23 March 2011

Namibia: Economists Sack Saara's Job Blueprint

Government's plan to create 128 new direct and indirect jobs every workday over the next three years is unsustainable pie in the sky and will burden Namibia with a high-risk fiscal policy by plunging the country into massive debt, economists are increasingly warning.

Nearly two weeks after Finance Minister Saara Kuugongelwa-Amadhila tabled her 2011-12 Budget in Parliament, economists have had the change to dissect her spending plans for 2011-14 and they remain extremely sceptic about the Targeted Intervention Programme for Employment and Economic Growth (Tipeeg), Government's solution to Namibia's unemployment rate of 51,2 per cent.

Tipeeg's N$14,6 billion budget until 2014 will, according to the Finance Minister, create 104 000 new direct and indirect jobs. That's 34 670 new jobs per year, or 128 per workday.

"No country in the world has halved unemployment within three years in a sustainable manner," veteran economist Rainer Ritter said, describing the Minister's latest effort as a "panic budget" with "overwhelming risks" which should have the taxpayer worried.

Economist Martin Mwinga of First Capital Namibia agreed, saying that the Budget has responded to economic challenges in an "emotional, ad-hoc and fragmented way". The results could be damaging and may include "painful policy adjustment in future in the form of higher taxes and cuts in government expenditure", Mwinga said.

Swanu President and former Permanent Secretary of the Ministry of Finance, Usutuaije Maamberua, called Tipeeg a "fallacy" in Parliament last week.

"Since this money is not coming from under the mattresses or just falling from heaven, it has to be squeezed from the economy. This the money is not idling somewhere in the economy; it is already employed.

"Shifting this money from one sector of the economy to another is simply abandoning jobs from one sector to create jobs in another sector, consequently no additional jobs are created," Maamberua said.

Ritter said Kuugongelwa-Amadhila's message reminds him of the former Soviet Union before its economic collapse two decades ago. "Roosevelt (The New Deal) or Hitler's public works programme could not achieve such an astonishing turnaround in the pressing unemployment situation as the Namibian Minister of Finance wishes," he said.

If pumping money into the economy was the simple answer to unemployment, why didn't Government started on a spending spree already ten years earlier, economists wanted to know.

Ritter sided with earlier comments by other economists that the N$120 billion state injection over the Medium Term Expenditure Framework (MTEF) will shrink the private sector's share in the economy even more. If one includes the entire spectrum of state-owned enterprises (SOEs), Government currently owns more than half of the economy, up from about 20 per cent at Independence, he said.

"The steady rise in the participation of the Namibian Government in the economy has a crowding-out effect on the private sector. The massive increase in spending will lead to a further crowding out," he said.

When confronted with the same issue at budget analysis meetings after the Budget, Kuugongelwa-Amadhila stressed that Government doesn't intend shutting the private sector out, but sees it as a partner in curbing unemployment.

Ritter called on Government to have in-depth talks with the country's top economists, the Namibia Chamber of Commerce and Industry (NCCI), the Namibian Employers' Federation (NEF), the Namibia Manufacturing Association (NMA), the Namibia Agricultural Union (NAU) and trade unions on the way to tackle unemployment in a sustainable way.

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