A plan for jobs
While unveiling the national budget yesterday, the finance minister highlighted the economic hardships that have afflicting Namibians over the past few years.
OGONE TLHAGE
Finance minister Calle Schlettwein has unveiled a N$66.5 billion budget geared towards “stimulating economic growth" and creating decent jobs, while further adjusting the public fiscal stance to “sustainable and stable levels”.
There was also bad news for civil servants, who will have their contributions to the Public Service Employees Medical Aid Scheme (PSEMAS) doubled from N$410 million to N$820 million, effective April 2019.
Transfers to commercial public enterprises during 2019/2020 will amount to N$836.5 million, dropping to N$815.6 million in 2020/21 and reaching about N$838 million thereafter.
Schlettwein said the restraint on the wage bill, which had increased by 110% in the five years preceding the 2018/19 financial year, also applied to all public enterprises. A total of N$650 million was reallocated from non-core expenditure and transfers to public enterprises to support the provision of core goods and services, financing for SMEs support facilities as well as development budget expenditure.
The N$66.5 billion budget tabled in the National Assembly yesterday is 2% larger than last year’s.
“I table this budget knowing that the current economic situation in our country has caused hardship for many citizens and I thank you all for your forbearance during these difficult times,” Schlettwein said.
“I am equally aware that the situation would have been much worse if we had not implemented fiscal consolidation and austerity measures.”
Schlettwein said beyond the budget, “the economy is greatly enabled by private-sector investment, the expansion of the final value of exports, the speedy implementation of intervention measures and a conducive policy environment”.
Schlettwein also announced a raft of tax proposals that are expected to generate approximately N$400 million in revenue. Income-tax changes will come into effect in 2020 after the drafting and tabling of the specific tax proposals. New excise duties will become effective upon the tabling and gazetting of the schedules.
N$8.2m deficit
Schlettwein said the budget deficit was estimated at N$8.2 billion, or 4.1% of GDP, and was expected to average 3.4% over the medium-term expenditure framework (MTEF), compared to 4.4% in 2018/19.
The deficit will be financed through a combination of domestic, multilateral and bilateral borrowing. The leveraging of state assets in the telecommunication sector is expected to ease financing obligations and mitigate against increases in the debt stock, Schlettwein said.
He said the budget provides for a growth stimulus package, centred on the increased magnitude of the development budget, an enhanced resource allocation to the agricultural sector and youth and SME support.
“Secondly, its policy stance proposes a continued reduction in the budget deficit, consistent with the medium-term fiscal consolidation policy stance.
“Thirdly, it proposes the timely implementation of enabling structural policy reforms to optimise outcomes through improved ease of doing business, business confidence and increased policy certainty.
“This also includes tax policy and tax administration reforms, which balance between promoting investment and revenue-generation to support the successful implementation of the fiscal consolidation programme,” Schlettwein said.
The development budget allocation has been increased by 42%, “with greater emphasis on economic growth enhancing infrastructure investment and crowding in private sector participation”, Schlettwein said.
The budget also reduces the proportion of non-core expenditure to curb wastage and enhance allocation efficiency.
It also provides increasing budgetary allocations to social sectors to guard against reversals and enhance access to affordable and reliable public services, and further strengthens allocations to social safety nets to improve the coverage for qualifying beneficiaries.
Development budget skyrockets
The development budget was increased to N$7.9 billion, from N$5.5 billion this financial year, and will be protected against frequent reallocation during the financial year.
The budget also deploys project financing amounting to N$1.1 billion under the African Development Bank (AfDB) arrangement within the budget year, along with own budget funding of N$831.9 million for logistics infrastructure, mainly rail and road, agricultural mechanisation and school infrastructure renovation.
The remaining N$2.9 billion under the AfDB funding will be utilised over the next two years.
In collaboration with AfDB, and to encourage local participation, construction projects will provide the option for 25% of the contract value to local entities through a competitive bidding process.
A total allocation of N$290 million was allocated to the crop and horticulture programme under the agriculture ministry, of which N$96 million is targeted for the Green Scheme irrigation programme. An amount of N$469 million was allocated for the water-generation and infrastructure refurbishment programme.
