How non-state actors lobby to influence budget outcomes in Zambia

1. How non-state actors lobby to influence budget outcomes in Zambia Samuel M. Bwalya, Ezekiel Phiri, Kelvin Mpembamoto Zambia Revenue Authority, Lusaka, Zambia

2. Outline • Introduction • Objectives of the paper • Evolution and Nature of non-state organization in Zambia • Definition and overview • Nature of state-business relations • Importance of state business relations • Overview of national budget process • Budget process • Budget institutions • Actors • How non-state actors influence budget outcomes • Data and methods • Formal lobbying by non-state actors • Lobbying through the media • Conclusions

3. Introduction • There is sizeable political economy and public choice literature on lobbying and specifically on fiscal decision-making especially on developed countries and Latin America, scanty on Sub-Saharan Africa. • The literature suggests that the budget process, actors and budget institutions matter a lot in determining fiscal outcomes and fiscal performance. • However, there is little information on how budget outcomes (fiscal policy) are produced, and how non-state actor seek to influence them. • Interested to examine how budget processes and institutions can be strengthen to promote fiscal governance and adoption of pro-poor tax and expenditures policies and programs • Since budget outcomes are political outcomes, political economy framework of analysis may be useful to extend this paper

4. Objectives • The paper was set out to; • Examines whether and how non-state actors influence tax policy and public expenditures in Zambia • Determine which lobbying channels and strategies are more effective in influencing budget outcomes • Assesses the extent to which lobbying by non-state actors could improve pro-poor budget outcomes • Distil recommendations on how state-business relations can be strengthened to promote fiscal governance and sustainability

5. Evolution and Nature of non-state organizations in Zambia • Significant growth in registration of Non-state actors after political and economic liberalization • We distinguish two major types: • State-Business Relations • The Zambia Business Council (ZBC) • Zambia Business Forum ( ZBF) • State-Civil Society Relations • NGOCC ( coordinating Committee) • The Civil Society for Poverty Reduction (CSPR) • Other civil society networks/coalitions

6. Evolution and Nature of non-state organization in Zambia Trend in new registrations of NS-Actors (1989-2008)

7. New registration of Non-state actors(1998—2008)

8. State-Business Relations • The Zambia Business Council as the apex body • Chaired by the President or his economic advisor • Three cabinet ministers, • business associations • Meet quarterly • Annual event of business forum with Zambia Business Advisory Council (ZIBAC) in attendance • The Zambia International Business Advisory Council • President (chair) • Economic advisor to the president • International Business Advisors • ZBF (Observer) • Meet once and reviews the Private Sector Development Review Program

9. Zambia Business Forum • Composition • Zambia Association of Manufacturing ( ZAM) • Zambia Indigenous Business Association (ZIBA) • Zambia National Farmers Union (ZNFU) • Banker Association of Zambia (BAZ) • Chamber of Mines of Zambia (CMZ) • Zambia Federation of Associations for women in business (ZFAWIB) • Tourism Council of Zambia (TCZ) • ZACCI has pulled-out. • Meets regularly

10. THE PRESIDENT ZIBAC Zambia Business Council ZBF, MOFNP, MoCTI, MACC,MTC,ZDA Zambia Business Forum TCZ TCZ TCZ ZIBA ZIBA ZNFU ZAM ZFAWIB ZFAWIB ZFAWIB ZFAWIB ZFAWIB ZFAWIB BAZ CMZ CMZ CMZ CMZ CMZ CMZ CMZ CMZ CMZ ZACCI

11. State-Business Relations • Summary of SBRs in Zambia • Have become quite effective in dialoguing with Govt. especially in the last two decades • SBRs are increasingly being perceived as mutually beneficial, although not in all cases • Business associations effectively lobby to influence fiscal policy in their favor using various channels • The ZIBAC independent advisory (business think-tank) • Helps moderate proposals from business associations and provides benchmarking information to government. • The PSD reform program is an example of successful engagement • Reviews the PSD reform program annually, advises the President

12. Civil Society for Poverty Reduction • Formed in 2000 as an anti-poverty advocacy network • Comprises over 140 non-governmental organizations • Has a network councils that meets annually • Has board of directors, provincial teams, and an active secretariat • Quite effective in PRSP and FNDP preparation • Not so effective in influencing implementation of FNDP and PRSP programs • Not quite able to effectively monitor implementation and hold govt. accountable to its Plans

13. Civil Society for Poverty Reduction • Civil Society Networks • Perceived to act in “Public Interest” and as mouth-piece for the poor • Represented civil society in the PRSP and FNDP • Participates in periodic progress review of PRSP and FDNP • Increasing concerns that budget allocations do not reflect priorities set out in the PRSP and its successor FNDP • Civil society seen as less effective at influencing fiscal policy and budgets, but can do better with enhanced capacity • Need to build capacity and re-organize themselves to become more effective stakeholders in fiscal governance and state-building

14. Is there scope and role for non-state actors in the budget process? • Do non-state actor influence fiscal policy decision-making? • Is there scope for their effective participation? • What lobbying strategies do they use? • What outcomes have they influenced? • Do they influence broader fiscal outcomes? • Promote fiscal transparency and accountability • Contribute to state-building (fiscal-social contract) • Do they contribute to adoption of more pro-poor tax and expenditure policies/programs?

