Calle tightens purse strings

FINANCIAL analysts widely expect finance minister Calle Schlettwein to announce further cuts in government spending on things like overtime and S&T allowances when he presents the 2016/17 budget in the National Assembly today.

Last year’s budget was N$67,1 billion representing a 11,3% increase over that of 2014.

Already this week, the minister told his staff that cost-saving measures he introduced late last year have saved the government N$5 billion so far.

“We don’t expect an austerity budget, but we expect some fiscal consolidation in light of falling tax revenue receipts and an uncertain outlook,” Suta Kavari, an investment strategist at Capricorn Asset Management, said yesterday.

The Bank of Namibia is projecting the economy to grow at a slow pace of 4,3% in 2016 compared to 5,4% in 2015. In 2014, the GDP growth was 6,3%.

Kavari said Schlettwein will have to guide the economy through the current uncertainty in global markets, falling commodity prices, weak global demand for commodities, the devastating effects of the continued drought, as well as the precarious fiscal position amid the squeeze on treasury.

Kavari said he does not expect Schlettwein to announce any major tax increases but only modest tax proposals. He expects the proposed Solidarity Tax to take the form of a ‘wealth tax’ adjustment targeting rich Namibians.

“We expect to see cuts to budget allocations for overtime, furniture and the government’s vehicle fleet,” he said.

Frans Uusiku, an economist at Simonis Storm Securities said yesterday he expects the finance minister, among other things, to announce measures for improving the governance of State-Owned Enterprises (SOEs) and to accelerate the implementation of the fourth National Development Plan (NDP4).

“The weakening rand (which is linked to the Namibia dollar) coupled with high expectations for inflation and interest rates is also expected to weigh down on the general standard of living, particularly for indebted households and pensioners.

We thus expect an announcement of additional social safety nets, in a form of poverty grants, to adjust the real living standards of senior citizens, as part of the poverty eradication programme,” said Uusiku.

Rowland Brown, an economist at IJG Securities said he expects the finance minister to acknowledge that the local economy is slowing and that local revenue collection is likely to come under pressure.

He expects to see a reduction in forecasts for key revenue lines, including VAT and personal income tax.

“We expect to see a reduction in spending compared to the 2015/16 financial year. While we believe it is possible, we do not expect to see major changes in tax brackets or rates in the current year, particularly with regards to personal income tax, company taxes and VAT,” he said.

Brown said he expects to see some of the more consumptive expenditure stripped out of the operational budget.

“Whatever our politicians wish to believe, Namibia cannot stand another sizable budget deficit. Anything over 5% will be too high, particularly if coupled with ambitious growth figures for revenue. Such a deficit will most likely drive a continuation of our growth boom in the short term, but fundamentally and undeniably undermine the long-term outlook for the country,” said Brown.

Eloise du Plessis, an analyst and equity strategists at PSG Namibia said she hoped for a larger allowable tax deduction for pension fund contributions.

“If people are encouraged to save for retirement, it will put a lesser burden on the state once they cannot work anymore,” she said. She also proposed a different tax scale for pensioners.

Du Plessis also called for tax incentives for companies to list on the Namibia Stock Exchange.

“We believe this could go a long way in deepening our capital market,” she said.

(See pages 16 and17)

In an age of information overload, Sunrise is The Namibian’s morning briefing, delivered at 6h00 from Monday to Friday. It offers a curated rundown of the most important stories from the past 24 hours – occasionally with a light, witty touch. It’s an essential way to stay informed. Subscribe and join our newsletter community.