An additional allocation of N$15 million was allocated for youth entrepreneurship projects on top of the N$9.5 million to support youth employment and self-employment under the National Youth Council.
“This is in addition to youth-related projects under the Ministry of Sports, Youth and National Service, as well as the support facilities at the Development Bank of Namibia and the Ministry of Industrialisation, Trade and SME Development,” Schlettwein said.
“Noting the severe effects of climate change and the ensuing drought, a total of N$100 million is allocated to the Emergency Fund, bringing the total balance of N$304 million. In addition, a total of N$204 million is provided for contingencies.”
Schlettwein also said the regulations on exclusive bidding to support local participation would be finalised in the second quarter of this year to provide for thresholds for local sourcing under the Public Procurement Act and for enforcement by the Central Procurement Board.
“Utilisation of this policy space will enable optimal participation of the domestic producers of goods and services and to stimulate domestic productive capacity.”
The finance minister added the Central Procurement Board will improve its turnaround time for tender and bid evaluation and prioritise the finalisation of high-value tender awards within a minimum prescribed timeframe.
A total of N$110 million was earmarked for SME financing strategy activities under the Development Bank of Namibia (DBN).
Also on the agenda was reversing some of the previously announced tax rate increases and non-deductibility of some categories of income tax to enable domestic economic agents to invest and produce.
Schlettwein said over 49% of the budget continues to be allocated to the social sectors, while adding that absolute poverty had declined from 41% in 1990s to 17.4% by 2015/16.
Extreme poverty, he said, had been reduced to 10.7%.
Schlettwein said the budget is presented against the backdrop of slowing momentum in the global economy, elevated trade tensions and climatic induced disasters.
“This is largely due to the risk factors which have materialised in the latter part of 2018. These include the ensuing emergence of unilateralism and resulting trade wars between and among the United States of America and China and the European Union and the impending process of the United Kingdom exiting the European Union later this year or earlier with or without a deal.”
Domestic economy
Schlettwein said the domestic economy was projected to emerge from recession this year.
“The pace and quality of the recovery is dependent on the speed and scale of implementation of pro-growth policy interventions, but may also be influenced by external factors.”
He said GDP growth for 2019 could reach up to 1%, from a contraction of between 0.2% and 0.5% in 2018.
“In a baseline scenario, if no policy measures are implemented, GDP growth is estimated at 0.2% in 2019 and will improve to approximately 1% by 2021. However, the outlook could improve to approximately 1.2% this year and reach 2.2% in 2020 if it is supported by timely implementation of supportive policy measures.”
The minister said it was therefore imperative to speed up implementation capacity and eliminate bureaucratic delays for the outlook to translate into per capita income expansion.
“On the demand side, the recovery is expected to be led by increased exports from the mining sector, increased investment in public infrastructure and a soft recovery in aggregate consumption expenditure. With aggregate public spending generally flat, private investment inflows are necessary to lift the growth potential of the economy.”
He said the revenue for the 2017/18 financial of N$58.8 billion was 4.3% better than the budget and 3.7% better than the revised budget. For 2018/19, revenue outturn was projected at N$56.7 billion, consistent with the budget review estimates.
“By Mid-March 2019, revenue outturn was N$55 billion, 97.1% of the collection target.”
For 2019/20, total revenue is estimated at N$58.4 billion, 3% better than the estimated outturn for 2018/19 and 29.7% of GDP.
“This is in anticipation of 16% better SACU receipts, which is largely offset by the downward revisions in annual estimates for non-mining company tax and value-added tax owing to a low growth and depressed consumption demand.”
He said to encourage achieving the primary objective of reigniting economic growth within a constrained fiscal space, targeted infrastructure financing will be done through bilateral and multilateral financing arrangements and budgetary transfers to public enterprises in economic sectors for targeted capital investments.
“While reviving broad-based economic growth is imperative, debt stabilisation through revenue-generation and non-core expenditure containment is a critical objective which cannot be abandoned. Therefore, the pro-growth fiscal consolidation policy remains the appropriate and timely policy stance to safeguard long-term macroeconomic stability and fiscal sustainability.”