15. The National Budget process • The budget is a policy document and tool for allocating public resources • Budget decisions are political decisions (institutions, actors, incentives, etc ) • Both state and non-state actors seek to influence budget outcomes in their preferred direction • Fiscal policy and budgets are important instruments for redistribution of public resources (benefits/losses)

16. Budget Process ctd • Main actors in the budget process • Bureaucrats • The Cabinet (President & Line Ministers) • Legislators • Non-state actors • Firms, individuals, civil society, business groups, donors etc • Potentials sources of problems • Political business cycles: elections cycles • Common pool problems, state actors lack the incentive to ensure wise use fiscal resources, • Institutional rigidities make budget allocations and adjustments difficult, • Politicians may hide their inefficiencies in these rigidities

17. Budget preparation process Parliament Cabinet President/Minister Ministry of Finance Minister (MoFNP) Economic performance & monitoring comttee Tax policy Committee Committee on Expenditure Income Tax Sub-Committee Customs and Excise Sub-Committee VAT Sub-Committee

18. Budget formulation and execution

19. Do non-state actors influence the budget • Data and Methods • Tracked tax policy proposals submitted throughout budget process, • Identified proposals approved, reviewed, and dropped at each budget stage • tracked new proposals introduced at each budget stage • To help detect elements of informal lobbying • To identify policy reversals (through statutory instruments) • Analyzed the composition of approval committees and representation of non-state actors • Largely used 2008 budget proposals and outcomes • Tracked lobbying activity as captured in the media • From 2006—2008 ( daily papers—daily mail, times, and post)

20. Some key findings: Lobbying activity • 11 business and professional associations accounted for largest number of tax proposals (53.8%) in 2008 • 8 submissions from Government departments accounted for (22.1%) • 16 from individual private corporations (16.1%) • 1 Civil society and 6 individuals had each 4% of tax proposals • A submission can contain several tax and expenditure proposals • We look at the number of proposals submitted

21. Formal lobbying to influence the budget

22. Tax proposals submitted by tax type

23. The most effective lobby in terms of success rate

24. The most effective lobby in terms of number of tax proposals adopted

25. Which actors were the most effective lobbies? • In relative terms, civil society had highest success rate of (80 %), followed by govt (21.8%) and companies (7.5%) • In absolute terms, professional and business associations though with lower 1.5% success rate, had more tax proposals adopted (need to compare revenue impacts) • Individuals had lowest success rate, their proposals were often poorly formulated and justified • Overall relative success rate in 2008 was 14.5% • It appears that this formal mechanism is working well but needs to be enhanced through capacity building

26. Which tax proposals adopted were pro-poor? • Highest no. of proposals were on VAT (26.3%), with 80 % of these seeking to reduce the VAT rate: • Were largely pro-poor especially if suppliers passed-on the benefit to consumer by reducing prices (??) • Poorly targeted as everyone benefits • Second highest no. of proposals adopted were on direct taxes, esp. payroll taxes and were largely pro-poor • Proposals on customs and excise had low success rate of 6.9% but directly benefited firms, • Some customs revenue measures adversely affected mining companies and cotton exporters (export levy)

27. Preliminary estimates of revenue implications • Important to look at revenue implications and redistribution effects • We are mining data on actual revenue impacts for 2008 • VAT revenue loss =US $ 58 million • PAYE revenue loss=US $K14.1 million • Customs and excise loss =US $.26 million • Customs other measure(gains)=US$3.2 million • Tax measures in the 2008 budget were by and large pro-poor.

28. Lobbying activity captured in print media • 2775 newspapers transcribed from 3285 editions between 2006 and 2008 inclusive • 269 stories related to tax and expenditure issues • 160 on tax policy; • 109 on expenditure issues • Pattern suggests civil society are more reactive rather than proactive • Partly due to lack of expertise to engage in formal budget process of lobbying

29. Articles and stories on tax and expenditure covered by print media 2006-2008

30. Total number of proposals published by tax type

31. Expenditure policy proposals published in print media 2006-2008

32. Concluding remarks • Zambia Business Council is a critical organizational arrangement for fostering state-business relations , but needs a legal and Institutional framework to be effective and sustainable • ZBF is strategic for private sector, but also needs to hold as stable coalition to be effective • The arrangement through which non-state actor make budget submissions is important and should be strengthened • Firms preferred to lobby unilaterally for firm specific concessions ( customs and excise) • Proposals channeled through government departments had greater chance of being adopted (public officers critical actors) • Civil society and govt. had highest success rates in lobbying, but submitted fewer proposals than professional and business association

33. Concluding remarks • Civil society were more active in lobbying through the media than through the formal budget process and appears to be more reactive than proactive. • Professional/business association were more capable and aggressive in lobbying for tax concessions (regulatory capture) • With enhanced capacity, CSOs and the Media can influence adoption of pro-poor fiscal policies and contribute to fiscal sustainability, poverty reduction and state-building • On the Overall, effective state-business relations seem to improve budget outcomes and promote adoption of pro-poor tax and expenditures policies (but regulatory capture and mine concessions??)

34. Final thoughts • Develop a formal (estimable) model to analyze fiscal policy decision-making more empirically to specifically • identify factors that explain why some non-state actors become more success at influencing fiscal outcomes than others; • determine whether such influence improves the adoption of more socially optimal (pro-poor) fiscal policies and programs; • examine how non-state actors build effective coalition to influence fiscal policy outcomes; and • explore data requirements/source /availability

35. Thanks