Deep budgetary cuts will hurt domestic economy

 

The sudden scrapping of N$5.5 billion off the Namibian economic and administrative environment just like that in an active financial year is just too much for the nation to bear. This very sad national development was significantly caused by the downgrading of the national economic outlook from stable to negative by Fitch Ratings agency.

Anything else to the contrary is simply not true as the government already knew that its debt is increasing beyond its self-imposed limit. These deep budgetary cuts as announced by Minister of Finance Calle Schlettwein are historically unprecedented, highly ill-advised and socially inconsiderate for a nation that is currently faced with so many problems and challenges.

Namibia, as an ambitious developing nation that aims to eradicate all forms of poverty through prosperity for all cannot at this juncture afford to disengage the local business community at any cost. What was needed is perhaps a partial budgetary cut of just N$2 billion and not a deep cut of N$5.5 billion that will without doubt send many businesses to the jungle of hopelessness and destitution.

With that said, government knows very well the precarious state of the domestic economy, the difficult living conditions and the challenges facing the majority of the people, but nevertheless over the years went ahead to spend the nation’s scarce financial resources on projects that did not necessarily add value to the socio-economic fibre and development of the country.

These scarce funds were further mostly spent on Chinese construction companies and other foreign businesses without any due consideration to the short- to medium-term negative financial impact on the country.

In that regard, scarce billion dollar funds that could have significantly circulated domestically to transform or drive the nation’s socio-economic development programmes were instead shipped out of the country by these foreign business entities to the now detrimental state of the domestic economy.

In addition to the above, there are plans to fund projects, such as a new parliament for politicians at an astronomical cost of N$2.7 billion, a new office for the Prime Minister at estimated cost of N$1 billion and on the international airport at N$7 billion, to mention just a few.

That is already N$10 billion that could have gone to projects that are relative to our socio-economic problems and challengesl. The extreme fundamental problem in Namibia is hence not the amount of scarce funds that are available to be spent, but how those specific funds are actually spent and their relative importance to the domestic social cohesion and economic stability of the country.

With that said, the general reasons provided by the minister of finance to justify these supposed unforeseen circumstances do not convince me. For instance, where were some of those same reasons at the beginning of the government’s financial year that could have led to a more realistic budget presentation and execution for the year 2016/17?

The international oil price decreasing over the years and its subsequent impact on neighbouring Angola and on the oil dependent nations were already known; the depressing price of certain minerals, such as uranium, copper and others are widely available to make an informed economic decision; the declining SACU revenue and the approximate time when they will recover should by now be anticipated.

It is, therefore, my honest opinion that there is actually more to these deep cuts than meets the eye and as such, the economic state of the nation is sadly not sound, not stable and certainly not healthy at all. These deep financial cuts will definitely have tremendous negative socio-economic consequences for the domestic economy.

On a very serious and immediate note, the Namibian government is historically and realistically the biggest procurer of various goods and services from so many current and aspiring business entities due to the disproportionate lack of support from the white-dominated private sector.

The sad scrapping of N$2.8 billion and N$2.7 billion from the operational and development budgets, respectively, will definitely affect the operational and going concern base of many businesses to such an extent that they will be forced to retrench their workers and subsequently close down.

* Pendapala Hangala is a socio-economist and an entrepreneur. Write to hangalap@yahoo.com

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