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SHOW ME THE MONEY!

How Government Spends and Accounts for Public Money in Zambia
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By Edem Djokotoe and Pamela K Chama PRIMUS MEDIA for Transparency International Zambia June 2006

TABLE OF CONTENTS Foreward About the Authors Acknowledgements List of Acronyms Preface Politics and Public Money Chapter 1: The Meaning of Public Money 1.1 Public Money Defined 1.2 Public Money and the Budget 1.3 The Appropriation Act 1.4 The Constitution and Government Spending 1.5 Taxation and the Public 1.6 Government Spending vs. Public Needs 1.7 Potholes on the Road to Accountability Chapter 2: Keeping Tabs on Public Expenditure 2.1 The Role of the Auditor-General 2.2 Making Sense of the Auditor-Generals report 2.3 Stages in the Auditing Process 2.4 Parliamentary Oversight of Public Money 2.5 The Role of the Public Accounts Committee Chapter 3: Government Expenditure Trends 3.1 The Politics of Government Spending: A Historical Perspective 3.2 Analysis of Government Expenditure: From the First to the Third Republic 3.3 A Review of Government Out-turn and Appropriation Accounts 3.4 An Assessment of General Revenues of the Republic 3.5 The Writing on the Wall Chapter 4: Media Coverage of Public Money 4.1 Public Access to Information 4.2 Public Access to the Media: The Case of Zambia 4.3 An Analysis of Content in the Zambian Media 4.4 Media Coverage of Public Money

Chapter 5: Improving Public Expenditure Management 5.1 Mending the Cracks in Financial Accountability 5.2 Tracking Public Expenditure: An Example from Uganda 5.3 Political Will, Public Participation and Accountability 5.4 Protecting the Integrity of Public Money: Recommendations 5.5 A Final Word Glossary References

Foreward

About the Authors Edem Djokotoe is a Ghanaian-born journalist, writer, newspaper columnist and media trainer who has been living and working in Zambia for over 20 years. He has contributed chapters to a number of books on journalism and media studies and is co-editor of the book, Breaking Monopolies: Legislation and Radio Pluralism in West Africa written by Cheikh Tidiane Thiam and Demby Sy and published by the Panos Institute. He is the author of An Issue-Based Journalism Handbook published in 2004 by the Media Institute of Southern Africa (MISA). Edem Djokotoe holds a B.Sc. in Journalism and Media Studies from the International School of Social Sciences of the University of Tampere in Finland, a Bachelor of Arts degree in Applied Linguistics and Literature with Education from the University of Zambia and a Master of Arts degree in Journalism and Media Studies from Rhodes University in South Africa. He is a founder member of the Southern African Media Trainers Network (SAMTRAN) and has undertaken extensive media and communication consultancy work in the SADC region. Pamela Koloni Chama is a television journalist and IEC specialist. She currently sits on the National AIDS Council IEC Technical Committee where she collaborated in the production of the Councils communication strategy, a monthly newsletter and fact sheets. Mrs. Chama has undertaken several media and communication consultancies for institutions as diverse as the National Malaria Control Centre, One World Africa, UNDP, the Kaiser Family Foundation and the Population Reference Bureau (PRB). Mrs. Chama is a journalism graduate of the Evelyn Hone College currently pursuing dual degrees in Communication Science and Development Studies with the University of South Africa and the Zambia Open University.

Acknowledgements This project could not have been undertaken without the support and input of many people. Special thanks go to Tom Thewo, chartered accountant and a partner of Thewo and Company for his invaluable efforts in making sense of government expenditure trends over a 20year period; Fred Mmembe, the Editor-in-Chief of Post Newspapers Limited for giving the consultants access to the companys library and its informational resources; Williams Nyoni and Mary Longwe, the diligent library staff at Post Newspapers for their help in locating material many others would have forgotten about; Chikomeni J. Banda, Chief Research Officer at the National Assembly for availing us with some of the reports we needed for our work; Ellen Chikale, Public Relations Officer, Mr. Mafwila Mafwila, Principal Auditor (Planning and Information), Mr. Louia Mwansa, Deputy Director (Planning and Information) and Mr. Chunga Chunga, Senior Auditor (Research and Development) at the Office of the Auditor-General for helping us get access to back issues of the Auditor-Generals report. Other key informants helped in the research process by allowing us to drink from the well of their experience. They include: Bob Sichinga, MP, Francis Simenda, current Chairman of the Public Accounts Committee of Parliament; Sketchley Sacika, former Secretary to the Cabinet, Ms. Anna Chifungula, the Auditor-General, a former acting Accountant-General at the Ministry of Finance; Reuben Kajokoto, Legal Counsel, ZNBC, Henry Ngilazi, Acting Assignment Editor, ZNBC, Aubrey Musumba, News Editor, Zambia News and Information Services, Joy Sata, News Editor, Webster Malido, News Editor, Post Newspapers Limited, Speedwell Mupuchi, Reporter, Post Newspapers Limited, Sipo Kapumba, Programme Officer, MISA (Zambia), Zarina Geloo, Executive Editor of the Guardian Weekly. The consultants extend their gratitude to the management and staff of Transparency International Zambia, notably Stuart Nsana, Goodwell Lungu and Ngoza Phiri-Yezi for their confidence in us, for their patience and understanding. They also acknowledge the moral and emotional support of Josephine Djokotoe and Yande Chama.

Acronyms and Abbreviations ACC ADB AFSL AG BBC BESSIP BOZ CCJDP CEO CNN CSO DfID DGIS EU FM FOI FRA GDP GFATM GRZ HIPC IMF INDECO IFMIS LSHTM JICA LAFICO LME MDRI MEMACO MISA MMD Anti Corruption Commission African Development Bank Access Financial Services Limited Auditor-General British Broadcasting Corporation Basic Education Sub-Sector Investment Programme Bank of Zambia Catholic Commission for Justice, Development and Peace Chief Executive Officer Cable News Network Central Statistical Office Department for International Development Directorate-General for International Co-operation European Union Frequency Modulation Freedom of Information (Bill/Act) Food Reserve Agency Gross Domestic Product Global Fund for AIDS, Tuberculosis and Malaria Government of the Republic of Zambia Highly Indebted Poor Countries International Monetary Fund Industrial Development Corporation Integrated Financial Management Information System London School of Hygiene and Tropical Medicine Japanese International Cooperation Agency Libyan Arab Foreign Investment London Metal Exchange Multilateral Debt Relief Initiative Metal Marketing Corporation Media Institute of Southern Africa Movement for Multi-Party Democracy

MOH MRG NGO NHA OAG OAU PAC PACRO PAYE PAZA PEM PEMFA PETS PHI PRSP PS PSMPSP SAF SAI SARPN SARS TI UNIP UNZA UNZASU VAT ZAF ZANACO ZCCM ZIC ZICA ZNBC ZNTB ZPA ZRA

Ministry of Health Metal Resources Group Non Governmental Organisation National Housing Authority Office of the Auditor-General Organisation of African Unity Public Accounts Committee Patents and Companies Registration Office Pay As You Earn Press Association of Zambia Public Expenditure Management Public Expenditure Management And Financial Accountability Public Expenditure Tracking Studies Presidential Housing Initiative Poverty Reduction Strategy Paper Permanent Secretary Public Sector Management Programme Support Project Structural Adjustment Facility Supreme Auditing Institution Southern African Regional Poverty Network South African Revenue Services Transparency International United National Independence Party University of Zambia University of Zambia Students Union Value Added Tax Zambia Air Force Zambia National Commercial Bank Zambia Consolidated Copper Mines Zambia Investment Centre Zambia Institute of Chartered Accountants Zambia National Broadcasting Corporation Zambia National Tender Board Zambia Privatisation Agency Zambia Revenue Authority

ZSIS ZUFIAW

Zambia Security Intelligence Service Zambia Union of Financial Institutions and Allied Workers

WHAT THIS BOOK SETS OUT TO DO This book explores how government spends and accounts for public money. The exploration is based on the Auditor-Generals report, which is a measure of a governments accountability record regarding public expenditure. Show Me The Money! may not name names, but it provides an empirical basis for public action against those who wilfully mismanage public resources or misappropriate it for private ends. The Constitution gives the Auditor-General the power to audit government expenditure and submit a report to the Republican President within 12 months after the end of each financial year. Once the report is officially out, any member of the public can go to the Office of the Auditor-General and buy a copy. However, very few do, even though the content of the AuditorGenerals report should arouse immense public interest. The book presupposes that the large majority of Zambians do not know what public money is and are unfamiliar with how it is raised, how it is managed, how it is spent and how it is accounted for. To bridge this gap in public information, Show Me The Money! tries to explain how public money is collected, how it is managed, how it is spent and how it accounted for. Some attention has been paid to the budget process and to the budget as a frame for expenditure analysis. Because the power to raise public money and spend it is enshrined in the Constitution and specific laws, an attempt has been made to locate the study against the backdrop of relevant legislation. In the interests of public information and public action, it is important for readers to know when the Constitution has been violated and when the laws governing the expenditure of public money have been broken. The public has a big role to play in ensuring that public money is spent prudently and transparently. But citizens cannot play this role if they do not have the knowledge to inform public action. In short, Show Me The Money! is meant to stimulate greater public interest in how public money is allocated, how it is spent and how it is accounted for. It is based on the logic that the greater the public interest, the greater the likelihood that there will be better controls in government management and expenditure of public money. When all is said and done, the onus is on citizens to ask those who manage, spend, oversee and account for public money one vital question: Show me the money!

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PREFACE Politics and Public Money No-one knows exactly how much Zambian public money has been stolen or misappropriated since 1964 when the country gained its independence. Not even the Office of the Auditor-General (OAG), which has the constitutional mandate to keeps tabs on government expenditure1. However, it is estimated that about K348.244 billion worth of public money is either misappropriated, stolen or grossly mismanaged every year. That translates as K6.964 trillion from 1984 to 2004. The figure is based on an average of misappropriated monies, revenue and expenditure losses captured in the Auditor-Generals report over a 20-year period. A colossal amount of money for a poor country to lose every year, if you consider that the total loss is more than two-thirds of the budget of K10.2 trillion expected to keep the wheels of government turning in the 2006 financial year. But even this figure does not tell the whole story. Actually, the amount of public money that is stolen or misappropriated by public servants is a lot larger than is reported, considering that not every government institution funded from the national treasury is audited every financial year. Which means an undisclosed amount of public money slips through the cracks and disappears altogether from the government radar screen every year. In the main, the Auditor-Generals inability to audit every head of public expenditure in every district of the Republic of Zambia due to operational and logistical constraints means that the exact amount of public money which finds its way into private bank accounts every year will never be known.

The Office of the Auditor-General (OAG) has no record of the cumulative amounts of public money that has been mismanaged or misappropriated from the time Zambia gained her political independence on 24th October 1964 to date.

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According to Transparency International (TI) estimates, about $140 billion worth of public money stolen by generations of African leaders over a 40-year period is hiding in Western banks. Recovering this money could take African countries at least 100 years, unless Western governments change their banking laws, the international anticorruption agency says. For instance, in 1995, two of Nigerian military leader, General Sani Abachas sons walked into a British bank in London and deposited US$150 million. The bank, in keeping with its own secrecy, asked no questions. More than a billion US dollars stolen by the Abacha regime passed through big British banks. These banks are not willing to return the money to Nigeria, even though the British government has been enacting laws to prevent thieving African leaders from stashing stolen public money away in British banks since 2002.2 Though more than 30 cases involving corrupt African leaders have been referred to Britains National Criminal Intelligence Service, no-one has been prosecuted yet, raising concerns about whether indeed there is sufficient political will to translate seemingly good intentions into tangible results. Developments like these make it more imperative for African countries to seal the loopholes that make it possible for government leaders and their cronies to steal public money and hide it in foreign banks in the first place. The kind of loopholes that made it possible for former Malawi President, Bakili Muluzi to allegedly stash US$10 million worth of development funds from Taiwan, Morocco, Libya and Rwanda into his private bank account and another US$50,000 through his countrys high commission in Tanzania. He has since been arrested and charged with 42 counts of theft, fraud, corruption and breach of trust, according to Malawis director of the Anti-Corruption Bureau, Gustave Kaliwo. Muluzi, who ruled Malawi from 1994 to 2004, has denied the charges, claiming that his hand-picked successor and incumbent President, Bingu wa Mutharika is waging a war of political persecution against him. Currently, several former government officials are either on trial for fraud, corruption and theft or being investigated for similar offences.

Patrick Smith, Trust Me, BBC Focus on Africa. January-March 2006. p.33. Smith is the editor of Africa Confidential in London.

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The parallel with Zambia, where Mwanawasa has thrown the book at his predecessor, Frederick Chiluba, is uncanny, suggesting that perhaps in Africa, the handpicking of presidential successors could be a way of forestalling prosecution for corruption, misappropriation of public funds and theft by public servant. Whatever the presidential motivation, corruption in Zambia, according to a 2004 National Integrity System (NIS) study, is systemic. The study notes that
the economic and political liberalisation process following the 1991 transition also introduced a new culture in Zambia that encouraged political leaders to accumulate private wealth irrespective of the method employedThe NIS report concludes that the majority of cases of grand/political corruption are from the Chiluba period (1991-2001).3

The study acknowledges that President Mwanawasa has declared zero tolerance on corruption and signed the SADC Protocol Against Corruption. However, it notes that he is not addressing the issue of corruption in his government with the same vigour as he is doing with those who served in the Chiluba administration and have since been implicated in stealing public money.
This has led to both Zambian and international observers to question the political willingness to fight corruption problems within the current government.4

Truth is, public money is easy to steal in Africa, records show. The Auditor-Generals report on Zambian government accounts for the financial year which ended on 31 December 2004 shows just how easy it is to steal public money. For instance, weaknesses in accounting and revenue collection made it easy for cashiers at the Passport Office in Kabwe to steal over K26 million and fail to account for another K78.9 million. Under the Penal Code (which is Chapter 87 of the Laws of Zambia),the officers should have been arrested on the instruction of the controlling officer of the ministry under which the Passport Office falls, namely the Permanent Secretary of the Ministry of Home Affairs and charged with theft by public servant. To date, they have merely been suspended, pending investigations.

Lise Rakner and Odd-Helge Fjeldstad et.al. National Integrity System Study: Zambia. NORAD. 2004. p.1 4 Ibid.

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At the Patents and Companies Registration Office (PACRO), staffers took advantage of weaknesses in internal controls to loot an undisclosed amount of public money between1999 and 2002. Sadly, the Commerce, Trade and Industry Permanent Secretary at the time, Richard Chizyuka admits that during the period under review his ministry did not supervise PACRO. Such laxity could explain why a PACRO officer who stole US$4,000 worth of public money in 2005 is likely to escape prosecution. According to the Auditor-General (AG),Anne Chifungula, police officers investigating the case have complained that they are not getting any co-operation from the Ministry of Commerce. She fears the police are likely to close the docket and discontinue the case, given the reported lack of co-operation from the supervising ministry. The fact that the permanent secretary has since been moved to the Ministry of Agriculture in the same capacity could frustrate the process of prosecution further. Richard Chizyuka, a former PS in the Ministry of Finance, has himself admitted to financial impropriety in the course of his duties, though he says he is not a habitual bribe taker. He told a London High Court in April 2006 that he received US$4,000 from Fisho Mwale, for assisting a foreign company, Donegal, to get two payments from government in 2003 and 2004. Mwale is reported to be the local representative for Donegal, which has since has the Zambian government for an outstanding debt. He has denied the allegation, saying he gave Chizyuka, his brother-in-law, the money on purely humanitarian grounds. But Chizyuka insists the money was a bribe meant to facilitate prompt settlement of the debt and explained why to presiding London High Court judge, Andrew Smith:
He (Mwale) said there would be something for all of us. I did not ask how much he was planning to give me. I trusted him and believed that I would receive my reward 5

In another development, a forensic audit of Solwezi District Councils book revealed glaring financial irregularities. The auditors report showed that the K168 million grant given to the municipal authority with instructions that 70 per cent of the money be spent on social services went towards salaries, allowances for councillors and cell phones for chief officers. Only 25 per cent of the money went towards social services. The report also revealed that K433.5 million meant to pay retirees, retrenchees and families of deceased employees had been misappropriated by the town clerk and senior officers who allegedly paid themselves monies from the council accounts without authority.

Guardian Weekly. 3-10 June 2006. The report headlined Im Not a Habitual Bribe Taker was written by Zarina Geloo, Editor of the newspaper.

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At every ministry or government department, the story is the same. Sometimes, those implicated in the misappropriation of public money are those entrusted with the responsibility of controlling it. To date, a Lusaka magistrates court has found former Ministry of Health Permanent Secretary, Dr. Kashiba Bulaya with a case to answer on charges of abuse of authority and corruption. He is alleged to have misappropriated K3 billion worth of public funds meant for immune boosters for people living with HIV/AIDS when he was the ministerial controlling officer. This is but one example of how weakness in the system of internal controls can be abused to the extent that colossal amounts of public money are misappropriated. As things stand, the constitutional and legislative structures mandated with the task of overseeing public money and government expenditure are too weak to rise to the occasion. For instance, the Republican Constitution empowers the National Assembly to enact the Appropriation Act every year. This law gives government the legal authority to spend public money in line with approved estimates of expenditure. However, the K500 million from the national treasury which went towards jumpstarting President Frederick Chilubas Presidential Housing Initiative (PHI) under the National Housing Authority (NHA) in 1998 did not have parliamentary approval, only Cabinet sanction, contrary to constitutional provisions. Nor was it provided for in the national budget. But Chiluba reportedly ignored Cabinet advice to legalise PHI, testified his former Vice-President Enock Kavindele during Richard Sakalas trial on 21 January 2004. He added that Sakala was answerable only to the President, thus it was impossible for Parliament to clip his wings and control his financial and administrative excesses.

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Today, Sakalas former boss is fighting his own court battles on a national and international front. Chiluba has pleaded not guilty to three counts of theft by public servant in an ongoing case before a Lusaka magistrates court. He is also facing a civil case in which the London High Court has frozen assets worth 13 million alleged to belong to him and four co-accused persons, namely Access Financial Services Limited (AFSL) directors Aaron Chungu and Faustin Kabwe, Francis Kaunda, former chief executive for the Zambia Consolidated Copper Mines (ZCCM) and Stella Chibanda, a former permanent secretary in the Chiluba administration. The former head of states decision to give Sakala absolute power to mobilise resources for his pet political project raise serious questions about the accountability of his regime. In effect, PHI was nothing more than an illegal entity funded with public money to operate under a statutory authority, the NHA without an amendment of the National Housing Authority Act. The obvious question that the public never asked was this: where exactly did the money come from, considering that funding for the multi-billion Kwacha project was not provided for in the national budget? The irregularities in the misapplication of public money do not end there. Operations at the PHI, headed by President Chilubas press aide, Richard Sakala, were procedurally contentious. Sakala, speaking in his own defence during his trial on theft by public servant and abuse of authority on 17 December 2003, admitted he was the ultimate authority when it came to spending money on the project. I handled billions of Kwacha, more money than most government ministries. There were no rules for us to follow at PHI and we operated on our own. We didnt follow tender procedures because there was no Act of Parliament to legitimise PHI as a statutory body, Sakala told magistrate Faides Hamaundu. Sakala was eventually convicted, but his testimony is a harsh indictment of the structures of government as well as the culture of governance in Zambia, especially since the advent of multipartyism. His testimony also confirms an observation made by two internationallyrenowned political economists, Daron Acemoglu and James A. Robinson. They say in weakly-institutionalised states formal institutions such as the constitution, the legislature, judiciary and the electoral system neither place significant restrictions on politicians actions nor make them accountable to citizens.

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The two scholars write in a 2003 study

When institutions are strong, citizens punish politicians by voting them out of power, when institutions are weak, politicians punish citizens who fail to support them; when institutions are strong, politicians vie for the support of interest groups; when institutions are weak, politicians create interest groups. When institutions are strong, citizens demand rights; when institutions are weak, citizens beg for favours.6

Daron Acemoglu and James A. Robinson. 2003. Kleptocracy and Divide-and-Rule: A Model of Personal Rule. London. University of Birmingham.

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Acemoglu and Robinson base their arguments on case studies of two of the worlds best-known kleptocracies, regimes where rulers use political power to steal public money for private use. One of the studies is based on Zaire under Mobutu Sese Seko, a man described as the inventor of the modern kleptocracy by British journalist Michela Wrong 7. Nine years after Mobutus death in 1997, the British Broadcasting Corporation (BBC) still describes the Democratic Republic of Congo as a looters paradise, suggesting that the changing of the political guard has not destroyed the vestiges of kleptocracy in the country.8 A 2004 Transparency International list of the 10 richest kleptocrats ranked Mobutu third. His personal fortune, all stashed away in foreign banks, was estimated at US$5 billion. It was widely rumoured that he could have personally wiped out his countrys foreign debt, but according to Michela Wrong, he chose not to, preferring to banquet in his palaces and jet off to properties in Europe, while his citizens annual income fell below US$120, leaving them dependent on their wits to survive.

Wrong worked for Reuters, the BBC and the Financial Times and spent many years covering political events across the African continent. 8 BBC Focus on Africa April to June 2006. London.

Mobutu is reported to have given members of his ruling Mouvement Populaire de la Revolution (MPR) a brief tutorial on theft by public servant during a party congress in 1984. He said:
If you steal, do not steal too much at a time. You may be arrested. Steal cleverly, little by little.9

But in spite of Mobutus role in the plunder of his countrys resources, Wrong does not lay all the blame squarely on his shoulders. She writes:
The momentum behind Zaires free-fall was generated not by one man but thousands of compliant collaborators, at home and abroad.10

By comparison, Mobutus Ivorian counterpart, Felix Houphouet-Boigny (since deceased) was not as generous when it came to granting his countrymen and women the license to steal. He once said:
Here in Cote DIvoire, there is no Number 1, 2 or 3. I am Number 1 and I dont share my decisions.11

And one decision Houphouet-Boigny did not share was his decision to build one of the world's largest cathedrals, Our Lady of Peace, in his village in Yamassoukro at a cost of US$260 million in 1989. An architectural replica of St Peter's Basilica in Rome, the 18,000-seater cathedral was a gift from President Houphouet-Boigny to the Vatican, and was dedicated by Pope John Paul II in 1990. When criticised by opposition groups and donor agencies about the immorality of his extravagance, he said the US$260 million he spent on the basilica came from his own pocket, not from the national treasury!12 How did he get to be richer than the country he ruled? That is the question.

Alec Russell. 1999. Big Men, Little People: Encounters in Africa. London. Macmillan.p.18 Michela Wrong op cit.p.11 11 Fuabeh P. Fonge.1997. Modernisation Without Development in Africa. Asmara. Africa World Press. P.285 12 ibid. p286.
10

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Acemoglu and Robinson say kleptocracy is only possible under autocratic regimes. They argue that democracy makes thievery difficult to accomplish and to conceal for two reasons. Firstly, the formal institutions of government such as the legislature constrain the behaviour of leaders and directly influence political outcomes. Secondly, popular participation in the process of government ensures that elected leaders are accountable to the citizenry. And that, some political observers say, is what transforms a nations future for the better. It is precisely that combination of factors, writes Robert Guest, that has transformed Botswana from what one British colonial official described as a useless bit of territory to an African success story. Guest compares Botswana to Zambia, which was the second-richest country in Africa at independence in 1964 in his controversial 2004 book, The Shackled Continent: Africas Past, Present and Future:
Unlike Zambia, Botswana spent its windfall (from diamond mining) wisely. Diamond dollars were ploughed into infrastructure, education and health. Private business was allowed to grow; foreign investment was welcomed. Government was astoundingly clean. The budget is usually in surplus... From 1966 to 2001, income per head in Botswana grew faster than any other country in the world, from bare subsistence to well over $3,000. Botswana is a wonderful success story, but it is tiny. Only a million and a half people live there, less than the population of a single slum in Lagos, Nigerias commercial capital. For Africa to thrive, it needs more and bigger Botswanas. And for that, the continent needs saner politics.

In his view,
Corruption under Chiluba held Zambia back as surely as Mr. Kaundas socialism. Despite huge infusions of foreign aid, Zambians are now poorer than they were at independence.13

Guests blunt assessment of the circumstances that have enriched some countries and impoverished others provides a good enough reason why ordinary citizens should care about public money, how it is spent and how it is accounted for.

Robert Guest is currently the Africa Editor of the international newsmagazine, The Economist and has reported contemporary African affairs consistently over the years. The citation appears on page 27 of his controversial 2004 book published by Macmillan.

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The question is: do ordinary Zambians care how their money is spent and how it is accounted for? In the absence of statistics and opinion polls, it is difficult to quantify the extent of popular concern with the manner in which government spends public money. Admittedly, over the years, there have been pockets of moral outrage expressed in editorial commentaries and letters to the editor in private newspapers, angry reactions during radio and television phone-in programme, petitions and statements by civic groups and opposition political parties. But according to Chiti Tembo, a former auditor in the Office of the Auditor-General, the average Zambian citizen is not concerned about how government spend public money. He said:
The general public acts like the irregularities, misappropriation and corruption is not their business. They do not understand that a theft in a government ministry is as good as theft from their pocket. They do not understand that the Auditor-General just reflects what is going on and it is up to the public out there to pick it up and agitate for stricter fiscal control.

Guardian Weekly Executive Editor, Zarina Geloo agrees that apart from the initial gasps of shock and outrage at the catalogue of financial mismanagement of public funds in the Auditor-Generals report, the public is largely apathetic. She says the prosecution of a few selected high-profile cases tend to grab the headlines, but on the whole, there is a singular lack of public interest in the entire process of financial accountability. She said:
The Office of the Auditor-General is as hidden as its work. It rears its head once a year, through Parliament, to inform a complacent public that once again, the national coffers have been ill spent and abused. It then sinks back into its cocoon, having attained its 15 minutes of glory.

But public complacency notwithstanding, the private press has played a sterling role in exposing some of the excesses of government, especially in the period after 1990, records will show. For instance, it was The Chronicle newspaper(now defunct) and The Post which, on 12 April 1996 exposed Dr. Remmy Mushota, then Legal Affairs minister for trying to cash a K210 million government cheque over the counter at Bank of Zambia (BOZ) on 11 April without the signature or written authorisation of the ministerial controlling officer, the permanent secretary. The money was to have been used to print copies of the Republican Constitution in the local languages.

