Honourable Speaker, I have the distinct honour to present the first Budget under the Presidential administration of His Excellency Dr Hage Gotfried Geingob.
I wish to thank His Excellency, the President, for the trust and confidence he has bestowed on me to serve as the custodian of our Public Finance Management and the financial sector.
I am grateful to the Founding President and Father of the Nation, His Excellency Dr. Sam Nujoma, for the firm foundation he has laid and for entrusting me to serve as Accounting Officer in his first Government and thereafter in the various portfolios.
I extend my sincere gratitude to Former President, His Excellency Hifikepunye Pohamba, under whose exemplary leadership I was privileged to respectively serve as the Deputy Minister of Finance and Minister of Trade and Industry; and especially for the quantum progress that the country has made in various facets of socio-economic development agenda during his Presidency.
I wish to sincerely thank my predecessor, former Minister of Finance and now the Right Honourable Prime Minister, Saara Kuugongelwa-Amadhila, for her great contribution to building a robust public finance management system and for her effective stewardship of the financial sector. Indeed, I thank her for her sound guidance during the memorable months and years we worked together (as her Permanent Secretary and Deputy Minister) as well as for her support during the last few days of finalizing the budget preparation.
Honourable Speaker, let me take this opportunity to congratulate you on your election as Speaker of the National Assembly. In the same vein, may I also congratulate Honourable Loide Kasingo as the Deputy Speaker of this House. I also want to congratulate all the honourable members of the National
Assembly, new and old, for their successful elections. Under your able leadership, this House is destined to steer the legislations to provide for the bread and butter issues affecting our people and our nation’s socio-economic development agenda, including the Appropriation Bill I am tabling today.
II. ACCOUNTABLE GOVERNANCE – RESULTS-BASED MANAGEMENT
Honourable Speaker, Honourable Members,
§ The expansion of the economy by a factor of 15 since 1990, from N$8.3 billion to N$126.6 billion by 2013, with the corresponding income per capita having increased more than 10 times, from N$5,500 to N$58,300, thus propelling Namibia into the league of upper middle-income economies by global comparison;
§ improved access to education, health facilities and basic amenities;
§ reduction in relative poverty from 38 percent in 1993/94 to 20 percent by 2009/10 and pushing back extreme poverty from 9 percent to 2.0 percent over the same period;
§ an impeccable record of democratic governance, peace and stability epitomized by our outgoing President, the indefatigable His Excellency Hifikepunye Pohamba, having been bestowed the 2015 Mo Ibrahim Award for excellence in African Leadership;
§ upholding of macroeconomic stability and fiscal prudence, which enhanced the competitiveness of our economy and the capacity of the State to expand the provision of public services to all our people; and
§ in spite of the difficult adjustment period stemming from the effects of the global financial crisis, Namibia was able to have its investment grade sovereign credit ratings by Moody’s and Fitch reaffirmed as stable.
III. SEIZING CHALLENGES, CREATING OPPORTUNITIES
15. Indeed, Honourable Speaker, we made this notable progress amidst daunting challenges and difficult circumstances, borne out of our historical past of glaring inequalities and exclusion. We have not yet fully prevailed over these challenges.
16. Making a significant dent in the development challenges requires prompt implementation of targeted intervention measures and increased service delivery, alongside a robust tracking mechanism to assess the remit of the interventions.
17. In his inaugural address to the nation, His Excellency Dr. Hage Geingob stated, and I quote “We plan to expand and spread the opportunities for growth and prosperity to be enjoyed by all Namibians in all parts of the country, with a specific focus on the disadvantaged sections of our population. We will do so by pursuing policies and strategies to safeguard macroeconomic stability, promote economic diversification and transformation of the Namibian economy to be more inclusive and resilient to internal and external shocks”
IV. WHAT DOES THIS BUDGET OFFER?
18. The budget and the Medium-term Expenditure Framework I am tabling today are aimed at tackling the structural challenges that affect the development potential of our economy, unlocking opportunities for jobs and wealth creation and improving the welfare of Namibians in an inclusive and sustainable manner. It is a pro-poor, pro-growth budget, with deliberate scaled-up resource allocations to the targeted programmes for broad-based economic growth, job creation and poverty eradication over time.
