Budget review: new taxes and cuts loom large
New Era, October 28, 2016, by Desie Heita
Click here to read the Minister's full speech
Namibia has officially entered a period of belt-tightening – this time tighter than previously – while re-allocating funds and freezing a whole lot to restore stability and confidence in the economy.
The country’s projected earnings are weak, because Namibia would not be able to export and sell as many of its products as it did last year. And although the situation is not quite frightening as yet, it does require that Namibia review how the country spends what is in the kitty.
That means cutting expenditure and re-allocating funds to assist those whose purses would otherwise be hard-hit by slow and low economic growth.
Hence, the austere fiscal policy statement that Finance Minister Calle Schlettwein tabled in parliament yesterday cuts the operational budget by N$1,82 billion.
The cuts amount to N$634 million on personnel expenditure; N$528 million on travel allowances, material suppliers and transport; N$379,6 million on subsidies and current transfers, as well as N$278 million on the acquisition of capital assets.
The development budget was cut by N$2,7 billion, which weighs on future construction of office blocks and extensions.
The defence ministry was the most heavily affected by cuts to the development budget.
The new fiscal stance advocates that N$1 billion, which in the current fiscal year was set aside for other items, would now be allocated to activities deemed urgent and crucial, so as to ease the country’s financial burden.
Of that billion N$150 million would now be used to fund drought relief efforts, another N$150 million would be allocated to support orphans and vulnerable children, while mass land servicing would also receive a boost of N$100 million.
The country’s two public universities – where students have been protesting over high tuition fees – would each receive N$100 million.
An additional N$350 million has been allocated to the completion of Neckartal Dam in the south.
However, about N$4,5 billion in the current fiscal year would be frozen, or not spent to ensure there is fiscal sustainability. The budget cuts will affect operational and development budgets.
State-owned enterprises not serving the social sectors would for some time also not expect a single cent to be transferred to them from central government.
To avoid having the country run out of money over the next three years – already a pressing concern as projections show weak earnings from mining and agriculture – government is going to put into place a number of tax reforms.
Schlettwein said in the 2017/18 budget he would table the “tax proposal for the introduction of the presumptive tax on small units and proposals to eliminate various categories of tax exemptions, both VAT and income taxes, as well as tax deductibility of some items not related to cost of production, such as the resource rent”.
He would also “redesign the proposals for the solidarity wealth tax into a high-income based wealth tax, coupled with further expansion and strengthening of the provisions of capital gains tax.”
According to current projections Namibian industries would bring in less money from their output this year than last year. The primary (extractive) industries in particular are expected to register negative growth of minus 0,6 percent this year.
In 2015 the primary sector registered negative growth of minus 3.2 percent.
The drought and veterinary restrictions on live animal exports also took their toll on the country’s agriculture sector. The fishing sector also did not perform too well this year.
The secondary industries – such construction and manufacturing – are also going to register lower income this year, projected at minus 2.3 percent. This is all largely due to the water crisis, which has inhibited growth in the construction sector.
Namibia is also likely to see a contraction in the amount of new investments coming into the country over the next three years or so.
“This is due to an anticipated decrease in significant investments over the medium term... based on the assumption that it is virtually impossible to match the phenomenal investments that emanated from the construction of the Swakop Uranium, B2Gold and Tshudi [mines] in the past three years,” Schlettwein said yesterday.