy are government taxationand expenditure.
Fiscal deficit - arises when a government's total expenditures
exceed the revenue that it generates (excluding money fromborrowings).
Government debt arises from an accumulation of yearly deficits
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http://en.wikipedia.org/wiki/Supply_of_moneyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Supply_of_money -
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Some of the main provisions of the Constitutionrelating to the budget, taxation and borrowing
Article 152 - gives Parliament powers to impose tax under theauthority of an Act of Parliament
Article 153 requires all monies received for the purpose of, or onbehalf of , or in the trust of the government to be deposited in the
government consolidated fund Article 154 no monies shall be withdrawn from the consolidated
fund unless it is to meet expenditure charged on the fund by theConstitution or an Act of Parliament
Article 155 - requires the President to present to Parliament
estimates of revenues and expenditure of the government for thenext financial year
Article 159 - gives Parliament power to authorise the governmentto borrow from any source under an Act of Parliament
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Section 3 requires the Minister to develop and implement a macroeconomic and development policy for the government
Section 9 consolidated fund and special funds
Section 10 the need to set up contingencies fund for emergenciesalso referred to in Section 157 of the Constitution
Section 16 - Supplementary budgets must be laid before Parliamentthrough a Supplementary Appropriations Bill
Section 20 authority to raise government loans is vested solely in
the Minister of Finance Sections 27 authority to receive grants on behalf of the government
is vested in the Minister of Finance
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Some of the main provisions of the Public Financeand Accountability Act relating to the budget
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The business communitys priority issues as perthe budget proposal submissions made by the PSF
1. Prioritise investments in infrastructure development to facilitatetrade, improve competitiveness and lower the cost of doingbusiness in the country
2. Invest in social services mainly education and health to improve the
skills development and access to medical services
3. Improve the legal and regulatory framework for doing business andexpedite the enacting of the many pending bills in Parliament
4. Improve service delivery and efficiency in the public sector, with
particular focus on reducing wastage, eliminating corruption andimproving value for money
5. Policies aimed at encouraging rural development andindustrialisation, access to credit for the private sector so as toachieve inclusive economic development
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Nearly 60% of the total budget has been allocatedto the six key sectors namely..
.
Source: Ministers Budget Speech
Works and transport
Health
Education
Agriculture
Water and environment
Power and energy
Public sector management
Others
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Business concern poor roads are the majorreason for high cost of ding business in Uganda
Budget Implication on Business and the Role of Public Relations13
05 July 2012
Businesses concern poor roads are making businesses veryuncompetitive, thereby increasing the cost of doing business
Governments response - 15% of the total budget was allocated toroad works and transport to finance 16 major roads construction andrehabilitation projects totalling > 1,500 kms
New road projects planned include the Kampala EntebbeExpressway, Mbarara bypass, dualing the Northern Bypass, etc
Also major bridges construction works are planned including thenew Nile bridge in Jinja and 13 other new bridges in North and NorthEastern Uganda
Major focus will be on rehabilitation and maintenance of roads inagricultural areas and export routes and 142 new units of roadmaintenance have been acquired for this work
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1405 July 2012
Business concern the education system is notaddressing the needs of the job market
There is a major need for specific skills and competencies in the jobmarket and the education system is not addressing this need
Governments response education system will change to focusmore on quality and relevance of the education and vocational skills
development Objective will be to equip school leavers with appropriate skills for
the job market and employment creation under the BTVET
Government also promised to enhance quality and relevance ofeducation by improving effectiveness and efficiency in the sector
Youth Venture Capital Fund to continue into FY2012/13 with anadditional Shs 3.25b
A new Shs 16b Graduate Venture Capital Fund also set up to supportgraduates with bankable projects
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Business concern unreliable power supply + thehigh cost of power = reduced industrial pdctcn
The industrial sector contracted by nearly 7% due to unreliableelectricity supply and increase in the power tariffs
Governments response Bujagali Hydro Power Project will be fullycommissioned by end of July 2012 (250 MW)
Construction of Karuma Hydro Power Project to commence this year(600 MW)
Complete preliminary designs for Ayago (600 MW) and Isimba (140MW) Hydro Power Projects
Plans to construct several Mini Hydro Power Projects totalling 125MW
Huge investments planned in power transmission lines totallingnearly 800 kms in length
Budget Implication on Business and the Role of Public Relations15
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Business concern theres an urgent need forregulatory reforms for private sector development
Reduction of regulatory burden on business is essential to reduce thecost of doing business in Uganda
Governments response - a comprehensive business licensing reformsunderway many of the existing licences either to be abolished,
amalgamated, or streamlined
A One Stop Centre to be established at the UIA to deal with allapprovals, licenses, and facilitation of investors
An electronic license registry to be set up, business registrationprocedures to be simplified and done online, land registrycountrywide to be computerised, and so on.
Electronic cargo tracking system to be introduced which willeliminate the need for road blocks on transit routes
Budget Implication on Business and the Role of Public Relations 1605 July 2012
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Business concern limited resources should beprioritised to production and less consumption
Governments response allocating nearly 60% of the budget to sixpriority sectors of the economy for maximum effectiveness
A commitment to make public sector efficiency and effectiveness apriority in FY2012/13
Strengthening of the performance and contract management acrossthe six priority sectors of the economy
Ring fencing budget allocations and committing to provide quarterlyprogress reports on budget implementation to cabinet for closeroversight of performance
Defining three KPI by which public expenditure is to be appraised,and a commitment to ensuring value for money for all public goodsand services
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Business concern need clear focus on agricultureto improve production and productivity
Government acknowledged that - Agriculture holds the key toUgandas economic transformation, job and wealth creation
Promised specific intervention to help unlock the countrysagriculture potential will include
a) Provision of improved seeds and farm inputs
b) Supporting the seed industry in improved breeding
c) Irrigation schemes to ensure all year round crop production
Focus will be on supporting farmers to produce and export stable
food crops that have a sure market in the region
Government will adopt a commodity based approach focusing 110commodities to complement the agricultural zoning strategy
Post Budget analysis breakfast 1815 June 2012
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Business concern an urgent need to widen thetax base and also reduce tax burden on business
Governments response the narrow tax base provides very limitedoptions for new tax incentives
To ease burden on lower paid workers PAYE threshold to increasefrom Shs 130,000 to Shs 235,000 a month
To finance the increase in the PAYE threshold, higher paid workersto be taxed at a rate of 40% on incomes over Shs 10 million a month
VAT on the supply of water to be reinstated
Withholding tax on interest income derived from treasury bill andother government securities to go up from 15% to 20%
Tax exemption on income derived from agro processing activities hasbeen abolished and replaced with accelerated capital deductions
Number of designated withholding agents now increased to captuaremore taxpayers into the tax net
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In conclusion, the budget was good for business,this is because it..
It focus and appropriately allocated the limited resources to the keysectors of the economy that greatly affect business in Uganda
Committed government to a tax policy that promotes investment, asopposed to one that is aimed at simply maximising tax revenue
Promised that governments resources will only be used to boost theproductive capacity of the economy,
Also promised public sector efficiency and effectiveness in servicedelivery,
Committed to promoting inclusive and sustainable development,eliminate inefficiency and wastage, provide the necessary policyand legal framework, and
Most importantly promised to fight corruption, reduce the cost ofdoing business and promote businesses competiveness
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A very responsive budget to the demands of privatesector but as always implementation will be the
issue
2105 July 2012Budget Implication on Business and the Role of Public Relations
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2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13
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54.5
72.7
78.6 78.8 77.880