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On the basis of press reports, the Chief Justice received a public request to set up a tribunal to establish whether the news report about Dr. Mushotas attempt to encash a K210 million government cheque over the counter was factual. The tribunal proved that the report was indeed true. It also found that the minister and his accomplice, Patrick Katyoka, then MP for Mandevu constituency acted in breach of the Parliamentary and Ministerial Code of Conduct in June that year. To save himself and his regime from further embarrassment, President Chiluba sacked Dr. Mushota from his ministerial post and as a Member of Parliament. Patrick Katyoka was also dismissed from Parliament in the glare of publicity. But on the whole, media coverage of financial impropriety and misappropriation of public money does not go beyond routine press reports of findings in the Auditor- Generals (AG) annual report. This is mainly true of the government-owned and state-controlled media which have a culture of overlooking or underplaying the financial excesses of the ruling regime. The lack of analytical and investigative reporting of government expenditure over the years has done very little to stimulate greater public engagement and action regarding the management and mismanagement of public money. Furthermore, the lack of action against those who dip their fingers into the national treasury seems to have also played a part in disconnecting ordinary citizens from issues of public expenditure management and financial accountability. Nevertheless, the issue about government disregard for budgetary provisions when it comes to spending public money is a recurrent one. President Mwanawasas appointment of a Womens Affairs Minister without an attendant financial provision in the 2006 budget suggests a serious lack of governmental control and a weakness in parliamentary regulation when it comes to how public money is spent and what it is spent on. Trade unionists like Zambia Union of Financial Institutions and Allied Workers (ZUFIAW) president, Cephas Mukuka say the decision is financially imprudent and has been made more in the interests of political expediency than for the public good.

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He said in an interview on 3 April 2006: ZUFIAW is not against the appointment of women but we are sad to see government create a ministry when hospitals have no drugs and education standards are falling daily. As a union, we believe that workers Pay As You Earn (PAYE) is likely to go up to accommodate the budget deficit so that the new position the president has created can be operational. His comments come in the wake of widespread claims that the womens movement and from opposition politicians that the ministerial portfolio was created to reward Milanzi Member of Parliament, Rosemary Banda for defecting to the Movement for Multi-Party Democracy (MMD). Government spokesperson and Information Minister, Vernon Mwaanga, insists that though a Womens Affairs minister has been appointed, a corresponding ministry has not been created. But he did not address the implications the creation of a new ministerial portfolio, particularly one that had not been provided for in the 2006 budget would have on government spending. In short, without greater public involvement with public expenditure, the status quo is unlikely to change. In the main, ordinary people will continue to be sucked dry by what Robert Guest describes as A Vampire Stateone which feeds, not on the blood of its victims, but on the taxes of its citizens.

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Chapter One
THE MEANING OF PUBLIC MONEY

1.1 Public Money Defined Talking about public money in a nation where 74 per cent 14 of the population have no money may seem like a cruel joke. Truth is, public money does exist. Agreed, we may not be able to lay our hands on it to buy mealie meal, pay schools fees or settle our debts before the neighbourhood Shylock comes knocking on our door, but public money is NOT an abstraction. It is realand it is OUR money. You could say that public money is the invisible foundation on which the state is built. When the foundation is strong, as is the case, in Botswana, the nation flourishes and ordinary people get to reap the benefits of public wealth through the services the state provides to its people: health care, schools, roads, housing. When the foundation is weak, the structures of state are shaky, the provision of essential social services is poor and the general quality of life of the average citizen is low. World Bank experts agree with this assessment and acknowledge that
When services fail poor people, a good place to start looking for the underlying problem is almost always how the government spends money. If politicians and policy makers spend more than they can sustain, services deteriorate. If budgets are misallocated, basic services remain underfunded and frontline providers are handicapped. And if funds are misappropriated, service quality, quantity and access suffer. The budget is the critical link on the long route of accountability connecting citizens to providers through politicians and policy makers.15

14

Statistics regarding the number of Zambians living below the poverty datum line vary from source to source. The percentage cited above is an average of the official government figure of 68 per cent as computed by the Central Statistical Office (CSO) data and the 80 per cent used by the World Bank, the IMF and international aid agencies. 15 World Development Report 2004. Washington. World Bank. 2003. p.181

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In real terms, public money is the aggregate of income and revenue a nation generates through various forms of taxes it levies on citizens as well as on private and public corporations, through the conversion of national resources such as copper, cobalt, timber and hydroelectric power into cash, through the grants it receives from donor countries and the loans it gets from lending institutions and monies accruing from the liquidation and sale of public companies like Zambia Airways. Governments financial dependence on ordinary citizens is higher than many people realise. Taxpayers are expected to contribute K2 trillion to the national treasury this year whereas mining companies will contribute K44 billion in mineral royalty tax this year, according to the 2006 budget. In other words, at between 30 per and 40 per cent on individual earnings, Pay As You Earn Proposed (PAYE) in this years budget is higher than any single local tax through which government proposes to collect revenue towards 71 per cent of its domestic funding. Interestingly PAYE will contribute K300 billion more to the national treasury this year than it did last year, even though the number of jobs did not increase significantly between 2005 and 2006. The burden of tax ordinary citizens in Zambia are shouldering does not end with PAYE. For instance, government earns over K500 million every day in excise duty on second-hand motor vehicles imported into the country from Japan via the South African port of Durban, according to the Zambia Revenue Authority (ZRA) estimates. This figure is based on what ZRA says is an average of 50 vehicles per day seven days a week, with duty ranging from K8 million to K16 million per vehicle depending on the type. In a year, this translates as K219 billion. This was the amount of money the Zambian government stood to lose after the South African Revenue Services (SARS) issued a circular dated 17 April 2005 banning second-hand vehicles imported from Japan from being driven on South African roads with effect from 1 June 2005.

25

Speaking in an interview shortly after the news was brought to his attention, Finance Minister and chief custodian of public money, Ngandu Magande said the decision would affect government revenue significantly. I need any little money that I can get. I will find out from colleagues at the Ministry of Commerce and Industry and ZRA what the full impact of the decision will be. We might need to speak with our friends in South Africa to see what can be done because obviously we cant afford the cost of ferrying vehicles to Zambia from Durban by trucks, he said.16 Given governments financial dependence on its citizens for revenue, it therefore stands to reason that the public should be interested in how government spends its moneywhether the individual contribution per transaction is as high as K16 million paid as 20 per cent excise duty on a Toyota Canter or 17.5 per cent Value Added Tax (VAT) on a 2kg packet of sugar. It also stands to reason that the public should be interested in how government raises revenue for capital as well as recurrent expenditures, especially through the intricate web of taxation. 1.2 Public Money and the Budget Paying tax, in whatever form, is a statutory obligation. This means that whether we like it or not, we have to pay up because the law stipulates that we should. The Constitution of Zambia provides the legal framework for taxation as a revenue collection imperative of government:
no taxation shall be imposed or altered except by or under an Act of Parliament17

16

Details about how much the Zambian government would lose following the decision by SARS were originally contained in a news report by Edem Djokotoe in the Business Post on 31 May 2005 headlined Govt. to lose K500m a dayas SA bans fong kongs from its roads. 17 Article 114(1) of the Constitution of Zambia (Amendment) Chapter 687 of 1996.

26

There are a whole range of laws that compel us to pay our dues to the state. This is because taxation is a system of compulsory contributions levied by a government or any other qualified public body on people, corporations and property in order to fund public expenditure. This means that without parliamentary approval, the executive arm of government cannot raise public funds through taxation. Among the range of taxes government uses to raise money for public finance are Income Tax Act, Customs and Excise Act, Value Added Tax Act and Property Transfer Act. And then of course, there are other compulsory levies such as medical levy we pay. But even this levy, which is a one per cent deduction on interest of money we have in the bank, is provided for under the Medical Levy Act. The Republican Constitution also stipulates that:
The minister responsible for finance shall cause to be prepared and shall lay before the National Assembly within three months after the commencement of each financial year estimates of the revenues and expenditure of the Republic for the financial year.18

It is a general rule that Parliament does not authorise the levying of taxes or the spending of public money for more than one year ahead. The period for which government opens and closes its accounts starts on the first day of January and ends on the 31st day of December. This is the official financial year for the government of the Republic of Zambia. All in all, the budget is a statement by the Minister of Finance and Economic Development of governments economic and financial policies for the coming financial year. Accompanying the national budget are the Estimates of Revenue and Expenditure (better known as the Yellow Book). This voluminous document sets out how each ministry proposes to use the public money at governments disposal during the financial year. Before the Yellow Book is actually compiled, each ministry submits its own estimates of expenditure and those of the various departments and statutory boards under its jurisdiction to the Ministry of Finance and Economic Development for inclusion in the final document. These estimates are debated by the National Assembly before they are eventually approved.

18

Ibid. Article 117 (1)

27

In a bid to enhance parliamentary oversight of the national budgeting process, Parliament constituted a Committee on Estimates in 2000. The committee was given the mandate to investigate budgetary matters and advise the main House accordingly. Since the Committee on Estimates was constituted, it has compiled a report on budget reforms, with recommendations on how to strengthen Parliaments involvement in the process. The key recommendations of the Committee on Estimates are reproduced below. The real challenge, however, is how to implement the budget reforms in the interests of prudent public finance and expenditure management.

28

Recommendations by the Parliamentary Committee on Estimates The committee calls on the government to produce a White Paper on Budgetary Reforms, and to demonstrate genuine political commitment at the highest level. The budget should be tabled in October, three months before the beginning of the fiscal year, and the Auditor-Generals report nine months after the end of a fiscal year. The committee demands the development of supporting documentation to be tabled with the budget, and a clearer link between the budget and policy. It also urges a revision of the budget format, and regular expenditure updates to be forwarded to Parliament. A five to ten-year National Development Plan should inform the budget process. All expenditures are to be made within approved estimates. The committee recommends several short-term steps to improve the cash budget system, including the gradual extension of cash release periods to phase out the cash budget, and the development of rules to ensure disbursements in line with budget priorities. The committee also calls for a number of legal and institutional changes. It urges the government to subscribe to the Code of Good Practices on Fiscal Transparency and announces the implementation of public access to committee sessions in Parliament. It also acknowledges the need for a Parliamentary Budget Unit. Recommended legal revisions aim at curbing the excessive use of virements (i.e the process of transferring items from one financial account to another) and a review of Parliaments powers of amendment in a way that would allow all amendments in principle as long as the deficit is not increased.19

19 The recommendations are abstracted from the Report of the Committee on Estimates for the Fourth Session of the Eighth National Assembly appointed on 1 March 2000 on the Budget System in Zambia.

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1.3 The Appropriation Act Once the estimates of expenditure as outlined in the budget are approved, the corresponding amounts are included in the Appropriation Bill pending enactment by Parliament. Like every other piece of legislation, this bill has to go through the mandatory three readings in the House before it becomes the Appropriation Act. This is a law enacted every year giving government the permission to spend public money. In the language of the law, the Appropriation Act is
An Act to authorise expenditure from the general revenues of the Republic of moneys required for the services of the Republic during the financial year ending on the 31st December (year in question spelt out) not exceeding the aggregate (exact amount approved by parliament spelt out)...

The heads outlined in the Appropriation Act every year cover all the institutions in the country which, by law, are funded, from the national treasury. They range from Office of the President (State House), the 25 diplomatic missions representing Zambia abroad to the smallest and most non-descript of government offices tucked away in the remotest parts of the country. In lay terms, a head is any point of expenditure for which a controlling officer is responsible and which is legally and constitutionally recognised for the purpose of budgeting and appropriation. By law, every institution that is funded from the national treasury has to have to their expenditures audited by the AuditorGeneral at the end of every financial year. Governments authority to spend money to in each financial year may be changed during the year by Supplementary Estimates. These increase the amount government was authorised to spend in the estimates submitted to the National Assembly together with the national budget. Before final parliamentary approval has been given to Estimates and Supplementary Estimates, the National Assembly gives government interim authority to spend public money. This interim authority is known as Imprest Supply Expenditure by Presidential Warrant.20

20

The Zambian Parliament, The National Assembly. Lusaka. 1999. p.11

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The Constitution defines the extent of presidential authority when it comes to sanctioning the expenditure of public money. The President cannot issue a warrant authorising expenditure from the general revenue unless: the expenditure is authorised by an Appropriation Act; the expenditure covers spending not exceeding four months at the beginning of the financial year before the Appropriation Act comes into force; the expenditure is contained in supplementary estimates approved by the National Assembly; no provision exists for the expenditure but the President deems it urgent to incur them in the public interest; and the expenditure is for an on-going capital project and is incurred before the commencement of the Appropriation Act for the current financial year. Another law which empowers the Minister of Finance to manage the financial affairs of the republic and to control the expenditure of public money is the Public Finance Act No. 15 of 2004. This piece of legislation, which replaced the Finance (Control and Management) Act of 1968, mandates the Minister of Finance to present to National Assembly: the annual estimates of revenue and expenditure and supplementary estimates to the National Assembly; half yearly budget performance reports to the National Assembly; and the annual audited financial report to the National Assembly.

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Under the new law, the Secretary to the Treasury, who is appointed by the President, is the chief controlling officer of government as well as the chief executive officer of the treasury. He has the power to designate a controlling officer as Chief Accountant in every ministry, government department or statutory body funded from the national treasury. These controlling officers are responsible for overseeing and controlling the expenditure of public money in line with spending requirements approved by Permanent Secretaries or heads of institutions. The Secretary to the Treasury has to make sure that controlling officers submit annual appropriation accounts are prepared and submitted promptly for certification by the Auditor-General for inclusion in the financial report. Preparing annual estimates of revenue and expenditure as well as quarterly reviews of the performance of the budget is also part of his responsibility. The law requires the Secretary to the Treasury to implement the recommendations of the Public Accounts Committee and prepare a Treasury Minute which specifies what actions have been taken on these recommendations accordingly. The Treasury Minute should be tabled before Parliament within 60 days of the submission of the report of the Public Accounts Committee to the main House. 1.4 The Constitution and Government Spending The Constitution compels the President to immediately provide a copy of any warrant signed authorising expenditure from the general revenue to the Auditor General. The Minister of Finance and Economic Development must prepare supplementary estimates for expenditure authorised by warrant for approval by the National Assembly within a period of four months. If the National Assembly is in recess, the Finance Minister must seek parliamentary approval at the first sitting of the Assembly. The bill shall not include supplementary expenditure where no amount has been appropriated for that purpose under any head of expenditure by the Appropriation Act or if there is excess supplementary expenditure.

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The Minister of Finance is required to prepare a Supplementary Appropriation Bill confirming the approval by Parliament of such expenditure or the excess of expenditure within 15 months after the end of the financial year. If the National Assembly is not sitting then, the Appropriation Bill must be tabled within a month of the first sitting. If in any financial year unconstitutional spending has been incurred, the Minister of Finance can introduce legislation for up to 30 months after the end of financial year to ratify the expenditure.21 The Constitution also requires the Minister of Finance to prepare and submit a financial report to Parliament within nine months after the end of the financial year. The report documents, among other things: the revenue and other monies received by the government in that financial year; government expenditure outside of what is provided for by the Constitution or any other law governing the general revenues of the Republic; a statement of the financial position of the Republic at the end of the financial year.

21

The draft legislation to this effect is known as the Excess Expenditure Appropriation Bill and it is provided for by Article 117(5) of the Constitution of Zambia.

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But what the law says and what actually happens are two different things. Some members of Parliament said all too frequently, the Ministry of Finance unilaterally makes changes in what the National Assembly has approved by virtue of the Appropriation Act. One of them, a former member of the Public Accounts Committee, said:
Very often, money that has been allocated to one ministry is allocated to another ministry. But the Ministry of Finance cannot just change things. They are supposed to come back to Parliament. We are seeing a situation where government goes ahead and expends the money and then asks for Parliaments permission later. When they spend money this way, such expenditure is called unconstitutional expenditure because it is not backed by the Constitution. Government has simply taken an administrative action that is not in tandem with the law, the Public Finance Act and the Constitution. When that occurs, according to Article 117 of the Constitution, government has a time limit to come to Parliament and inform us that we would like to change expenditure from one category to another. This can be done through a Supplementary Expenditure Appropriation Bill. But right now, the power of the executive seems to be overriding the power of Parliament when it comes to making decisions about over-expenditure and unconstitutional expenditure.

Unconstitutional expenditure can occur in the event of a budget overrun, when the budget has not been properly constructed to take into account all requirements or when poor administrative and budget controls result in overspending. However, there are times when unconstitutional expenditure is unavoidable. For instance, in times of a flood when expenditure allocated to provide relief and shelter to victims is unforeseen and therefore unbudgeted for. Whatever the circumstances, the national budgeting and public finance process should be robust enough to raise money for eventualities. Raising revenue through taxation is the main method to finance public expenditure.

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1.5 Taxation and the Public Raising money for government to spend inevitably puts the Minister of Finance on a collision course with those who will bear the brunt of taxation: labour unions, farmers unions, importers, exporters, corporations and ordinary citizens. The reason is simple. Taxes hit people where it hurts the most: their pockets. Furthermore, the colossal amounts of money ordinary citizens contribute to the national treasury through the myriad of taxes they pay should be the moral and judicial reason why the misappropriation of public money should be high on the public agenda and on the cause list of the public prosecutor. Regular and successful prosecution would serve as a deterrent, safeguard the integrity of public money and create an enabling environment for citizens to get the benefits of paying tax. As things stand, the fact that government the uncanny habit of increasing the burden of tax every financial year, leaving people with less money to spend, tends to put a large section of the tax-paying population in a bad frame of mind. In the 2004 budget, government increased excise duty on saloon cars and station wagons with a seating capacity of below 14 from 10 per cent to 20 per cent. The 100 per cent increase swelled up the national treasury significantly. Government also took advantage of the 17 per cent increase in motor vehicle imports between 2003 and 2004 to increase its revenue base. Indeed, thanks to government opportunism, ZRA banked K22.452 billion of duty on second-hand vehicles from January to October 2004. This was K1.45 billion more than it collected in the whole of 2003. However, the 100 per cent increase in excise duty put many vehicle importers in a bad frame of mind. Representatives of the 600-plus members of self-help motor vehicle association told the Business Post in an interview in May 2005 that the increase in excise duty would force many of them out of business. Vice-Chairman of the association, Faston Kalulu said in an interview:
As you know, there are no jobs in Zambia and some of us have used our initiative to employ ourselves. Most of the chimtengo car dealers are either retrenched, retired or unemployed. But it is not just us who will be affected by this decision. Even those contract drivers who earn their living bringing in cars on behalf of others will be affected. Another car dealer, Sidney Matanda, said the repercussions of the ban would be far reaching, affecting the public transport sector which is driven by private enterprise. All the taxis you see on our roads, all the Hiaces and the Rosas you see running as mini-buses, we are the ones who supply them. This decision is one that will affect many sectors of the economy and government has to realise that.

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Excluding such interest groups in the budget process is one of the weaknesses in the system of public finance and expenditure that Inyambo Mwanawina, a University of Zambia economics lecturer, identifies in a 2002 study. He describes this as an impediment for transparency, accountability and participation and explains why:
There is no legal obligation on government to allow civil society input in the budget process. This means that civil society itself is unclear as to what its potential role is or should beThere are no official or informal access points for civil society in the budget process. Parliaments oversight over the budget is so much weakened by low capacity and lack of time that it provides no official access point for other external stakeholders. Some organisations however, provide input into the drafting process, mostly through advocacy in public media channels, but it is left to the discretion of the Ministry of Finance and Economic Development whether to use the information or not.22

But sometimes the Minister of Finances discretion does not always yield the best results, as developments following his submission of the 2006 budget show. Following Ngandu Magandes decision to impose 17.5 per cent VAT on agricultural supplies, the Zambia National Farmers Union (ZNFU) issued a statement to government which reads in part:
The ZNFU worked very closely with the Ministry of Finance, the Ministry of Agriculture and Co-operatives, Zambia Revenue Authority and Central Statistics Office on issues relating to the development of the agriculture sector, particularly the Value Added Tax (VAT) following the 2004 and 2005 national budget measures. The collaboration was achieved through a joint ZNFU/Government committee which commissioned an independent study on taxaffecting the agricultural sectorThe study recommended VAT zerorating of agricultural products and supplies. It also indicated the negative impact the VAT standard rating would have. It has therefore come as a shock to the farming community to see that the budget has not reflected the concerns and suggestions by the independent study, indicating that the ZNFU/Government joint effort was cosmetic.23

22 Inyambo Mwanawina, Kufekisa Akapelwa,Kalunga M. Sampa and Justina Moonga. Explaining African Growth Performance: The Case of Zambia. 2002. 23 ZNFU Reaction to the 2006 National Budget. The Zambian Farmer. Vol.9, No.2, February 2006.p.7. The decision to impose VAT on agricultural supplies would have hurt small-scale farmers because they would not have been able to reclaim the input VAT. They are not eligible to register because most of them do not reach the K200 million per annum turnover threshold. It would have meant the cost of fertiliser, seed, agrochemicals, grain bags etc. would have gone up as this would have attracted 17.5 per cent.

36

Government eventually rescinded the decision to impose VAT on agricultural supplies, but the financial implications on the budget will be far reaching. According to the Minister of Finance, the removal of VAT on agricultural supplies would cost government K33.2 billion in revenue. He said the money would have been used to buy maize from farmers this year. He is yet to explain how he intends to deal with the budgetary shortfall arising from what appears to be his own unilateral decision making. To date, a number of interest groups, including ZNFU, have voiced their displeasure with the ministers explanation and with the budget making process. They say governments decision to impose a tax in one breath and rescind it in another illustrates how flawed the budget process is. A former Secretary to the Cabinet, Sketchley Sacika identifies other flaws in the budgeting process. He said:
Constructing a budget is a technical matter which requires people with a technical understanding of what the ministries or departments requirements are. My experience is that in these government ministries or departments, what you have are youngsters at executive officer level who are not very qualified and they are the ones who are given the responsibility to construct these budgets. Sometimes they under-budget because they have no proper understanding of what the budget is all about. Sometimes they over-value and these overvaluations become subject to drastic cuts when they go to the Ministry of Finance Budget Office. They look at these things and ask themselves: what are these chaps talking about? And because they are not aware of the basis on which those budgets were constructed, they will take arbitrary decisions to make drastic cuts. When you have a budget that is not realistic either because it is undervalued or cut because it is over-valued, then the chances are that you will not be able to operate within that budget and you are likely to overrun.

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However, a former Accountant-General at the Ministry of Finance, Mr. Mwale does not agree with Sacikas assessment and explains why:
The responsibility for preparing a ministerial budget lies with the controlling officer. He can choose to delegate this function, but that should not mean he absconds from his responsibility. So if he is not able to check what has been prepared to ensure that it meets the aspirations of his ministry, my personal view is that the particular officer has abrogated his responsibility and should not pass the buck to his junior officers. On the question of Ministry of Finance arbitrarily cutting ministerial budgets, lets look at it this way, budgeting is always seen as a very complicated thing. Yet everybody does it day in and day out. When you work, you earn a salary. You have a wife who takes care of domestic expenditure. Now if your wife takes ration money to go and do her hair but you have not received any extra income to cover the situation, you will need to make some adjustment. In order to continue eating, you will probably delay buying school uniforms for the children. So in a similar manner, the Ministry of Finance will look at its overall revenues available and the demands of various ministries. If there is need for cutbacks, the Ministry of Finance will do some consultations and explain why they will not be able to meet all the financial obligations. A good controlling officer should be able to determine which areas should be given priority and which ones can wait.

The perceived flaws in the budget process and the implications these have on public information are spelt out by Mwanawina in his study. He writes:
The budget is not based on macro-forecasts but on an ad-hoc projection arrangement, which can best be described as professional expert opinion polling within the Ministry of Finance and Economic Development itself. Such forecasts are neither reliable nor published and the assumptions and parameters of macroforecasts and expenditure estimates are not available and not open to scrutiny by independent experts. Information on government priorities in the budget is not published. Whereas the budget speech provides government objectives, these objectives are not necessarily related to measurable indicators. There is no information provided on the cost of both existing and new policies There is very little information available on past expenditure, and even if it is, it is not reliable since the interaction of a cash-budgeting system and a cash accounting system means that departments accrue huge arrears in the absence of the release of their allocated funds from the finance ministry.24

24

Mwanawina et.al. p.10

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Since1993, the budget system in Zambia has been based on a cash accounting system, though today, it is called a Medium-Term Expenditure Framework. The system was introduced to foster financial discipline and control inflation. It was based on a simple principle: you cannot spend money you do not have. In other words, no money is released for spending unless there is enough funds in governments central account with the Bank of Zambia (BOZ) to cover such expenditure. But a cash accounting system has its own drawbacks, according to economists like Mwanawina and Akapelwa. They say it does not provide information about accumulated arrears. Thus a lot of unexplained cash movements can occur in coming financial years and there will be no record why the money is moving and for what purpose it is moving. The volume of such cash movements is not known when the budget is being drafted, which is a very serious omission, given the extent of variance between approved budgetary allocation and actual spending.25 In short, given these informational gaps in the budgeting and financial accounting processes, it is very easy for public money to be misappropriated or to be made to disappear from governments radar screen altogether. Inevitably, such glitches have implications on how public money is spent and how it is accounted for in the long term. Not only that. Records show that under the cash budget system, government has the tendency to change its expenditure priorities based on how much money is available at a given time, with ministries and departments associated with the Office of the President benefiting more from supplementary allocations . For instance, in 1997, the Ministry of Defence received K71,546,598,937 out of the K72,982,529,106 that was allocated to it in the national budget that year. In the main, it received 98.032 per cent of its budgetary allocation while the Ministry of Health got 56 per cent of its financial requirements. Out of the K173,362,909,002 that was allocated to the health ministry in the 1997 budget, it received only K97,211,785,737. Development analysts like Brian S. McDonald say that sizeable portions of military expenditures in African countries are not included in annual defence budgets.

25

Ibid.

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Consequently, the figures that find their way into the public domain represent under-reporting of true defence expenditures. In a comparative study of defence spending of eight countries in the Southern African region between 1990 and 1994, McDonald notes that Zambias military expenditure during the period under review was 3.2 per cent of its Gross National Product (GNP), making it the fourth highest after South Africa, Zimbabwe and Botswana.26 At a time when the country is more under threat from the AIDS pandemic than from external military attack, it is unclear why defence spending far exceeds the money allocated to the public health sector, especially given indications from successive Auditor-Generals reports that the defence forces have not been very frugal in their expenditure of scarce public resources. Particular attention is drawn to an instance of careless expenditure by the Zambia Air Force (ZAF) highlighted in the Auditor-Generals report released in 2001. The purpose of the audit, according to the AGs report, was
to determine whether control systems were estimated to ensure that equipment and stores were ordered with due regard to economy, efficiency, effectiveness and the equipment and stores were delivered and payments made in accordance with relevant regulations.

