Budget out: Now what?

By by Trivangani Masawi
April 2011
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Prime Focus recently hosted a post-2011/2012 annual budget review lunch at a local hotel in Windhoek.

The event, attended by captains of the industry, Namibia Chamber of Commerce and Industry (NCCI) members, cabinet officials, and economic analysts, saw the Minister of Finance, Saara Kuugongelwa-Amadhila defend the budget arguing that although the economy has grown, unemployment has not been abated and the country is beset with high poverty levels and inequalities.

Addressing these challenges requires strengthening our job creation efforts, she said

Kuugongelwa-Amadhila added, “The budget proposes an expenditure of N$37 billion for the period 2011/ 2012 representing an increase of 30.4 percent from the 2010/ 2011 budget. For the Media Term Expenditure Framework (MTEF) period the expenditure amounts to N$119 million.”

Government will spend close to N$26 billion within the next three years in its quest to turn Namibia into a knowledge based economy and also avert the low literacy levels characterising the country.

More on its consolidation approach, treasury will spend N$14.1 billion in creating employment opportunities for the country, a move that will see close to 105 000 long and short term jobs being created.

The two moves are arguably very difficult considering their implications on the country’s borrowing rate and will remain among the boldest decisions Kuugongelwa-Amadhila has taken.

Although the heavy Government expenditure is centred mainly on curbing illiteracy (education) and unemployment, this move will create heavy Government debt and open a budget deficit and the results of such investments will be realised in future, analysts at the lunch argued.

But economic analyst, Ngoni Bopoto applauded the Government’s expenditure in some of the most critical areas saying this will shape up Namibia into a knowledge based economy.

Bopoto also lamented the growing gap between the rich and poor in Namibia, which he believes does not augur well for the future and need to be addressed to create a sense of prosperity among the country’s poverty stricken masses.

“Going forward Government is taking the necessary steps in averting the problems at hand. However, it does not end here but the most important issue is not on the allocation of funds but that Government still has to implement the projects.

‘I would also want to congratulate the Minister for coming up with mitigatory measures in food security and also boost agriculture, tourism and infrastructure development,” said Bopoto.

He added, “The Government has also made heavy investments in agriculture, tourism and infrastructure development which have potential to absorb most of the country’s semi-skilled unemployed youths.”

Minister of Trade and Industry, Hage Geingob said the budget deficit at 9.1 percent maybe big but should be viewed with good light considering Amadhila’s intentions.

“We should not be happy about a budget deficit but I think under the circumstances it is necessary and will go a long way in addressing the problems of unemployment and education.

“It is good to have a society that complains because that shows a sign of hope. Going forward, it will be very important to create society togetherness. Both Government and private sector have a role in promoting economic growth and should work hand in hand,” said Geingob.

The decision by the Minister to go all out on an expansion idea to solve some of the thorny problems in the economy did not gone unchallenged, however, with some economic analysts questioning the availability of funds.

Analysts allayed fears of the growing budget deficit and Government’s ability to raise the required capital to finance the expansion at a time when Southern African Customs Union receipts are receding.

Old Mutual economic analyst Robin Sherbourne questioned the growing deficit arguing that it can put the country into high debt levels and create pressure in the future.

“As we all know, borrowing money is rarely a good idea simply because it is easy to do so. Honourable Minister one of your many achievements since taking office has been reducing Namibia’s public debt to more sustainable levels and securing Namibia’s reputation as a credit worthy country.

“Once the fiscal taps are open, it takes a significant effort to close them down again .I sincerely hope this budget does not signify the end of financial prudence for the sake of political expediency,” said Sherbourne.

Sherbourne raised questions on the aggressive approach taken by Government on averting unemployment using an aggressive fiscal approach.

“The first thing that the initiative cannot credibly be justified as part of a counter cyclical fiscal policy which helps to cushion an economic downturn due to lack of demand in the export and private sector parts of the economy.”

“As you state the economy grew by 4.8 percent last year rebounding relatively quick from the global financial crises.

By international standards there was a relatively mild contraction of 0.7 percent experienced in 2009. There is no doubt the economy was helped by a sound fiscal policy and monitory policy adopted by the Ministry of Finance and the central bank.

“But all the signs are that growth will continue this year and in the coming year as world growth, especially as commodity prices start to pick up again. In terms of fiscal policy now is the time to take the foot off the accelerator pedal,” said Sherbourne. PF

51% tender deal on cards

NAMIBIA will soon witness a new era in local empowerment following the drive by the Ministry of Finance to push for at least 51 percent local representation in all companies that win local tenders.

The move is expected to benefit local enterprises and create equal opportunities for the local business people following the influx of foreign companies especially in the construction sector.

Speaking at the Prime Focus post budget luncheon, Minister of Finance, Saara Kuugongelwa-Amadhila said Government will soon push for a local empowerment policy that could accommodate locals getting the tenders.

“We will soon have a 51 percent local stake for all companies that want to access tenders with the aim of creating business opportunities for the local Small to Medium Scale Enterprises.

“The onus is now on Namibians not to be pushed to play front for the multinationals but take advantage of the opportunity presented to them and utilise it to the fullest,” said Kuugongelwa-Amadhila much to the delight of the crowd.

In the past there have been revelations of local business people who played front for multinationals to win tenders of big projects while in the mining sector locals are accused of selling exploration licences to multinational firms for meagre amounts.

The Minister also availed N$60 million to the forthcoming Small to Medium Scale Enterprises bank and N$100 million to the Development Bank of Namibia through the Bridging Finance Facility.

Seconded Minister of Trade and Industry, Hage Geingob at the same event; “I would believe that foreign investors will remain an important tool in our economy. However, we keep in mind that foreign investors do not only come where there are opportunities. Foreign investors are after resources and we have seen even in war zones investors still go.

“I am very impressed and I do agree that deficit is exactly desirable in a budget. But a deficit created to ensure growth and curb unemployment is worth it, at least after some time we will have solved the problem,” added Geingob. PF