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Home / Opinion - Expectation of mid-term budget…building economy works for all

Opinion - Expectation of mid-term budget…building economy works for all

2022-10-14  Josef Kefas Sheehama

Opinion - Expectation of mid-term budget…building economy works for all

The finance minister, Iipumbu Shiimi, will present the mid-term budget review on 26 October 2022. The budget review 2022 will coincide with the Monetary Policy Committee meetingvof the Bank of Namibia. 

The mid-term budget review is, therefore, expected to present an opportunity for fiscal authorities to review if the targets are being achieved, identify challenges, and provide imminent solutions. We are expecting Shiimi to introduce tax relief packages to cushion industry and individuals to improve viability and increase spending. 

On the macroeconomic front, there hasn’t been much change economically around the globe. Growth was expected to be muted, which was bound to affect revenue. In the latest data released by the head of the IMF mission that assessed the performance of the South West African country, Giorgia Albertin said the Namibian economy has been on a recovery path after a sharp gross domestic product (GDP) contraction triggered by the Covid-19 pandemic. The real GDP growth is expected at 3% in 2022 and 3.2% in 2023, supported by robust diamond, gold and uranium production, and rebounding tourism. 

The IMF team called on President Hage Geingob’s government to work towards preserving macroeconomic stability, advancing structural reforms and protecting vulnerable groups in order “to foster private sector-led and inclusive growth, and reduce unemployment and inequality.” This should involve preserving debt sustainability, containing the public sector wage bill, advancing the reform of state-owned enterprises and strengthening tax administration. Namibia also has the second-highest inequality and unemployment rate in the world, with 50% of young people unemployed. 

Furthermore, Shiimi should provide clarity on how government proposes to reprioritise scarce funds, stimulate economic growth and create jobs. A combination of global shocks, currency instability and the effects of the Russia/Ukraine conflict have weighed down on Namibia’s economic performance. The review is really necessary, taking into account the currency volatility, exchange rate movements and inflationary pressures. So basically, it is the fiscal authorities’ role to cushion ordinary consumers. Industry needs incentives, so it is all up to the fiscal authorities in ensuring that they strike a balance between spending and revenues by focusing on policies that guarantee sustainable production processes in the short to long-term. For the business community, it is the need to facilitate tax relief for the mining, agriculture, tourism, retail and distribution sectors that is also imperative in sustaining the economy.

Moreover, the mid-term budget must focus on green hydrogen as a key energy resource. The biggest challenges facing Namibia are to develop and demonstrate green hydrogen technologies which are technically and economically viable and cost-competitive, and to create a robust supply chain and delivery mechanism for these technologies. 

Leveraging Namibia’s significant renewable energy potential to position Namibia as a top producer and potential exporter of green hydrogen should be a priority. An increase in investment in the sector will ultimately lead to better development and more jobs. It is also crucial for the government to support the sector to enable it to promote the hydrogen economy. 

Green hydrogen is a new but reliable technology for reducing carbon emissions in areas where electrification is ineffective. The growth of green energy is predicted to be among the fastest of any aspect of the energy revolution, generating specialised opportunities for businesses and investors. Furthermore, there is the spillover effect of Eskom on Namibia’s economy. 

In addition, manufacturing remains central for industrialising the country. There are policy reforms on improving the investment environment currently ongoing under the ease of doing business programme and containing the cost of doing business by addressing cost-effectiveness challenges such as energy, road networks, corruption, dispute settlement and property rights. The rise in agricultural output and income can expand the market for the manufacturing sector. There is also migration of surplus labour from agriculture to manufacturing. 

Manufacturing calls for re-industrialisation in the Namibian economy, based on improving performance through innovation, skills development and reduced input costs in the economy. This emphasis on skills applies across the economy, and will be a centrepiece of partnership with business and labour. Promoting the agriculture for development agenda requires fast-tracking the productivity of smallholder farming by supporting smallholder farmers to access land, farm inputs and post-harvest facilities. 

Agricultural productivity is an important factor in labour reallocation to other sectors of the economy. In this regard, promoting access to fertilisers, expanding irrigational facilities, promoting non-tillage farming and investing in agriculture are pivotal to promoting agricultural productivity that could help link agriculture to poverty and inequality reduction in Namibia. 

The availability of specific skills needed to prepare, launch and manage PPPs can represent a major implementation challenge in Namibia. Reaping the benefits of PPPs involves a careful and complex preparation process as final results may take time to materialise after the contract had been signed. The actual terms of contractual agreements and the changes needed to create an enabling environment will depend on the sector, and often the specific transaction. 

The steps needed to get there, though, are always the same, constituting a necessary framework for Namibia to succeed with the PPPs. Furthermore, the informal sector (SMEs) is very much neglected as it seldom accounts for a pride of place in government planning for the overall economy. This may be due to a myriad of factors such as the unregistered and unregulated nature of most businesses in the informal sector. 

Giving the role of the informal sector, in the economy, government should begin to take more than a simple look at the informal sector with a view of enacting policies that will synergise the informal and formal sectors in order to unleash the vast potential of the Namibian economy since activities in both sectors of the economy are not mutually exclusive. Also, there is progress on the Sovereign Wealth Fund.

Furthermore, Shiimi is to unpack on the Sovereign Africa Rating (SAR) agency as a very important step forward towards African integration, not only when seen from an economic point of view, but also politically. The challenge is for SAR and how to overcome the skepticism around black people’s abilities to run countries with sophisticated market economies. How will the international community recognise SAR as an alternative for S&P Global, Fitch ratings, and Moody’s International? 

From an education perspective, digital infrastructure and applications also need to be upgraded to enable the education system to adjust towards supporting online education. For the business sector, digital infrastructure and applications would also play an important role in ensuring that the economic sectors remained operational and productive. 

This will expose the need for the nation to transition to industrial sectors with a higher level of productivity, based on automated technology and higher skills. Hence, it will accelerate the transition towards the Fourth Industrial Revolution and digital transformation, raising human capital capabilities through upskilling and reskilling programmes, based on the needs of the labour market.

In conclusion, there are a lot of considerations to be taken as we seek to consolidate gains achieved so far, but I think overall growth estimates will slightly be lowered. There are also expectations that Shiimi will review revenue forecasts for this year in the wake of inflationary pressures.

2022-10-14  Josef Kefas Sheehama

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