FOR BUDGET AND COUNTRY
Thursday, March 16, 2017 - 11:00
hlettwein last presented his Budget Statement to Parliament, and what a year it has been. The economy had taken blow after blow – first from the commodity price crash, then the effects of the drought, then from the global economy struggling in light of political upheaval in advanced economies… the list goes on.
It should then be no surprise that the Namibian economy found itself struggling this year. By now, the estimate for 2016’s growth has dropped to only 1%, with growth for 2017 being revised downwards to 2,5%. As a result, Namibia found itself not only facing a slowing economy, but with sliding confidence, also a lack of liquidity. It is in this climate that Minister Schlettwein had to prepare and present his Budget Statement for the next year. So let’s take a look at what he presented:
Let’s start at the top, with government revenues. In total, the government expects to receive about N$56,4 billion from various sources, down from N$57 billion last year (later reduced to N$51,5 billion by mid-year), reflecting Namibia’s difficult situation. N$53,3 billion will be from taxes, with N$19,2 billion from income taxes – as paid by us every year, and paid by the various companies operating in Namibia. Another N$34,1 billion is collected via indirect taxes, like VAT, that you pay when purchasing products or importing products, and transfer duties and property taxes. Then an additional N$2,6 billion is raised from other sources, such as dividends and profit shares from government investments and interest of loans and investments, royalties on minerals mined, and fines and administration fees.
So far, so good. It seems quite prudent, given the state of the economy, and it seems the government is not making the mistake of over-estimating its revenues again, and having to adjust it as they did during last year. So, let us take a look at the expenditure now. Minister Schlettwein’s budget indicates that the government intends to spend N$62,5 billion this year. How is this allocated?
As usual, the biggest expense is the N$12 billion is budgeted for Basic Education. It has been noted that education is the greatest equaliser, and the Namibian government is certainly striving toward it as government spending on education dwarfs other spending by a significant amount. In fact, Namibia is one of only three countries in the world where education is the top spending priority for government. An additional N$3,1 billion is budgeted for Higher Education, Training and Innovation.
Health and Social Services receive N$6,4 billion in the budget, and N$3,3 billion goes to the Ministry of Poverty Eradication and Social Welfare. The budget increases the old age pension grant to N$1 200 per month, allowing our oldest and most vulnerable of citizens to be placed above the national poverty line. The Ministry of Defence and the Ministry of Safety and Security receive N$5,6 billion and N$5 billion respectively. Together, the abovementioned ministries receive more than 50% of the budget.
The rest of the ministries are funded by the remainder, as well as several infrastructure development programme, which inter alia include the rehabilitation of the national railway, the on-going expansion of the Port of Walvis Bay, several national roads, water and storage infrastructure, the Mass Land Servicing Programme and increased funding to the Public Financial Institutions for private sector support and SME development.
As you may have noticed, our government expenditures exceed our revenue – this is what is called our budget deficit. This year, however, it only amounts to 3,6% of GDP, in contrast to the 6,3% of last year. This is due to the fiscal consolidation stance taken by the Ministry of Finance to maintain our macroeconomic stability and sovereign credit rating of our bonds. As a result of the prudent budgeting, only N$6,1 billion worth of debt funding will have to be raised by government this year.
This was achieved by reducing unproductive capital spend and non-core recurrent spending, while refocusing expenditures to national development priorities. This enabled government to cap our national debt at 42%, which otherwise would have ballooned to 46%, and put pressure on our finances via debt servicing costs, as well as jeopardised our credit rating, which was already downgraded to outlook negative last year.
With the economy just starting to rebound, and only expected to recover to 2,5%, policies to improve domestic resilience, economic and market diversification, regional integration and national competitiveness are of primary importance for Namibia, especially in the light of several large completion projects that has reduced our investment rates to more realistic levels.
The coming year will be an unconventional one. In contrast to the previous decades, the geopolitical shifts towards protectionist policies and away from multilateralism and globalisation could slow global growth and trade. Namibia’s inflation has just reached new highs, while our currency has strengthened again after weakening last year. This indicates that we might experience trade problems going forward, especially if the commodity price recovery does not continue as envisaged.
This budget, at least, should give some reassurance that the government is keeping its eye on the ball, and positioning itself against adverse conditions, while simultaneously attempting to put the country on the right footing for rapid growth should the opportunity present itself. Still, this quick summary is no replacement for your own – every citizen should avail themselves of the documents as presented on the Ministry of Finance website, and make their own assessment. It is our duty to keep the government accountable and transparent. Namibia expects every man and woman to do his/her duty.
Desmond P van Heerden, HonsBComm (Stell) is the Chief Analytics Officer of Trustco Group Holdings Ltd. Previous articles available online at http://toi.hopto.org/. He can be contacted at