Finance minister Calle Schlettwein has unveiled a N$66.5 billion budget geared towards “stimulating economic growth" and creating decent jobs, while further adjusting the public fiscal stance to “sustainable and stable levels”.
There was also bad news for civil servants, who will have their contributions to the Public Service Employees Medical Aid Scheme (PSEMAS) doubled from N$410 million to N$820 million, effective April 2019.
Transfers to commercial public enterprises during 2019/2020 will amount to N$836.5 million, dropping to N$815.6 million in 2020/21 and reaching about N$838 million thereafter.
Schlettwein said the restraint on the wage bill, which had increased by 110% in the five years preceding the 2018/19 financial year, also applied to all public enterprises. A total of N$650 million was reallocated from non-core expenditure and transfers to public enterprises to support the provision of core goods and services, financing for SMEs support facilities as well as development budget expenditure.
The N$66.5 billion budget tabled in the National Assembly yesterday is 2% larger than last year’s.
“I table this budget knowing that the current economic situation in our country has caused hardship for many citizens and I thank you all for your forbearance during these difficult times,” Schlettwein said.
“I am equally aware that the situation would have been much worse if we had not implemented fiscal consolidation and austerity measures.”
Schlettwein said beyond the budget, “the economy is greatly enabled by private-sector investment, the expansion of the final value of exports, the speedy implementation of intervention measures and a conducive policy environment”.
Schlettwein also announced a raft of tax proposals that are expected to generate approximately N$400 million in revenue. Income-tax changes will come into effect in 2020 after the drafting and tabling of the specific tax proposals. New excise duties will become effective upon the tabling and gazetting of the schedules.
N$8.2m deficit
Schlettwein said the budget deficit was estimated at N$8.2 billion, or 4.1% of GDP, and was expected to average 3.4% over the medium-term expenditure framework (MTEF), compared to 4.4% in 2018/19.
The deficit will be financed through a combination of domestic, multilateral and bilateral borrowing. The leveraging of state assets in the telecommunication sector is expected to ease financing obligations and mitigate against increases in the debt stock, Schlettwein said.
He said the budget provides for a growth stimulus package, centred on the increased magnitude of the development budget, an enhanced resource allocation to the agricultural sector and youth and SME support.
“Secondly, its policy stance proposes a continued reduction in the budget deficit, consistent with the medium-term fiscal consolidation policy stance.
“Thirdly, it proposes the timely implementation of enabling structural policy reforms to optimise outcomes through improved ease of doing business, business confidence and increased policy certainty.
“This also includes tax policy and tax administration reforms, which balance between promoting investment and revenue-generation to support the successful implementation of the fiscal consolidation programme,” Schlettwein said.
The development budget allocation has been increased by 42%, “with greater emphasis on economic growth enhancing infrastructure investment and crowding in private sector participation”, Schlettwein said.
The budget also reduces the proportion of non-core expenditure to curb wastage and enhance allocation efficiency.
It also provides increasing budgetary allocations to social sectors to guard against reversals and enhance access to affordable and reliable public services, and further strengthens allocations to social safety nets to improve the coverage for qualifying beneficiaries.
Development budget skyrockets
The development budget was increased to N$7.9 billion, from N$5.5 billion this financial year, and will be protected against frequent reallocation during the financial year.
The budget also deploys project financing amounting to N$1.1 billion under the African Development Bank (AfDB) arrangement within the budget year, along with own budget funding of N$831.9 million for logistics infrastructure, mainly rail and road, agricultural mechanisation and school infrastructure renovation.
The remaining N$2.9 billion under the AfDB funding will be utilised over the next two years.
In collaboration with AfDB, and to encourage local participation, construction projects will provide the option for 25% of the contract value to local entities through a competitive bidding process.
A total allocation of N$290 million was allocated to the crop and horticulture programme under the agriculture ministry, of which N$96 million is targeted for the Green Scheme irrigation programme. An amount of N$469 million was allocated for the water-generation and infrastructure refurbishment programme.
