*COVID-19 Fiscal and Monetary Interventions and Incentives For Investment Clubs in Zambia*

 

*Zanaica White Paper*

 

A disease that causes shops to close, exports to dwindle, and imports to be curtailed is such an event that is worse than war. It requires the fullest most extensive measures and response by governments, and in this case, we, at Zanaica, suggest a raft of possible fiscal and monetary policy positions that a government might consider to alleviate the challenges posed by the lockdown of the economy to flatten the curve. We hypothesize that the proposed incentives can contain the economic impact of COVID-19 outbreak.

*50% Income Tax*

We propose halving of all forms of income tax payment for 6 months beginning End of March, 2020 Until End of September, 2020. This means we propose corporate income tax to be levied at 15% p.a.; capital gains tax to be levied at K. 10% for dividends; stamp duty to be halved at 0.75%; interest income tax to be halved at 7.5%; and withholding tax to be halved at 3%.

*36 Hour VAT Refunds*

We propose immediate and efficient refund of VAT, with processing periods to be not more than 36 hours. In the alternative, we propose no VAT levy for the duration.

*Zero Rated Paye*

We propose non-payment of PAYE for the duration of the pandemic.

*NSSF*

We propose non remittance of NSSF for duration of the pandemic. In addition, we propose access to NSSF savings of upto 10% by savers, to help them in this tough times. This can be direct, or inform of home improvement loans, or personal loans, secured by 10% of the NSSF contributions by the applicant.

*Central Bank Base Lending Rate*

Bank of Zambia, the central bank, should slash the base lending rate by half, to 5%, so as inject enough liquidity into the money market and knee jerk the economy. This will allow both interbank borrowing to help individual banks constrained due to potential run in the banks, as well as bank to consumer lending. This type of lending will then spur manufacturing, as a form of import substitution, which will end up creating jobs, and supporting the economy in the era of reduced imports.

*Freezing of Loan Repayment and Other Overheads*

The central bank should temporarily withdraw credit reference bureau numbers and listing, freeze loan repayments, treating the period as a moratoria period, and also free utility overheads, namely, water, electricity, gas, heavy fuel, and rent.

*Freezing Rent & Rent Income Relief to Landlords*

Once loan repayments are frozen, it should be easy to freeze rent payments, since the burden to the landlords of collecting money to repay the loans shall have been eliminated. However, the government should go ahead and establish a K. 10 bn fund as rent income relief to landlords, purely to be wired to their accounts as income for their personal home use, in the period when their rental income sources have been terminated to relive the tenants.

*Large Scale Farm Infrastructure Project*

We propose that the government puts upto 100 square miles of land under large scale agricultural, for food security purposes, targeting production of staples such as maize, beans, sorghum, etc. This will offer the only thing that matters when all breaks down, assuming the worst is yet to come, and that is, food. Food security is paramount in such a situation. Such a farm can produce food to feed the country for 6 months.

*Suspension of Regular Payments*

Regular payment obligations including life insurance premium payment, retirement fund contributions and loan instalments will be restructured and rescheduled to offer relief for at least three months to affected people subject to individual policies.

*Green LPOs*

All Government institutions will pay purchase orders within three working days and parastatals to will pay within 24 hours. This will ensure that the businesses in business can sustain themselves, and the trickle down can reach other sectors too, including MSMEs. Further, all LPOs to be issued by the government going forward must be issued only when funds have been escrowed. Further, all LPOs below K. 10 million to be paid on delivery. In addition, government to pay all outstanding arrears for invoices within two (2) weeks. This can be financed through the issuing of a long term e-bond, to fill the gap of any liquidity, and prevent government from printing money and causing inflation.

*National Relief Fund*

The government should establish a national relief fund, contributed to by companies and individuals through donation of their income, and offering tax deductible status on such donations. Such a fund can go ahead and priorities interventions in such areas, and this will avoid cases where sugar is donated, yet the same sugar is a promoting factor in spread of the virus. This will also enable other politicians to donate, and make public their donations, for their self-interest, but without causing health crisis by organizing an event to donate household items.

*Limiting FX Transactions*

The country should limited foreign currency transactions, especially with respect to the USD, so as to have a stable reserves, and to be able to pick up effectively when the virus subsides, and allow the country men to be able to buy items in imports, and engage in export trade effectively. The practical limits can be set by the various bodies responsible.

*Loans To SMEs To Retain Employees*

There should be payroll loans, issued to SMEs, and direct to their employees, to allow for sustainability of the people.

*Removal of Tariffs on Internet*

In the era of lockdown, most work shall be done online. The government should provide subsidy, or reduce taxes on internet services, to enable the citizens to access high speed internet and reduced prices. This will facilitate working from home, to shoulder the economy during the crisis.

*Rolling Out Elearning Platform*

It has been oft quoted that a crisis is a dangerous opportunity. This crisis offers the government a chance to execute certain novel objectives like e-learning, by quickly executing a national backbone platform for teachers and students to learn basic approved curriculum, even if we use the content from neighboring Kenya.

 

*About us*

Zanaica is a leading local private equity fund, enabling Zambians, Zambians in diaspora, investment clubs, saccos, NGOs, churches and pension funds to invest in one or more of the four portfolios and benefit from market beating returns. The portfolios are: Boda boda fund, for lease to own, hire purchase, financing; Commodity contract financing; Furnished apartment fund, for furnished office spaces and residential apartments; and Avocado forest fund, planting avocado for long term investors. Zanaica is giving back to the community during this trying times by employing 100 doctors online, and allowing the public to talk to them, to consult them, for FREE, without paying anything, to share their health concerns and get answers. You can download the ContractKapital app here:  https://play.google.com/store/apps/details?id=com.contractkapital&hl=en. You can also use the app to shop online, or to pay bills, or to send money to friends and family at no fee. If you need any clarification about this and our other services, do not hesitate to contact us at our whatsapp group, https://chat.whatsapp.com/FDSC7wWHuZsBqYRopr0hcR.

For Wealth, For Financial Freedom!