Honourable Speaker, Fellow Namibians, To bring about better results in these focal areas of social and economic transformation, we need to depart from a business as usual mindset by making measurable efforts to hold Offices, Ministries and Agencies entrusted with programme execution accountable for their action or inaction. We have to move in top gear in our journey to Vision 2030.
In particular, we need to make bold decisions and commence with targeted policies to transform and diversify the economy, alongside a package of strategic interventions to amplify the policy impacts in the targeted areas.
POLICY PRIORITIES FOR THE MTEF
Honourable Speaker, His Excellency President Hage Geingob’s administration came into office on the basis of a strong foundation laid over the past twenty-five years. As a matter of policy priorities, this administration will seize the opportunity to address the socio-economic challenges expeditiously.
By and large, Namibia’s economic growth so far has been positive and moderately high, but it largely remained jobless, with unemployment perpetually high, and now standing at 28.1 percent. A key challenge that we face is the narrow production base with growth being concentrated largely on the production and export of raw materials and commodities on one hand, and a high import bill on the other hand. This state of affairs limits the job creation potential, continually drives our trade balance deeper into deficit, exerts pressure on the stock of international reserves and renders the economy highly vulnerable to external shocks.
Thus, the first priority in this budget and MTEF is to bring about an inclusive growth agenda for our country by:-
diversifying and industrializing the economy, through targeted budgetary allocations to the priority economic sectors with high economic growth and job creation potential,
continuous development of functional and technical skills through increased access to tertiary education and vocational training,
developing and supporting domestic and regional value chains in the areas of comparative and competitive advantage,
crowding-in the much needed investment through private sector and SME support programmes as well as harnessing PPPs,
§enhancing greater access to development finance through the operations of domestic Development Finance Institutions and tailor- made commercial credit offerings, and
§ leveraging PPPs for infrastructure development and public service delivery.
24.Honourable Speaker, although we have, undoubtedly, made a remarkable dent in poverty, deep pockets of poverty and vulnerabilities still remain.
25.Thus, the second priority for this budget and MTEF is to reduce poverty and improve social welfare. A sustainable and long-term strategy to address poverty is the provision of opportunities for income generation as well as promoting the creation of decent jobs. This will be achieved through:-
§ strengthening social safety nets in coverage and quantum as the first line of defence against poverty for the vulnerable members of our society,
§supporting the creation of decent jobs and self-employment opportunities in the private sector,
§ implementing policies that promote local access to, and ownership of the resources, and nurturing the capacity to exploit the resources profitably,
§developing social security networks that are sustainable and meaningful,and
§ designing and implementing redistributive tax policies that are pro-poor and pro-growth
26. Honourable Speaker, the interconnectedness across the skills deficit, joblessness, poverty, income inequalities and skewed ownership levels, pose an unyielding barrier to wealth creation for the majority of Namibians. We need to recognize that there is no silver bullet to address these challenges. A package of policies and instruments is needed to break this barrier over time.
§ empowering Namibians in a manner that creates sustainable and broad- based wealth creation,
§ promoting affordable and sustainable access to finance and means of production, while maintaining responsible lending,
§ developing facilities to support SME access to finance and mentorship programmes,
§ increasing the share of local ownership and value share in the value chains across various industrial and service-oriented activities,
§ encouraging wealth accumulation and prudent management, and
§ expanding the provision of basic amenities to all Namibians.
· improve service delivery by strengthening internal efficiency of the public service sector through performance measures and accountability;
· continuous skills development, and
· reform of public enterprises to ensure affordable, competitive, reliable and sustainable service delivery.
The extent to which we can address these priorities today depends on the multiplicity of internal and external factors impacting on our growth potential, the revenue generation capacity of our economy and the measures that we can deploy to address these constraints. Allow me, therefore, to highlight the economic context and constraints under which this budget and MTEF will be executed.
