By Josef Kefas Sheehama
There is a need for a number of reforms that the government can implement to supplement the macroeconomic framework. The foundations for economic growth include a responsible electrical supply, a functioning financial system, and respect for the rule of law. They also include wise and credible fiscal and monetary policies. To do this, firm action must be taken to increase confidence, encourage investment and job creation, combat economic inequality, and remove regulatory obstacles.
The Minister of Finance and Public Enterprises, Iipumbu Shiimi this week tabled an N$84.6 billion budget for the financial year 2023/2024 under the theme: “Economic Revival and Carrying for the Poor”. A successful strategy of poverty reduction must have at its core measures to promote rapid and sustained economic growth. The challenge for policy is to combine growth[1]promoting policies with policies that allow the poor to participate fully in the opportunities unleashed and so contribute to that growth. This includes policies to make labour markets work better, remove inequalities, and increase financial inclusion. The challenge in both areas is the way in which openness is achieved. Proper sequencing and pacing of reform are needed to smooth the adjustment for domestic producers. This is especially important for capital market integration.
Gross revenue estimated of N$74.7 billion Namibia dollars are estimated for the financial year 2023/24, about 16.5% higher than the revised estimates for the financial year 2022/23, he said, adding that the significant boost to revenues stems from an upward revision in receipts from the Southern African Customs Union (SACU) customs pool to N$24.3 billion, around N$6.4 billion higher than our previous estimates. growth is projected to moderate to 3.2%, reflecting revised mining production estimates, before slowing further to 2.2% in 2024. Gross government debt (total debt stock) increases to N$150.9 billion, equivalent to 70.1 percent of GDP.
Therefore, the 2022/2023 Budget speech by Hon. Minister Ipumbu Shiimi, cautiously indicated the government’s commitment to continued gradual fiscal consolidation, which provides much-needed fiscal policy certainty and sustainability. In my view, the extent to which government can achieve fiscal sustainability will be dependent on the implementation of expenditure curb and accelerated growth-enhancing reforms. This is critical for supporting the ongoing fragile economic recovery and should counteract the negative impact of several headwinds, ranging from higher energy and food prices to a relatively less accommodative interest rate environment. Government is determined to implement reforms aimed at stimulating demand through investment in infrastructure; employment programmes and tax incentives that should boost consumption; ease the skills constraints; and modernise network industries, which should ultimately lead to increased production capacity. Furthermore, the Minister indicates that a modified Electronic Filing Tax Relief Programme will be introduced for another period of twelve months to offer much-needed relief to taxpayers by writing off a percentage of the interest and penalties owed as tax arrears to NamRA and to promote the online filing of tax returns and general usage of the Integrated Tax Administration System (ITAS).
Despite this being another market-friendly budget, implementation will again be key, particularly on the reform and expenditure fronts. Here political will to drive growth and boost revenue, keeping expenses in check, will once again prove to be vital. Facilitating faster private-sector involvement in the power sector will catalyze confidence and growth more broadly. Namibia’s low growth levels and high unemployment reinforce the desire to protect existing industries and jobs. To achieve higher living standards, Namibia needs to adjust to global market demand. Climate change is starting to shape the manner in which the largest markets regulate imported and domestic products. Climate challenges also represent opportunities to generate new economic activity. Jobs and investment can be created by drawing on private-sector skills and capital, while demand for carbon-intensive products can be managed with incentives and penalties. Industrial policy should support businesses that can respond to these challenges. A future-focused policy that takes cognizance of climate change would support efforts to raise youth employment, as announced in National Budget, in sectors such as business-process outsourcing, tourism and technology.
Weak domestic demand continues to limit firms’ ability to pass higher prices on to consumers. There is a risk that higher administered prices and exchange-rate depreciation could put upward pressure on inflation. In line with the government’s commitment to fiscal sustainability, the 2023/2024 Budget proposes a set of measures to reduce public spending as a share of GDP, improve the composition of spending by reducing growth in the wage bill, and maintain good budget execution. Although local economic development projects often focus on small areas, they usually require collaboration among stakeholders across government, the private sector and community organizations to succeed.
The amounts allocated to the Anti-Corruption Commission are a matter of concern. The cumulative effect of individual corrupt acts is dysfunctionality. The effects of corruption can be categorized along the following lines economic, political, moral, psychological and so on. We will not root out corruption with limited resources.
The financial performance of several large state-owned companies continued to deteriorate sharply over the past years, leading to an increasing drain on public resources. Unlike their private counterparts, most state-owned companies hold developmental rather than profit-driven mandates. Nonetheless, these entities need to be financially self-sustaining. In recent years, a pattern of mismanagement and poor governance at major state-owned companies has led to operational failures, financial distress and increased demands for taxpayer support through the national budget. This problem is compounded by broad, sometimes unfunded mandates and, in some cases, outdated business models. Increasingly, however, these entities rely on external funding, government-guaranteed debt and bailouts to sustain operations.
There is strong pressure to improve the performance and quality of services delivered by SOEs. Namibia State-Owned Enterprises are facing a wide range of issues, from insolvency to weak accounting systems, as well as serious corporate governance shortcomings. These 22 SOEs are valued closer to N$ 30 billion. The State-owned enterprises and industries are structured to enrich government officials instead of pursuing innovation and efficiencies. This can lead to the loss of intrinsic motivation within organizations. Workers and managers are demoralized. People begin to doubt the value of hard work and innovation. Therefore, we welcome the reform of state-owned enterprises now to avoid macroeconomic risks.
To resuscitate the Namibian economy would require massive investment in infrastructure, skills & training; enacting and enforcing enabling-business incentives to stimulate the production of goods and services for local consumption and exports and having a clear fiscal and monetary policy direction for the economy. Namibia must exercise caution as debts are paid by revenue rather than GDP and also given the low-tax to-GDP ratio. Furthermore, incurring more debt in the current year would mean adding pressure on future budgets due to debt servicing obligations. One of the biggest risks facing the budget is the poor implementation of capital projects, which is a major concern for stakeholders in the economy, and to a large extent influences the level of impact of the budget on the private sector and the economy. Whether the budget will meet up to the expectations of Namibians and deliver the promised change depends largely on the implementation of institutional and structural reforms targeted at improving the budget process.
Furthermore, it was evident that during the Covid 19 pandemic, people lost their means of earning and ability to access capital.
Therefore, by allowing partial access to retirement savings, the government will be providing room for people to use some of their retirement savings in times of distress. A rising cost of living causes pain to everyone.
