Can Calle Schlettwein fix it?

March 30, 2015, 8:41am

Can Calle Schlettwein fix it?

The country is facing one of the highest inequality gaps in the world, poverty has been a thorn in its flesh since independence and the average Namibian struggles to acquire decent accommodation because the market is charging unrealistic prices.
There are also concerns from the students who are facing the reality of ever increasing tuition and registration fees at the tertiary institution while the senior members of society have to survive on a meagre N$600 per month in the in the harsh world where a small family of four will basically spend about N$2000 for the basic groceries.
As if that is not enough, the President Dr. Hage Geingob has declared all-out war in poverty, inequality and wants the country to be prosperous in the short term.
Put bluntly, the words of Dr. Geingob at his inauguration said, “The prerequisites for a prosperous nation include good constitutions, peace and democracy. We are however aware that people don’t eat constitutions, peace or democracy. People eat decent food, live under decent shelter and enjoy decent employment. Therefore, our first priority will be to declare all-out war on poverty and concomitant inequality. Our focal point will be to address inequality, poverty 6 and hunger and that will involve looking at a range institutions,”
These are some of the harsh realities that new Minister of Finance, Calle Schlettwein, would have to address when he announces his Medium Term Expenditure Framework (MTEF) this week. While the harsh realities of poverty will not be eradicated in the shortest period of time, Schletwein has to find a way of stimulating the domestic economy to accommodate the hundreds of thousands of Namibian school-leavers who are failing to find solace in the job market.
According to the statistics released by the Namibian Statistics Agency the country’s unemployment rate hovers at 28% of the economically active population. Schlettwein will also have to find a solution on how to improve industry performance and create jobs, bearing in mind that the last attempt by his predecessor Sara Kuugongelwa Amdahila through the Targeted Intervention for Employment and Economic Growth (TIPEEG), did not yield more than 104 000 employment opportunities.
Broadening revenue base
Key to Schlettwein’s expenditure patterns will be how Government aims to stimulate more revenue from the mining sector through taxes. Historically the mining sector in Namibia has been very sensitive to any manoeuvres towards their earnings. In the past, Government had to engage in dragging negotiations with the extractive sector when the Finance Ministry proposed a raft of change to up the revenue.
There is also the recurrent headache for Schlettwein will be how to come up with other revenue streams other than the overreliance on the Southern African Customs Union (Sacu), which is still to finalise its equitable distribution stream among member states. Sacu is the oldest customs union in the world but has, in the past, taken long to satisfy the needs of its member states (South Africa Namibia, Botswana, Swaziland and Lesotho) spreading the revenue cake.
Social safety nets
There is also a good part of the society that would want to see Government releasing pressure off the workforce. In the past, the Ministry of Finance has weighed in with assisting the low-income earning bracket by reducing the cumbersome burden of taxes on the section of Society that does not get remunerated above the N$50 000 threshold.
The Government has also tried to implement a policy that sees those who earn the largest chunk being taxed more in the bid to have the tax burden spread evenly among all citizens. Whether Schlettwein also shares the same sentiments remains to be seen.
Analyst’s view
Head of Research at Simonis Storm Securities, James Cumming, emphasises that substantial spending should be allocated to the infrastructure, with special focus on transport and logistics sectors.
“The renaming and reshuffling of the new ministries added to a new dimension and would also need a substantiating funding. We need to put emphasis on turning Namibia into an industrialist nation with this new budget.  More money is likely to be put into streamlining and business registrations. Poverty eradication is a big theme. It needs an intervention, especially with government putting priority in increasing state pensions and all other grants such as orphan grants. Government should accommodate job opportunities and more spending should be allocated to Education now that we have two Education Ministries,” said Cumming.
 “It is difficult to try and predict what the budget will enshrine since we now have a new President, cabinet and finance minister. The theme for the current president is “Poverty Eradication” and we expect that over the medium term, government spending will be aligned to the implementation of this vision.”
“We are certain this will be an expansionary budget and that the government will borrow more, possibly exceeding 30% of GDP during the MTEF period. (Currently government debt is 24% of GDP). Fiscal deficit is likely to remain in the low- to mid-single digits,” he added.