GLOBAL AND REGIONAL ECONOMIC AND FINANCIAL CONTEXT
The global economy is projected to grow, but at a weaker pace of 3.5 percent in 2015 and marginally improving to 3.6 percent in 2016. With the exception of the United States of America, the growth outlook is weaker for other major economies, such as the Euro zone, China and Japan.
The Sub-Saharan African region is also not spared, with growth projected to remain relatively flat at 5 percent over the MTEF.
Closer to home, the South African economy, which is closely linked to Namibia through strong trade and financial ties, is projected to remain subdued, having only registered an estimated 1.4 percent growth in 2014 and projected to grow by an average of 2.5 over the MTEF, mainly due to the effects of electricity supply shortages.
The prolonged low growth spell for the South African economy poses inescapable consequences for Namibia, particularly in regard to export growth and revenue accruing from the Southern African Customs Union (SACU).
DEVELOPMENTS IN THE DOMESTIC ECONOMY
With regard to developments in the domestic economy, growth is estimated at 6.2 percent in 2014, an acceleration from the growth rate of 5.1 percent recorded in 2013.
35. Growth in 2014 was anchored by the strong expansion of output in secondary industries, on the back of a booming construction activity and the recovery in the primary industry sector as well as associated increased investment in the mining sector, a strong surge in the retail sector and strong public consumption expenditure. Looking ahead, a stronger economic expansion could benefit from increased value chain developments in agriculture, agro processing, minerals beneficiation and stronger output from the services sector.
Inflation and Monetary Policy
36.Inflation remained relatively low, having been declining since 2012 to reach 3.6 percent by February 2015, thanks to lower oil and transport prices. After a sustained period of accommodative monetary policy, the Repo rate was, however, increased by a cumulative 75 basis points since June 2014, from 5.50 percent in May 2014 to 6.25 percent by February 2015, mainly as a measure to contain the rapid rise in household credit extension.
Balance of Payments and Foreign Reserves
37. The Overall Balance of Payments recorded a deficit of N$1.8 billion, from a surplus of N$598 million in 2013, mainly as a result of a widening current account deficit. The current account continued to register a deficit as a result of strong inflows of imports over exports, which further puts pressure on the stock of foreign reserves, although the stock remains sufficient to support the currency peg. On the other hand, the capital and financial account recorded an increased surplus, primarily due to large net capital inflows from other long-term investment, albeit not enough to offset the deteriorated current account deficit. These inflows were due to increased borrowings by the private sector, especially in the mining sector.
Exchange Rate and Currency Movements
38.The exchange rate has been depreciating against all major currencies in the recent years which, coupled with low inflation, augurs well for the competitiveness of the export industry, but comes with a higher import bill and increased debt servicing costs. This, together with improved market access
into Africa and other major markets, such as the EU, offers a competitive opportunity for Namibia to further expand her exports.
Capital Market Developments
VIII. THE MEDIUM-TERM ECONOMIC OUTLOOK
The budget that I table before this house, proposes an expenditure outlay of N$67.08 billion for the 2015/16 financial year, equating to 40.8 percent of GDP. This represents 7.0 percent nominal increase over the past year, a much moderate expansion rate, compared to 27.7 percent over the previous year. For the MTEF, total expenditure is forecast to moderately increase to N$72.06 billion by 2017/18 and average 39.0 percent of GDP.
Total non-interest expenditure for 2015/16 will increase to N$63.23 billion, from N$57.69 billion in 2014/15, and average around N$65.56 billion over the MTEF.
Interest payments, which represents Government obligations to debt servicing is estimated at N$3.87 billion in FY2015/16 or some 6.6 percent of revenue, seen against the limit of 10 percent of revenue.
Non-interest operational expenditure for the budget year is set at N$52.12 billion or 31.7 percent of GDP, representing a 3.0 percent nominal increase over the previous financial year, due to expenditure commitments arising from public sector remuneration corrections as well as adjustments to the Government structure.