The audit revealed that in 1994, government decided to rehabilitate military aircraft to provide additional training to technical staff in order to enhance the performance of the ZAF. The total cost of the refurbishing four Augustabell helicopters and training of 50 ZAF personnel by Israeli Aircraft Industries was US$6.5 million. The costs of training each ZAF officer for a period of seven months was US$70,000 per head, a figure the AGs report noted was too high. In November 1995, the Permanent Secretary in the Ministry of Defence signed another agreement for the repair of three additional helicopters and two Russians made MIGs at a total of US$5.5 million. In December that same year, a deposit of US$825,000 was paid to Israeli Aircraft Industries.

26

Brian S. McDonald. Military Spending in Developing Countries: How Much Is Too Much? Ontario. Carleton University. 1997. p.88

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However, payment of the full amount stalled, which meant the aircraft could not be returned to Zambia. In May 1999, the Ministry of Finance and Economic Development and Israeli Aircraft Industries negotiated a repayment schedule to the effect that the total debt would be liquidated by November 2000. However, as of June 2000, only US$407,000 had been paid. The audit revealed that as a result of non-payment of the amount agreed between the Ministry of Defence and IAI, the aircraft and other equipment could not be returned to Zambia. It also revealed that the indebtedness will increase due to interest charges. The audit concluded that the expenditure incurred in training of technical staff, repair and refurbishment was wasteful. The report read in part:
The consequence of poor planning has been exhibited by the inability to arrange funding and by official entering into costly arrangements and agreements with private companies. These arrangements were made by individuals in Zambia Army, Zambia Air Force, the Ministries of Defence and Finance without adequate consultations. As a result and due to lack of coordination funds were not appropriated by Parliament. Thus huge expenditures were incurred without authority.

1.6 Government Spending vs. Public Needs Such developments raise concerns about how national priorities are determined, how scarce resources are allocated and whether these are indeed in tandem with public needs. For instance, what is governments moral justification for spending a reported US$28 million on a VIP helicopter for the head of state when health facilities around the country are in desperate need of essential drugs? There are many people who feel that governments priorities and public needs are at variance. Davies Mike Sitali, a former University of Zambia Students Union (UNZASU) secretary general is one such person. In a letter published by the Saturday Post on 29 April 2006, he said government expenditure is not motivated by public interest but by political considerations. He wrote to comment on student riots on 24 March following a hit-and-run accident which killed a third year UNZA student on Great East Road. Sitali said three years ago, UNZASU set aside K30 million towards the construction of a footbridge and a hostel block which were expected to cost K6.5 billion. The union received a K10 million donation from President Mwanawasa and an additional K90 million from an unnamed donor.

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Work on a footbridge started shortly after the student riots, but Sitali feels the project should have started three years ago when the Lusaka mayor at the time, Levy Mkandawire gave his word that the Lusaka City Council would quickly approve the plans for both projects in the national interest. He wrote in his letter: I sympathise with the many innocent people who found themselves caught up in the crossfire when the students unleashed their anger in protest against the death of their fellow comrades... Most of them do not seem to know and understand the genesis of this issue. It is our government that seems to have no capacity to learn from past experiencesIf the government was serious, they would have easily given the University money for these projects (i.e. construction of a footbridge across Great East Road) but as usual, they would rather find money for a bye-election than to channel it towards such noble and developmental projects.27 Sitalis view about the legitimacy of government priorities in the context of public expenditure and national development is a widely-held oneone that government consistently denies. Permanent Secretary for Budget and Economic Affairs in the Ministry of Finance, Petronella Mwangala was at pains to convince diners at a Zambia Institute for Public Policy Analysis (ZIPPA) dinner dance in Kitwe that government listens to the voice of the people when it comes to deciding how public money will be spent. Explaining the Fifth National Development Plan for 2006-2010 government was putting together, she said:
This is a people-driven plan. Everything that is going into it has come from Zambian citizens themselves directly or through institutions or individuals qualified to speak on behalf of others, like traditional rulers. This was not just a group of people sitting down somewhere in Lusaka and deciding this is what the government will do for the people. We visited all the 72 districts and spoke to many people, including some of you people sitting here this evening.28

27

Sitalis letter to the editor was headlined UNZA Footbridge. It was written against the backdrop of the hit-and-run accident in which Robert Chiluba, a Third Year Education student called was killed on the spot on Great East Road near the university on 24 March 2006. His death sparked off an orgy of violence and destruction. 28 Ms. Mwangala was addressing diners at a Zambia Institute for Policy Analysis dinner dance in Kitwe on 7 April 2006. She was quoted by the Guardian Weekly, 15-21 April 2006

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However, not everyone was convinced. One diner, Pius Maambo from Konkola Copper Mines asked:
In this five-year plan you are promoting, how does government plan to link industry and university, how does it hope to improve health delivery, how does it plan to develop seed that can withstand drought? How many jobs does government plan to create? It is unacceptable that the number of people in formal employment has remained almost at the same level of 350,000 since 1964 when the population of the country has risen from 3 million to just over 10 million in 2006? It is this over-taxed minority in employment that will be required to finance this development plan you are talking about.

His concerns are echoed by a 2004 joint World Bank and IMF country report on Zambia which reads in part:
The outturn for key social sectors such as education and health has been consistently and significantly below the budget estimate, up to 68 per cent below in the health sector in 2002. Spending by the Ministry of Works and Supply, the ministry responsible for much of the governments capital spending programme was less than 80 per cent of the budgeted figure in 2002. Defence spending has been consistently above the budget estimateThe lack of consistency and high degree of volatility between the budget and actual spending hampers the ability of ministries to plan and execute programmes, and in Zambias case, the problem appears particularly acute in the areas where most poverty reducing spending occur29

In the main, it has been difficult for government to dispel allegations that resource allocation and legislative decision making is driven by the politics of patronage, given the extent of evidence to that effect. A case in point is the controversial Presidential Discretionary Fund Parliament instituted during the tenure of Second Republican President, Frederick Chiluba. Even though the Fund has since been discontinued, the fact that it was sanctioned by Parliament in the first place was enough to convince many people that resource allocation is indeed driven by the engine of political patronage. For instance, the 2001 Auditor-Generals report revealed that in 1998, President Chiluba gave his Deputy Education Minister, Reverend Dan Pule K129 million from the Presidential Discretionary Fund towards the construction of his Dunamis International Church studio and offices. Part of the money went towards staff salaries, electricity and telephone bills.

29 Abebe Adugna, Mushimba Nyamazana, Theo Thomas and Jos Verbeek. 2004. Public Expenditure Management: Country Assessment and Action Plan (AAP) Zambia. World Bank/IMF.p.10

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The report noted that a test check of expenses recorded at Cabinet Office revealed that K6.395 billion was spent on the Presidential Fund, even though the sum of money allocated to it in the 1999 budget was K1 billion. The 1999 financial statements submitted by the controlling officer at Cabinet Office also revealed that a total of K39,682,571,952 was given out to various recipients during that year. In all, K44 billion in unsanctioned allocation was spent by the Presidential Fund between 1998 and 1999. The 2001 Auditor-Generals report observed there were no guidelines or records to show how beneficiaries used the money. It also raised the following concerns:
Whereas donations to public institutions such as schools, clinics, councils and parastatal organisations for part of the public property of those institutions and are subject to state and audit scrutiny, the same may not apply to private institutions such as churches, social clubs, charitable organisations, etc.

Mwanawina and Akapelwa note in their study of budgetary processes and government expenditure that the Fund does not allow for proper public debate on the use of money in it. They wrote:
The Presidential Fund flows are not transparent and are only audited up to disbursement level but after that no attention is paid to them. The capacity for applying for funds and approval of allocations out of the Presidential Fund is also not transparent at all. Some allocations happen on the basis of requests that are assessed, but the President can also allocate money on his own without assessment from anybodyThe Presidential Fund, therefore, represents a potentially limitless drain on scarce resources, which impacts negatively on budget management... 30

But what exactly was the Presidential Discretionary Fund? What objective was it meant to serve? The Presidential Fund (or the Slush Fund, as the private press and the Opposition described it) was conceived in the Third Republic. It was established to allow the Republican President to make cash donations as he pleased to whom he pleased. Records show that beneficiaries of presidential largesse ranged from churches, charitable organisations, public institutions and recreational clubs to individuals.

30

Mwanawina et.al. p.26

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Though the Presidential Fund was not supported by the Constitution, the Appropriation Act allocated public money to it, which meant that all the money that was spent on donations was unconstitutional expenditure . Previously, presidential donations were covered under the budget head, State House, sub-head Grants to Charitable Organisations as grant aid. The Fund was subsequently moved to Cabinet Office in 2000 under the misleading sub-head Recurrent Departmental Charges/Purchase of Services. 1.7 Potholes on the Road to Accountability In spite of the overwhelming evidence of chronic mismanagement of public money and the obvious glitches in governments accountability record, the Finance Minister, Ngandu Magande believes that the regime has managed scarce national resources prudently over the years. Speaking when he presented the 2006 budget on 3rd February this year, he said:
The HIPC Initiative is an international test for governments on integrity and prudent financial management. Full and timely implementation of the stringent conditionalities of the Initiative has created confidence and trust of the international community. The New Deal Government has therefore passed the test and now wishes to pass the benefits to all Zambians through prudent use and focused investment of public resources. This will clearly be evident from the allocations made in this years Budget31

Magande told Parliament that Zambia will save about US$180 million or K500 billion per annum in debt service under both the Highly Indebted Poor Countries (HIPC )Initiative and Multilateral Debt Relief Initiative (MDRI). He said the savings arising from debt relief will help the country in its development efforts and reduce the current levels of poverty by 50 per cent by 2015.

31

In his 2006 Budget Address ,, Finance Minister Ngandu Magande told Parliament that Zambia met the HIPC Completion Point in April 2005 after struggling to comply with a number of conditionalities agreed to at the HIPC Initiative Decision Point in December 2000. Most of the Paris Club creditors wrote off 100 percent of Zambia's debts after the country reached the HIPC Completion Point. In addition, Zambia qualified for write-off of 100 percent of its debt to the African Development Bank (ADB), IMF and World Bank under the MDRI, which is a new initiative born out of the G-8 proposal at the Gleneagles Summit held in Scotland in July 2005.

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Interestingly, the Finance Minister forgot to mention in his Budget Address some of the glaring weaknesses institutions such as the World Bank, the International Monetary Fund (IMF) and Britains Department for International Development (DfID) have pointed out regarding Zambias public expenditure management. For instance, a study conducted by the World Bank in 2002 under the Public Expenditure Management and Financial Accountability Review (PEMFAR) concluded that the Zambian government has consistently approved budgets that are structurally overcommitted and that lack the resources to meet the ongoing obligations of government. It noted:
The most obvious result has been that actual expenditures at the end of the year bear little relationship with the original budget estimatesSome supplementary appropriations have been directed at regularising transactions that were not sanctioned by Parliament.

A 2004 joint World Bank/IMF country report on Zambia identified further glitches in the national budgeting process and in the management of public expenditure:
The high degree of variance between the budget and fiscal outturns reflects weaknesses in both budget preparation and budget execution. The inability to stringently enforce the quarterly cash release systemresults in regular ad hoc changes in the distribution of funding between ministries, votes and/or breaching of aggregate ceilingsNeither the cash management system nor the commitment control system comprehensively covers all aspects of the budget and enforcement is weak, with sanctions rarely applied. Overall, these factors seriously undermine the credibility of the budget as a tool for fiscal management.32

On the basis of their findings, the authors of the report recommended that government should improve existing systems and enforce compliance with laid-down regulations, particularly in areas of internal expenditure control, cash management and in following up recommendations of various audits. They concluded that the lack of enforcement of existing financial instructions and regulations was probably the most serious threat to the sustainability of any Public Expenditure Management (PEM) system that is established.

32

Adugna et.al. pp.4-5

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Interestingly, a 2004 report on the Global Fund for AIDS, Tuberculosis and Malaria (GFATM) made similar observations. The report, which was based on an 18-month tracking study of Global Fund disbursements to the health sector in Zambia, noted that:
The Ministry of Health does not provide information and returns which are standard GRZ requirements as administered by the Ministry of Finance.33

It further noted that the area of procurement, particularly of drugs and pharmaceutical products, has been a persistent problem in the health sector. The study also noted that governments awarding of a management contract to a private company for the running of Medical Stores Limited resulted in the withdrawal of funding by several bilateral partners in the late 1990s. That, coupled, with the consistent failure by the Ministry of Health and Central Board of Health to provide
transparent information on budgets and expenditure was one factor in the breakdown in the partnership between government and bilateral partners.

Given these structural weaknesses in the system of public expenditure management and in the evidently poor record of compliance with laid-down rules and regulations, exactly how reliable is the AuditorGenerals report as an objective governance record? How much does it tell us about how public money has been spent and accounted for, considering that large amounts of revenues collected and retained by some extra-budgetary funds like the Road Fund or huge deficits by parastatal companies are neither reflected in the budget nor appear on the government radar screen? To answer these questions, it would be necessary to examine how government expenditure of public money is audited. This is what the next chapter tries to do.

Sally Lake. GFATM Tracking Study: Macroeconomic and Sectoral Background: Zambia. London School of Hygiene and Tropical Medicine. 2004. p.35

33

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Chapter 2
KEEPING TABS ON PUBLIC MONEY 2.1 The Role of the Auditor-General Tracking government expenditure of public money in a developing country bigger than Spain, Portugal, England, Scotland and Malta combined is no easy task. However, that is the task the Republican Constitution places squarely on the shoulders of the Auditor-General, an office which exists by virtue of Article 121 (1) of the Constitution of Zambia. The Auditor-General is appointed by the President of the Republic and ratified by the National Assembly, primarily through the Public Accounts Committee of the House. The work of the Auditor-General is carried out by a cadre of staff employed through the Public Service Commission. This effectively makes employees of the Office of the Auditor-General civil servants. The most senior civil servant in the office is the State Audit Secretary, who is the controlling officer for the Office of the Auditor-General. Operations are managed by a team of directors and assistants directors of audits responsible for various sections of government activity. The Office of the Auditor-General is represented in various parts of the country by regional offices headed by directors in Lusaka, Kabwe, Ndola and Livingstone. Each regional office is responsible for audit operations in the areas where they are located for ease of coordination. These offices are headed by headed by an assistant director of audits who supervises two principal auditors, two senior auditors and a cadre of audit staff. Provincial offices are monitored by a director at the headquarters of the Office of the Auditor-General in Lusaka. The director travels three times a year to provincial offices to check how government spending of public money is being accounted for. Sometimes, he/she makes unscheduled visits to the provinces, especially when provincial audit reports are not being submitted as regularly as they should. Once a year, the Auditor-General travels around the country to check on the operations of provincial offices. Following the government restructuring exercise, the position of a Deputy Auditor-General in charge of audits has been created to keep a closer eye on the audit operations in the nooks and crannies of the country.

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The Office of the Auditor-General is required by law to audit all the accounts of the republic and submit a written report to the President within 12 months after the end of each financial year. This means that the Auditor-General must satisfy himself or herself that public money allocated to various institutions in the Appropriations Act have been used for the purposes for which it was intended. In addition to the constitutional requirements, the Office of the AuditorGeneral must comply with the letter of two particular pieces of legislation, namely the Public Finance Act and the Public Audit Act. The Public Audit Act gives powers to the Auditor-General to audit all statutory corporations or public companies as well as private institutions which receive government grants and subsidies in any financial year. The Public Finance Act mandates the Office of the Auditor-General to audit the accounts of government ministries and departments to ensure that money allocated to them in the Yellow Book were used for the purposes for which it was intended. Carrying out this function involves inspections, examinations of stores, financial reports and records of financial transactions, assessment of internal control systems and compliance with these control measures, laws and regulations and other relevant documents maintained by public officers entrusted with the responsibility of handling of public resources. These auditing procedures help give the auditors from the AGs office basis for making a professional judgement on the preparation, reliability and accuracy of financial records. In carrying out their duties, the auditors also rely on supplementary information and explanations provided by the auditees and other relevant parties whose testimony helps corroborate such financial information. All in all, the findings of the audit should be able to stand up to independent scrutiny. This means that should any other independent auditor carry out an audit of the same institutions using the same methods and processes, they should be able to arrive at the same conclusions. The Auditor-Generals responsibilities also extend to certifying the financial statements that make up the financial report at the end of the financial year. The financial statements audited by the AGs office are then submitted to the Secretary to the Treasury to enable him/her prepare the annual financial report for submission to the National Assembly by the Minister of Finance in accordance with Article 118 (1) of the Constitution of Zambia.

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The annual financial report is prepared by the Accountant-General in the Ministry of Finance. The financial report of public expenditure from various government ministries and department is prepared by the Accountant-General in the Ministry of Finance and submitted to Parliament in September every year, within nine months after the end of the financial year. Before the report is tabled in Parliament, it has to be audited by the Office of the Auditor-General. In a manner of speaking, the financial report provides a more timely and current account of governments financial position and a record of spending than the Auditor-Generals report. However, for some reason, it attracts little or no media attention or public interest, perhaps because it is not tabled before Parliament with the same fanfare and with the same air of expectation as the Auditor-Generals report. Sometimes, due to glitches in the reporting system, the financial report is not submitted, making it difficult for the Office of the Auditor-General to know what the expenditure record and out-turns of government are in a given financial year.34 The current Auditor-General, Anna Chifungula, admits that keeping tabs on public money and government spending is indeed an onerous taskone that could see the current number of auditors increasing from 327 to 500 by the end of December 2007. The need to broaden the base of the audit staff stems from the constitutional mandate of the Auditor-Generals Office and from an expected change in the Local Government Act. Once the law changes, the task of auditing local councils will shift to the Office of the Auditor-General. Previously councils were audited by the Ministry of Local Government and Housing, which meant that in effect, those entrusted with the responsibility of preparing financial statements for these municipal authorities were the same ones auditing their books. In effect, councils in Zambia are not externally audited, contrary to the principles of financial accountability and prudent public expenditure management. Soon this financial irregularity will be corrected, subjecting local councils to closer external scrutiny and greater accountability of their expenditure than before. Given the number of councils and municipal authorities in a country the size of Zambia, the burden of work on the Auditor-Generals Office is likely to increase by leaps and bounds. But the biggest operational challenge her office faces is not the size of the country. It is getting the Auditor-Generals Report out on time, and that means by the 31st December of each year. As things stand, the report is always late, sometimes two years too late.
34

An out-turn is a record of governments indebtedness.

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The lateness, according to Ms. Chinfungula, is not deliberate. However, weaknesses in the reporting process make it inevitable, constraining the timely submission of the Auditor-Generals report. She explained:
We get so many reports from so many divisions and from the provinces and sometimes, these reports dont come on time. And when they come, sometimes the quality is so poor we need to panel beat them into shape and often this means sitting for long hours going through them to make sure they are the kind of reports you can publish.

The poor quality of reports from the provincial offices raises serious concerns about the technical capacity of audit staff. Ms. Chifungula said ideally, audit staff in her office should be Chartered Accountants. However, the reality of the marketplace has put the Office of the Auditor-General in a Catch-22 situation.
My office is competing with the outside world, particularly with private audit firms. And if you see what they pay their staff and what we pay them, it is difficult for us to attract the best people. And when we spend money training them, we cant retain them. So really, if we are going to perform to expectation, we need to have some kind of retention policy for our staff.

These challenges notwithstanding, the scope and methodology of the audit should make it possible for the Auditor-General to express an authoritative opinion on the financial statements for the year and to help Parliament keep tabs on the management and expenditure of public money. 2.2 Making Sense of the Auditor-Generals Report The Auditor-Generals report may not have the popular appeal of a bestselling novel, but it is structured in a manner that should give even the lay reader a fair idea of how public money has been spent. The report is in two parts, both of which have to be read in tandem to give a holistic view of the state of the governments financial management record during the period under review. The first part of the report certifies how money allocated to various ministries, government departments, parastatal institutions and statutory bodies have been accounted for by the respective controlling officers. The second part is an overall review of the operations of governments financial management and control mechanisms as it relates to public expenditure as regulated by the Public Finance Act.

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The certification provides some professional assurances that the information contained in the report is reliable, accurate and complete. The review of the operations of government financial management and control mechanisms pays attention to procedures. It is neither practical nor possible for the Office of the Auditor-General to review and examine every single financial transaction involving all the institutions that run on public money. What is practical and possible is for the Auditor-General to work around sample checks based on what her office considers important enough to give an indication about whether the financial regulations, procedures and laws governing the management, control, expenditure and accountability of public money have been complied with. In working with samples, the Auditor-General takes into account previous reports, past experiences and information made available to her office by interest groups. The limitations of time and resources justifies the reliance on sampling as a methodological consideration. In other words, what gets to be included in the Auditor-Generals report are the significant findings based on her professional judgement findings which should ultimately give Parliament enough intelligence to correct or address the issues raised therein. All said, the AuditorGenerals report will therefore not be the complete account of what is happening and what is not happening regarding how the financial affairs of the republic are being run. Nevertheless, the key contents of the Auditor-Generals report for the financial year will include, among other things, the following: the context and circumstances of the accounts being reported on; out-turn and appropriation accounts for the year; scope and extent of the revenues and financing and the results thereof.

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With regard to revenues and expenditures, the Auditor-General will be required to highlight and indicate, among others: financial irregularities and unconformities; existence and operation of internal controls; weaknesses in internal controls and the implications of this on the management of public money; quantification of how much public money has been lost as a result of such weaknesses, and action taken on previous matters documented in previous Auditor-Generals reports as may have been raised by Parliament. 2.3 Stages in the Auditing Process The Auditor-Generals report is the last in a series of auditing and reporting processes which starts with an Oral Inquiry. This is basically a request for information or clarification made by the Office of the Auditor-General to a specific officer over a particular transaction or activity. However, the fact that the inquiry is not written down does not make it any less formal. Procedurally, it is the first step in a fact-finding exercise to find out if certain transactions and activities regarding the expenditure of public money were carried out in line with laid-down rules and regulations. An Oral Inquiry is followed by a Preliminary Audit Query which is written and formally submitted to the controlling officer for the attention of the officer whose operations and activities have warranted special audit attention. For instance, the query may involve purchases which may have been irregularly made, in which case the procurement officers and chief accountants may find themselves having to answer a lot of questions. The Preliminary Audit Query gives a time frame during which answers to the questions that have been asked should be provided to the Office of the Auditor-General. This query is formally made by the auditor who is carrying out the assignment. The formal document, together with the written response, become part of the auditors working papers.

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If no responses are forthcoming by the time the deadline expires, the auditor simply makes a note of this in an Audit Inspection Report. If the answers that are submitted are unsatisfactory, these are also noted accordingly. Controlling officers have up to 30 days to respond to audit queries. If the auditors are satisfied with the answers they get, they do not proceed with their queries. However, if they are not satisfied, they make a note of their dissatisfaction in an Audit Reference Sheet. When all attempts to get answers to audit queries fail, the AuditorGeneral is left with no alternative but to include these details in the final report which is simultaneously submitted to the President and the National Assembly not later than seven days after its first sitting for its attention. Under the Public Finance Act, the Secretary to the Treasury can recommend that the Secretary to the Cabinet takes disciplinary action against controlling officers who fail to respond to audit queries. Presently, the Auditor-Generals mandate ends once her report is tabled before Parliament. Errant public officers identified by the Auditor-Generals report for financial negligence and for wilful default in the discharge of their duties face prosecution and punishment. Under the law, the extent of liability is determined by the Permanent Secretary. If the errant official fails to admit liability, the Attorney-General is empowered by law to institute legal proceedings to recover money that has either been misappropriated or misapplied. On paper, officers face liability if they: fail to collect any money owing to the government or if the money cannot be collected due to wilful default or gross neglect; make, cause or permit improper payment of public money, or payment of such public money which is not duly accounted for; cause or permit any loss of public money under their control; cause or permit any damage, destruction or loss of any public stores, building, fixtures, fittings or furniture; cause or permit any personal injury or property damage in circumstances which give rise to liability of the Republic.

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From the point of view of legal provision and administrative procedure, the process of auditing and reporting is very systematic, with a built-in mechanism for ensuring that there is some degree of financial accountability when it comes to the management and expenditure of public money. However, the tediousness of the process, not to mention the time it takes for the Auditor-General to swing into action, means that very often, errant controlling officers and other functionaries can get away with misapplying or misappropriating public money. The Auditor-Generals report of 2001 for the financial year ended 31st December 2000 provides a classic example. The report documents the disappearance of K73 billion meant for the Basic Education Sub-Sector Investment Programme (BESSIP). It all started in 1999 when government and a consortium of co-operating partners set aside the sum of K73 billion to boost the basic education sector by building new classroom blocks and upgrading old ones and to improve the supply of teaching and learning materials. Part of the money came from the World Bank, the Africa Development Bank, Irish Aid, UNICEF, UNESCO, the British, Dutch and Finnish governments. However, after a tour of selected schools, auditors from the AGs office discovered that many of the schools had not been built. They also found out that the workmanship of the classroom blocks that had been built was very poor and was not commensurate with the money that had been spent on them. In July 2001, a local company was contracted to supply school furniture to 87 primary schools around the country at a cost of US$500,000. The furniture should have been supplied between 10 and 14 weeks after the Ministry of Education placed the order. However, the company made its first delivery 26 weeks after the contract was signed. The AGs report noted that though the firm was paid US$484,249.60, it failed to deliver more than half of the consignment. The auditors also discovered that only a fraction of the textbooks and teachers guides that were paid for were actually supplied. They noted that in several instances, receipts and invoices for purchases were not available at the time of audit. The receipts and invoices surfaced many months later. At Siasikabole Basic School in Choma, the auditors discovered that only K15 million worth of building material out of the K79.7 million was accounted for.

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In spite of the overwhelming evidence of financial mismanagement of public money and irregular reporting of the expenditure of BESSIP funds, the then Education Permanent Secretary, Barbara Chilangwa denied any wrongdoing. In a 100-page report to the Public Accounts Committee of the National Assembly, she refuted allegations that her ministry had misused or misapplied BESSIP funds. The missing money is yet to be recovered. To date, the controlling officers implicated in the misappropriated and misapplication of the K73 billion worth of BESSIP funds have not been prosecuted. The lack of action against those who misapply or misappropriate public money is a major source of consternation for the Auditor-General, Ms. Chifungula. She explains why:
After every audit, we issue an inspection report to the controlling officer and we do this before the Auditor-Generals report is actually submitted to Parliament. If we have noticed some serious irregularities my officers have unearthed, I immediately write to them and bring it to their attention and demand that they take appropriate action. Unfortunately, I have only up to December to include these things in my report and send it to Parliament. Now where there are serious financial losses, it becomes a problem because of the time lag. From the time you discover the irregularities to the time action is taken, a lot of things may have changed. The culprits may have gone away or have been relieved of their duties or would have died. Problems actually arise from implementing the recommendations of the report

As things stand, the Office of the Auditor-General does not have the power to prosecute or follow up on penal measures taken against those who have misappropriated public money. Parliament has the power, through the Public Accounts Committee of the National Assembly, to recommend action and prosecution. But according to Director of Audits in the AGs office, Matthew Hara, appearing before the Public Accounts Committee does not seem to strike fear in the hearts of errant officers. He said:
We have sometimes been really disappointed when people have just sauntered out of Public Accounts Committee meetings without missing a heartbeat because the PAC did not fully interrogate the issues.

