Minister of Finance Calle Schlettwein concurs that the country faces a quandary over continued reliance on the extractive sector to supplement Government revenue and drive the economy, a situation he agrees needs a raft of interventions to diversify the economy and widen the revenue base.
This amid a time when Schlettwein needs to dig deep into his bag of economic tricks to find a lasting solution for alternative revenue generation for the country other than the obvious mining sector, the Southern African Customs Union (SACU) and taxation.
While the mining industry contributes about 11 percent to the Gross Domestic Product (GDP), acting as Government’s cash cow for survival, and the Southern African Customs Union (SACU) revenue pool carries more than 30 percent of the country’s revenue needs, Schlettwein tells Prime Focus that the situation creates an economic quandary and needs urgent redress.
Among a cocktail of measures to deal with the plethora of challenges stifling broader revenue collection, Schlettwein says Government’s key focus areas for diversifications are on improving agriculture and agro processing, improving tourism performance, improving manufacturing, and also making sure the dream to make Namibian a transport and logistics hub for the Southern African Development Community (SADC) does not merely remain just that.
He also believes there is need to have the power and water generation sectors made the key backbones of the economy as their non-performance would have detrimental effects on the growth of the manufacturing, mining and construction sectors.
“We are unfortunately one of those countries that have relied heavily on the primary industry for sustenance. However we have within our National Development Plan four (NDP4) agreed to improve the four key sectors that can improve revenue and steer the economy. These sectors are agriculture and agro processing; manufacturing; tourism; and transport and logistics. Of course we will need the power and water sectors to be very vibrant if we are to generate revenue from the other sectors that are reliant on these,” a rather enthusiastic Schlettwein says.
Closing the SACU revenue gap
Perhaps in a statement that comes short of admitting that the ongoing decrease in SACU revenue that has been sustaining the country’s expenditure patterns, Schlettwein opines that he will only be targeting to at least have a constant supply of 25 percent of the country’s revenue coming from SACU while the rest would be sourced elsewhere.
“We have deliberately widened our tax regimes and in the process introduced new taxes to make sure that we have constant supply of money in the future,” Schlettwein says.
He also reveals that his plan on the different taxes is to push much of the burden to corporate citizens while getting reasonable income from the individuals who contribute significantly through Pay As You Earn (PAYE).
The need for revenue could also be easily linked to the recent move by Fiscus to lean on those that are not in good books with the tax men to put their books in order. Schlettwein’s office has also not been sleeping on the job and making sure that constant follow ups and engagements with defaulters or those that want to pay their Ceaserian dues late are constant.
Confronting the elephant in the room
Although the Minister of Finance sounds convinced that the long term and short term measures laid down so far are bearing fruits and are easily sustainable in future to improve the revenue base, he knows that for way too long setting sights on secondary industry for revenue is not child’s play. Statistics show that the mining sector alone is the largest single contributor to Government through taxes and royalties.
It is also by far the most reliable sector that has kept the Government bank account ticking.
Ironically, manufacturing that has long been singled out as the solace to the plethora of problems to do with improving revenue generation for the future has not grown significantly. Infact the sector has grown on paper but with very little on ground save for the beer brewing firm Namibia Breweries Limited and Pasta Polana.
Tourism has also not seen the best of days despite the fluctuations of the South African Rand which is pegged at one as to one with the local currency.
‘To be frank we are not comfortable with our continued reliance on SACU and mining. However, as member states within SACU we have agreed that the earnings are more of an entitlement and need to be shared equally,” says Schlettwein, in an apparent reference to the continued engagement over the five countries (Namibia, South Africa, Botswana, Swaziland and Lesotho) in the past five years over sharing the revenue cake.
Schlettwein sentiments are also close to the fact that while Government has seen the revenue from SACU dwindling for four consecutive years, cutting the umbilical code with the oldest customs union in the world is not an option but rather soldiering on until practical solutions are found.
“We can also safely say that some of the projects that will bring in revenue for the country are already underway.
These include the port expansion and also resuscitation of the railway network,” says Schlettwein although he could not reveal exactly how much Namibia needs to have a fully functional railway system.
Running against the odds
Although plans laid down by Schlettwein to diversify are solid on paper there are few spanners on his path way.
Some of the obvious challenges are that more than 45 percent of the country’s rail is obsolete and surely it will not be rectified overnight, domestic tourism is not booming that much and the drought has heavily affected agriculture and adversely affected agro processing.