The development budget, which is key to infrastructure development and fiscal countercyclicality is proposed to increase at a much higher rate of 15.9 percent to N$11.10 billion in the budget year and average around N$12.05 billion over the MTEF. As a portion of GDP, the development budget allocation increases from 6.4 percent in 2014/15 to 6.7 percent in 2015/16 and averages around this level over the MTEF.
In addition to the development budget allocation, budgetary allocations are made under the operational budget for targeted transfers to State-owned Enterprises for investment in strategic infrastructure projects such as the Kudu
The FY2015/16 Budget and Expenditure Outlook for the MTEF
Gas-to-Power project, railway and road network rehabilitation, Walvis Bay Port expansion and the Mass Housing flagship projects.
60.Going forward, Government must seek a better alignment of the development budget to our economic priorities, industrialization policy and our Growth at Home Strategy. This alignment would further be optimized through leveraging local sourcing requirements, PPPs, improved Namibian ownership and the development of value chains across the development initiatives.
Budget Balance and Financing Options
IX. EXPENDITURE PRIORITIES AND INTERVENTIONS FOR MTEF
· N$4.93 billion over the MTEF to support the balance sheets of Nampower and Namcor for the Kudu Gas-to-Power Project. In addition, the State will provide a guarantee for the financing that will be sourced outside the budget,
· N$1.25 billion over the MTEF for Mass Housing Project. In addition, Government will issue a sovereign guarantee to the tune of N$2 billion for NHE to access funding for this vital project,
· N$3.27 billion over the MTEF for the roads projects, in addition to N$1.7 billion to be raised by the Road Fund Administration, and
· N$945.84 million for railway projects, with funding outside the scope of the State Revenue Fund to the tune of N$3.79 billion over the MTEF.
· N$7.75 billion is allocated to the Agricultural Sector to cater for, among others, the Green Scheme programme and other interventions in the sector over the MTEF. Social Sectors, 68. Honourable Speaker, Namibia has an impeccable record of according the highest share of the national budget to the social sectors, particularly education, health and social safety net systems. Commensurate attention is also being accorded to the housing sector. Thus, a total of N$23.99 billion is allocated to the social sectors, which is 38.9 percent of the total non-interest budgeted expenditure. Over the MTEF, this allocation amounts to N$74.42 billion.
§ the largest share of this allocation accrues to the education sector, with a combined allocation of N$15.35 billion in the budget year and N$ 48.07 billion over the MTEF,
§ The Ministry of Basic Education, Arts and Culture receives N$11.32 billion in the budget year or 73.7 percent of the total allocation to the education sector. The Ministry of Higher Education, Training and Innovation gets N$4.03 billion in the budget year and N$12.04 billion over the MTEF,
§ For basic education, we shall be able to provide both primary and secondary education for free with this allocation. Access to tertiary education will be further expanded through a formula based funding and enhanced financial assistance to students. In addition, better facilities and equipment will be provided for vocational training,
§ the Old Age Pension grant is increased by N$400.00 to N$1,000.00 per month. This will further be increased annually to reach N$1,200.00 per month at the end of the MTEF period. Other social grants will be strengthened in coverage. This places our elderly above the national poverty line, which is estimated at N$530.00 per month in 2015 and compares very favourably with R1,410.00 per month offered in South Africa.
§ the health sector receives N$6.49 billion for the coming financial year, and a total of N$19.78 billion over the MTEF to expand and improve the quality of health service delivery,
§ N$303.81 million is allocated for National Youth Service development programmes over the MTEF to implement a host of youth empowerment programmes. Public Safety and Order Honourable Speaker
72. An amount of N$499.24 million is allocated to the Contingency Provision for the budget year and N$1.10 billion over the MTEF to cater for unforeseen emergencies. An amount of N$334.0 million was allocated during 2014/15 and N$319.48 million was spent. I have distributed the information regarding the use of the Provision in the last financial year.