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However, a senior accountant in the Ministry of Finance rejected Haras observation. He said:
It is not true that we would rather face the Public Accounts Committee than auditors from the Auditor-Generals Office. The thing is we would rather discuss one on one with our professional peers than go to the Committee where members may or may not understand accounting procedures.

His views about the technical incapacity of the Public Accounts Committee notwithstanding, the role of the National Assembly in the oversight of public money cannot be overemphasized. 2.4 Parliamentary Oversight of Public Money Besides making laws and approving proposals for taxation and public expenditure, the role of Parliament is to keep government clean and accountable. It does this by keeping government activities and expenditure under close scrutiny and review. For instance, because of the scarcity of public money, every bill brought to Parliament must state how it will affect public expenditure once it is passed. As thing stand, Parliament is barred by the Constitution from debating any motion or bill whose implementation could increase public expenditure. But according to the 2004 National Integrity System (NIS) Zambia Country Study commissioned by NORAD, Parliament is restricted in its accountability functions vis--vis the executive because of its weak formal mandate in law making, policy making and budgeting. It notes that an unfettered and unrestricted executive presidential domination still remains in spite of the spread of democracy and the rise of multiparty politics. The study explains how this is manifested:
Besides, when Zambia observes the British tradition of appointing all cabinet ministers and deputy ministers from among the Members of Parliament (so that about half of the MMD Members of Parliament are appointed Cabinet and Deputy Ministers), the Backbenchers and the Opposition becomes particularly crucial as a basis for parliamentary counter-balancing powers.35

35

Rakner. op.cit p.4

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A weak Back Bench and Opposition in the National Assembly means that the counter-balancing powers needed to keep government clean and accountable is severely constrained. In the main, the excesses of government action and expenditure cannot be checked. This legislative weakness is graphically exemplified by the Presidential Housing Initiative (PHI) established by the Chiluba regime on 5th November 1998 after a special Cabinet meeting, not by legislative sanction, even though it was to have been funded with public money. PHI was to operate as a unit within the National Housing Authority (NHA) and was to be spearheaded by a Management Committee appointed by President Frederick Chiluba. Its objectives, according to the government, was to revive housing construction in order to enhance home ownership among Zambians and ease the demand for quality housing, upgrade unplanned settlements and create employment. PHI was to be implemented as part of governments Social and Economic Development Programme. In order to achieve these objectives, government approved, in principle, the amendment of the National Housing Authority Act of 1971 to provide for PHI. In addition, government also authorised the transfer of ownership and proceeds of the sale of parastatal housing under the custody of the Zambia Privatisation Agency (ZPA), INDECO Estate Development Company, ZIMCO Properties, Zambia Wholesale and Marketing Company and Ex-NAMBOARD houses to the National Housing Authority and gave it the mandate to manage Mulungushi Village and Conference Centre on its behalf. NHA was also mandated to sell these houses and use the money it realised from the sale to finance the construction of new housing units. Between November 1998 and August 2001, the sum of K22.1 billion was released from the national treasury to PHI. This was in addition to the K500 million worth of public money released to PHI as start-up capital. Records show that during the period under the review, PHI received a total of K32.269 billion. Yet in spite of the colossal amounts of public money involved, the management structure and control of PHI was very dubious. A Public Accounts Committee report on the report of the Auditor-General on the operations of PHI for the period November 1998 to August 2001 revealed several glaring financial irregularities which should have been nipped in the bud before they got out of control.

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In a submission to the Public Accounts Committee, the Secretary to the Treasury said:
Funding was released through the budget line, that is, through the Controlling Officers at Cabinet Office and the Ministry of Local Government and Housing, but once the money reached the PHI, procedure was never followedThe PHI Chairperson was very powerful and was not subjected to any law then. Whenever he wanted money from the Treasury and the Treasury could not release it because they were not mandated to fund PHI, he could go to the Minister of Finance and National Planning. There had been shocking revelations of how much money was diverted to PHI. For example, K500million meant for Chani Fisheries and the Civil Service Housing Loans ended up with PHIAll rules were ignored and everything was from State House to the Minister of Finance and National Planning to the PHI Chairperson. Anyone who advised or delayed anything was said to be working against the system.

The Committee also discovered that the PHI Chairperson, Richard Sakala, had exploited the lack of controls and the limitless power his relationship with State House gave him to fraudulently acquire 13 out of 19 plots of land in Siavonga for the Presidential Housing Initiative. The plots were transferred to the Mulungushi Millennium Development Company Limited, a company he co-owned. The Public Accounts Committee noted in its report one serious issue of individuals flouting all the regulations and proceduresresulting in financial and human resource mismanagement. Such financial and administrative excesses could explain why the NIS Zambia Country Study recommends donor support for the strengthening of certain priority areas such as the official Opposition party, the office of the leader of the Opposition and the Public Accounts Committee in the interests of financial accountability. It also explains why the study recommends that in order to strengthen the oversight role of Parliament, the Anti-Corruption Commission (ACC) should be an advisory body reporting to the legislature and not only to the President. 36 Strengthening Parliaments oversight role would mean giving its financial watchdog, the Public Accounts Committee, sharper teeth.

36

Rakner and Fjeldstad. op.cit. p.4

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2.5 The Role of the Public Accounts Committee The Public Accounts Committee is one of the select committees of Parliament. It is responsible for keeping a close eye on public money on behalf of the National Assembly. This is why the Public Accounts Committee is called a watchdog committee. By metaphorical extension, the Public Accounts Committee is expected to be as uncompromising in its oversight duties as a Rottweiler, arguably the fiercest of watchdogs. It comprises nine members who are nominated from pool of sitting MPs at the start of every parliamentary session. The Public Accounts Committee is headed by a chairperson who is supported administratively by a secretary. Any five members of the Committee may constitute a quorum. Public Accounts Committees in countries like England, Canada and Australia have worked well in keeping close tabs on public money by operating on the basis of corporate governance principles. Jones and Jacobs explain how:
Re-define the shareholders as voters and company accounts as government expenditure, and public accounts committees would recognise themselves as part of this modern corporate governance system.37

The Public Accounts Committee of the Zambian Parliament may have its roots in the Westminster tradition, but question is: how effective is it when it comes to curbing the misapplication and misappropriation of public money? How uncompromising is it as a watchdog? Or as watchdogs go, is its bark fiercer than its bite?

37

Kate Jones and Kerry Jacobs. Governing the Government: The Paradoxical Place of the Public Accounts Committee. Public Sector and Acccountability Research Centre. La Trobe University. 2005. p.10.

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Chairman of the Public Accounts Committee, Francis Simenda, MP, said the committee could be effective if certain laws could change, granting the Auditor-General greater autonomy and independence. He said in an interview:
It would be desirable if the Auditor-General reports to Parliament directly without alterations. Currently, the AG submits her report to the President who is the one being investigated because he is the overseer of how money has been utilised during the year. Depending on his goodwill, he could choose to suppress certain information from Parliament, though according to the law, the report has to be taken to Parliament. We feel that with this kind of scenario, the report could be doctored and certain parts considered unfavourable could be removed.

Simenda said that the independence of the Office of the AuditorGeneral would always be in doubt as long as the power to nominate the office bearer lay with the Republican President, with Parliament only ratifying the candidate.
Usually, the majority party votes in favour of whoever the President nominates and for that reason, I feel that the independence of the Auditor-General is questionable. Under these circumstances, the officer is more loyal to the appointing authority than to the people whose money government should be accounting for.

He said this situation in itself tended to limit how far the Public Accounts Committee could go in its operations.

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A Member of Parliament who has served as Chairman of the Public Accounts Committee, Bob Sichinga, agrees. He said the governance arrangements as well as the rules that govern the oversight of public money must change. Sichinga explained, by way of an example:
Youve got a parliament of 158 people, 66 of whom are ministers. So you basically have 92 people who are back benchers. Now in order to make a constitutional amendment, you need 106 people, which two-thirds of 158. How are you going to get it, considering that the 66 front benchers must vote for the government position. So even if all the backbenchers voted against a particular amendment, it wont work. That is why the Constitution must say you cannot have more than 40 ministers because then there is room to make amendments which ultimately enhance transparency and accountability when it comes to parliamentary oversight of public expenditure. But even that is going to be a problem. This is why it is imperative to separate Parliament from the Executive. At the moment, the Minister of Finance appoints the Public Accounts Committee. He goes to Parliament and he presents a list of names and says: these are the members of the Committee, including myself am a member. How do you debate against your own colleagues?

He said this system was inherited from the British and is patterned along the lines of the Westminster model, the foundation on which British parliamentary practice is based. Sichinga said though the system has worked well for the British, the same cannot be said about Zambia. He gave his reasons:
Under the Westminster model, the Chairperson of the Public Accounts Committee always comes from the Opposition. This is a tradition, not law and is meant to enhance the oversight role of Parliament. If this has worked well for them, it is because of the length of the tradition and the kind of respect people have for it. Here, things like that cannot work as a mere tradition. It has to be made into law to have any chance of success.

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Chairman of the PAC, Francis Simenda says apart from the structural difficulties, there are financial and logistical factors that constrain the work of the committee. He explained:
There are times when the Office of the Auditor-General has found fraud, misappropriation of public funds and shoddy work undertaken by questionable contractors, but as a committee we cannot physically go on the ground to verify these things for ourselves because there is no money. Sometimes, controlling officers may dispute the claims the Auditor-General has made in her report, so we need to go and see for ourselves whether these things are really true. But the report itself comes out very late and by the time we are discussing it, some of the officers implicated many have retired, been transferred or died. One of the recommendations we have made to the draft Constitution is that the Auditor-Generals report should come out six months after the financial year. This way, action can be more timely and we would be in a better position to safeguard public money.

As a watchdog committee, the PAC swings into action once the Auditor-Generals report is tabled before the National Assembly by the President. It studies the report accordingly, calling various officers from ministries, government departments and statutory bodies which are funded from the national treasury to appear before it to explain their expenditure and to shed light on the concerns raised therein. The Auditor-General and the Accountant-General are permanent witnesses during PAC meetings. The AG advises on how some of the issued raised in her report can be dealt with. The Committee makes its recommendations to the main House, suggesting what action is to be taken where public money has been misapplied or misappropriated. On PAC recommendations, the National Assembly adopts the Committees submission as a true reflection of government expenditure. Thereafter, Parliament gives the Minister of Finance the mandate to effect the recommendations of the Public Accounts Committee. The Ministry of Finance does this by issuing a Treasury Minute within 60 days of the submission of the PACs report to the main House which specifies what action it has taken against errant officers. Treasury Minutes are signed on behalf of the Minister of Finance by the Secretary to the Treasury. Checks on Treasury Minutes issued by the Ministry of Finance over a five-year period show nothing more than superficial comments and responses to the Public Accounts Committee report on the Auditor-Generals report.

63

For instance, in the Treasury Minute issued during the fourth session of the ninth National Assembly on 25th January 2006, the Secretary to the Treasury, Dr. Situmbeko Musokotwane, reports, on the issue of unconstitutional expenditure:
I have taken note of the committees observations and recommendations and wish to report that the Express Expenditure Bill totalling K68,308,042,568.00 is being prepared for presentation to National Assembly for approval at the 2006 Budget session sittings.

All the Secretary to the Treasury notes in all four counts regarding the Misappropriation of Revenue Collections, Overbanking, Delayed Banking and Missing General Receipt Books and other Accounting Irregularities at the Passport Office Kabwe is that :
The Controlling Officer has not yet reported any progress on the matter.

Similar responses are noted in other Treasury Minutes. For instance, the Treasury Minute meant to provide answers in the case of financial and procurement irregularities involving the Zambia Army and the Zambia Air Force during the period 1992 to 1999 is an exercise in brevity. The three-page document, submitted by the Acting Secretary to the Treasury at the time, Anna O. Chifungula contains submissions like these:
I have taken note of the Committees observations and recommendations. I have since directed the Controlling Officer to provide progress on the recovery of the amount of K91,950,600.

With regard to the irregular purchase of stable belts, leather belts and vehicle stickers without the approval of the Ministerial Tender Committee, Ms. Chifungula reports that:
Investigations into the matter have been commenced and those who will be found guilty will be handed over to the law enforcement agencies for action.

However, a check of actions taken arising from such the findings of successive Auditor-Generals reports and Treasury Minutes over the years reveal a very poor prosecution record. Furthermore, the nature of the reporting system is such that it is impossible to find out what actions have been taken against controlling officers and other public servants implicated in financial irregularities as well as the misapplication and misappropriation of public money. In the process, it becomes very easy to sweep a lot of dirt under the carpet, causing it to disappear from the public radar screen.

64

Under the current system, the Committee can only recommend what action controlling officers in ministries, government departments and statutory bodies ought to take; it has no power to enforce decision. And therein lies its main weakness, says Public Accounts Committee Chairman, Francis Simenda. He said both his committee and the Office of the Auditor-General should have powers to take corrective action against those who misappropriate and misapply public money.
What would make a big difference is if we had the power to refer fraud cases and cases of theft by public servant to the police, or the Anti-Corruption Commission and other law enforcement agencies. Also, we could withhold the release of funds to those ministries, government departments and statutory bodies who have not been able to account for monies given to them in the previous financial year. But now, even when we come across cases of fraud or theft, the police cant take action because they say there is no complainant. We could learn a few lessons from Ghana and Uganda where the police had permanent representatives who attend Public Accounts Committee meetings. Once cases of fraud, embezzlement and theft by public servant are identified, they take immediate action. But the way things are, people have gone scot-free year after year, depending on their relationship with the executive. They are merely transferred and very rarely prosecuted

Sichinga shares this point of view, but adds his own recommendations. He says:
When the Public Accounts Committee is meeting, you need the AntiCorruption Commission, the Drug Enforcement Commission, the AdministratorGeneral or the Ombudsman, the Secretary to the Cabinet and the Director of Public Prosecutions (DPP) who can come with the police if they so wish. Some of the issues that might the Auditor-Generals report may be administrative and have to do with the controlling officers of a ministry. In this case, the Secretary to the Cabinet could start the process of taking administrative action right way. The DPP will be looking out for issues that have to do with theft by public servant and they can immediately begin the process of prosecution. These people could sit on the committee as expert witnesses the way the Auditor-General and the Accountant-General are. If this is not happening, it could either be because of system failure or because the executive does not want to see this happen.

65

But Sacika, who worked in the public service for 32 years of public service, disagrees with the recommendation and explains why:
It is not necessary. You see, under the law, the responsibility to manage the resources allocated to a ministry is vested in the Permanent Secretary. Under the General Orders, (i.e. the body of rules governing the conduct of public servants) matters of discipline falls with the Permanent Secretary, so there is no need to bring the Secretary to the Cabinet, the ACC or DPP to the Public Accounts Committee. What should happen is this: when a report of the AG has been tabled and it indicates that in Ministry X, monies have been misappropriated, it is the responsibility of the Secretary to the Cabinet and the Permanent Secretary of that ministry to institute action against the officers implicated. There are several types of action that may be taken. For instance, where there is prima facie evidence that somebody has indeed nicked money, they must be taken to court and prosecuted because that is what the law says. But if it is misappropriation of funds, which does not lend itself to prosecution in the courts of the law, then the Secretary to the Cabinet and the Permanent Secretary should take action to either demote or recommend dismissal from employment, as provided for in the General Orders. They have the power to institute measures to recover misappropriated money, but even when this is done, there should still be disciplinary action. Paying back the money should not be the end.

Bye and large, executive dithering and delays in taking disciplinary or corrective action against those who have misappropriated or misapplied public money detracts from the Public Accounts Committees effectiveness as a watchdog. This is intensified by the fact that currently, there is no public institution tasked with investigation and criminal prosecution based on information from the audit reports and from the findings and recommendations of Public Accounts Committee reports.

66

In spite of its lack of powers to enforce action against those who misappropriate or misapply public money, records show that the Public Accounts Committee has undertaken its responsibilities diligently over the years within its financial and operational limitations. In May 2006, members of the Committee travelled to Germany, France and England to verify issues raised in the Auditor-Generals reports of 2003 and 2004 regarding how public money and properties in the care of diplomatic missions in the said countries are being managed. The 10-member delegation was led by PAC chairman, Francis Simenda, Mongu Central MP and included Luena MP, Crispin Sibetta, Chisamba MP, Jethro Masowe and Sinda MP, Levy Ngoma as well as the AuditorGeneral, Ms. Anna Chifungula . They discovered that two of the missions had entered into contracts worth millions of Euros without prior authority from the controlling officer at the Ministry of Foreign Affairs, with the Berlin mission irregularly buying goods and services and overpaying diplomatic staff on overseas allowances and personal advances. The ambassadors said in their defence that because the Ministry of Foreign Affairs delayed in granting authority to heads of mission to spend money, they were forced to break government financial regulations by entering into unsanctioned contracts and transactions. For instance, the Committee found that the Zambian government was buying a house in Paris to serve as the Ambassadors residence at a cost of 2.9 million Euros. To date, however, only 800,000 Euros has been paid towards the purchase. Government is in danger of forfeiting the deposit paid if the money is not paid by the end of June this year. It is not clear what difference the Committees fact-finding mission will make to prudent public expenditure management and to financial accountability in the short, medium and long term. In the event that the wheels of government continue to grind slowly in so far as implementing recommendations go, it is likely the status quo will remain. In other words, it is unlikely that stringent measures will be put in place to stop the haemorrhage of public money.

67

In the main, weaknesses in the administration and reportage of public expenditure could further constrain the oversight role of Parliament. For instance, the Financial Report for the financial year ended 31st December 1999 was not tabled before the National Assembly by the Minister of Finance, nine months after the end of the financial year (i.e. 30th September 2000), contrary to the provisions of Article 118 (10) of the Constitution. By February 2001, the report had still not been tabled. Thus it was not possible for Auditor-General to check on the out-turns of government for the financial year under review. Because of this, the Public Accounts Committee was not able to study the report and make its submissions to the main House accordingly. But if available records are anything to go by, government expenditure over the years reflect certain recurrent trends. According to Sacika, a former Secretary to the Cabinet, this is because the public service, a monolithic bureaucracy governed by regulations and administrative instructions, has been heavily politicised, with ministers systematically usurping the role of controlling officers, contrary to the Public Finance Act. Sacika, a recipient of an international Excellent Service to the Public Service award, said:
Ministers and civil servants have different but complimentary roles to play in the public service. Civil servants are the professional wing of government, while ministers are there to ensure that the policies and programmes of their government are implemented. The failure in our system to define the roles of politicians and civil servants has created problems and given politicians an upper hand to control everything, including meddling in matters which are a preserve of civil servants. This has led to administrative inefficiency and the imprudent use of public funds.

Is this a recent phenomenon or is it a practice that is entrenched in government in a manner that impacts negatively on the management and expenditure of public money? The following chapter tries to answer that question by studying government expenditure trends in the First, Second and Third Republics. In this regard, historical authority helps to establish an apolitical baseline for scientific analysis, creating an objective basis for drawing value-free conclusions about government expenditure under different political regimes.

68

Chapter 3
GOVERNMENT EXPENDITURE TRENDS 3.1 The Politics of Government Spending: A Historical Perspective Government spending is inextricably linked to the politics of an age. For instance, the 1960s was a time when state intervention in the national economy was the dominant development paradigm on the continent. Many countries in Africa gained their political independence during this period and inherited economies that were structured to primarily supply colonial powers with cheap raw materials. Given these historical circumstances, the view that the state should be the engine driving economic development in newly-independent states seemed justified. In the main, state intervention in the economy became the political ethos behind public expenditure. Ultimately, notions of economic nationalism, coupled with the need for political patronage in newly-independent nation-states, led to the extensive growth of state-owned enterprises across the continent.38 A tracking study of government expenditure in Zambia from 1964 to date will reveal that changes in the countrys political circumstances and direction invariably influenced the definition of public priorities and subsequently the trend of public spending. From 1968, the Zambian government began to acquire majority shareholding in 26 mostly expatriate owned companies. It established the Metal Marketing Corporation (MEMACO) to control the sale of the nations minerals. The year 1968 also saw the establishment of the Industrial Development Corporation (INDECO) to be the vanguard in the development of a national industrial sector. In August 1969, government acquired 51 per cent share in the copper mines, which was formerly controlled by the South African Anglo-American and by the American-owned Metal Climax. These measures may have lined the national treasury with money at a time when international copper and metal prices were high, but it led to a vast increase in the size of the public sector, something political scholars describe as over-employment.

Roger Tangri. The Politics of Patronage in Africa: Parastatals, Privatisation and Public Enterprise. Kampala. Africa World Press. 1999.p.19.

38

69

Was this a good sign? Political historian, Roland Oliver, thinks not and explains why:
Perhaps the greatest misfortune of modern African nations was that their approach to independence coincided with a period when it was generally believed that the way to a better future lay through more and longer term state planning, with its implementation led by a large and ever-expanding public sector.39

And the public sector continued to grow by leaps and bounds. Kaunda justified his economic decisions and the attendant expenditure of public resources in a 1973 policy document:
State participation is designed to guarantee the control of the economy by the Zambian people and the reduction of the impact of foreign influence in shaping destiny.40

However, historical records show that most of the decisions which were born out of this policy were ill conceived and consequently led to a misapplication of public resources. For instance, in 1979, a Parliamentary Committee on Parastatal Companies noted in its report on the Finnish company that installed the machinery for Mansa Batteries that the equipment was:
installed on an experimental basis since it had never been used elsewhere in the world including the country of its originthe key problem of machine failure to reach its estimated output arose from the fact that it was a prototype i.e. it was the first of its kind to be made and its basic design was not intended for continuous operation for long periods.

For some reason, a number of projects initiated during this period were taken for purely political reasons, even though, as is the case with Mansa Batteries, the feasibility study showed that basing the factory in Luapula would be uneconomic.

Roland Oliver. The African Experience. London. Africa World Press. 1991.p.241 National Policies for the Next Decade. 1974-1984. United National Independence Party. 1973. p.39.
40

39

70

The catalogue of white elephants initiated during Kaundas regime without regard to feasibility or cost is long. The location of Livingstone Motor Assemblers, Kapiri Glass, Mansa Batteries (all subsidiaries of INDECO) were decided on the basis of providing employment opportunities outside the main urban areas. Multi-million dollar brick factories were set up under presidential directive in Kalulushi and Nega Nega, but transporting the bricks long distances to construction sites raised their cost to uneconomic levels. Because of the declining demand for its products, the brick works at Nega Nega was forced to close down in 1979 as the factory in Kalulushi incurred huge losses.41 The amount of public money that went down the drain through such illconceived initiatives during Kaundas 27-year reign is difficult to quantify in the absence of financial records, but the financial cost of political absolutism was undoubtedly a heavy one for the Zambian taxpayer to bear. Imprudent management of public resources, unlike misappropriation of public money, derives from poor judgement. However, both acts show a blatant disregard for the integrity of public money. The politics of government spending is one that political scientists like Roger Tangri have tried to rationalise through research and scholarship. In his estimation, this is largely driven by the ethic of power. Tangri writes:
Africas political leaders have sought to remain in power. They have also sought to enhance the wealth of those in power. Both these goals have been pursued through the political disbursement of public resources.Those in control of the state have used public resources and positions within the public service institutions in ways designed to further the twin goals of power retention and material accumulation.42

The advent of multi-party politics in Zambia in 1991 after 19 years of one-party rule brought about a radical shift in governments economic policy direction and the management of public resources. Chilubas regime succeeded in doing something that Kaunda had failed to do. In March 1992, it raised the price of mealie meal by 35 per cent, reducing the subsidy that had for many years distorted the market price of maize. The Chiluba regime soon won international acclaim from the International Monetary Fund (IMF) and the World Bank for fiscal discipline and sound financial management of public money.

41 42

Tangri. op.cit. p.30. Ibid. p.25

71

In 1992, government began to effect a public enterprise reform process which saw 200 parastatal companies being put up for sale. A review of Chilubas first year in office showed that he had implemented all the IMF/World Bank conditions and had gone a long way towards creating a market economy. He reduced the civil service by 20,000 and put measures in place to cut it by a further 50,000. On 27th July 1994, the Chiluba regime announced that it had abandoned plans to build a hydro-electric power station at Batoka Gorge at an estimated cost of US$4 billion. To all intents and purposes, the pendulum of public expenditure management had made a 360-degree turn. Perhaps one of the most contentious decisions the Chiluba regime made its efforts to reform the parastatal sector was the liquidation of the national flag carrier, Zambia Airways. The most enduring memory was the seizure of the airlines flagship, the DC10 (better known as the Nkwazi) at Londons Heathrow Airport on 11th November 1994 following a court order that Zambia Airways had defaulted on payments on a lease agreement with its creditors, Chemical Bank. In the meantime, a similar drama was unfolding at Lusaka International Airport where two Zambia Airways ATR42s were also impounded following the seizure of the airlines 737 in Israel. In spite of all, President Chiluba assured the nation that the airline would not be sold, but would be restructured to get it back on track. On 13th November, two days after the Nkhwazi was seized at Heathrow, government announced that it would rescue Zambia Airways with a loan facility to enable it acquire assets that would facilitate privatisation on acceptable terms. The assets in question included: two ATR42s, a DC10 and a Boeing 737. The story changed when, during a visit to London, President Chiluba said, there was no justification for government to continue subsidising Zambia Airways at US$7 million per year when subsidies on mealie meal which benefited the large majority of Zambians had been removed. Interestingly, ex-Zambia Airways staff tell a different story. They say, by liquidating the national airline, government committed a treasonable act, costing the country more than it gained in the process.