 “There will be an additional allocation to “poverty eradication”, but it is unknown how the government has decided how to go about this. If it is only through social grants / programs (which, in our view, is not a long-term solution) then we will see a large increase in that area. If the government wants to achieve this through industrialisation or other economic developments then more funds will be channelled in that direction.”
“We are also not expecting much in the way of increase tax rates or new taxes, but we do expect the Ministry of Finance to continue with widening the tax net to improve collections. Presumptive tax may be mentioned again during the Minister’s speech. We also expect additional input with reference to the Mass housing project,” he noted.
 “On the topic of the government taking on additional debt, increasing the debt to GDP ratio – Moody’s has confirmed that Namibia’s credit rating will remain stable if additional borrowing is used to fund productive assets which add to economic growth, employment and infrastructure. We couldn’t agree more,” he concluded.
 Expectations:
The new ministries will need a budget allocation therefore increasing operational expenses, although some existing ministries were split in two, and the Planning Commission was elevated to ministry level which should curb the increase.
l Despite the point above, we don’t foresee a drastic increase in operational expenditure.
l However we expect continued increase in spending on infrastructure: This is in line with the NDP’s, Industrialisation drive and vision 2030. Spending likely to be on roads, rail, housing, water and electricity
l Provision made for drought relief.
l We also expect above inflation increases in social grants and programs.
 Industry’s view
Chief Executive Officer of the Namibian Chamber of Commerce and Industry Chamber of Commerce Industry (NCCI), Tarah Shaanika, believes the budget allocation should communicate and support what has been set by the President through his new cabinet and ministries.
“I would expect the budget to reflect what the President said in his inaugural speech with regards to the industrialisation of the economy. We expect the adjustments made to Ministries not to only be reflected in the budget but also influence measures that will drive our objectives,” said Shaanika.
He also added that, “The adjustments and the budget must address the issue of employment creation and poverty eradication. All these need to be reflected in budget and the need for the economy to be expanded. For many years we have had jobless growth. It is time we create jobs that stimulate growth that will in turn create more jobs.  This can only happen if we can expand the economy and we expect the budget to reflect all this.”
According to Shaanika, there is a need to focus special attention and support on SMEs.
“Reality is these programs need to be expanded and we expect to see that in the budget. There is also need to support emerging industries and growth for the existing ones. It will be very interesting to see how the new ministries will be reflected in the budget, particularly the Ministry of Poverty Alleviation, which I believe, does not have a strategic plan yet and it is going to be a consumption Ministry. It will need support from other Ministries as poverty-related activities carried out by other Ministries will be transferred there,” he said.
Civil Society
The Ombudsman, John Walters’s, sentiments lie with pensioners and whether Schlettwein will be increasing allowances for the elderly.
 “What I am receiving from the people on the ground is they expect and hope for an increase in the old-age pension and all other grants. We are not expecting a N$50 increase, but at least an increase to N$1000. Due to the high cost of living, many just cannot survive on the current amount.”
He added, “Another thing they expect is for government to inject more resources in the Mass Housing Project. The provision of houses, especially to the poor is a big hope for the man on the street,” Walters said.
He explained that people are worried about bread and butter issues and urged government to consider the needs of the citizens who have served the economy when it was still starting out and have a human rights approach for the national budget.
Walters says citizens should engage government if their needs are not met “What people do is complain for two weeks to a month when the budget is not satisfactory and then are silent until next year. People need to engage government as soon as it is announced and put pressure and encourage government to meet the needs of the people”.
Meanwhile Former General Secretary of Council of Churches Namibia (CCN) and Chief Chaplin in the Namibian Defence Forces (NDF), Nangula Kathindi said, “For starters I believe the pension should be increased. The government could allocate more funds to local authorities to alleviate the pressures adding to the housing crisis. I also believe in the BIG and target for marginalised communities like the San”.

by Charmaine Nghatjiheue and Patrick Haingura: The Villager