X. POLICY INTERVENTIONS FOR THE MTEF
§ reduction of the withholding tax on services rendered by Non-residents from 25 percent to 10 percent,
§ implementation of the reduction of the non-mining corporate income tax from 33 percent to 32 percent as announced last year,
§ introduction of the first phase of environmental taxes on carbon dioxide emission tax on motor vehicles, incandescent light bulbs and motor vehicle tyres as considered and announced last year,
§ lifting of the Value-Added Tax (VAT) threshold for registration from N$200,000 to N$500,000 as announced last year, following a lengthy consultation process,
§ introduction of criteria for voluntary VAT registration and VAT import accounts,
§ introduction of mandatory security requirement for the deferral of VAT goods,
§ introduction of electronic communication rules, which enable online filing of tax returns and online payment of taxes,
§ introducing taxation of restraint of trade payments, as well as proceeds from the sale of a petroleum licence or right to explore, develop and produce petroleum,
§ introducing transfer duty on the sale of shares in companies and membership interest in close corporations owning residential property, commercial property, land and mineral licences, as announced previously,
§ tabling of the Customs and Excise Bill, following regional harmonization and modernization of customs and excise procedures,
§ strengthening the provisions for recovery of tax debts, and § introduction of taxes to promote domestic value-addition in the primary commodity and natural resources sectors.
§ introduction of a Mid-Year Budget Review and Pre-Budget Statement, to be presented in October/November each year, as a measure to assess the budget execution and budget policy implementation as well as to further inject greater transparency in the budget process. The review for coming financial year will greatly assist in further refining expenditure programmes for the newly established portfolios,
§ extending the Public Expenditure Reviews and Public Expenditure and Financial Accountability (PEFA) self-assessments to major budget
Votes, as a mechanisms of assessing the quality of expenditure in terms of outcomes and enhancing value for money,
§ strengthening the capitalization and supporting the market operations of our Development Financial Institutions to enhance access to development finance,
§ improving Government accounting standards to strengthen the accounting system and accounting skills in line with best international practices,
§ tabling the revised Public Procurement Bill, pursuant to further consultations and legislative inputs provided,
§ develop and implement a policy framework for the structuring and management of Government sovereign guarantees to diversify risks, realize improved financial terms and manage the macro-fiscal exposures,
§ finalizing work on the Public Private Partnership legislation and facilitating the preparation of bankable projects for private sector investment in the potential areas of Mass housing, energy, railways, ports, health and industrial parks, and
§ working closely with the Law Reform and Development Commission on the drafting of a new Public Finance Management Bill.
XI. Financial Sector Law Reforms
Honourable Speaker and Members of the National Assembly,
· Achieving greater inclusiveness and prosperity for all and we know that this requires high and sustainable economic growth, grounded on strong macroeconomic fundamentals.
· In this budget, we have scaled-up allocations to the economic and social sectors to spur growth, job-creation and long-term productivity gains.
· We have increased Old Age Pension grants and made a commitment to future adjustments in line with resource availability and regional best practices. Anti-poverty policy packages and instruments are being streamlined through the deliberate intervention to create a dedicated Government Ministry.
· Government is taking measures to improve internal efficiency and accelerate service delivery to all Namibians.
· We have extended free education to the secondary education phase, increased the support to tertiary and vocational education, land reform programme and the provision of basic services so that no Namibian must feel left out.
· We are investing in the youth through continuous skills development and empowerment opportunities.
· We are keeping fiscal operations within sustainable levels, and working collaboratively with organized labour and the private sector for the common good of our country.
· Through this budget, we will move a step closer to our objective of inclusivity, reduction of poverty and income inequalities.
99.Targeted resource allocation proposals have been made. What matters is effective implementation and results-based management. And we need to act decisively and in the shortest time possible. I thus seek for your support and insights going forward.
100. I want to end with a quotation from Charles Darwin who quite rightly said, and I quote “If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.”
101. It is now my distinguished honour to submit for your favourable consideration the Appropriation Bill 2015, and the 2015/16 – 2017/18 MTEF.
I thank you.