72

A former Zambia Airways senior manager with over 30 years experience in the aviation industry, George Lewis, admitted that operational costs took their toll on the airline, but argued that the situation could have been contained:
All the airline needed to turn it around was a bridging loan of US$2 million, thats all. Take the ATRs, for instance. They had a market value of US$12 million each and Zambia Airways only had US$2 million to pay to finish off the total debts for both of them. Had government given the airline that money, the aircraft would have been ours. We could have sold one for US$12 million and saved the other aircraft, including the Nkhwazi. Zambia lost US$11 million on each plane and that is what I find treasonable. The decision to liquidate was ill conceived and poorly thought out. As far as I know, you only liquidate a company when it is possible from its assets to be a running concern, but we can see what massive assets Zambia Airways has because up to now, 10 years after the liquidation, they are still trying to liquidate its assets. I am talking about everything from planes to houses, equipment, ground support equipment, workshop equipment, spare engines, consummables The assets should have been put on the market, not on a fire sale. And all the while, you are paying the liquidator US$80,000 per month. Over a 10-year-period, that should be in excess of US$10 million. What I fail to understand is why government failed to release US$2 million as a bridging loan to help a national airline which it owned 100 per cent but instead gave US$90million to Meridien Bank, a private commercial bank, to save it from collapse under the pretext that it was protecting the interests of savers43

In short, liquidation robbed the country of US$50 million in aircraft value alone and an undisclosed amount of money realised from the sale of 546 Zambia Airways housing units in Longacres, Rhodes Park and Chelstone, Ndeke House, Ndeke Hotel, properties in London and the US as well as shares in a beachfront hotel in the Indian Ocean island of Mauritius.44

43 44

Edem Djokotoe, National Airline Controversy, Sunday Post, 29 August 2004. p.6 Ibid. p.17

73

By contrast, prudent public expenditure management and financial accountability is what has transformed another national flag carrier, Ethiopian Airlines, into one of the best run and most profitable airlines in the world. Ethiopian Airlines, which has been in operation for 57 years, is wholly owned by the Ethiopian government, though it is run autonomously. Chief executive of the airline, Bisrat Nigatu said in an interview that government policy regarding ownership is unlikely to change because Ethiopian Airlines has never had any difficulties securing finance for capital projects. Records show that the airline has consistently made profits in the last 22 years, only losing money during the two years it was at war with Eritrea. By 2000, Ethiopian Airlines had a fleet of 24 planes, flying to 46 destinations. Continuous state support, even when the state was at war, has helped the airline boost the Ethiopian economy. Zambia, on the other hand, has never been at war, but due to mismanagement and political interference, its national flag carrier was run aground, costing the country money it could ill afford to lose. Developments like these raise questions about the safety as well as the status of public resources in the political scheme of things. According to Tom Killick, a political economist, such developments demonstrate a
willingness by African leaders to sacrifice economic benefits for short-term party, constituency and personal advantage.45

They also illustrate a worrying tendency towards mismanagement of public resources by African leaders, irrespective of their political complexion or ideological disposition, in an effort to consolidate their grip on power. In Kaundas day, one of the ways in which this was done through the creation of a monolithic party structure funded from the national treasury. The supremacy of UNIP obscured the dividing line between party and government, making it almost invisible.46

Tom Killick. Development Economics in Action. London. 1978.p.248. Bornwell C. Chikulo, Elections in a One-Party Participatory Democracy in Ben Turok ed. Development in Zambia: A Reader. London. Zed Books. 1989. p.201.
46

45

74

Admittedly, the dividing line between the ruling party and government is more well defined in the Second and Third Republics than it was in the First. Also, the monolithic party structure which comprised the central committee, district governors to low-level grassroot political commissars was a drain of public resources from 1972 when Zambia became a one-party state to 1991 when one-party rule was dismantled. In effect, the ruling party was effectively de-linked from the national treasury. However, Chilubas re-creation of the position of District Administrators saw the country returning to a trend started by the UNIP regime to fund the consolidation of political power at grassroot level throughout the country using public money. Records show that they were ill-qualified cadres whose badge of distinction was blind loyalty to the party. Today, the Mwanawasa government still maintains the 72 political commissars Chiluba re-created. The only difference is that they are now called District Commissioners. The new office bearers may be a lot more literate than their predecessors, but the irony is that they have been recruited at a time when the civil service is being downsized and restructured, and when the appointment of teachers for poorly-staffed government schools in the most disadvantaged districts has been put on hold. This seems to give credence to Killicks view that African leaders are given to sacrificing economic benefit on the altar of political expediency for short-term party, constituency and personal advantage. A study of how successive regimes have spent public money and managed public resources over the years reveals some interesting trends. The study is based on analyses of Auditor-Generals reports from 1984 to 2004 matched against amounts allocated to various ministries, government departments and statutory boards in the budget and legally sanctioned in the Appropriation Act. For practical reasons, the study sampled every third year from 1984 to 2004. This made it possible to study public expenditure trends in all three Republics.

75

3.2

Analysis of Government Expenditure: From the First to the Third Republic Government consistently overspent public money, engaging in wasteful and unconstitutional expenditure from 1984 to 2004. An examination of expenditure reports in the seven years used as a sample for the study revealed that a total of 94 heads of expenditure were appraised. In lay terms, a head is a line of expenditure for which a controlling officer is responsible and which is legally recognised from the point of view of budgeting and appropriation. The frequency of reports on each of the 94 heads varied from report to report. The total losses arising from each head during the period under review have been ranked in order of declining amounts. The total cumulative losses of public money for the period under review was K887,252 million. The highest cumulative losses are attributed to Loans and Investments under the Ministry of Finance and represents 38 per cent of the total figure. The Ministry of Defence ranks second, with its losses standing at 13 per cent of the cumulative total. It is followed by the Office of the President, with 12 per cent, with the Ministry of Local Government ranking fourth, with 11 per cent of the cumulative total. Other expenditure heads responsible for heavy losses during the period under review include: Ministry of Finance, Ministry of Health, Ministry of Foreign Affairs, Ministry of Agriculture, Ministry of Works and Supply and Office of the President and Lusaka Provincial Administration. The Ministry of Defence, the Office of the President and the Zambia Police consistently exceeded their expenditures during the period under review while ministries like Youth and Sport and Community Development under-expended as a result of chronic underfunding. It is important to mention that undisclosed amounts allocated to and appropriated by the Office of the President Special Division do not appear on the radar screen of the Auditor-General. This is because traditionally, amounts of money purported to go towards operations were not accounted for due to the clandestine nature of what the funds were used for. The table below provides a detailed account of losses incurred by the various heads of expenditure during the period under review.

76

77

K'million 1988

K'million 1991

K'Million 1995

K'Million 1998

K'Million 1999

K'Million 2002

K'Million 2004

K'Million CUM' TOTAL

PERCENTAGE OF TOTAL

% TOTAL OF SUBHEAD

State House Office of the president - HQ National Assembly Electoral Commission Public Service Commission Cabinet Office-Office of the President HQ Cabinet Office-Human Resource & Admin (Task Force on Corruption) Cabinet Office-Office of the former President Min Home Affairs - Zambia Police Min Home Affairs - Zambia Police (Paramilitary) Min Energy & Water Devs - Hq Min Home affairs - Prisons Min Foreign Affairs - Hq Min Foreign Affairs - Missions abroad (Lubumbashi) Min Foreign Affairs - Missions abroad (Washington) Min Foreign Affairs - Missions abroad (Lilongwe) Min Foreign Affairs - Missions abroad (Cairo) Min Foreign Affairs - Missions abroad (Kinshasa) Min Foreign Affairs - Missions abroad (Moscow) Min Foreign Affairs - Missions abroad (Gaberone) Min Foreign Affairs - Missions abroad (Lagos) Min Foreign Affairs - Missions abroad (Stockholm) Min Foreign Affairs - Missions abroad (Windhoek) Min Foreign Affairs - Missions abroad (Brussels) Min Foreign Affairs - Missions abroad (Luanda) Min Foreign Affairs - Missions abroad (Harare) 0.062 24 8.866 15 265 7,455 100

836

836.00 265.00 8,405 15,859.60 5,747 5,947.40 15.00

0.094% 0.030% 1.787% 0.670% 0.002%

100

44,246

4,749

48,995.00

5.522% 12.235%

59,423

59,422.85

6.697%

135

135.00 8.87 25.07 1,533.00 1,481.06 585.00 39.80 39.19 -

0.015% 0.001% 0.004%

25.066 1,533 1,481 561

0.003% 0.173% 0.167% 0.066% 3.532%

40

0.004%

39.191

0.004%

4,128

13

4,141.00 152.00 106 109.09 27.77 -

0.467%

152

0.017%

3.290

0.012%

27.770

0.003%

13.176

276

292

580.99 9.56 4.16 -

0.065%

9.562

0.001%

4.162

0.000%

26

1,008

1,034.00 1,583 5,970.00 64.00 71.00

0.117%

4,387

0.673%

64

0.007%

71

0.008%

78

K'million 1988

K'million 1991

K'Million 1995

K'Million 1998

K'Million 1999

K'Million 2002

K'Million 2004

K'Million CUM' TOTAL

PERCENTAGE OF TOTAL

% TOTAL OF SUBHEAD

79

Min Foreign Affairs - Missions abroad (Berlin) Min Foreign Affairs - Missions abroad (Pretoria) Judiciary Hq Judiciary sheriff

16,757

16,757.00 1,751.00 1,148.00 1,771.50 -

1.889%

304 341 21

1,447 807 1,751

0.197% 0.129% 0.200% 0.329%

Min Local Government & Housing District Development Projects Min Local Government & Housing Loans & Investments (Mkts dev prog) with funding from EU Loans & Investments-MOFED Min Information & BroadcastingZAMCOM Public Service Mgt Div Min Local Government & Housing - HQ Min Local Government & Housing Chailmbana Local Government Training School Min Local Government & Housing Adminstration Legal Affairs - HQ Legal Affairs - ZIALE Administrator Generals Chamber Human Rights Commision Min Finance and National Planning - Adminstration Government Stores NCDP Min Community Developmen & Social Services - HQ Min Health - Adminstration Min Health - Adminstration (CBOH) Min Health - Adminstration (various) Min Health - Adminstration (District Basket Funding) Min Health - Adminstration (ZFDS) Min Health - Adminstration (Chainama Hills Hosp) 100.512 18.337 88 21 333,727

5,490

90,723

96,213.00 -

10.844% 10.844%

333,726.80 9,970.00 -

37.614%

9,970

1.124%

1.175%

82

82.00 372.00 21.00 299.00 1,405.00 1,432.80 -

0.009%

372

0.042% 0.002% 0.034% 0.158% 0.161% 0.036%

266 1,405 1,433

33

21.240

6,024

69

101

9,575

28,578

44,367.54 106.64 243.00 3,189.51 -

5.001%

5.001%

0.012%

110

133 786 2,303

0.027% 0.359% 3.603%

1,996

1,996.00 24,279.00 2,503.00 -

0.225%

2,887

4,222

17,170

2.736%

0.000% 0.282%

2,503

0.000%

Min Communications & Transport Min Works & Supply-MV Revolving account Min Works & Supply Min Works & Supply- Govt Printers Min Works & Supply

921.568

929.57 17,932 4,114 17,932.00 4,114.00 160.52 29.00

0.105%

2.021% 0.464% 0.018% 0.003%

2.506%

160.518 29

80

K'million
1988

K'million
1991

K'Million
1995

K'Million
1998

K'Million
1999

K'Million
2002

K'Million
2004

K'Million CUM' TOTAL

PERCENTAGE OF TOTAL

% TOTAL OF SUBHEAD

81

Min Science,Technilogy & Vocational Training Min Higher EducationScience & Technology- ESSP Min Tourism -HQ Min Sport, Youth & Child Development Min Defence - HQ Min Defence - Zambia Army Min Defence - ZAF Min Defence - ZNS Min Education- HQ (ZEPIU) Min Education- Continuing Education Min Education-Primary schools (Lsk) Min Education- HQ (C/Belt) Min Education-Primary schools (C/Belt) Min Education- HQ (Central) Min Education-HQ (Northern) Min Education-Sec schools (Northern) Min Education-HQ (Eastern) Min Education-HQ (Southern) Min Education-HQ (Luapula) Min Education-HQ (Southern) Min Agriculture & Cooperatives Adminstration Min Agriculture & Cooperatives Adminstration Min Agriculture & Cooperatives Vet & Livestock Development Min Agriculture & Cooperatives Extension Services Min Agriculture & Cooperatives Animal Prod & Health Min Agriculture & Cooperatives (RIF) Office of the President-Prov Admin -Lusaka Prov Office of the President-Prisons Lusaka Prov Office of the Prime Minister -Prov Admin -C/belt Prov Office of the Prime Minister -Prov Admin -Central Prov 3.287 451.685

21

21.00 15.72 1,201.00 1,421.00 2,956.00 98,270.69 7,409.00 4,138.00 5,687.23 31.00 54.00 716.00 214.00 6.30 190.00 252.00 75.00 41.00 23.00 11.00 3,035 3,350.19 943 943.00 0.17 1,125 1,125.00 1,434 23,911.60 1,445.00 1,065.00 7,164 7,164.53 498.80

0.002%

15.723 1,201

0.002% 0.135%

1,421 57 236 473 847 96,736 3,644 4,138 860 261 3,699 864 3,765 2,426

0.160% 0.333% 12.710% 11.076% 0.835% 0.466% 0.641% 0.823%

31

0.003%

54 42 674

0.006% 0.081%

214 6 69 121

0.024% 0.001% 0.021%

232 75 41 23 11

20

0.028% 0.008% 0.005% 0.003% 0.001%

109.187

206

0.378%

3.306%

0.000%

0.106%

0.167

0.000%

0.127%

22,478

2.695%

534

911

0.163%

1.298%

1,065

0.120%

0.526

0.807%

20.800

181

297

0.056%

82

K'million
1988

K'million
1991

K'Million
1995

K'Million
1998

K'Million
1999

K'Million
2002

K'Million
2004

K'Million CUM' TOTAL

PERCENTAGE OF TOTAL

% TOTAL OF SUBHEAD

Office of the President-Prisons Central Prov Office of the President-Prov Admin -Northern Prov Office of the President-Prisons Northern Prov Office of the President-Prisons Eastern Prov Office of the President-Prov Admin -Southern Prov Office of the President-Roads Dept -Southern Prov Constitutional & Statutory Expenditure

36

36.00 260.00 229.00 210.00 544 544.00 60.00 11,527.00 887,252.50

0.004%

114

146

0.029%

229

0.026%

210

0.024%

0.061%

60

0.007%

11,527

1.299%

1,955

347,481

21,528

111,947

244,532

159,810

100.000%

83

A few cases which reflect significant trends in revenue losses during the period under review have been selected as extended examples for discussion hereunder. Loans & Investments MOFED Notable among these is a loss incurred under Loans and Investments under the Ministry of Finance and Economic Development. Analysis of the 1995 Auditor-Generals report reveals that it is the single most significant loss in public expenditure from 1984 to 2004 and relates to the financial management for strategic food reserves. This was done under Capital Expenditure under the Ministry of Agriculture Food and Fisheries. Records show that there were serious anomalies ranging from accounting irregularities to the management of bank accounts itere the designated funds were kept. This was further compounded by the non-repayment of loans for fertiliser purchases, mismanagement of the Agriculture Credit Management Programme, the non-collection of interest and principals for the Crop and Fertilizer Marketing and Financing Revolving Fund, irregularities in the procurement of strategic maize reserves and irregularities in the transportation of maize to strategic storage points. The amount of money lost through what appears to be an intricate web of accounting, financial and administrative irregularity was colossal. It is difficult to establish, on the basis of the analysis, whether what was documented in the Auditor-Generals report captures the full scale of irregularity and whether what happened was indeed restricted to the time period reviewed in the report. The above example was chosen for three main reasons. Firstly, maize is a national staple food. Secondly, by virtue of being a national staple, maize is a political cropone which attracts state interventionism in pricing, marketing and storage. Thirdly, history shows that periods of social and political upheaval have been precipitated by shortages of maize and increases in retail price. Thus successive regimes have had adequate reasons for intervening directly in the politics of maize production, pricing, marketing, distribution and storage. The Food Strategic Reserve appears as Item No. 22 and subhead number 502/89 of capital expenditure under the Ministry of Food and Fisheries. It is reflected in the 1995 Auditor-Generals report as a classic example of accounting, financial and administrative irregularity. For instance, the sum of K6,850,000,000 was realized from the sale of a strategic maize reserve which were deposited into interest-bearing accounts with 12 commercial banks by a sales agent during the 1995 financial year. However, there were no details of interest earned on the money. Not only that. Only K4,362,552,376 of the total amount was transferred to the main Maize Revolving Account maintained at the Bank of Zambia as at October 1995.

84

Question is: where did the K2.48 billion go? To date, that money is yet to be accounted for. In addition, there were major weaknesses in the system of internal controls in that the accounts in the unnamed commercial banks were opened without authority from the Secretary to the Treasury (formerly the Permanent Secretary in the Ministry of Finance). There were no books of accounts maintained to record the transactions. Thus it was not possible to establish how much money was earned as interest, how much money was transferred to government accounts at the central bank and what the balances in the accounts were during the period. Records show that in 1995, government leased all its storage sheds to private sector operators and later hired the same sheds for storage of strategic maize reserves. The charges levied by these private traders were a lot higher than those charged by government. It turned out that most of the traders who leased the sheds were government officials. The five companies formed by unidentified government officers were paid a total of K104,574,272 for storage of maize in 1996 from the national treasury. Four of the five officers who were implicated in this irregularity worked at the Ministry of Agriculture; the fifth was employed by the Ministry of Finance. Their identities are not revealed; they are simply identified as Contact Persons V,W,X, Y and Z in the Auditor-Generals report. There are no records to show whether the officers in question were ever disciplined administratively or prosecuted under the relevant laws. From the trends discerned by the study, it is likely that the officers implicated in these irregularities are still on the government payroll.

85

Available records at the Ministry of Agriculture and the Loans and Investment Section of the Ministry of Finance also show gross irregularities in the Agricultural Credit Management Programme (ACMP) and fertilizer purchases during the same period. A check of records for fertilizer sold on credit reveals that there were no ledger cards to show which people got the commodity on credit, no receipts and cash books to show the amounts realized from the sale. It was reported that a total of 47 people received 20,322 metric tonnes of fertilizer valued at K2.94 billion on credit during the 1994/95 farming season. Altogether, they made a 30 per cent of the total sales value as down payment worth K845.255 million. An examination of the debtors schedule at the Ministry of Agriculture shows that though five of the people who reportedly got fertilizer on credit paid K426,678,620, there were neither receipts nor bank deposit slips to prove that the money was indeed deposited. According to the 1995 Auditor-Generals report, by January 1997, the Permanent Secretary reported that he had referred the matter to the Ministry of Legal Affairs for legal action. The report does not state against whom the legal action should be taken and which arm of the Ministry of Legal Affairs should be responsible. This would explain why to date, there is no record to suggest that the wheels of prosecution have begun to grind. Nor are there any records to show that the money has been recovered. The failure to name culprits makes it virtually impossible to prosecute them. All in all, weaknesses in accounting for strategic maize reserves, irregularities in the storage and transportation of maize as well as irregularities in the Agricultural Credit Management Programme and in the purchase of fertilizer during the 1994/95 and 1995/1996 farming season cost the Zambian taxpayer an undisclosed amount of trillions of Kwacha.

86

Ministry of Defence The Ministry of Defence covers the ministerial headquarters next to Cabinet Office, the Zambia Army, the Zambia Air Force (ZAF) and the Zambia National Service (ZNS). During the period under review, the Zambia Army had by far the largest incidence of audit reports. The total losses accruing during the reporting period amounted to K98,270 million which was about 11 per cent of the total losses quantified in the reports reviewed. Of the K98,270 million worth of public money the army lost, K96,736 million was accrued in 2002 alone. The misappropriation of money and the subsequent loss of public money arose as a result of irregular procurements of tents, blankets and beef for service personnel. There were also serious irregularities in the procurement of equipment but the most telling was the failure to account for the use of US$13.58 million(K61,126 million) received from the UN for peacekeeping operations and the payment of US$1.5million (K6,750 million) as deposit for the purchase of trucks from Germany. For some reason, the procurement was not concluded and the money that was paid to the supplier as a deposit was not recovered. Records further show that Zambia Army paid for goods, but there was no evidence the goods were ever supplied or received. Interestingly, ZAF and ZNS do not appear in the Auditor-Generals reports as regularly as the army does. Nevertheless, during the period under review, they incurred large amounts in expenditure losses (K7,409 million and K4,138 million respectively). ZAF had an arrangement to buy fuel from a South African company (SASOL Finance) through a local agent Base Chemicals Ltd. However, through irregular contract arrangements over duty on fuel the contracts, K5,333 million worth of public money was allegedly misappropriated by officers in the air force, according to the Auditor-Generals report.

Cabinet Office The Office of the President Headquarters at Cabinet Office recorded huge amounts of irregular expenditure. This involved the Presidential Fund which took up 86 per cent of the total budget for the office. There were no guidelines provided on the manner in which the Presidential Fund was to be applied and as such there were difficulties in determining the appropriateness of the disbursements.

87

The table below indicated the breakdown of this expenditure:

Sector Education Health Councils Churches Social clubs, NGOs etc Traditional ceremonies Agriculture Parastatals Regional Peace Initiative State visits & functions Local trips Others

Amount Kmillion 2,810 2,096 67 811 754 57 23 1,685 13,195 13,847 293 4,044 39,682

Percentage 7.08 5.28 0.17 2.04 1.90 0.14 0.06 4.25 33.25 34.89 0.74 10.19 100

The table shows that during the period under review, government spent more money on state visits and functions and the regional peace initiative than it spent on education, health, agriculture and local authorities combined. Presidential visits took up more than one-third of the total expenditure for the period under review (34.89 per cent), with the regional peace initiative taking up 33.25 per cent. The total expenditure on education, health, agriculture and municipal councils accounted for 12.59 per cent for the period under review. Money spent on traditional ceremonies outstripped expenditure on agriculture by 0.8 per cent. At 3.94 per cent, total expenditure on social clubs, NGOs and churches for the period under review exceeded expenditure on municipal councils by 3.77 per cent. The study revealed that such expenditure was not uncharacteristic of government. Spending on state visits and politically-motivated activities accounted for an average of 78.14 per cent of public spending, with spending on the social sector, namely, health, education, agriculture, community development and social welfare accounting for 16.32 per cent over a 20-year period. The figures show that on the whole, the social sector tends to lie at the tail-end of government expenditure priorities, confirming Killicks observation that public money is used more by those in power to further their individual interests than the interests of citizens.

88

The 2004 Auditor-Generals report also reveals some interesting features of the financial activities of the Task Force on Corruption under Cabinet Office. It documents large amounts of unconstitutional expenditure, irregularities in the procurement and payment for professional services, non-adherence to tender procedures, failure to keep proper books of accounts and general financial management and neglect of seized assets and chattels. The amounts of losses identified amounted to K59,423 million which is about seven per cent of the total losses accumulated over the period of the review. In the same year there were further anomalies at Cabinet Office where K323 million was misappropriated from money meant to be presidential imprest for a trip to Malawi which never took place. A further K773 million meant for provinces towards Independence Day celebrations was never accounted for. Nor were expenditure returns received. Ministry of Local Government and Housing Gross financial irregularities were noted in the application of the Constituency Development Funds which were supposed to be disbursed through the Ministry of Local Government and Housing. A total of K4,445 million in 1998 and K2,223 million in 2002 were not properly accounted for. There was also the case of an excess of K7,200 million released by the Ministry of Finance for councils. Out of this amount, K4,290 million was used on the ministrys operations, according to the 2002 report. The largest amount of expenditure loss incurred by the ministry during the period under review arises from an omission in the accounting for amounts committed and disbursed by the Japanese government for the rehabilitation of the Great East and the Great North Roads) and amounts paid in liquidated damages on the construction of the Soweto Market. The total expenditure losses stand at K88,873 million and K1,233 million respectively.

89

Ministry of Finance The Ministry of Finance features prominently in all the Auditor-Generals reports during the period under review and shows a characteristic trend in financial anomalies ranging from irregularities in procurements to unretired imprest. The amounts lost in expenditure have ranged from K21 million in 1991 to K28,571 million in 2004. These were for the purchase of briefcases which eventually turned out to be of the wrong specifications. No refunds were received, according to the 1999 report. A check of the reports for 1991, 2002 and 2004 reveal colossal amounts of money in payments to suppliers without accompanying payment vouchers. The most glaring anomaly during the period under review occurred in 1995 when a safari company was paid money in very irregular circumstances. It all started with the refund of foreign currency payment made when the company was given a hunting license. When the license was cancelled, the company claimed the money it had paid. The safari company later sued government for non-payment on account of some misinterpreted policy provision at the time for foreign currency transaction. Though government won the case, it later paid damages worth US$2.32 million against the court ruling. The amount appears in the Auditor-Generals report for 1995 as an expenditure loss. The question is: could the Ministry of Finance have avoided a situation which cost the taxpayer huge sums of money in wasteful expenditure? Ministry of Health Audit reports on the Ministry of Health show a characteristic trend: irregularities in the procurement of requisites. Another characteristic feature during the period under review are significant expenditure losses arising from accounting irregularities where staff seconded from the Ministry of Health to the Central Board of Health were receiving civil service salaries as well as salaries from the board. Accounting irregularities also included the payment for vouchers without supporting documentation and the misapplication of grants for grant-aided institutions at the Ministry Headquarters. In 2002, it incurred losses through wasteful payments in interest and other charges arising from a contract to buy a plane for the Zambia Flying Doctor Service worth K2,503 million.

90

Ministry of Foreign Affairs Reports for the Ministry of Foreign Affairs regarding expenditure losses relate mainly to the foreign missions. These show a trend in irregularities in the payment of allowances, payment for various requisites in the missions, the management of property and the misapplication of visa fees received. If the reports are anything to go by, missions abroad show a lack of prudent financial management of public money and are given to either unbanking revenues such as visa fees or unaccounting for such monies. Typical cases include the payment of K15,230 million for the renovations and rehabilitation of the chancery building for the Berlin mission in 2004. The said payment was for a building which had just been bought and whose scope of work had not been approved by the Ministry of Works and Supply. In the 1995 report, the Lilongwe mission did not declare rentals from one of it properties amounting to K4,325 million. In Windhoek(2002), the story was the same; a total of K546 million worth of rent money could not be accounted for. In a separate development, the sum of K276 million was transferred to the Zambias representative to the UN in New York without Treasury authority. Analysis of the records suggests that such developments have become a trend over the years in Zambias missions abroad. Another trend which seems peculiar to the Ministry of Foreign Affairs is the irregular payments for hotel accommodation for diplomats who have been recalled. According to Ministry of Foreign Affairs regulations, a recalled diplomat and his family are entitled to stay in a hotel for no more than seven days while alternative accommodation is arranged. Interestingly, an unnamed Zambian diplomat to the United Nations who was recalled in October 1994 stayed in a Lusaka hotel for 214 days from October 1994 to July 1995 when he was ordered to vacate the hotel. Altogether, this cost the Zambian taxpayer K24,124,872 instead of K2,030,000 which government should have paid if the diplomat had stayed in the hotel for the stipulated seven days. Records show that the said former diplomat was not redeployed after his recall. Nevertheless, he remained on government payroll from October 1994 to July 1995. There are no records to show whether the costs he irregularly incurred were recovered from him.