An additional allocation of N$15 million was allocated for youth entrepreneurship projects on top of the N$9.5 million to support youth employment and self-employment under the National Youth Council.
“This is in addition to youth-related projects under the Ministry of Sports, Youth and National Service, as well as the support facilities at the Development Bank of Namibia and the Ministry of Industrialisation, Trade and SME Development,” Schlettwein said.
“Noting the severe effects of climate change and the ensuing drought, a total of N$100 million is allocated to the Emergency Fund, bringing the total balance of N$304 million. In addition, a total of N$204 million is provided for contingencies.”
Schlettwein also said the regulations on exclusive bidding to support local participation would be finalised in the second quarter of this year to provide for thresholds for local sourcing under the Public Procurement Act and for enforcement by the Central Procurement Board.
“Utilisation of this policy space will enable optimal participation of the domestic producers of goods and services and to stimulate domestic productive capacity.”
The finance minister added the Central Procurement Board will improve its turnaround time for tender and bid evaluation and prioritise the finalisation of high-value tender awards within a minimum prescribed timeframe.
A total of N$110 million was earmarked for SME financing strategy activities under the Development Bank of Namibia (DBN).
Also on the agenda was reversing some of the previously announced tax rate increases and non-deductibility of some categories of income tax to enable domestic economic agents to invest and produce.
Schlettwein said over 49% of the budget continues to be allocated to the social sectors, while adding that absolute poverty had declined from 41% in 1990s to 17.4% by 2015/16.
Extreme poverty, he said, had been reduced to 10.7%.
Schlettwein said the budget is presented against the backdrop of slowing momentum in the global economy, elevated trade tensions and climatic induced disasters.
“This is largely due to the risk factors which have materialised in the latter part of 2018. These include the ensuing emergence of unilateralism and resulting trade wars between and among the United States of America and China and the European Union and the impending process of the United Kingdom exiting the European Union later this year or earlier with or without a deal.”
Domestic economy
Schlettwein said the domestic economy was projected to emerge from recession this year.
“The pace and quality of the recovery is dependent on the speed and scale of implementation of pro-growth policy interventions, but may also be influenced by external factors.”
He said GDP growth for 2019 could reach up to 1%, from a contraction of between 0.2% and 0.5% in 2018.
“In a baseline scenario, if no policy measures are implemented, GDP growth is estimated at 0.2% in 2019 and will improve to approximately 1% by 2021. However, the outlook could improve to approximately 1.2% this year and reach 2.2% in 2020 if it is supported by timely implementation of supportive policy measures.”
The minister said it was therefore imperative to speed up implementation capacity and eliminate bureaucratic delays for the outlook to translate into per capita income expansion.
“On the demand side, the recovery is expected to be led by increased exports from the mining sector, increased investment in public infrastructure and a soft recovery in aggregate consumption expenditure. With aggregate public spending generally flat, private investment inflows are necessary to lift the growth potential of the economy.”
He said the revenue for the 2017/18 financial of N$58.8 billion was 4.3% better than the budget and 3.7% better than the revised budget. For 2018/19, revenue outturn was projected at N$56.7 billion, consistent with the budget review estimates.
“By Mid-March 2019, revenue outturn was N$55 billion, 97.1% of the collection target.”
For 2019/20, total revenue is estimated at N$58.4 billion, 3% better than the estimated outturn for 2018/19 and 29.7% of GDP.
“This is in anticipation of 16% better SACU receipts, which is largely offset by the downward revisions in annual estimates for non-mining company tax and value-added tax owing to a low growth and depressed consumption demand.”
He said to encourage achieving the primary objective of reigniting economic growth within a constrained fiscal space, targeted infrastructure financing will be done through bilateral and multilateral financing arrangements and budgetary transfers to public enterprises in economic sectors for targeted capital investments.
“While reviving broad-based economic growth is imperative, debt stabilisation through revenue-generation and non-core expenditure containment is a critical objective which cannot be abandoned. Therefore, the pro-growth fiscal consolidation policy remains the appropriate and timely policy stance to safeguard long-term macroeconomic stability and fiscal sustainability.”
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