Namibia take lead in fight against poverty

Magreth Nunuhe

WINDHOEK – Namibia is championing the cause in reducing poverty, with overall average public spending or direct (cash) transfers to vulnerable segments of the population having exceeded any other Sub-Saharan African country.

These revelations were made in a new report by released by the Namibia Statistics Agency (NSA) and World Bank entitled ‘Does Fiscal Policy Benefit the Poor and Reduce Inequality in Namibia?’.

In the 2015/2016 financial year, direct transfers in Namibia accounted for 5 percent of government spending and 2.0 percent of GDP, while a recent analysis on average spending for developing countries on social safety nets was estimated at 1.6 percent of GDP.

Direct transfers refer to a non-contributory old-age pension fund for all Namibians and grants to families caring for orphans and vulnerable children, disabled children and adults and war veterans.

According to the report, these direct transfers have made important contributions to reducing poverty and inequality in Namibia, and have consequently also lifted 118 000 Namibians out of poverty, cutting the rate of severe poverty in the country by nearly a quarter.

Beneficiaries of the old-age pension fund receive a monthly pay-out of N$1,200 while the war veterans get the highest value of the social grants of N$2,200 a month.

The Child Maintenance Grant provides support to children with either a disabled parent, a parent receiving an Old Age Pension grant, or a parent who is absent due to death or imprisonment, with the threshold for an applying parent set at less than a gross income of N$1,000 a month.

The Foster Care Grant targets children who the courts have placed in the temporary care of foster parents at the value of N$200 for the first foster child and N$100 for any additional foster children.

An average of 20 percent of the national budget goes to education. Incidences of extreme poverty fell from 58.9 percent of individuals in 1993/94 to 15.3 percent in 2009/10.

“Severe poverty, defined as the proportion of Namibians living below the lower bound poverty line of N$277.54 per month, falls from 22.2 percent before any fiscal policy measures (i.e., based on market incomes) to 16.7 percent after adding direct transfers and indirect subsidies and subtracting taxes. This translates to a reduction of 24.7 percent in extreme poverty due to fiscal policy,” pronounces the study.

According to the report, Namibia has made strides in upgrading its human development record by improving citizens’ access to basic public services.

This means that Namibia’s generous fiscal policy does reduce poverty and inequality, but its impact is relatively modest in comparison to other high inequality countries, according to Paul Noumba Um, Country Director for Namibia, World Bank.

Um further stated that the overall income tax system in Namibia was mildly progressive with the income tax burden falling on the top income earners, whereas the poor hardly pay income taxes.

“We see from this report that Namibia’s progressive fiscal policies, and generous social spending have on the whole helped reduce poverty and inequality even though these remain the country’s pressing developmental challenges”, said Namibia’s Statistician General, Alex Shimuafeni.

While the generous and progressive social spending benefits the low income earners and the poor, its coverage and efficiency could be further improved, stated the report.

The child support grants and old age pension were picked as the most progressive programs of direct transfers, however to further reduce poverty and inequality, the report suggested that Namibia would need further improvements in the efficiency of social spending throught better targeting efficiency and consolidation of social programs and reducing leakages of existing programs.

“Ultimately, higher and more inclusive economic growth that creates more jobs for the poorest members of society is needed,” read the report.

In the 2009/2010 financial year, Namibia recorded the highest social spending of 12.7 percent of GDP, which was higher than other middle-income countries, including Indonesia (4.9 percent), Peru (8.4 percent), and Mexico (10.0 percent).

Nevertheless, income inequality in Namibia remains quite high relative to its level of national income per person and the latest World Bank available data estimates that Namibia has the second most unequal distribution of income in the world after South Africa.

In 2009/10, women were reported as predominantly poor, followed by subsistence farmers and pensioners, and those living in rural areas.

Regional variation also revealed that the Kavango Region in north-eastern Namibia had the highest incidence of poverty, while the Karas Region in the south registered the highest inequality.

This, coupled with a century of colonial rule and apartheid concentrated Namibia’s wealth, including ownership of land, companies, and financial assets in the hands of a small minority.

“Tackling poverty and unemployment in one of the most unequal countries in the world is no small task, but Namibia has outlined a clear strategy for the way forward in the Vision 2030 plan,” said Um.

He said that they hoped that the analysis would help policy makers improve existing policies that have been shown to reduce poverty and inequality, with the goal of lifting up those who are still living in poverty in Namibia.

Now that Namibia has entered into a period of fiscal consolidation, the report analysis can help assess anti-poverty programs during a time of budget cuts.

The questions are now looming whether effectiveness of social protection programs in reducing poverty are effective, adequate and whether they cover a significant number of poor people.

A comparison to South Africa indicated that the majority of the South African grants were strongly progressive in contrast to Namibian grants that were merely neutral or slightly progressive.

Although South Africa and Namibia are very similar countries in terms of the high level of income inequality and availability of a wide range of direct transfers, South Africa uses proxy means tests for most social assistance programs, which was observed with strong progressivity.

“If so, proxy means tests could be explored in Namibia as a way to improve the progressivity and efficiency of social assistance programs,” stated the report.

Namibia’s long-term development plan, Vision 2030 challenges the country to reduce poverty by ensuring that all Namibians enjoy access to safe drinking water, comprehensive health services, housing, sanitation, and other basic services.

In addition, it calls for social integration of people with disabilities and sets a numerical target of reducing the Gini coefficient to 0.30 by 2030. In 1993/94, Namibia’s Gini coefficient stood at 0.646, declining to 0.600 in 2003/04 and 0.597 in 2009/10.

The report, ‘Does Fiscal Policy Benefit the Poor and Reduce Inequality in Namibia?’ assessed the impact of government taxation and social spending and whether the government is making the best possible use of these tools to address poverty and inequality.

This is in line with the World Bank’s goals to help countries eliminate extreme poverty by 2030 and promote shared prosperity, in order to improve the lives of the poorest people everywhere.

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June 2017
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