91

Ministry of Agriculture and Cooperatives The Ministry showed a general disregard for financial regulations and a penchant for fraud. For example, in 2004, K2,574 million was loaned to 12 officers on the Copperbelt without supporting vouchers. The trend is noticeable in other reports. Another characteristic feature of expenditure loss in the Ministry of Agriculture arises from vaccines and other veterinary requisites not being accounted for. From 1984 to 2004, a total of K984 million worth of veterinary supplies could not be accounted for. In 1999 K22,274 million in counterpart funds for the Rural Investment Fund (RIF) were not released and were not accounted for in the accounts of the RIF. A total of K109 million was lost during the same period in unauthorised payments and unretired imprest. Ministry of Works and Supply There were very few citations in the Auditor-Generals report about the Ministry of Works and Supply during the period under review. However, the three years the ministry appears in the reports are characterized by gross financial anomalies and irregularities. For instance, in 1999 a decision was made to procure furniture and other moveable assets for VIPs. The kitchen at State House was to be refurbished during the same period. Procurements for these were irregular in that tender procedures and the negotiation of the contracts were dubious. The furniture was sourced from a single supplier contrary to government tender regulations and delivered directly to the VIPs homes without going through government stores to be recorded as public property. The total value of the procurement was K16,120 million. Records also show that the cost for the refurbishment of the State House kitchen were irregularly amended on documentation. Altogether, the contract for the refurbishment of the State House kitchen was expanded to include the refurbishment of kitchens for ministers homes at a total cost of K4,112 million. The Government Printers recorded an expenditure loss of K160,518 million according to the 1991 Auditor-Generals report arising from wasteful expenditure, refunds not given by bank on payments effected through them and purchase of supplies that were already available in stores and which were slow moving.

92

Office of the President Provincial Administration The Provincial Administration of the Office of the President incurred losses during the period under review from irregularities which seem to have become a characteristic feature of ministries and overnment departments: unretired imprest, overpayments on contracts and payments for goods that are never received. In 2002, HIPC funds were disbursed through the provincial administrations, but a lot of the money was lost through irregularities in the procurement of civil works and overpayment for work done to the tune of K7164 million for the period under review. In Lusaka, for instance, there was a total of K1,056 million incurred at Lusaka Central and Kamwala Remand prisons for goods that were neither supplied nor received and commitments incurred against a cash budget. Ministry of Education Records during the period under review show that the biggest expenditure losses were incurred under the Basic Education Sector Support Programme (BESSIP) through non-delivery of items bought and the non-availability of vouchers to support payments. For instance, in the 2002 report, a total of K3,699 million meant for the purchase of various requisites for community schools around the country was misappropriated and misapplied. On the whole, all the heads that were subjected to audit scrutiny over the 20-year period revealed a recurrent trend of anomalies and irregularities arising from worsening internal controls. The Public Finance Act and other financial regulations governing government transactions provide a relatively robust and adequate control framework. However, the records show a consistent and flagrant disregard for the rules and procedures. What emerges from the study of public expenditure management and government spending trends is an entrenched culture of misappropriation of funds, blatant fraud, unretired imprest, loss of stores, lack of required financial records, irregular procurements and contracts and a disregard for tender procedures and other financial regulations.

93

3.3 A Review of Government Out-turn and Appropriation Accounts Also included in the Auditor-Generals report is the statement of the Out-turn and Appropriation accounts as well as a record of funding for any deficit or surplus for the financial year under review. An out-turn account is a balance sheet which shows the extent of government indebtedness. An appropriation account shows how much money government received during a specified period, how much was spent and how much remained either as a surplus or a deficit. A review of the reports for the period under review revealed that in 1995, 1998 and 1999, this financial information was not included. No reasons are given for this glaring oversight. However, the revenue statement A1.1 reproduced below shows an equal increase in estimated revenues from K5.5 billion in 1998 to K5.77 trillion in 2004. Actual revenue collected during the period under review exceeded budget by as much as 87 per cent in 2004. Deficits in revenue were recorded only twice in 1991 and 1992. Expenditure statement A1.2 shows the original budget estimates, the supplementary and the actual as incurred in the year and in the four years for which data was available. The level of expenditure rose from a total of K9.9 billion to K9.17 trillion in 2004. There was a decline in supplementary estimates in 2002 and 2004 where the figures stood at eight per cent and 10 per cent respectively of the original budget compared to 20 per cent and 40 per cent in 1991 and 1998. The overall operational statement shows deficits of K2.6 billion in 1998 and K459 billion in 2002. The year 2004 showed a surplus of K215 billion. Financing for the budget during the years under review have not been enough to cover operational deficits.

94

The table below provides a numerative summary of statements for the period under review .
K'million 1988
Revenue - A1.1 Original Supplementary Total Actual Surplus Unrealised Revenue Actual Surplus Supplementary Estimates against Budget Actual against originalEstimates Actual agaisnt total estimates Net Underexpenditure
Expenditure - A1.2

K'million 1991

K'Million 1995
526,557 526,557 550,577 24,020 24,020

K'Million 1998
1,090,001 1,090,001 1,210,000 119,999 119,999

K'Million 1999

K'Million 2002
4,586,112 4,586,112 2,810,096 (1,776,016) (4,167,205) 2,391,189

K'Million 2004
5,771,661 5,771,661 6,203,783 432,122 (338,736) 770,858

K'Million CUM' TOTAL

12,028,831.41 12,028,831 10,824,508.52 (1,204,323) -4,505,941.00 3,301,618

5,552 5,552 5,733 181 181

48,948 48,948 44,319 (4,629) (4,629)

0.00% 103% 103% 3%

8,293 1,674 9,967 8,359 1,608

0.00% 91% 91% -9%

50,231 20,289 70,520 84,724 (14,204)

0.00% 105% 105% 5%

-

0.00% 111% 111% 11%

#DIV/0! #DIV/0! #DIV/0! #DIV/0!

0.00% 61% 61% 52%

5,676,754 449,659

0.00% 107% 107% 13%

8,328,594 845,364 9,173,958 5,988,101 3,185,857

0.00% 90% 90% 27%

14,063,872.24 1,316,986.29 15,380,859 9,350,442.11 6,030,416

Original Supplementary Total Actual Net Under Exp Supplementary Estimates against Budget Actual against originalEstimates Actual agaisnt total estimates Net Underexpenditure
Surplus on Actuals Actual Revenue Actual Expenditure Operational (Deficit)/Surplus Financing Surplus Internal Borrowing External Borrowing Exceptional Revenue Financing (Deficit)/Surplus

6,126,413 3,269,258 2,857,155

20% 101% 84% 16%

40% 169% 120% -20%

#DIV/0! #DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! #DIV/0! #DIV/0!

8% 58% 53% 47%

10% 72% 65% 35%

9% 66% 61% 39%

5,733 8,359 (2,626)

44,319 84,724 (40,404)

550,577 550,577

1,210,000 1,210,000

2,810,096 3,269,258 (459,162)

6,203,783 5,988,101 215,682

10,824,509 9,350,442 1,474,066

(2,626) 48 703 (1,876)

(40,404) 2 1,818 (38,584)

550,577 550,577

1,210,000 1,210,000

(459,162) 483,203 337,819 361,860

215,682 1,320,414 149,891 1,685,987

1,474,066 50 1,806,138 487,710 3,767,964

Source: Auditor-Generals reports for the years under review

Analysis of the revenue and expenditure losses over the period under review shows an upward trend in the amounts of losses incurred from year to year. The revenue losses are significantly higher than the expenditure ones. On the whole, the total losses recorded for the period comes to K2,313,940 million. Revenue losses account for 62 per cent of the total figure. These losses would undoubtedly have drastically reduced the burden of debts the country experienced over the years. However, the amount of revenue and expenditure losses recorded in this report for the period under review is not a true reflection of how much public money has been lost in the last 20 years.

95

Given that not all heads that received public money during the financial year are audited, the amounts recorded herein are an estimate of revenue and expenditure loss. They are meant to provide a fair indication of how public money is managed, spent and accounted for. The trends in the collection of revenue show either an understatement in revenue targets or there is a radical misstatement of revenues in the accounts. This observation notwithstanding, the performance of revenue collection in the key areas noted during the period under review has risen consistently. Sadly, the rise in revenue is not supported by prudent expenditure management. In the main, the brunt of endemic under-expenditure, over-expenditure and mismanagement of public resources documented in the Auditor-Generals report should be borne by those who manage the treasury and control public expenditure.

96

The table below illustrates the revenue and expenditure trends for 1988, 1991, 1995, 1998, 1999, 2002 and 2004 as calculated from the AuditorGenerals reports for the period under review.
K'million 1988
Revenue Losses Expenditure Losses TOTAL LOSSES Adjusted Operational (Deficit)/Surplus 1 Adjusted Operational (Deficit)/Surplus 2 Revenue Losses against Expenditure Losses Revenue Losses Against Total Losses Expenditure Losses against Total Losses -

K'million 1991
15,113 2 15,115

K'Million 1995
6,705 347,481 354,186

K'Million 1998
247,724 21,528 269,252

K'Million 1999
86,028 111,947 197,975

K'Million 2002
255,626 244,532 500,158

K'Million 2004
592,969 159,810 752,779

K'Million CUM' TOTAL

1,204,163.96 885,299.76 2,089,464

(2,626) (2,626)

(25,290) (55,519)

904,763 196,391

1,479,252 940,748

197,975 (197,975)

40,996 (959,320)

968,461 (537,097)

3,563,530 (615,397)

#DIV/0! #DIV/0! #DIV/0!

7,731.52 100% 0%

0.02 2% 98%

11.51 92% 8%

0.77 43% 57%

1.05 51% 49%

3.71 79% 21%

1.36 58% 42%

Note: The shaded area shows periods where no out-turn accounts were provided.

The analysis is based purely on the Auditor-Generals report and does not take into account the justifications provided by the erring ministries. 3.4 An Assessment of General Revenues of the Republic A review of government revenues during the period under review showed major weaknesses in accounting systems. These weaknesses in internal controls culminated in delayed banking and/or failed unreceipted revenues, misappropriation and misapplication of revenue by government officers, failure to issue revenue receipts, uncollected and uncollectible tax arrears as well as outstanding and unenforced bonds and warrants, consistent accounting irregularities, misappropriation of public money and unaccounted for revenue. An examination of reports on revenues during the period under review revealed records on about 16 heads of revenue. The frequency of reports on each of the 16 heads varied from report to report, with some heads having a report on all but two years studied. The head on Income Tax, Customs and VAT is a case in point.

97

The total cumulative losses for the period under review stand at K1,428,639.96 million. The highest cumulative losses are attributable to Income Tax, Customs and VAT and amount to K866.478.51 million, which translates as 61 per cent of the total losses recorded during the period. This is followed by losses from Fees of Court- Ministry of Lands at K347,545.39 million, which is 24 per cent. Losses accruing from fees of Court from the Ministry of Communications & Transport at the Road Traffic Commission were at K75,679.58 million, representing five per cent of total revenue losses over the period. The table below shows the detailed amounts as captured from the reports.

98

K'million 1988

K'million 1991

K'Million 1995

K'Million 1998

K'Million 1999

K'Million 2002

K'Million 2004

K'Million CUM' TOTAL

PERCENTAGE OF TOTAL

Income Tax, Customs & VAT

15,042.51

156,146

79,493

52,344

563,453

866,478.51

71.96%

Fees of Court - Min Commerce & Industry (Assize Dept)

20

19.62

0.00%

Fees of Court Environment(Forestry)

16

16.00

0.00%

Fees of Court - Education (Chiwala & Mpongw e Sec Sch)

2.77

2.77

0.00%

Fees of Court - Home Affairs (Police) Fees of Court - Home Affairs (Immigration) Fees of Court - Home Affairs (Registration) Fees of Court - Home Affairs (Passposrt Office-Kabwe)

284

284.00

0.02%

11.97

327

338.97

0.03%

25

25.00

0.00%

143

143.00

0.01%

Fees of Court- Communications& Transport (Road Traffic) Fees of Court- Communications & Transport (Civil Aviation) Fees of Court- Lands Fees of Court- Works & Supply (roads) Miscellenous - MOFNP Fees of Court- Tourism (NPWS) Fees of Court- Sale of Equip/Furn Execeptional Revenue - Fuel Levy Execeptional Revenue Privatization Fund 1,983 54.11 1.39 1,748

52,240

5,713

3,792

13,935

75,679.58

6.28%

802 63 106,621 14,636

802.00 123,069.39

0.07% 10.22%

865 391 2,245 43 92,400 142

865.40 587.11 2,244.60 43.00 94,383.00

0.07% 0.05% 0.19% 0.00% 7.84%

2,954

36,228

39,182.00

3.25%

15,113

6,705

247,724

86,028

255,626

592,969

1,204,163.96

100.00%

99

Below is a detailed description of selected cases deemed to be reflecting of significant trends in revenue losses during the period under review. Income Tax, Customs and VAT Significant increases in the amounts of money lost were noted for the period under review. The typical areas of loss were the tax arrears, customs and excise and VAT being written off or lost due to tax payers going into liquidation, disappearing and just generally being unable to pay the amounts due. In the majority of cases, not much was done to recover the amounts due. The largest revenue loss during the period under review was recorded in 2004. It was attributed to the failure to meet budgeted amounts of revenue in given taxes worth K282 billion. With customs duty, the typical losses arose from improper attention to provisions of the Customs & Excise Act such as seizure of goods, acquittal of Removals in Bond (RIBs) and staff abetting underdeclarations and non-compliance with customs regulation leading to loss of revenues. Fees of Court Ministry of Communications and Transport The Road Traffic Commission (RTC) which falls under the ministerial jurisdiction of the Ministry of Communications and Transport Commission had the highest incidence of audit reports showing rampant fraud, misappropriations, misapplications and outright theft during the period under review. If available records are anything to go by, RTC is a high revenue collection. However, it is also the source of rampant theft by public servant and misappropriation of public money. For some reason, nothing has been done to check these occurrences or to seal the loopholes that make such vices possible. For instance, in 1998 K43 billion worth of public revenue was not collected. RTC gave no reasons why the revenue was uncollected. In the same year, over K100million was not receipted. Over K530 million was transferred from revenue to ministerial operations without authority and there were irregularities in the procurement and installation of the SADC computerised licensing system which cost well over K8billion to procure and install.

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The 2004 Auditor-Generals report showed the level of impropriety at border posts regarding the collection of toll fees paid by foreign motorists entering Zambia. A classic example is Chirundu where officers could not account for well over US$230,000 as shown by the test checks done during the period. A similar trend was observed in the other border points of Kasumbalesa and Nakonde though these were not fully quantified in the Auditor-Generals reports. Fees of Court- Ministry of Lands This is another revenue head which has shown serious weaknesses in the collection and custody of revenue from various collection points. The Ministry of Lands has been the subject of audit inquiry five times during the period under review. The total losses reported adds up to K228 billion, with 2002 recording the highest single losses in the periods reviewed. It recorded a loss of revenue of K107 billion. Of this amount, K105 billion was uncollected ground rent and K105million was revenue receipts irregularly cancelled. This amount has since grown by K14 billion in 2004. Miscellaneous Ministry of Finance Government pool houses were rented to non-civil servant through the Ministry of Works and Supply. In 1991, the amount of revenue lost in uncollected rent stood at K54 million. Records relating to the rented properties were not properly kept making it difficult for all revenue to be properly accounted for. Exceptional Revenue- Fuel Fund Funds collected by the ZRA and remitted to the Ministry of Finance were not remitted to the National Roads Board as required by law. The amount lost from 1995 to 2002 stood at K92.4billion. Exceptional Revenue- Privatisation Fund The 1995 Auditor-Generals report shows that the proceeds from the sale of state enterprises by ZPA worth K2.95 billion were not remitted to the Privatisation account at the Ministry of Finance and Economic Development, contrary to the provisions of the Privatisation Act. No explanations were given for this anomaly. The 1998 report also shows that K36 billion from the sale of state enterprises was retained by the ZPA, contrary to the Privatization Act. The Minister of Finance does not justify why this happened. In addition, there were no details on record to open the irregularity up for audit scrutiny.

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3.6 The Writing on the Wall It is clear, from the foregoing, that the Auditor-Generals report provides a fairly objective and apolitical basis for investigations into government expenditure. However, it does not tell the whole story. One of the main weaknesses of the report is that it does not identify those implicated in the misappropriation and misapplication of public money. Hiding their identities behind a cloak of secrecy does little to help strengthen the accountability chain as well as the prosecution process. The situation is further accentuated by weaknesses in record keeping by institutions like the Office of the Auditor-General and the Ministry of Finance. Records such as back issues of Auditor-Generals reports, annual financial reports and annual estimates of revenue and expenditure are kept so haphazardly that a lot of vital information is not available. In the absence of comprehensive information about the state of the nations financial accountability and public expenditure management record, it becomes a lot easier for those who manage public money and account for government spending to sweep their excesses under the carpet. For example, how can anyone match allocation with expenditure when there are no back issues of vital records to refer to? These weaknesses notwithstanding, the study of government expenditure trends during the period under review reveals a bleak picture of the state of public expenditure management and financial accountability. It also shows a general lack of integrity by those entrusted with the responsibility of overseeing public money as well as a deeply-rooted sense of indiscipline in the manner in which resources of the state are managed. It is clear from the catalogue of financial and administrative irregularities surrounding the management and expenditure of public money that government leaders and officers know that even when they misappropriate and misapply the resources of state, it will take a long time before they are discovered. Besides, if and when their excesses are discovered, the probability of prosecution or punishment is very small.

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As things stand, government has no record showing how many cases of theft by public servant and misappropriation of public funds it has successfully prosecuted. Nor are there any records to show how many of those who have been implicated in various acts of financial impropriety arising from revelations by the Office of the AuditorGeneral have been punished in line with the law or according to the General Orders, the rule book which governs the professional conduct of public servants. For some reason, the names and identities of those implicated in the acts of financial impropriety involving public money remains a closely guarded secret. In the main, many of them remain in service, are transferred to other ministries or departments, retire, move on to other jobs, drop out of sight or die without being brought to book. The sad irony is that those employed to manage and oversee public expenditure are among the most educated and professionally qualified in the country. Over the years, successive Auditor-Generals have noted glaring weaknesses in the internal control systems of government. Without exception, they have all acknowledged that there is need for the Ministry of Finance to strengthen its supervisory role on the expenditure of public money in order to ensure that transparency and accountability are not stifled but are promoted and enhanced. More recently, they have also acknowledged that the system of cash budgeting introduced by government in 1993 is being circumvented. Records show that the central bank is often instructed by the treasury to issue treasury bills to third parties. Once these treasury bills mature, they are redeemed from the general revenues of the republic. This tends to circumvent the cash budget system, short circuiting Parliaments financial approval and oversight mechanisms. None of this augurs well for public expenditure management and financial accountability. Some say things like these happen because rules and regulations governing public expenditure management and financial accountability are weak. On the contrary. A check of the financial regulations and administrative instruments show that they are robust and adequate. It is up to those who have the warrant to control public expenditure to enforce financial regulations, to ensure that administrative instructions are followed to the letter and to manage their programmes in such a way that they operate within the budgets available to them. But the problem is that public servants either do not follow the rules or choose to throw the rule book out of the window. The fact that this has crystallised over time, becoming an integral part of the monolithic government structure suggests a failure in the public expenditure management system.

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Can the situation change for the better? It can, but only if ordinary citizens, who are the real shareholders in the public corporation we all know as Government, show a keener interest in how their money is managed, spent and accounted for. However, such interest is largely dependent on how the media inform citizens, stimulating active public engagement with issues of public expenditure management and financial accountability. The media can step up to the plate and educate and inform the public about how public money is raised, how it is managed, how it is spent and how it is accounted. Tracking public expenditure coherently and simply would be a practical way to inform public opinion and cultivate greater public interest in issues of governance. Ultimately, the onus of oversight of public money should lie with the public.

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Chapter 4
THE MEDIA, THE PUBLIC AND PUBLIC MONEY 4.1 Public Access to Public Information How much citizens know of what goes on in the corridors of power and in the chambers of government decision making depends on how much they want to know. In other words, their levels of interest play a major part in the process of their own enlightenment. So, for instance, civic-minded Zambian citizens will know that it is customary for the Minister of Finance to present the budget to Parliament on the last Friday of February every financial year. Some may see it as their civic duty to make their way to the National Assembly building on Manda Hill on Budget Day and spend several hours listening to the Minister deliver his speech. Others might choose more convenient options, which could range from listening to the live presentation on the National Assembly frequency modulation (FM) channel, to catching highlights of the budget speech on the radio and television news or reading all about it in the newspapers the following day. A few will use up valuable talk time to phone in to public discussion programmes on the budget on the various radio stations to express their views or seek clarification from panels of experts on what they think about governments revenue collection and estimates of expenditure. How much citizens know of the goings-on around them also depends on two other factors: (1) what the media chooses to tell them, and (2) how much access journalists have to public information in the control of government. Media scholars like Dahlgren argue that the health of democracy is inextricably linked to the health of the systems of communicationsystems which have certain significant functions: surveillance and reporting of the socio-political environment, highlighting issues and developments likely to impinge on the welfare of citizensand mechanisms for holding public officials accountable in their exercise of power. He says the only way
people can exercise their full rights as citizens is if they have access to information, advice, analysis, interpretation and debate on areas that involve public political choices.47

P. Dahlgren. Television and the Public Sphere: Democracy, Citizenship and the Public Sphere. London; Sage.1995.p.2.

47

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In short, a well-functioning democracy depends on media which stimulate public debate by

reconstituting private citizens as a public body in the form of public opinion.48

That is the Western yardstick by which the role of the media in a democracy is measured. In Zambia as in other parts of Africa, the reality is somewhat different, though according to Helge Ronning, the Norwegian media academic, it was widely believed that the African media would assume this role in the early 1990s when many of the countries on the continent were breaking the stranglehold of one-party rule.49 Sadly, this has not happened. Media bodies like the Zambia Chapter of the Media Institute of Southern Africa (MISA) and the Press Association of Zambia (PAZA) say it is as difficult to obtain public information today as it was back then. This is why, they say, it is imperative for a Freedom of Information Bill to be enacted. The draft law has been on the government drawing board for 13 years. According to Information Minister, Vernon Mwaanga, this is because government is still consulting with stakeholders. In its current form, the bill provides for a 30-day waiting period after one files a request for information. Journalists say this will embroil the process of fact finding in more red tape, making public access to public information more difficult than it is already.

B.I. Page. Who Deliberates? Mass Media and Democracy. Chicago: University of Chicago. 1996. p.5. 49 Helge Ronning. Media and Democracy: Theories and Principles with Reference to the African Context. Harare. SAFES Books.1994. p.1

48

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4.2 Public Access to the Media: The Case of Zambia Public access to information is inextricably linked to public access to the media. However, the extent of public access to information and to the media depends on a number of factors, particularly in Africa where, according to Ansah (1991), media are weak because their reach is limited and their markets are too small to sustain them.50 In Zambia, for instance, the total circulation of daily and weekly newspapers in Zambia is under 200,000 a day, a numerically insignificant figure in a nation of over 10 million people.51 With about three million Zambian unable to read or write and about 74 per cent of the population earning under US$1 a day, the impact of newspapers as a source of news and information is likely to be limited. Poverty and illiteracy may restrict public access to media, but in Africa, government remains the largest obstacle, stifling the media with direct measures such as the imposition of repressive media laws, discriminatory licensing, physical attacks on journalists and restrictions on access to information. Economic pressure is one of the ways in which government can kill the privately-owned media. This pressure comes in different forms. The imposition of heavy duties on printing materials can increase the production costs of privately-owned newspapers and eventually force them out of business. Denying the private media access to government advertising is another method of economic control, like President Kaunda did in 1990 when he banned . all parastatal and government institutions from advertising in the church-owned National Mirror, accusing it of printing lies about his regime.

Paul Ansah. Blueprint for Freedom, Index on Censorship. Vol. 9.1991. p.12. The figure cited above is an unofficial estimate based on local intelligence. Currently no circulation records which have been independently audited by the London-based Audit Bureau of Circulation (ABC) exist in Zambia. A 1996 GRZ Information and Media Policy Document placed the combined circulation of the Times of Zambia, the Zambia Daily Mail, the Post, the National Mirror, the Chronicle and the Monitor at 92,000 copies.
51

50

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Peter Mwaura, a Kenyan journalist who worked in Zambia as bureau chief of the Pan-African News Agency (PANA), sums up the reasons why governments in Africa are distrustful of media they do not control:
Many politicians think of the press as a tool in the service of government and politicians in government. News that does not serve the interests of government is deemed irresponsible journalism, anti-government propaganda, sedition or treason52

Mwauras observation could explain why successive regimes have been reluctant to privatise the government-owned media, in spite of official pronouncements to that effect. To date, the state-owned and government-controlled media still run on public money. The Zambia Daily Mail and the Times of Zambia receive financial grants through the Ministry of Information and Broadcasting to subsidise their operations and to save them from collapse, falling newspaper circulation notwithstanding. Today, the media landscape in Zambia has changed significantly, with the most notable developments occurring in the community radio sector. The exact number of radio listeners or television viewers in Zambia is not known, though ZNBC estimates its nationwide listenership at eight million and the number of people who watch TV at 2.5 million during weekends.53 A 2006 Panos Southern Africa inventory of media in Zambia places the total number of radio stations in the country at 31. Out of these, 24 are based in rural areas and are either owned by church organisations, private citizens or community groups.54 The newspaper sector has not experienced the kind of growth that has characterised the radio sector. Admittedly, the Post may evolved with time and circumstance from a small but influential privately-owned weekly to a fully-fledged daily, but on the whole, the private press in Zambia do not have a history of longevity. Between 1991 and 2006, the number of private newspapers that have collapsed after short spells on the street are many. Among the papers that have bitten the dust in the last decade are the Sun, the Chronicle, the Weekly Standard, The Weekly Express, the Confidential and the Advocate, the Monitor (which has since reincarnated as The Monitor and Digest) and the church-owned National Mirror, which recently resurrected after a year in newspaper purgatory.

Mwauras views are contained in a paper he wrote entitled Ethics and the Protection of Journalists in Francis Kasoma ed. Journalism Ethics in Africa.1996 P.93. 53 Source: ZNBC Radio and TV Rate Card (December 2005) 54 Zambia Community Media Forum Needs Assessment Report. Panos Southern Africa. 2006. p.4.

