A CLOSE LOOK AT THE EAST AFRICAN COMMUNITY COUNTRIES 2014/15 BUDGETS: WHAT IS THE PLACE FOR AGRICULTURE?

 http://www.newvision.co.ug/news/659781-parliament-set-to-scrap-taxes-on-agricultural-inputs.html

Overview:

On June 12^th, 2014, all the East African Countries, presented the 2014/15 budget proposals that are all geared at promoting economic growth and development.  RWECO as a pro-poor focused civil society organization located in Rwenzori region, Uganda, has taken a keen eye in finding out how the 2014/15 budgets are tackling food security to answer the big questions looming in the East African Community of ensuring food security for increased productivity and growth.

Table1: EAC, budget Allocations

s/n	Country	2013/14 (shs)	2014/15 (shs)	2014/15 (US$)
1	Uganda	UgSh13.06 trillion.	UgSh14.36 trillion	$5.616Billion
2	Kenya	Ksh. 1.64 trillion	Ksh1.77 trillion	$21.52Billion.
3	Tanzania	Tzsh.18.25 trillion	TzSh19.5 trillion	$12.268Billion
4	Rwanda	Rwf1.6773 trillion	Rwf1.75 trillion	$2.558Billion
4	Burundi

Source: http://www.newtimes.co.rw/news/index.php?i=15752&a=77533

NB: Burundi budget is not aligned to the rest of the EAC countries.

Fig. 1: 2014/15 FY: EAC Budgets in US$ (bn)

 

Source: Calculations from the 2014/15 budget speeches

Kenya has continued to be the biggest EAC economy followed by Tanzania as indicated in the fig.1.  In the EAC regional Governments have taken it upon themselves to present the budget estimates on the same day and time, save for Burundi which has a different budget arrangement.  However, as we note from the Fig. 1, the 2014/15 budget estimates for all the four countries increased slightly. 

The case of Uganda, the budget has hit Ugx. 15 trillion with an estimated growth of 6.2%. While we are all happy with the growth, agriculture as a backbone to development has remained underfunded thus resulting into the food security questions. In the horn of Africa, Uganda is believed to be the food basket but the budget allocations to Agriculture in the 2014/15 was 3.1% of the total budget which is far below the  10%  Maputo (2003) recommendation  to the Agriculture sector.

Table 2: What the place for Agriculture in the 2014/15 EAC Budgets : Ensuring food security

s/n	Country	2014/15 (shs)	2014/15:Agriculture
1	Uganda	UgSh14.363 trillion	Ugsh. 473.66bn
2	Kenya	Ksh1.77 trillion	Kshs 3bn
3	Tanzania	TzSh19.5 trillion	Tzsh. 1,084.7 bn
4	Rwanda	Rwf1.75 trillion	Rwf170.3 bn
5	Burundi

Source: EAC Country 2014/15 FY Speeches, Ministrial Policy Statements ( June, 2014

Fig. 2: EAC Countries 2014/15 Budget  (US$M)Allocation to the Agriculture Sector

Source: Calculations from 2014/15 budget allocations

The case of Uganda.

“Agriculture Production and Productivity….agriculture and agribusiness is a

priority to Government to create jobs, improve productivity and expand exports in the medium term. The sector employs 70 percent of the Uganda’s labour  force, and contributes about 21 percent to the GDP. Government plays an important support role to ensure  value for money and lower the cost of doing business”. ( Budget Speech, 2014/15, Uganda)

Source: MAAIF, Ministerial Policy Statement FY2014/15

Source: MAAIF, Ministerial Policy Statement FY2014/15

Whereas, government opines that, Agriculture employs 73% of the Uganda’s labour force, budget allocations of Ugx. 473.66bn will not meet the envisaged targets of ensuring increased productivity compared to Tanzania’s  Tzsh. 1084bn to support irrigation, and Kenya’s  Ksh. 3bn for agriculture inputs. The Ugx. 473.66bn, represents 3.3% of the total budget far less than what other EAC countries have allocated to the Agriculture sector. The last harmer that broke the camel’s back was for President to transfer  NAADs program that was employing close to 4513 youths to the army as the NAADs technical team had created a structure of ‘human beings’ having wasted tax payers money on salaries and  workshops.  The president during the address of the nation castigated NAADS technocrats for having hijacked the program and instead allocated 70% of the budget to salaries of staff, workshops, monitoring e.t.c. The big question is, where will the over 4513 youths employed by Naads go despite the challenges faced? We need to engage government on that and not to cause a vacuum in solving one problem.

