Namibia’s economic outlook bright
Windhoek – An economic and market researcher with Standard Bank Namibia, Mally Likukela says that the outlook on the Namibian economy remains bright and prospects of further growth in the construction industry continue to be solid, while the demand side of the economy for much of the past 12 months, was robust as key demand indicators remained positive.
Likukela made the appraisal based on the 2015/2016 national budget which was presented in Parliament on March 31, 2015 and added that the economy further benefited from the easing of inflation on the backdrop of low food and energy prices.
“The outturn during the year accorded additional and much needed space for expansionary fiscal and monetary policy to stimulate the domestic economy,” he said, adding that 2014 was however not without its challenges, such as unemployment, poverty and widespread inequality stalked the nation.
He is of the opinion that the Namibian government must adopt a pragmatic approach to address these challenges and embark on rigorous policy reform initiatives to align the budget with key priorities.
The Minister of Finance, Calle Schlettwein described the national budget as a “pro-poor, pro-growth budget” with deliberate scaled up resource allocations to the targeted programmes for broad-based economic growth, job creation and poverty eradication over time.
Schlettwein further stated that the budget was also aimed at tackling the structural challenges that affect the development potential of the Namibian economy, while unlocking opportunities for jobs and wealth creation and improving the welfare of Namibians.
That includes the introduction of free primary and secondary education (from Grade 1 to 12) from 2016, while access to tertiary education would be further expanded through a formula based funding and enhanced financial assistance to students.
Government has also increased old-age pension from N$600 (US$50) to N$1 000 (approximately U$83 at current exchange rate), which would further be increased to N$1 200 by the second year.
The new government, which was inaugurated on March 21 2015, unveiled a pro-poor budget which highlights poverty reduction and improving social welfare as its second biggest priority after economic growth.
The third priority of the budget is the achievement of prosperity and wealth creation, which according to the Finance Minister would, among others, promote affordable and sustainable access to finance and means of production, while maintaining responsible lending; develop facilities to support Small to Medium Enterprises (SMEs) and increase the share of local ownership and value share in chains across various industrial and service oriented activities.
Government’s revenue for 2015/2016 is projected to be N$53.9 billion against an estimated expenditure of N$67.1 billion, leaving a deficit of N$8.64 billion.
“The budget placed strong emphasis on developmental allocation which is the key to infrastructural development,” said Likukela.
Stefan Hugo, a tax partner at Pricewaterhouse Coopers (PWC), said although the Minister of Finance confirmed the reduction in the corporate tax rate from 33 percent to 32 percent, uncertainty remains as to whether the rate would be applied retrospectively.
“The tax rates for mining companies remained unchanged at 37.5 percent and 55 percent. However the proposed taxes on commodity exports like minerals, fish and meat will increase the tax burden for these industries,” he said.
Hugo said that the 2015/2016 budget speech had a few surprises such as the old age pensioners N$1000 grant per month which will be increased to N$1 200, free primary and secondary education and heavy investment in infrastructure development.
Infrastructure funding which will require sovereign guarantees, include the construction of a dual-carriage highway between Windhoek and Okahandja, construction of a national fuel storage, fuel pipeline and a fuel off-loading jetty at Walvis Bay to the National Energy Fund, rehabilitation and upgrading of the railway network for TransNamib and the realisation of the Kudu-Gas-to-Power Project in both upstream and downstream developments to Namcor and Nampower.
The lion’s share of the N$67.08 billion total expenditure budget went to the education sector as expected, with an allocation of N$11.32 billion (18 percent of budget).
This was followed by the defence and health sectors, which got f N$7.2 billion and N$6.4 billion respectively.
The police got N$4.7 billion while the transport sector gets N$4.4 billion, followed by the finance sector which receives N$3.8 billion.
The bottom three sectors are urban and rural development; agriculture and labour and social welfare, which got N$3.1 billion, N$2.4 billion and N$351 million, respectively.
On the economic and infrastructural front, the Kudu-Gas-to-Power Project received the biggest financial boost with an allocation of N$4.3 billion to support the two state enterprises Nampower and Namcor, while the National Mass Housing Project got N$1.25 billion.
“Namibia has an impeccable record of according the highest share of the national budget to the social sectors, particularly education, health and social safety net systems. Commensurate attention is also being accorded to the housing sector,” said the new Finance Minister, adding that better facilities and equipment would be provided for vocational training.
With regard to public finance management, Schlettwein announced the introduction of a mid-year budget review and pre-budget statement to be presented in October/November each year as a measure to assess the budget execution and budget policy implementation for transparency.
“Over the past twenty-five years, we have laid a strong pillar of macro-economic stability, robust public finance management and robust financial policies. This is the framework which I am honoured to preserve and improve as a foundation for accelerated inclusive economic growth and wealth creation,” he said.