52

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4.3 An Analysis of Content in the Zambian Media Media content in Zambia is essentially political, irrespective of media ownership. Banda (1997) observes that the media in Zambia are polarised along definite political lines and identifies three distinct forms of journalism based on his analysis of newspaper content. He writes:
The first had to do with administrative journalism which existed to service the status quo. The state-owned media are clearly biased in favour of the ruling party The second had to with critical journalism that existed to popularise other views. This was usually supportive of Opposition statements. Into this slot could be located the PostThe third has to do with a middle-ground journalism that seemed to give a semblance of equal coverage to all, or almost all, political stakeholdersThis is not to say these were absolutely unbiased or objective; rather, it is to say that it was extremely difficult to detect a clear adherence to, or abhorrence, for a certain political party. Into this slot could be located the Mirror55

The political character of media content is a worldwide phenomenon and not entirely peculiar to Zambia, concedes David Kimble, author of The Machinery of Self-Government:
An analysis of the headlines taken from all the papers in any country on the same day will show that many are angled politically. The amount of space given to the same news item may vary according to the political views of the paper.

Kimbles views are as valid now as they were in 1959 when he first expressed them. Most editors see the day-to-day developments in the world of politics as well as in the executive and legislative sectors of government as the main essence of news. This explains the prevalence of political news in the Zambian media. It also explains why the News Desk is held to be the nerve centre of the entire editorial operation. Given this scenario, what kind of editorial importance do the local media attach to public money?

55

Fackson Banda. Elections and the Press in Zambia: The Case of the 1996 Polls. Lusaka. ZIMA. 1997. pp.62-63.

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4.4 Media Coverage of Public Money The media in Zambia consistently covers public money, as an analysis of media content will show. However, coverage is mainly administrative, focusing more on official events such as the presentation of the national budget by the Minister of Finance and the submission of the Auditor-Generals report to the Republican President than on the interpretation of their underlying significance. A check of media content further shows that the annual financial report prepared by the Accountant-General and submitted to Parliament by the Minister of Finance is not covered, even though it is more up to date than the Auditor-Generals report. Estimates of revenue and expenditure as contained in the Yellow Book tend to make headlines every financial year, though the degree of emphasis varies from medium to medium. For instance, between 9th and 13th February 2006, the Zambia Daily Mail published five news reports based on estimates of revenue and expenditure for the 2006 financial year. The reports noted how much money had been proposed in the budget for the tripartite elections, by-elections, petition hearings and for observing elections, how much had been allocated to pay the gratuities for Central Board of Health (CBoH) which has since been dissolved and for recruiting about 800 health workers. A report dated 13 February noted that PAYE was higher than any single tax government intended to use to collect revenue in the 2006 financial year. Similar reports appeared in the Times of Zambia and the Post during the same period, confirming Chirwas observation that both the government-owned and the privately-owned press tended to cover non-political events and issues in a similar manner.56

56

Chris Chirwa. Press Freedom in Zambia. Lusaka. ZIMA.1997.p.28.

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Television coverage of public money is qualitatively different from newspaper reports essentially because of the peculiarities of the medium. According to ZNBC Assignment Editor, Henry Ngilazi, the medium of television constrains news coverage in very definite ways. In a 30-minute TV newscast, we can only accommodate 13 reports, with each running no more than 1 minute 20 seconds. So when we are covering the budget, all we can do is select three or four major items of importance for the main bulletin and select a few others for the news brief. It is not possible to be very detailed in television news reporting. Investigative reporting is out of the question because we just dont have the resources or the time for that sort of thing. We rely on scheduled assignments and often this means following the Minister of Finance. With the Auditor-Generals report, we merely get items of interest because of time limitations, but we have had the AuditorGeneral on the news to discuss the main findings of the report and also to talk about the shortcomings of her office. The constraints of time motivated ZNBC to attempt to change the face of television news in 1998 with an extended version of reportage. A Current Affairs team was constituted to provide additional news of up to 30 minutes on Mondays and Fridays. According to Reuben Kajokoto, the first manager of the ZNBC Current Affairs team, the aim of the Newshour segment (as this addition to the television news bulletin was called) was to bring depth and context to reporting. We had the latitude to produce five-minute reports on a wide range of subjects which accommodated other voices. If the budget was read, for instance, we took the trouble to find out what ordinary people in the rural areas and off the line of rail felt about some of the measures that had been taken or what they thought the impact would be on them. But slowly, the concept started to change and politicians started taking advantage of this slot for their own ends. In the end, the whole idea was diluted and eventually had to be scrapped altogether. This has deprived the public of substance in the news, Kajokoto said. He says though the ZNBC newsroom today has more cameras, more vehicles and more staff than it had when the Current Affairs Newshour initiative was launched eight years ago, reporters do not seem to have the desire to report the news with depth and with public interest in mind.

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But according to Zambia Daily Mail News Editor, Joy Sata, when it comes to covering public expenditure, the biggest constraint is the fact that the Auditor-Generals report is a few years too late. The delay doesnt work well for a newspaper. It is very difficult to follow up how government spent money in a particular year when the report is three years behind, she said. Post News Editor, Webster Malido agrees. He said: As a newspaper, we are not assisted by the lapse from the time the budget is presented, the money is spent and eventually accounted for. It becomes impractical to start a proper follow-up of government expenditure under these circumstances. If the reports were coming out on time, we could do our own analyses, show how much was disbursed, how much was spent and come up with a better picture of public expenditure. We try to follow up some of the disclosures in the public domain but sometimes, we are banned from attending Public Accounts Committee sittings at Parliament especially when they are discussing the Ministry of Defence or issues to do with the expenditure to do with national security. Mind you, these are departments which receive the most public funding. In retrospect, the lack of openness in looking at the books of the intelligence wings has led to serious abuse as we are seeing from the cases in court. Today, people are discovering that actually, these institutions were merely a conduit for abusing public funds. His statement comes in the wake of revelations in the ongoing trial of former Zambia National Commercial Bank (ZANACO) managing director, Samuel Musonda on charges of abuse of authority of office which implicates former intelligence chief, Xavier Chungu in the misapplication of public money.

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In a letter to the then Finance Minister, Ronald Penza dated 14th April 1995 and marked State Secret, Chungu wrote:
Whilst I appreciate the budget limitations and indeed the IMF programme, among other things, I wish once more to appeal for assistance. By the nature of our operations, I am not, however, at liberty to reveal the exact nature of the projects I am embarking on, hence their importance and benefit to the government and the people of ZambiaIn this regard, your continued financial assistance in general and the clearing of the debts accrued during the Second Republic shall continue to be highly valued. As you may be aware, the suppliers of the kind of services in question tend to be specialised and this limits our ability to choose who to deal with. As such, unless we paid the outstanding debts the service would not be able to procure the muchneeded servicesThe amount involved are quite modest and can therefore be accommodated within the external debt service budget without drawing the attention of the IMF and the donor community57

Malido said such revelations made it imperative that stringent limitations are imposed on so-called sensitive institutions such as the intelligence service in the interest of the prudent management of public resources and given the large amounts of money allocated to them. This brings us back to the issue of access to public information and the need for a Freedom of Information Act. Government has concerns about how far we can manage information considered to be of a security nature, but for us, it is difficult to divide what is national security and what is public interest. That is the complication we have as a newspaper. We dont want to compromise our security as a nation, but at the same time, we also dont want to compromise the expenditure of our resources. We have to ask ourselves: where is the greatest harm? To prohibit publication of information on matters of national security or to allow people to abuse public resources in the name of national security? Right now, there is no legal provision to compel government to give us access to information regarding republican expenditure. It is not easy to go to a government ministry or department and ask to look at their books. At best, we can only rely on whistleblowers, Malido said. Whether through their reliance on whistleblowers or through their own resourcefulness, the private press has been a consistent thorn in the side of the ruling regime, exposing the underbelly of government spending and the misappropriation of public money since 1991.

Extracts of Xavier Chungus letter to Ronald Penza headed Financial Assistance to Special Division were published in the Zambia Daily Mail on 16th May 2006 under the headline How Chungu Disguised OP Debts. Details from the letter also appeared in the Post on the same day under the headline Chinyama Exposes Contents of Secret Letter.

57

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An analysis of media coverage of public money over the last 15 years show that 94.6 per cent of the disclosures of cases of misappropriation of public money have been published in the Post, with the remaining 5.4 per cent appearing in other private newspapers, notably the Chronicle (which went out of circulation almost a decade ago) the Monitor (which has since reincarnated as the Monitor and Digest) and more recently, the Guardian Weekly.58 One of the most spectacular disclosures ever to be published in a Zambian newspaper appeared in the Post on 11th May 2001. In an eight-page supplement titled Cobalt Scam, the paper disclosed that government had tried to cover up irregular sales of US$95 million worth of ZCCM cobalt, resulting in discrepancies of US$60 million through an Israeli owned company, Metal Resources Group (MRG) . The revelations came to light in a forensic audit of cobalt sales for the 1998/1999 period by a firm of Mauritian chartered accountants, De Chazal du Mee. The audit, which was an IMF conditionality and financed by the European Union, revealed that huge discounts as well as a US$10 million commission had been unjustifiably paid to two Israeli brothers, Amir and Rami Weissfisch resulting in a loss of US$150 million to ZCCM. The auditors accused ZCCM chief executive, Edward Shamutete and the chairman of the ZCCM board, Mr. Shalaulwa Shimukowa of obstructing their investigations by refusing to answer their questions or provide the evidence they requested. According to the Post report, the auditors reported an absence of accounting records for the sales cycle including: original sales invoices for any cobalt sales; any proper sales listings; sales ledger for any cobalt customers; any bank statements for the relevant ZCCM bank accounts into which cobalt sales proceeds were normally paid by telegraphic transfer; any cash books where sales of cobalt would be recorded. They also found incomplete files and photocopies of unsigned contracts, internal sales notes and incomplete set of monthly invoices. But perhaps the most significant disclosure of all revolved around deductions the Post made based on difference between the prevailing price of cobalt and copper on the London Metal Exchange (LME) during the period under review and the amount that MRG actually paid for the commodities.

58

Based on a newspaper content analysis by Edem Djokotoe between April and May 2006.

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The newspaper made a number of observations and raised the following concerns:
During 1998, ZCCM exported 213,383 metric tonnes of copper and 4,713 tonnes of cobalt. The revenue from these sales amounted to US$487 million. However, the average price for copper on the LME was 75 cents/pound and the average for cobalt was US$21.93/pound. If you do the arithmetic, ZCCM should have earned US$580 million, NOT 487 million. Where did the difference of $93million go? During 1999, ZCCM exported 200,669 metric tonnes of copper and 43,424 tonnes of cobalt. The revenue earned from these sales amounted to US$387 million. However, the average price for copper on the LME was 72 cents/pound and the average price for cobalt was $19.25/pound. If you do the arithmetic, ZCCM should have earned 454 million, NOT $387 million. Where did the difference of $67 million go? So the total amount that is missing is about $160 million. Before proposing an explanation, lets avoid trying to make the problem disappear by juggling figures. Data on ZCCM exports during this period are available on a month-by-month basis for both copper and cobalt and prices are available on a daily basis. ZCCM was paid normally between 4 and 6 weeks after the metal was shipped outside of Zambia. So there was normal lag in time between shipment and receipt of payment. On a month by month basis, revenue and export data dont necessarily match. But over a period of two years, this difference in timing between been export and payment should have disappeared. In fact, since ZCCM exports declinedduring 1998/1999, the timing difference should, if anything, should have resulted in slightly higher revenues than estimated on the basis of exports. Clearly, the data doesnt add up. Part of the answer to the missing money comes out clearly in the cobalt study. ZCCM lost US$60 million because of irregularities in cobalt sales and payment was never received for US$20 million worth of cobalt. What happened to the rest of the missing moneyanother US$80 million or so?

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In all, the auditor, Andrew Stephenson of De Chazal Du Mee asked Shamutete and Shimukowa 18 questions, including why Zambian cobalt was sold to MRG at 55 per cent less that it actually cost on the international market. All 18 questions went unanswered. Interestingly, ZCCMs strange relationship with MRG first made headlines two years earlier. The Times of Zambia had, on 7th January 1999, reported ZCCMs denial that it had appointed MRG to be its exclusive agents worldwide, with the exception of France, Switzerland and Japan. On 13th January 1999, the paper reported ZCCMs confirmation that they had signed an agreement with MRG. The agreement, which was dated 12th October 1999, came into force on 1st December 1998 and included the following clauses: That the agreement shall stay in force for three years until 31st December 2001 and may not be terminated prior to this; ZCCM shall undertake not to sell directly or indirectly to a third party within the stipulated area; Any sales outside the area would have a clause in them restricting resale or delivery within the area; ZCCM has also undertaken to inform MRG of all the terms that it sells to third parties outside the area covered by the agreement; In the event of privatisation, ZCCM unconditionally and irrevocably undertakes that the cobalt sales agency agreement shall be novated to the new owners. Today, five years down the line, the circumstances surrounding the irregular sale of cobalt are still remain shrouded in mystery. Those implicated in the irregular sale have not been prosecuted, But the consistency with which the private press, particularly the Post, has drawn public attention to the mismanagement and misappropriation of public money in the face of great odds is commendable, something that should be emulated by other media.

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Since the publication of the Cobalt Scam, the Post has made several landmark editorial revelations between May and June 2001 which cast serious aspersions on governments accountability record. The dossier of financial irregularities speak for itself, as the examples below show: On 15th May, The Post revealed that K2 billion belonging to National Assembly was given to then Works and Supply Minister, Godden Mandandi and then Home Affairs Minister, Peter Machungwa just before the MMD convention in Kabwe for essential government services. Based on the Post expose, the Anti-Corruption Commission (ACC) instituted investigations into the alleged diversion of public funds for a ruling party function. On 17th May 2001, the Post disclosed that Mandandi diverted K2.5 billion meant for the Kasama-Luwingu-Mansa road to the MMD convention in Kabwe. According to a letter of instruction from Finance Permanent Secretary, Herrick Mpuku to the Bank of Zambia governor dated 25 April 2001, the central bank was asked to transfer K2.5 billion from the GRZ Main Account 99 to the Ministry of Works and Supply Control Account No. 61. On 22nd May 2001, the Post reported that President Chiluba summoned the Inspector-General of Police, Silas Ngangula to State House to find out how details about investigations into the disappearance of petroleum products worth K61 billion intended for the Indeni Oil Refinery in Ndola found themselves in a private newspaper. The report quoted intelligence sources. A day earlier, the paper had published a report implicating State House in the disappearance of 763 tankers laden with petroleum products. Police confirmed the missing fuel but would not disclose whether State House was involved. In a statement, police spokesperson Lemmy Kajoba, said: It is a criminal offence to leak documents and it is equally an offence to receive the documents with the full knowledge that they were illegally obtained.

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On 31st May 2001, the nation woke up to a headline in the Post which read: State House Diverts $1 m. According to the report, the money was part of US$2.5 million meant for the purchase of 50,000 metric tonnes of maize in 1998 through a Canadian company called Carlington Sales Company for national consumption. The Post quoted from a letter from Deputy Bank of Zambia governor D. Mbalashi letter dated 18th March 1998 confirming the payment arrangements for the US$2.5 million to President Chilubas special assistant for economic and development affairs, Donald Chanda. The Post reported that following the confirmed payment of the money, State House, through Donald Chanda, effected the diversion of US$1million to one Mr. Ari-Ben Monashe of Carlington Sales Company for an unclear lobbying agreement entered into on 10th March, 1998 when the maize purchase deal was concluded. Chandas letter read in part:I hereby authorise the deduction from the above referenced contract of US$2,384,531.30 and final payment for the lobbying entered into on 10th March in Lusaka. The question the Post asked the nation regarding this transaction was this: why did State House get involved in the purchase of maize instead of the Ministry of Agriculture? The damning disclosures did not end there. On 12th June 2001, a Post report that government had sold the OAU Millennium Village to a Libyan company made headlines. Quoting sources at the Ministry of Lands and the Zambia Investment Centre, paper reported that the Millennium Village has been sold to Libyan Arab Foreign Investment Company (LAFICO) for US$8.4 million and title deed certificate number L11356 had been issued to that effect. It noted that under the law, a foreign entity could not own land in Zambia unless it had an investment licence or on the special authority of the Republican President, using the powers vested in him by the law as the custodian of the land. In 2000, government started the project supposedly with the intention of accommodating foreign heads of state who would be coming to embark on the construction of the village as accommodation for the heads of state who were scheduled to attend the 37th OAU summit in Lusaka in July 2001. However, chief government spokesperson and Information Minister, Vernon Mwaanga said the Millennium Village was not part of governments plan for the OAU.

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He said the Millennium Village was President Chilubas Special Assistant for Press and Public Relations, Richard Sakalas private project. However, the fact that it was funded from the national treasury raises questions about how public money found itself in a private project. But the most damning of all disclosures of wanton misappropriation of public money by political leaders and their agents in what has come to be known as The Matrix of Plunder. In a three-part series published on the 25th, 27th June and 5th July 2002 , the Post revealed how, from 1995, millions of US dollars allocated to the Zambia Security Intelligence Services were transferred from its Permace-General account at ZANACO Lusaka to an account in the name of Zamtrop Limited at ZANACO London. Another account was opened in ZANACO Lusaka in the name of FTJ Centre and FTJ Institute. Funds from all these accounts, the Post reported, were disbursed to Standard Chartered accounts in Geneva, Brussels and the Channel Islands and were used to pay for the personal expenses of President Chiluba and his cronies. For instance, on November 28, 2001, the FTJ Institute transferred US$81,629.09 to a Standard Chartered account in the Channel islands. The beneficiary, in this particular case, was a Mr. David Stally. Other beneficiaries include partners in a London law called Meer, Care and Desai. Records show that the partners, all of whom have links with Zambia, received almost US$9million from the Zamtrop account. The paper trail detailing the Matrix of Plunder also shows how cash payments of US$25,000 and 5,000 were made out to President Chilubas wife at the time, Vera from ZCCM in response to a request from the head of state. The Post revealed that cash payments from ZSIS cannot be tallied with official business and did not adhere to proper government financial controls. The accounts were run on a single signature in the name of Xavier Chungu, the Director of ZSIS who allegedly paid US$1,238, 124 to Attan Shansonga, who was then Zambias Ambassador to the United States. Financial records further show that Chungu spent over US$1.2 million buying clothes and jewellery for himself from boutiques in Geneva, Switzerland. The Post reported that between 1995 and 2001, the Ministry of Finance deposited US$36,512,084.17 to the ZSIS account in London. The amounts, records show, were more than double what Parliament voted for.

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On the 5th of July 2002, the Post reported, in the third and final instalment of the Matrix of Plunder that between December 1999 and July 2001, a gross total of US$52, 715, 184.90 was deposited in the ZSIS Limited. Out of this, US$52,626,652.24 was drawn under the single signature of Xavier Chungu. The sum of US$1million was deposited from a Citibank account in Geneva and another US$1m from Leadenhall Trust sent via Barclays Bank in Nassau, Bahamas. The paper trial shows that US$14,826 went to pay for President Chilubas fees at the University of Warwick. Other amounts went towards the school fees of the Presidents children. For instance, Helen Chiluba reportedly received cash and school fees worth US$91,645.43; Hilda Chiluba got US$33, 725.58, Miko Chiluba got US$3,046.20 and Veronica Chiluba got US$4,000. School fees for Frederick Chiluba Jr. at Gstaad International School and Albion International Study Centre amounting to US$93,363.17 were paid from the said account. Records also show that the amount of US$276,434.48 were drawn as school fees for Xavier Chungus s child, Christopher. Chungu reportedly made cash withdrawals amounting to US$506,903.93 during the period under review. The Posts three-part Matrix of Plunder series blew the lid off the irregular transfers of public money into offshore foreign accounts for private use. The reports proved to be a major catalyst in the arrest and trial of Second Republican President Frederick Chiluba and Access Financial Services Limited (AFSL) directors Aaron Chungu and Faustin Kabwe, former chief executive for the Zambia Consolidated Copper Mines (ZCCM), Francis Kaunda and Stella Chibanda, a former permanent secretary in the Chiluba administration. The five are currently facing embezzlement charges in a London court. They have all pleaded not guilty in a case in which the Attorney-General, who is also the Minister of Justice, George Kunda, is representing the Zambian government.

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President Chiluba has said the London court has no jurisdiction in matters relating to his 10-year rule and has asked that the case should be heard in a Zambian court. He and his co-accused have since filed a petition in the Lusaka High Court seeking the civil proceedings in England to be discontinued because they say this would prejudice the criminal proceedings against them in Zambia, thus denying them the right to a fair trial as guaranteed under Article 18 of the Constitution of Zambia. Their concerns notwithstanding, the trial in the London High Court continues, as pieces in a seemingly complex jigsaw of evidence continue to mount. The prosecution is relying on the expert testimony of a Bank of Zambia inspector by the name of Autmet Maulu Hamunjele in the unfolding courtroom drama. He is the mystery financial analyst who authored the elaborate report on irregular movement of money from the Ministry of Finance through the governments Zambia National Commercial Bank (ZANACO) account in the United Kingdom to Meer, Care and Desai, a London law firm and then to AFSL in Zambia in what has since become as The Matrix of Plunder. Predictably, none of these disclosures were ever initiated by the government media. However, once the disclosures led to arrests and prosecution for embezzlement, theft by public servant and abuse of authority involving public money, the government-owned media and the other privately-owned media has reported them consistently. For instance, on 14th February 2006, the Times of Zambia reported that Second Republican President Frederick Chiluba pleaded not guilty to three amended counts of theft by public servant in a Lusaka magistrates court. On 3rd March 2006, the paper reported that Chiluba and four others
facing charges of plunder of national resources are opposed to the inspection of documents by a team of lawyers from London representing the Attorney-General of Zambia, George Kunda. The four argued in their letter to the Ministry of Justice that the documents were questionable. This is a matter in which the London High Court has effected a worldwide freezing order of Chilubas assets and four others amounting to 13 million.

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In the main, coverage of public money in the government-owned media has been opportunistic, as the examples cited above show. Revelations regarding misappropriation and mismanagement of public money by the media have been largely driven by the private press. It was a private newspaper, the Guardian Weekly which published a report that the Zambia Air Force was paying over K20 million for two parking slots at the Lusaka Golf Club for the ZAF commander and his deputy when some 80 per cent of the population were living on under US$ 1 a day. The paper reported in its 31st December 2005-6th January 2006 edition that workers at the club said they were ordered to remove the ZAF slot signs last week after the Guardian Weekly published pictures of them. But the fact of the matter is that the slots are still being reserved for the ZAF commander and his deputy. Its just that we have removed the signs. Much as such disclosures draw public attention to the financial excesses to those in public office, the status quo raises serious implications for civil engagement and freedom of the press, say Mwanawina and Akapelwa. They observe that
the independent press has come under constant fire for printing allegations on the use of public funds and resources to sustain actions outside of Zambias borders and about the Presidents use of public funds. Civil society and especially the press find themselves in a difficult situation in such cases as they have only limited financial means to seek recourse from the judiciary.59

It is clear, in view of this situation, that the constant struggle by the private media to hold government accountable for its expenditure and management of public money is not one it can win without the greater involvement of ordinary citizens and civil groups. Sometimes, the greatest pressure on government to be accountable for its actions has come from the international press and Western donors. The international media, for their part, have often drawn worldwide attention to some of the excesses of African political leaders and their extravagances. A recent case in point involved President of Congo Brazaville, Denis Sassou-Nguesso.

59

Mwanawina et. al. p.24.

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On 12 February 2006, the Sunday Times of London reported how Sassou-Nguesso spent US$295,000 on hotel bills during an eight-day stay in New York when he went to attend the UN summit last year. Nguesso reportedly travelled with an entourage of more than 50 people and occupied 25 rooms at an exclusive hotel near the UN Headquarters. The newspaper report, which was based on court documents, read in part:
Sassou-Nguesso, who is chairman of the African Union, representing all the continents governments, is negotiating with the World Bank and the International Monetary Fund (IMF) to cancel many of his countrys debts on grounds that it cannot afford to repay them. Yet the president spent a week last September in the Palace Hotel, one of Manhattans most prestigious addresses. He paid US$8,500 a night for a three-storey suite with art deco furniture, a Jacuzzi bath tub and a 50-inch plasma television screen. His room service charges on September 18 alone came to more than US$2,000. More than 70 per cent of the 3 million people in his republic live on less than 1.15 a day...The main purpose of the presidents visit was to deliver a 15-minute speech to the general assemblys 60th anniversary summit.60

According to the Sunday Times report, the details of the SassouNguessos extravagance might never have been made public had some of the Congo-Brazavilles creditors not been pursuing the country through US and British courts over repayment of debts. Since then, anti-corruption campaigners have written to the head of the World Bank, Paul Wolfowitz urging him to oppose debt relief for Congo Brazaville until there has been a massive cleaning up of the countrys finances, which are heavily dependent on oil revenues. Through such activism and through the imposition of conditionalities, donors and powerful interest groups try to amplify the weak voice of citizens in keeping political leaders in check. One of the main objective of poverty reduction strategies, according to the 2004 World Development Report, is to encourage and promote a stronger citizen voice, with particular emphasis on public spending. However, this is not as easy as it sounds.

Tony Allen-Mills article, which was headlined Congo leaders 169,000 hotel bill, noted that Sassou-Nguessos aides paid startled hotel staff by paying his bills in cash!

60

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Why? Because
Faced with classrooms without teachers, clinics without medicines, dry taps, unlit homes and corrupt police, poor citizens often feel powerless. Elected representatives seem answerable only to the more powerful interests in society61

In short, the pervasiveness of poverty has a way of making poor people susceptible to the wiles of politicians and the power players with the means to buy their allegiance, their support and their votes with bags of mealie meal, pieces of cloth, blankets, bicycles and whatever goods are legal tender in the game of political patronage. Many people feel government is doing them a favour when it builds schools, clinics in their areas or provide them with clean drinking water and other social amenities; they believe that Constituency Development Funds are a reward for political loyalty. Few believe that government is merely doing its job using the taxes people pay and the money realised from national resources to improve the quality of their lives. Sadly, the idea of voting for individuals, groups of individuals or political parties to bring development to their provinces, districts and constituencies is deeply ingrained in the political psyche of the large majority of citizens. Those who know better are dissatisfied with the way their tax money is used and with the sheer lack of public expenditure in capital projects and social amenities. Lubinda Nyambe, a home owner who lives in Rhodes Park in Lusaka is one such person. Mr. Nyambe said there is very little agitation by tax-paying Zambians about how their money is used. He explained why he, as a taxpayer, is an angry man.
People in this country are just not angry enough and their complacency is what is killing this country. Look at the state of the road in this place. It has been getting worse every year. As a property owner and rate payer, I have written to government several times, but nobody pays attention. A few weeks ago, a few young men in the area came together to form a committee to raise money to repair the roads in the neighbourhood. They came to my home to ask me to contribute, but I refused because I pay tax on this property and because of that, I expect government to repair the road. The neighbours across the road from me have also refused to pay. The question we should be asking government is: where is our tax going?