Snap shot of the NAADs Activities: 2014/15

NAADS Services 2014/15

In the 2014/15, NAADs services budget was drastically decreased from Ugx. 104.34 bn to 68.87 bn, a shift in the right direction but we also note that, NAADs district wage was increased from Ugx. 26.90 bn to Ugx. 62.37 bn. We question why money is moved from one vote but being transferred to the wage vote indicating that the cost of running NAADs is still high (42%) compared to what will go to the farmers ( 46%). While NAADs was presumably overhauled, the farmers are still getting leap services given the high wage bill at NAADs secretariat and the district wage bill. If we must realize value for money, all these anomalies must be addressed in favor of the peasant farmers who are the beneficiaries.

The Agriculture allocation in the 2014/15 budget is short of the Maputo 2003 declaration of 10% and also the Kyankwanzi 2011 NRM caucus to increase the agriculture sector budget to 4.8% till the target of 10%

Taxing the Agriculture inputs will hurt the poor women and men:

Terminated exemption on interest income on agricultural loans. The measure is expected to generate sh25.1b. Terminated exemptions on the following supply with effect  from 1st July 2014:-

i. Supply of Feeds for Poultry and Livestock

ii. Supply of Agriculture and Diary Machinery

iii. Supply of Packaging Materials to the Diary and  Milling Industries

iv. Supply of Specialized Vehicles, Plant and Machinery  services and civil works related to roads and bridges construction, agriculture, water, education and  health.

The above measures are projected to generate sh215b and  the details are contained in the VAT (Amendment Bill) 2014.

 Termination of the exemptions VAT zero-rated supplies with  effect from 1st July 2014:-

v. Supply of cereals, grown, milled or produced in Uganda

vi. Supply of processed milk and milk products

vii. Supply of Machinery and Tools for Agriculture

viii. Supply of Seeds, Fertilizers, Pesticides and Hoes

RWECO has observed that, the above taxes if implemented in their current form will further stifle the agriculture sector that employs 73% of the labour force who derive their livelihoods. The taxes slapped on Agriculture inputs will further curtail the developments in the agriculture sector that is already underfunded by government. CSOs need to engage with government to identify other tax alternatives including increasing taxes on  betting, the music industry and bear and cigarettes  among other measures.

The taxes imposed on agriculture inputs will hurt the grassroots women and men who derive their livelihoods from subsistence farming, this category of people are susceptible to economic shocks. Other taxes on basic needs like paraffin of shs. 200/ will have much impact on the poor than the middle class.  The Ugx. 50/  exercise duty on petrol and diesel will have a further indirect increment on the cost of living  as trader will transfer the burden to the final consumer who is an average citizen. Overall, the poor will suffer the tax burden as the traders will transfer the tax on commodity prices. As we move towards the 2016 general elections, citizens need assurance of a fair and free elections both in the pre-election, during elections  as these elections have a direct impact on the economy as evidenced in the post 2011 elections.

Proposals for a pro-poor 2014/15 budget

·         Government to engage with all stakeholders before NAADS is re-directed to UPDF  to identify alternatives for the over 4513 youths who are employed and their dependents will fill the burden more;

·         Revise the excise duty on kerosene and instead increase the tax on betting since its counter productive;

·         Scrap the tax on agriculture inputs as the tax will have a direct impact on food security and employment in the agriculture sector;

·         Harmonize the taxes proposed with the rest of the EAC countries as indicated in fig 2 above.

·          

Conclusion:

 Uganda as a food basket in the horn of Africa has the capacity to increase food production if more resources were allocated to the Agriculture sector and focus put on water for production. The tax policies proposed in the 2014/15 budget are likely to hurt the grassroots men and women the more given that they derive their livelihoods from subsistence  agriculture. Moving from subsistence farming requires deliberate efforts by government and the private sector to invest both human and financial resources.

RWECO will continue to work with the CSBAG platform to engage with government in order to come up with pro-poor tax proposals that will not hurt a bigger percentage of the population given that if the tax proposals are implemented in the current form, the grassroots citizens will suffer as  traders will transfer the tax burden to the final consumer .

Jimmy Baluku Odyek MA –Development Studies (Poverty Studies and Policy Analysis)
Coordinator RWECO and a partner with CSBAG

RWECO is a consortium of: Kali, Good hope foundation for rural development, RIDE AFRICA and RICNET: http://rwecovoice.blogspot.com/ , http://somaschools.blogspot.com/ http://ricnet.co.ug/ http://www.ride-africa.org/