SERIES 2: IMPEACHMENT MOTION – Did Government break financial regulations and the law on the monies from Mukula logs?

• SERIES 1: IMPEACHMENT MOTION: President Lungu To Be Impeached For Debt Which Parliament Approved
• SERIES 2: IMPEACHMENT MOTION – Did Government break financial regulations and the law on the monies from Mukula logs?
• SERIES 3: IMPEACHMENT MOTION – Is The Frustrated Fire Tender Petition a Basis for Members of Parliament to impeach the President?

By Isaac Mwanza

Introduction

SERIES 1: IMPEACHMENT MOTION: President Lungu To Be Impeached For Debt Which Parliament Approved

In the first series of these articles meant to analyse grounds in the impeachment motion as submitted to Parliament, I showed how Member of Parliament, Gary Nkombo, included a ground to impeach the President for debt contracted by the Lungu administration. In this article, I address the issue of monies from the Mukula logs which are now a basis for impeachment of the President.

Analysis of Ground 1.4.1

The particulars of the allegation for impeachment of the President in ground 1.4.1 reads:

1.4. Having regard to provisions of Article 113 and 114(2) of the Constitution which make the President an integral part of Cabinet and which render the President collectively responsible with Cabinet for the decisions of Cabinet;

1.4.1. The President fell into violation of Article 200(1) of the Constitution when Cabinet authorised the diversion of the proceeds from the sale of the confiscated Mukula logs, being revenue property accruing to the Treasury, to the Kawambwa Tea Project under ZAFFICO rather than the said proceeds being credited to the Consolidated Fund as required by law.

In simple terms, what this ground of impeachment state is that monies from the sale of the confiscated Mukula logs should, first, have been credited to the Consolidated Fund before making it available for spending by government, and only with authorisation of Parliament. Hon Nkombo is, in short, stating that the President and his 41 Ministers, should have directed the Secretary to the Treasury and officers to deposit the money from the sale of the Mukula logs into the Treasury Account 99 as opposed to depositing the same into some ‘other accounts’ and authorising the spending of the money to revamp the Kawambwa Tea Project without the authority of Parliament.

Origin of the allegation

The ground arose from the question by Milenge Constituency Member of Parliament Mbulakulima in Parliament on 20th February 2018 who wanted to know why a special account cannot be created so that all the proceeds from the Mukula tree can go into that special account so that the people of Zambia can see what we are doing with the money.

In reply, Minister Jean Kapata stated,

“…an account has been opened through the Zambia Forestry and Forest Industries Corporation Limited (ZAFFICO) and the proceeds from the sale of illegally-harvested Mukula tree are being used to revamp Kawambwa Tea Company which fold up some time back, but has now been given to ZAFFICO to run”

This reply did not sit well with UPND Members of Parliament, in particular Dr. Musokotwane, Lufuma and Kasonso who inquired why the Minister decided to take the money from the disposal of the Mukula logs to the Zambia Forestry and Forest Industries Corporation Limited (ZAFFICO) which they claimed, by law, proceeds from disposal of such properties should have gone into the Treasury Account 99, and only used with approval by the National Assembly.

The Question of the Law

The opposition members of Parliament raised a question of the law on how public finance must be managed by government. Ground 1.4.1 of the impeachment motion pertains to the same question which was raised on 20th February, 2018, except this time it’s directed at the President and not the Minister. What does the law say about where public money can be deposited and utilised?

The relevant provision of the law is Article 200 (1) of the Constitution of Zambia which establishes a Consolidated Fund where all revenues and other monies accruing to the Treasury are credited. However, the authority used by Government to manage and regulate public funds is drawn from an administrative law, the Public Finance Act No. 15, 2004 as well as Regulation 130 of the Financial Regulations of 2006. The relevant Sections of the Act are Sections 2, 13 (2), 15, 19 and 25.

In short, the question whether breached the law by opening an account where monies were deposited and are being utilised to revamp the Kawambwa Tea Project without the approval of Parliament can only be answered by examining the administrative law itself on financial management and regulation of public funds.