Deepa Narayan, Raj Patel, Kai Schafft, Anne Rademacher and Sarah Koch-Schulte. Voices of the Poor: Can Anyone Hear Us? New York. Oxford University Press. 2000. p. 12.

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Indeed where does the tax money go? This is one question which the average Danish taxpayer does not ask, even though Denmark has one of the highest tax rates in the world. According to the Director for Compliance at the Danish Tax Commission, Steffen Hansen, this is because citizens can see the benefits of prudent and equitable public expenditure and financial accountability. About 4.5 million people out of the countrys 5.2 million-strong population pay up to 60 per cent of their income as tax, records show. Danes also pay 25 per cent Value Added Tax, which is 7.5 per cent more than Zambians pay on goods and services.62 Social welfare gobbles the largest chunk of tax revenue, says Hansen. And Tommy Simonsen, a working Danish citizen, explains why the heavy tax burden notwithstanding, the average Dane enjoys the benefits of paying tax.
In Denmark, we keep half the money we earn. The other half goes to the state. But this is not a bad thing because the taxes we pay go to the public service sector, the maintenance of roads, parks, nature, social welfare, free education, free hospitals and free dental care until every childs 18th birthday.63

Another Dane, Per Osterlund, a communications consultant, agrees.

We dont have to worry about our money ending up in a politician or civil servants pocket. All we have to worry about is whether government has the right priorities. The trick is how you make sure public money is spent in the service of the public and not in the service of the politician or the civil servant. People also have to get the notion that tax money is our money. If you dont have a feeling like that, you will not having people denouncing corruption.64

The Danish experience is one example Zambia would do well to emulate. Citizens may have no choice but to pay tax because that is a statutory obligation. However, they have to believe that the money they pay is not abused and mismanaged by those entrusted to run public enterprises and to oversee the expenditure of public money. They have to reject the notion that public money is for government to use as it sees fit. The following chapter will look at ways in which the management of public expenditure can be improved.

62 63

Speedwell Mupuchi, Danes Benefits of Paying Tax, Sunday Post, 15 July 2006. p.20 Ibid. 64 Ibid. p.21

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Chapter 5
TOWARDS GREATER OVERSIGHT OF PUBLIC MONEY 5.1 Mending the Cracks in Financial Accountability Four decades of political independence have not rationalised the management of Zambian public money or refined the system of financial accountability. The study of government expenditure trends from 1984 to 2004 reveals widening cracks in public expenditure management and financial accountability arising from weaknesses in control systems. People like the current Auditor-General, Ms. Chifungula, who has worked in the government financial sector for 31years, feels the situation has gone from bad to worse in recent times. She says there is more wastage of public money now than there used to be in 1975 when she joined the civil service:
In the past, there were lesser queries. There were punitive measures against those who abused public funds, very serious measures. Controlling officers were dismissed over things like that. I remember one controlling officer who was dismissed in 1989 for drawing fuel from government even though he was being paid fuel allowance. But when you look at our later reports, things like that seem to be normal. All the culprits do is pay back the money and remain in service. Back then, if someone did a thing like that, they were immediately brought to book. There was sanity. You didnt have a situation where someone merely issued instructions for money where there was no budget line. Before he approved any payment, the senior finance officer would look at the Yellow Book to see if there was any money for the institution making the request. Because of these systems, auditing was routine. Back then, the internal audit function was non-existent. We just had the external audit

Today, deficiencies in all areas of the public financial management cycle, from Parliamentary oversight and budget preparation to internal controls and external audit have attracted the attention as well as the intervention of various donors, including the United Kingdom, the European Union (EU), Germany, Norway, Denmark, Finland, Ireland, the Netherlands, Sweden and the United Nations Development Programme . The World Bank is one of the agencies supporting this multi-donor effort to provide technical and financial assistance to the Zambian government in the area of public expenditure management. This is part of the Public Sector Management Programme Support Project (PSMPSP).

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To this end, government will receive a total of US$74 million over a fiveyear period towards Public Expenditure Management and Financial Accountability (PEMFA). The bulk of the money will come from the UK through the Department for International Development (DfID) and the EU. The funds will, among other things, go towards a computer-based integrated financial management information system (IFMIS) which will cover the whole country, making it possible to monitor how government ministries and departments spend public money. The system is expected to make it difficult for seal the loopholes that made it possible for K73 billion worth of Basic Education Sub-Sector Investment Programme (BESSIP) funds to disappear from the government radar screen, a detail which was discovered by the Office of the AuditorGeneral three years after the money went missing. Computerising record keeping should also make it possible for government to take quick action against those controlling officers who misapply or misappropriate public money or exceed their spending ceilings. Part of the money will go towards strengthening the linkages between the Office of the Auditor General and Zambia Institute of Chartered Accountants (ZICA), the Anti-Corruption Commission (ACC), the Drug Enforcement Commission (DEC), and the Office of the Ombudsman. In the main, the PEMFA project will be implemented by the Ministry of Finance and National Planning, the Ministry of Justice, the Office of the Auditor General; Parliament; the Zambia National Tender Board (ZNTB) and the Zambia Institute of Chartered Accountants (ZICA). PEMFA will also extend to the national budgeting process and will put in place measures to reduce the variance between the budget and actual spending. The new system should make it possible to undertake regular public expenditure reviews and ultimately improve the management and control of public money. One of the outcomes of the PEMFA will be a strengthening of Parliaments oversight role. Members of the Public Accounts Committee and the Estimates Committee will receive training and equipment to help them play a more pro-active oversight role. The capacity-building package will include a management information system that will ensure a response to Public Accounts Committee reports is developed through strengthened linkages between the Public Accounts Committee, the Office of the Auditor General and other institutions.

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In May 2003, the offices of the Auditor-General in Zambia and Norway signed a cooperation agreement in May 2003 to formalise the relationship between them. In June of the same year, five officers from the Office of the Auditor-General in Zambia were hosted by the Auditor-General of Norway. Both institutions agreed during the visit that they would undertake a joint audit in Zambia. The exercise was aimed at improving the quality of auditing through on-the-job training and supervision. Subsequently, three auditors from Norway came to Zambia to take part in a joint audit of three government ministries. During their stay, they helped standardise the working papers for the Office of the Auditor-General. From the foregoing, it is evident that enhancing the effectiveness as well as the performance of the Auditor-Generals office in keeping tabs on public money is a major preoccupation of the donor community which funds a significant portion of national budgetary requirements. However, unless there is political will to support the ideals of PEMFA, the systems being put in place for greater financial accountability might not work. The lack of effective internal control systems in government ministries and departments is one of the biggest problems facing public expenditure management and financial accountability in Zambia. Over the years, the Public Accounts Committee has called on the Ministry of Finance to improve the internal control systems in government. The Ministry of Finance has given countless assurances that control systems will be tightened in the interests of prudent public expenditure management. In spite of these assurances, cases of misappropriation of public money, lack of reconciliation of bank accounts and unretired imprest, losses of stores and unconstitutional expenditure have become a perennial feature in the Auditor-Generals report, suggesting that the political will required to turn things around is either thin on the ground or non-existent. Uganda provides a classic example of how political will has played a catalytic role in ensuring the workability of a public expenditure management and financial accountability system.

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5.2

Tracking Public Expenditure Management: An Example from Uganda Uganda was the first country in Africa to implement a Public Expenditure Tracking Survey (PETS) in 1996. This is a method used to study the flow of public funds and other resources from the national treasury to public institutions. PETS is most relevant in environments where public accounting systems function poorly or provide unreliable information. In the case of Uganda, government observed that in spite of substantial increases in public spending on education, there was no corresponding increase in primary school enrolment. On the basis of this observation, government concluded that the money was not reaching the intended schools it was allocated to. The PETS confirmed these suspicions. A total of 250 schools in 18 rural districts were surveyed. The survey revealed that 87 per cent of the money was not reaching the schools. Only about 22 per cent of government grants reached the schools in 1995, the survey further revealed. In the interests of transparency and accountability, the Ugandan government began to publish monthly transfers of funds to primary schools in the main newspapers and broadcasting them on radio, insisting that recipient institutions put out notices of the money they received for all to see. The Ugandan experience may have been a pilot project, but the information campaign that attended the PETS has been hailed as a practical approach to public accountability. Records show that direct social benefits from the Public Expenditure Tracking Survey and the information campaign that publicised its findings. Primary school enrolment increased from 3.8 million in 1996 to 7 million 2001.65

Zambia too undertook a Public Expenditure Tracking Survey of the educational sector in 2001 to evaluate the impact of funds provided to government schools through BESSIP, which was launched in 1998. BESSIPs goal was to achieve a 100 per cent enrolment from Grades One to Seven and to improve learning achievement countrywide. This was based on the realisation that at two per cent of GDP, Zambia was spending less than any other country in the SADC region.

65

Paud, Murphy, Carla Bertoncino and Lianquin Wang, Achieving Universal Primary Education in Uganda: The Big Bang Approach, Washington DC, World Bank. 2002.

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The survey identified two channels through which public funds meant for government schools were disbursed. One of these was through provincial and district offices which, in turn disbursed the money at the discretion of the education officer. The second method was through legislated rule. This meant that the equivalent of US$600 was allocated per school, irrespective of enrolment. The PETS revealed that of the funds that were allocated based on the discretion of the provincial or district education officer, less than 20 per cent actually reached the schools. It also revealed that more than 90 per cent of money allocated to schools based on the method of legislated rule was received by the schools. However, as the Auditor-Generals report of 2001 revealed, K73 billion worth of BESSIP funds were misappropriated during the period under review. The absence of an attendant information campaign to publicise financial and material disbursements to schools under BESSIP as was the case with Uganda could be the missing link in maximising the benefits of public expenditure tracking. 5.3 Political Will, Public Participation and Accountability There is a lot that Zambia can learn from the Ugandan experience, especially the role political will and government sincerity can play in creating an enabling environment for greater financial accountability and more prudent public expenditure management. For instance, Uganda has adopted PETS as a standard tool for public finance management in other sectors. This has served to open up public expenditure processes in other sectors to more public participation and scrutiny. A public expenditure expert, Joanne Bosworth says this can be done at four stages of the budget process: the drafting stage, the legislative stage, the implementation stage and the audit stage.66

Joanne Bosworth, Citizens, Accountability and Public Expenditure: A Rapid Review of DfID Support, Department for International Development. July 2005.pp.12-13.

66

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In a study of public expenditure management in Africa, Asia and Latin America, she admits that though there are very limited opportunities for citizens to formally engage in the budget drafting process, it is possible for donor countries to strengthen the capacity of civil society to participate in and monitor public expenditure so that it can complement the role of Parliament. This should create a framework for civil organisations to monitor and analyse divergences between planned and actual expenditures and to track public financial flows. For instance, in Malawi, civil society groups prepare and submit reports on public expenditure to the Budget and Finance Committee of Parliament and discuss their findings and concerns with them. To some extent, this has helped influence the budget debate in the legislature.67 In Nigeria, civil society monitoring of sector budgets is working well especially in the health sector. Similar strides have been made in Uganda, where the Uganda Debt Network is developing methods for community-based expenditure monitoring. Such initiatives, coupled with public expenditure tracking studies (PETS) could help in participatory auditing, making it easier for citizens to keep tabs on how government spends public money at national, provincial and district levels. But keeping tabs on public money requires money and adequate technical resources, neither of which the Office of the Auditor-General is well endowed with. Chronic under-funding has remained a perennial problem. The gap between the amounts proposed by the OAG as well as the amounts allocated to the Office in the Appropriation Bill and the amount actually released to cover operational costs is a huge one, as records show. For instance, in 1996, the Office of the Auditor-General received 15 per cent of the amount it proposed in its estimates of expenditure. The figure increased to 18 per cent the following year and to 30 per cent in 1998. However, in 1999, it dropped to 18 per cent again, rising to 31 per cent in 2000. Poor funding has played a big part in hampering the operations of the Office of the Auditor-General. Though the Office has since been decentralised to all nine provinces of the country, provincial offices remain critically understaffed. In some cases, there are only two staffers running a provincial office.

67

Ibid. p. 18.

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But in spite of the financial and operational difficulties her office is facing, Auditor-General Ms. Chifungula says more people are showing interest in how public money is being spent and accounted for than ever before. She said in an interview:
We have been receiving more queries, more whistleblowers. More people are giving us information. For us, that is an indication that people are more aware of what is happening. And these come from all sorts of people in society. Sometimes we get letters from people who have not even been paid their money for very many years and they will write to us to say, I have been going to Pensions, I have been going to this Ministry to get my dues which have not come to me since I retired or State Insurance has not paid me my claims and my children are out of school. These are coming from ordinary people from all corners of the country so it means that people know us a bit more than they did in the past.

Admittedly, greater financial accountability and more prudent public expenditure management take time, especially in environments where the misapplication and misappropriation of public money have become institutionalised over the years. But it is a good sign if more people are showing a greater interest in the work of the AuditorGeneral and in issues to do with public expenditure and financial accountability than they did before. This could be an indication that people want value for their tax money and to see the benefits of national resources they consider to be their birthright. Simply put, this could be their way of demanding government to answer the question: show me the money! And showing them the money could translate as a public demand for more public expenditure on education, health, affordable housing, community development, roads, water and sanitation and whatever it takes to improve the quality of life of the large majority of Zambians, most of whom are poor. It could be their way of reminding government that as citizens, they are shareholders in a public corporation called the state, with the president as chief executive officer and his cabinet as his directors. How tightly the corporation is run would depend on what kind of expectations the shareholders demand of management and what value of dividends they receive year after year on their investment. Far fetched as this analogy may seem, it best describes what the outcome of prudent public expenditure management and financial accountability could be, once certain recommendations are effected.

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5.4 Protecting the Integrity of Public Money: Recommendations The wide range of recommendations outlined below aim at two main objectives: firstly, safeguarding the integrity of public money, and secondly, strengthening the technical and moral capacity of various governance institutions to oversee national resources more effectively and more efficiently. Independence of the Office of the Auditor-General Parliament could appoint the Auditor-General based on the recommendations of the professional body of accountants, namely the Zambia Institute of Certified Accountants (ZICA). This recommendation is in response to concerns raised by various interests groups that the Auditor-Generals independence is severely curtailed by the fact that the office bearer is employed by the government and the office funded by government through the Ministry of Finance. They say the situation undermines the ability of the Auditor-General to objectively audit the appointing authority because he/she is part of government. Currently, the Auditor-General is appointed by the President and ratified by Parliament. Naming erring public officers servants in the Auditor-Generals report Disclosing the names of those public servants implicated in the misappropriation and misapplication of public funds in the AuditorGenerals report would not only serve as a deterrent but go a long way in satisfying the publics right to know. Law enforcement agencies as witnesses at PAC sittings To fast track the process of prosecution of and administrative action against public officers implicated in theft by public servant, misappropriation and misapplication of public money, the Director of Public Prosecutions, the Inspector-General of Police, the Commissioners of the Anti-Corruption Commission (ACC) and the Drug Enforcement Commission (DEC) and the Secretary to the Cabinet ought to be permanent witnesses at Public Accounts Committee sittings. To this end, they would be joining other current expert permanent witnesses, namely the Auditor-General and the Accountant-General on the committee. This way, there would be enough technical expertise available to strengthen Parliaments oversight role and to create a framework for instituting corrective action to protect the integrity of public money.

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Live broadcasts of Public Accounts Committee sittings Because of their public interest value, Public Accounts Committee sittings could be televised and broadcast live on National Assemblys FM channel. The possibility of prosecution and administrative action arising out of the financial report and the Auditor-Generals report could raise public interest in the role of Parliament in overseeing public money. Advertising Public Accounts Committee sittings Attendance at parliamentary committees meetings has been opened to the public, but Public Accounts Committee meetings have to be advertised more aggressively to encourage more people to attend. PACT Zambia, a USAID-funded agency, has been advertising PAC sittings in the past two years, but this will need to be kicked into a higher gear. Publishing disbursements of public money in the media In the interests of accountability and transparency, government would do well to publish disbursements of funds in the media to enhance the tracking of public expenditure, to encourage greater public participation and to safeguard the integrity of public money. Inclusion of independent auditor at PAC sittings Having an independent auditor as an expert witness at PAC sittings would strengthen the technical capacity of the committee to interrogate the findings of the financial report and the AuditorGenerals report. As things stand, most members of the Public Accounts Committees are not conversant with government accounting procedures or with the technicalities of auditing. Release of Quarterly Financial reports to PAC The current procedure of releasing the financial report nine months after the end of the financial year should be supplemented with the release of a quarterly report which shows how public money has been allocated and spent during the period under review. This would help inform the PAC of government spending trends and suggest corrective action ahead of the Auditor-Generals report which, by law, should be tabled before Parliament not later than 12 months after the end of the financial year and which, in spite of this legal requirement is submitted at least two years late. It would also give Parliament an idea of what expenditure trends to expect in the coming financial year.

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Establishing a Budget Office at Parliament In a bid to strengthen its role of oversight over public money, Parliament would need a full-time budget office staffed by economists, accountants and lawyers. Their technical expertise would come in handy when it comes to advising parliamentarians on economic, financial, legal and constitutional matters regarding the budget. Creating a cadre of journalists able to cover public money The lack of analytical, informed and investigative reporting when it comes to covering the budget and making sense of the financial report and the Auditor-Generals report could have contributed to the lack of public participation and oversight of public money. Developing the technical capacity of journalists in the governmentowned and private media to cover public money through productionbased training could help the cause of public information. Such a capacity-building initiative could be undertaken as a pilot programme with the support and intervention of agencies like Panos, Friedrich Ebert Stiftung, Transparency International and UNDP, which have been involved in media and governance programmes in Zambia in recent times. 5.6 A Final Word The problems of public expenditure management and financial accountability that Zambia face are huge, but they are neither insurmountable nor impossible to solve, especially if they are tackled rationally and systemically.

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Political will, coupled with the will of citizens to improve the quality of their lives by participating not only in their own governance but in the manner in which public resources are used, are two vital factors which can save the current situation from degenerating into the bleak picture the Africa editor for The Economist, Robert Guest paints in his apocryphal book, The Shackled Continent: Africas Past, Present and Future:
Governments everywhere waste money, but in Africa, the problem is especially grave because there is less cash to waste and because it is wasted so flagrantly. Given finite funds and potentially infinite demands for them, a government has to decide what is really important and what is not. Needs vary from country to country, but most African countries still need the basics: primary education, primary health care, passable roads, piped water and a functional legal system. Such bare necessities should be given priority but often arent. Even in the most indebted countries, there is always money for ministerial limousines and mansions, or first-class flights to pointless conferences. After an unexpected upgrade on a plane bound for Lusaka, I once found myself sitting next to one of the top men at the Zambian finance ministry. When he found out who I was, he spent the next hour hectoring me about Zambias need for deeper debt relief before the complimentary champagne put him to sleep. Around that time, his countrys annual budget for dealing with the AIDS crisis was half the sum earmarked for building villas for hosting heads of state attending a talking shop Zambia was hosting

Guests observations may seem like a harsh indictment of the state of public expenditure management in Zambia. But whether his unflattering assessment remains an enduring legacy or a thing of the past depends on how harshly Zambians want Posterity to judge them.

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GLOSSARY OF TERMS

Abuse of Authority of Office

An offence under Section 99 of the Penal Code. This misdemeanour is committed when a person employed in the public service, does or directs to be done in abuse of authority of his office, any arbitrary act prejudicial to the interests of government. If the act is done for purposes of gain, it becomes a felony for which one can be jailed for three years. The willingness of leaders to justify their actions and to accept legal, electoral and administrative penalties if the justification is found lacking. This is a law enacted every year authorising government to spend public money approved by the National Assembly. An examination of financial accounts to check their accuracy a forecast of expenditures and revenues for a financial year. Governments usually deliver a budget annually, in which taxation and expenditure proposals are presented. In Zambia, the national budget is usually presented by the Finance Minister to the National Assembly on the last Friday of January every year. the collective body of advisers to the executive head of a parliamentary government. In Zambia, Cabinet comprises all full ministers, with the Republican President at the head. Cabinet is responsible to Parliament.

Accountability

Appropriations Act

Audit

Budget

Cabinet

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Capital Expenditure

Amount of money used to acquire, construct or improve long-term assets such as dams, roads, railways and other major infrastructure. Expenditure on repair and maintenance which does not increase the life, value or extent of use of an asset is not considered capital expenditure. The fundamental system of law of a sovereign state formulated as a guide for governing the state. A constitution defines the relations of the legislative, judicial and executive powers of the state, thus setting up the basis for government. It also provides guarantees of certain rights to the people. This is an officer designated by the Secretary to the Treasury to manage and safeguard public resources of the public institutions under their jurisdiction. It is the responsibility of the controlling officer to prepare and submit financial statements to the Auditor-General for audit and certification before inclusion in the Financial Report the Minister of Finance tables before the National Assembly every year. This is an investigation conducted into financial accounts of an institution in the express purpose of probing suspected irregularities. Political organisation comprising the individuals and institutions authorised to formulate public policies and conduct affairs of state. The word government may also refer to the people who form the supreme administrative body of a country, as in the expression the government of President Levy Mwanawasa.

Constitution

Controlling Officer

Forensic Audit

Government

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Gross Domestic Product This is a measure of the value of all economic activity taking place within a countrys borders. It is based on the total market value of a country's output of goods and services that are exchanged for money or traded in a market system over a certain period (usually a year or a quarter), regardless of who owns the productive assets. Kleptocracy derived from two Greek words kleptos, which means thief, and kratos, which means rule), it literally means rule by thieves. In a kleptocracy the mechanisms of government are almost entirely devoted to taxing the public at large, or using their control of government processes in order to amass substantial personal fortunes for the rulers and their cronies. Kleptocrats (as these people are called) typically use money laundering and anonymous banking to protect and conceal stolen money. This is one of the watchdog committees of the National Assembly. This nine-member Committee oversees the management and expenditure of public money and reports its findings as well as its recommendations to the main House. This refers to money raised by government through taxation, grants and loans for public expenditure as approved by National Assembly. This refers to expenditure which recurs continually and very frequently, for example, salaries, utility bills etc.

Public Accounts Committee

Public money

Recurrent Expenditure

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Revenue

This is money raised by government mainly through taxation to pay for government expenditure. In Zambia, the body responsible for collecting revenue on behalf of government is the Zambia Revenue Authority (ZRA). If government revenue is more than government expenditure, a country is said to be running a budget surplus. If government expenditure is more than government revenue, a country is running a budget deficit, which has to be financed through borrowing or printing money. An offence under Section 277 the Penal Code. When the offender is employed in the public service and the thing stolen is the property of government, a local authority, a corporation, body or board including an institution of higher learning in which the government has a majority or controlling interest. The penalty for theft by public servant is 15 years imprisonment maximum. A compilation of government estimates and expenditure, including Capital, Constitutional and Statutory Expenditure. It is produced every year by the Ministry of Finance and Economic Development and made available together with the Budget Speech and the Economic Report on the day the budget is presented to the National Assembly.

Theft by Public Servant

Yellow Book

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Lake, Sally. Global Fund for AIDS, Tuberculosis and Malaria (GFATM) Tracking Study: Macroeconomic and Sectoral Background Paper for Zambia. 2004. MacDonald, Brian. Military Spending in Developing Countries: How Much is Too Much? Ontario. Carlton University Press.1997. Murphy,Paud, Bertoncino, Carla and, Wang, Lianquin. Achieving Universal Primary Education in Uganda: The Big Bang Approach, Washington DC, World Bank. 2002. Mwanawina, Inyambo, Akapelwa, Kufekisa, Sampa, Kalunga M. and Moonga, Justina.. Explaining African Growth Performance: The Case of Zambia. 2002. Narayan, Deepa, Patel, Raj, Schafft, Kai, Rademacher, Anne and Koch-Schulte, Sarah. Voices of the Poor: Can Anyone Hear Us? New York. Oxford University Press. 2000. Neal, Margaret. Ensuring Accountability in Public Expenditure. London. Commonwealth Parliamentary Association. 2003 Page. B.I. Who Deliberates? Mass Media and Democracy. Chicago: University of Chicago. 1996. Perkins, John. Confessions of an Economic Hit Man. New York. Penguin Books. 2006. Rakner, Lise,Fjeldstad, Odd-Helge, Svensson, Jakob and Amundsen, Inge. National Integrity System (NIS) Zambia Country Study. NORAD.2004. Reinikka, Ritva and Smith, Nathaniel. Public Expenditure Tracking Surveys in Education. International Institute for Educational Planning. UNESCO. 2004 Reinikka, Ritva and Svensson, Jakob. The Power of Information: Evidence from an Information Campaign to Reduce Capture, Washington DC, World Bank. 2003. Ronning, Helge. Media and Democracy: Theories and Principles with Reference to the African Context. Harare. SAFES Books.1994. Russell, Alec. Big Men, Little People: Encounters in Africa. London. Macmillan.1999.

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Stasavage, David. On the Role of Democracy in Ugandas Move to Universal Primary Education, Background paper for World Development Report 2004, Washington DC, World Bank. 2003. Tangri, Roger. The Politics of Patronage in Africa. Kampala. Fountain Publishers. 1999. Turok, Ben. ed. Development in Zambia: A Reader. London. Zed Press. 1989. Wrong, Michela. In the Footsteps of Mr. Kutz. London. Fourth Estate. 2001. Others BBC Focus on Africa April June 2006. Guardian Weekly, 31 December 20056 January 2006. Ministry of Finance and Economic Development, Estimates of Revenue and Expenditure, 1997, 2000, 2001, Government Printers, Lusaka. Post, 11 May 2001. Post, 15 May 2001. Post, 17 May 2001. Post, 22 May 2001. Post, 31 May 2001. Post, 12 June 2001. Post, 25 June 2002. Post, 27 June, 2002. Post, 5 July 2002. Report of the Public Accounts Committee on the Collection and Management of Government Revenue for the Fourth Session of the Eighth National Assembly.

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Report of the Public Accounts Committee on the Report of the AuditorGeneral on the Procurement of Goods and Services in the Zambia Army and Zambia Air Force for the Period from 1992 to December 1999 for the Fifth Session of the Eighth National Assembly. Report of the Public Accounts Committee on the Report of the AuditorGeneral on the Operations of the Presidential Housing Initiative for the Period November 1998 to August 2001 for the First Session of the Ninth National Assembly. Sunday Post, 29 August, 2004. Sunday Post, 15 July 2006 Sunday Times of London, 12 February 2006. Times of Zambia, 14 February 2006 World Development Report 2004. Washington. World Bank. 2003. The Zambia Farmer. No.9. No.2 February 2006. Lusaka. Zambia National Farmers Union. The Zambian Parliament. National Assembly. Lusaka. 1999.

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