By Teboho Molapo and Bongiwe Zihlangu
MASERU — Finance Minister Timothy Thahane yesterday awarded a three percent salary increase to civil servants.
But in an unprecedented move Thahane announced that high ranking government officials will not get a salary increase this year.
Presenting his M13.7 billion budget, Thahane said senior civil servants who will not get a salary increase this year include ministers, deputy ministers, MPs, principal secretaries and senators.
Statutory officers, the government secretary, clerks of the national assembly and parliament and other officials within the same salary range will also have to wait for next year’s budget to get a salary hike.
“The government also recognises that when sacrifices have to be made in public remuneration, those in position of leadership and those who earn more than others must make bigger sacrifices,” Thahane said.
He said the “government recognises that public servants deserve a decent remuneration even when public revenues are under squeeze”.
Last year all civil servants received a 3.5 percent salary increment.
The three percent salary increase means that the lowest paid civil servant who earns M1 400 will get an extra M42, an amount that is only enough to buy about five loaves of bread or a 20kg bag of meali-meal.
Lesotho’s inflation rate is currently pegged at around three percent.
The increment is unlikely to change much for most civil servants because it is coming at a time when their incomes have been dissipated by last year’s surge in food and fuel prices.
Education and health fees have also increased.
So have the costs of housing and power.
All these mean that even with the three percent increase civil servants are poorer than they were last year.
Thahane tried to improve the plight of the low earners by increasing the non-taxable income threshold from M22 788 to M26 160 per annum.
That means those who earn M2 096 and below will not have to worry about Pay As You Earn (PAYE) tax.
The minister said the move is aimed at providing relief for low earners whose purchasing power has been eroded by inflation.
“We must therefore look at how to provide relief for those low earners, whose purchasing power has been eroded by inflation and those affected by annual salary adjustments which have put them into higher income tax brackets,” Thahane said.
At present, people who earn between M22 788 and M40 368 per annum pay income tax at a rate of 22 percent.
This range will be increased to M26 160 and M48 744 per annum.
Thahane said the minimum turnover businesses that have to register for VAT will be increased to M850 000 from M500 000.
“This would relieve some small businesses from the burden of having to comply at M500 000 which, due to inflation, is easily reached,” he added.
Pensioners are also set to benefit from Thahane’s new tax bracket adjustments.
He said for some time now pensioners had complained about the tax levied on their terminal benefits.
“The government has decided to eliminate tax on the lump-sum element of the terminal benefits – capped at 25 percent.”
Tsikoane Peshoane, a programme officer at the Transformation Resource Centre, an ecumenical organisation, hailed the budget as exceptional particularly pointing out the fact that employees earning less than M2200 and M26 100 per annum will no longer be compelled to pay tax on their salaries.
“This is a highlight because it leaves people with disposable income,” Peshoane said.
Peshoane however said he was worried that the government was silent about the creation of jobs adding it created the isconception that “it is the responsibility of the private sector”.
“This indicates that government has no strategy in place to create jobs anticipating that in that department the buck lies with the private sector. But it is government’s responsibility to do that,” Peshoane said.
“It is also government’s responsibility to fight the scourge of poverty by creating jobs.”
Tsikoane also said Thahane’s speech was pregnant with political undertones and that it did not give the public “government’s clear economic perspective”.
“It’s like they are just telling us what we want to hear. It has political undertones,” Tsikoane said. The Lesotho Council of Non-Governmental Organisations director ‘Mabulara Ts’oene described Thahane’s budget as “impressive and encouraging” but said it was “a pity that such a great budget is coming late”.
“Not long from now we’re going for elections. If there’s change of government, what guarantee do we have that it will be implemented in its entirety?” Ts’oene quipped.
“Again, another setback is that most of these brilliant plans take a long time to be implemented.”
Ts’oene said the decision to increase the non-taxable income threshold was “a step in the right direction”.
However, Ts’oene lamented that the budget was not clear about the funds allocated to local government “for the realisation of decentralisation”.
“The budget does not say how much local councils have been allocated and how the money is going to be used. The decentralisation of local government is not explained and it’s a cause for concern,” Ts’oene said.
“This will lead to a situation whereby local councils do not have money and have to survive on hand-outs from the central government.”