20 February 2013

Namibia: Quo Vadis Budget 2013/14?

Windhoek — Suspense is building over whether or not the Minister of Finance, Saara Kuugongelwa-Amadhila, will table a national budget tomorrow that will redirect or re-align development plans.

There has also been a heightened interest in just how the finance minister will deal with the historic and massive stimulus package, which is the Targeted Intervention Programme for Employment and Economic Growth (Tipeeg) introduced two years ago, which failed to achieve its ambitious targets.

Reports over the near depletion of the Contingency Fund have also given rise to additional concerns and jitters ahead of the expected tabling of the national budget tomorrow. The fund was created to cater for emergencies and not to fund development and operational government expenses such as state grants.

Many of the apprehensions come in the wake of concerns over a possible drought and the unpredictable trajectory of the global economy since the financial crisis of 2008. Analysts hope the finance minister will place more emphasis on implementing programmes to boost the economy through state-owned institutions rather than through the central government, and yank the chains to bring about the speedy implementation of the capital budget and introduce concrete plans to recapitalise priority sectors.

Public policy analyst Graham Hopwood says it will be interesting to see if the finance minister continues to present Tipeeg as an economic stimulus programme with less emphasis on the creation of new jobs as its primary aim. There are sentiments that the contingency fund should not have been this low, with Hopwood opining that the depletion is due to a failure to plan for civil service salary hikes and growth in welfare grants.

"I hope public sector wages and welfare expenditure will be properly planned for in the budget so that they will not drain the contingency fund, particularly as we look to be heading towards a drought," said Hopwood. Expectations are also for the finance ministry to announce new or strengthened revenue collection mechanisms to ease government cash flow, which is currently reeling under the unplanned increases in the wages of civil servants, as well as alarming welfare spending.

"Revenue is under pressure and therefore we have to learn to do more with less in the real sense of the word. There is capacity to raise further revenue with better tax collection measures, speedy tax assessments, and overhauling of the VAT claims system," opined economist Daniel Motinga, a senior manager for research and development at FNB Namibia Holdings.

Motinga says the key is to realign expenditure to support growth, and he is hoping for "concrete plans to recapitalise the transport and logistics sector to dovetail with the expectations of the Fourth National Development Plan (NDP4). TransNamib, RCC and Namport should all be priorities."

In agreement is James Cumming, financial analyst at local brokerage firm Simonis Storm Securities, who expects to see "more emphasis on implementing the programmes through parastatals rather than directly by the central government. We have already seen the escalation in the priority of developing the Kudu gas field by Nampower, likewise for Namport which is expanding its capacity."

Independent economist Martin Mwinga, an outspoken critic of Tipeeg, calls for the willingness and action to translate policy statements into realistic and achievable objectives. "There seems to be a disjoint and poor coordination between what is articulated in policy documents and what is announced in the budget," Mwinga said this week.

He reiterated that the country never experienced cyclical unemployment, but structural unemployment hence the Tipeeg short-term fiscal expansionary policy was "not the right solution, and it brought more confusion, including implementation challenges because people were implementing a wrong programme."

There is consensus though that the country faces risks of an evolving global economic system birthed from the financial crisis. "As a commodity driven economy and reliant on the Southern Africa Customs Union (SACU) revenues, Namibia must spend more funds in conducting research to determine other sources of revenue and avoid guessing.

"Unless government realises and appreciates the seriousness of future risks the country faces, Namibia will be caught with its pants down," says Mwinga. Hopwood shares the concerns over the sustainability of Namibia's dependence on SACU revenues, but does not think the upcoming budget "will address this problem in any fundamental kind of way. It is more likely that that the budget will maintain the more cautious approach to debt and deficit levels outlined in 2012/13."

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