In addition to the Consolidated Fund, Section 25 of the Public Finance Act establishes what are called “working account”. The relevant part of this Section reads:

“25. (1)
Where the Secretary to the Treasury considers it expedient to do so, the Secretary to the Treasury may establish funds or working accounts for the purpose of-
(a) the purchase of stores, equipment or livestock for subsequent use or resale;
(b) services rendered or to be rendered by any individual and it is desirable to recover the cost of such services from such other department or individual; or
(c) the making of grants or loans for purposes specified in the estimates of expenditure, or where moneys are made available from any other source for any of the above stated purposes.

In view of the above provision of the law, the opening of a working account through the Zambia Forestry and Forest Industries Corporation Limited (ZAFFICO) and the proceeds from the sale of illegally-harvested Mukula logs were deposited, if sanctioned by Secretary to the Treasury is thus not a breach of the law.

As seen from above Section of the law, the monies deposited into a working account can be used for purpose of the purchase of stores, equipment or livestock for subsequent use or resale and services rendered or to be rendered by any individual and it is desirable to recover the cost of such services from such other department or individual.

Our next key question is, what happens to these accounts and whether government can spend the money from them. To answer this question, the Public Finance Act of 2004, in Section 25(2)(b) reads:

“Section 25 (2)(b)
Each fund or working account established under subsection (1) shall be credited with its receipts, earnings and accruals and any money which otherwise may be made available for the fund or working account may be expended from the fund or working account on the purposes for which it was established.”

In response to Dr. Musokotwane, Mr Lufuma and Mr Kasonso, Minister Jean Kapata explained Government had made a decision to invest or expend this money into revamping Kawambwa Tea Company because it decided Kawambwa Tea Company is a viable company stating it Government policy. Was Cabinet required to obtain any authorisation to expend the money which was lawfully deposited into a working account and not Consolidated Fund?

As seen from the Section of the Public Finance Act, government does not need to obtain parliamentary approval to spend monies deposited into a working account. However, Section 19 of the Act require that all unspent balances standing to the credit of Government bank accounts at the end of every financial year are paid into Consolidated Fund unless prior authority has been obtained from the Secretary to the Treasury for their retention in such accounts. Government cannot, however, spend money deposited into the Consolidated Fund without parliamentary approval.

Conclusion

While the Constitution of Zambia, the Public Finance Act and the Financial Regulations of 2006 generally require all revenue to be deposited to the credit of the Treasury Account (Control 99) at the Bank of Zambia, it was Parliament that enacted the law which allowed Government, through Secretary to the Treasury, to open working accounts where receipts, earnings, accruals and any moneys, in this case, proceeds from the sale of Mukula logs can be credited and for government to expend from the working account without requiring Parliamentary approval.

The key is that the Secretary to the Treasury had considered it expedient to open the working accounts through the Zambia Forestry and Forest Industries Corporation Limited (ZAFFICO) where proceeds from the sale of illegally-harvested Mukula tree were deposited and are being used to revamp Kawambwa Tea Company.

To succeed with this ground of impeachment, therefore, Hon Gary Nkombo and his fellow MPs would have to show that the separate account where monies from sale of Mukula logs are deposited were opened by or with knowledge of President Lungu; that the operation of the same said account are illegal or were opened without consent of Secretary to the Treasury.

In short, there is no illegality for government to open a working account where proceeds from the Mukula logs can be deposited and later spent for purposes for which it was opened. If the intention by Parliament is that every government expenditure must only be deposited into the Consolidated Fund, the solution is to remove the discretion that Parliament has given to Secretary to the Treasury to allow the opening of working accounts and utilisation of monies from the same without prior approval by Parliament.

Has Parliament got capacity to do that? I doubt. Parliament is considering, if not already passed, the Public Finance and Management Bill No. 17 of 2017. The problem has always been the reading culture and research among Members of Parliament when debating these Bills they enact into law and not necessarily government.