Saara urged to be brave and spend

By: STAFF REPORTER

FINANCE Minister Saara Kuugongelwa-Amadhila should “lean against the wind” and maintain an expansionary fiscal stance in the 2010-11 Budget, Johannes !Gawaxab, Managing Director of Old Mutual’s African Operations, said yesterday.

“It is critical this is done in a way that adds to the nation’s productive infrastructure – its roads, railways, energy and water supply and harbours – rather than be directed disproportionately towards expenditure that is consumptive in nature,” !Gawaxab said.
He said the budget is particularly important for the country at a time when the world economy is slowly recovering from the most severe downturn since the Great Recession. The budget plays a critical role in determining overall demand in the economy and carrying out the investment needed to bring about higher and sustained economic growth and employment.
“The short-term cyclical needs require Government not to withdraw its stimulus from the economy, because the economic recovery is still fragile and uncertain. However, over the longer-term, the country should avoid accumulating a massive debt with attendant interest payments which would burden future generations unnecessarily,” he said.
!Gawaxab said the Government has been prudent in its handling of the nation’s finances in the years prior to the crisis. Budget surpluses, rather than deficits, undoubtedly made it possible for Government to use fiscal policy as an instrument to counter the downturn when it came. The Bank of Namibia also played a vital role in complementing Government’s efforts, controlling inflation and contributing to economic growth, he said.
“We were encouraged by many measures introduced by the Minister of Finance last year in an attempt to “weather the storm”.
However, we were disappointed that many of the measures announced were not implemented. Lack of implementation is a cause for great concern. We believe there is much to be done in terms of improving the way Government designs, implements and monitors policy measures and projects and we encourage the Minister of Finance to take steps required to ensure this takes place,” !Gawaxab said.
Namibia’s over-dependence on revenue from the Southern African Customs Union (Sacu) is unlikely to prove sustainable and suggests that this source of income be treated as windfall revenue to be used for key investments that bring a return to the country rather than as current income, !Gawaxab said.
“Namibia needs to establish alternatives to the current Sacu revenue arrangement, identify new sources of revenue and limit expenditure to sustainable levels.”
!Gawaxab also expressed the hope that the much-talked about changes to Regulations 28 and 15 of the Pension Fund Act and the Long-term Insurance Act respectively, and in particular those related to investment in unlisted instruments and infrastructure, will be implemented soon.
“The latest revisions in Regulations 28 and 15, which have been circulated to the industry for comment, not only indicate hesitancy on the part of Government, but would be meaningless in assisting the country with job creation and economic growth,” he said.
“The unemployment rate remains far too high and is bound to create social tension and instability if it is not addressed in a way that makes a meaningful difference,” he said/
!Gawaxab expects tax rates across the various categories such as personal income tax, corporate income tax and value added tax (VAT) to remain unchanged, while an adjustment to the thresholds for personal income tax stands to benefit the real economy.
“Government should not raise taxes this time around, but should rather increase revenue through broadening the tax base and improving tax compliance. The real economy also stands to benefit by bringing in greater efficiencies in tax refunds to individuals and companies,” he said.

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