Economists welcome aims of ‘ambitious’ Budget

ECONOMISTS appear to be generally positive about Namibia’s 2004-05 Budget which they say holds few surprises for the market.

Finance Minister Saara Kuugongelwa-Amadhila told a post-Budget gathering of the business community on Wednesday evening that the focus of the coming fiscal year would be on social development issues including poverty, unemployment, education and health. She said the main challenge was to balance the twin aims of “improving social outcomes” and “promoting business-friendly policies”.The Finance Minister also announced new measures aimed at enhancing Government revenue collection and management of the national debt – a move welcomed by most pundits.Apparently responding to an outcry over high Government expenditure, Kuugongelwa-Amadhila said that social development objectives could not be achieved without spending money.”We may manage our resources more efficiently to achieve better results for lower expenditure, but the bottom line is that social development cannot be done on the cheap,” she said.PriceWaterhouseCoopers Senior Partner Albe Botha predicted a decline in revenue from the Southern African Customs Union (Sacu) in the near future, and urged Government to start looking at alternative revenue sources.Botha was also happy that company tax was not increased.”The challenge for Namibia is to keep corporate tax at the current rate (35 per cent) which is competitive in terms of attracting investments,” he said.PriceWaterhouseCoopers Tax Manager Roberta Brusa addressed the issue of transfer pricing and thin capitalisation, which will soon be legislated in Namibia, as confirmed by the Finance Minister in her Budget speech.”To the average person in the street, transfer pricing and thin capitalisation is a foreign concept,” Brusa said.She said it was a wise move as it would safeguard Namibia’s tax base from being eroded.Transfer pricing (TP) is when goods or services are supplied or acquired in terms of an international agreement, while thin capitalisation is a term used to refer to loans made to companies by investors which are disproportionately large in relation to the equity of the company.In line with a worldwide trend, and in an effort not to erode Namibia’s tax base, the Ministry of Finance has decided to promulgate TP legislation as soon as possible.Bank Windhoek’s Chief Treasurer Tertius Liebenberg said the country’s debt, though still generally low, needed to be properly managed.He also felt that the N$50 million for land reform was inadequate given that “it is certainly one of the big issues in the country at the moment”.A senior economist from ABSA in South Africa, John Loos, cautioned Namibians to brace themselves for more hard times during 2004 as revenue from mining and fishing exports would continue to be affected by a strong Namibia dollar.He also predicted that the low interest rates prevailing in Namibia and South Africa could start rising as soon as June.The Namibia Economic Policy Research Unit (Nepru) said this year’s Budget “sets clear spending priorities”.”It will need a tough stand by the Finance Minister and the backing by higher ranks to keep expenditure within limits and to reject requests for additional expenditure as has not been the norm in the past,” Nepru said.She said the main challenge was to balance the twin aims of “improving social outcomes” and “promoting business-friendly policies”.The Finance Minister also announced new measures aimed at enhancing Government revenue collection and management of the national debt – a move welcomed by most pundits.Apparently responding to an outcry over high Government expenditure, Kuugongelwa-Amadhila said that social development objectives could not be achieved without spending money.”We may manage our resources more efficiently to achieve better results for lower expenditure, but the bottom line is that social development cannot be done on the cheap,” she said.PriceWaterhouseCoopers Senior Partner Albe Botha predicted a decline in revenue from the Southern African Customs Union (Sacu) in the near future, and urged Government to start looking at alternative revenue sources.Botha was also happy that company tax was not increased.”The challenge for Namibia is to keep corporate tax at the current rate (35 per cent) which is competitive in terms of attracting investments,” he said.PriceWaterhouseCoopers Tax Manager Roberta Brusa addressed the issue of transfer pricing and thin capitalisation, which will soon be legislated in Namibia, as confirmed by the Finance Minister in her Budget speech.”To the average person in the street, transfer pricing and thin capitalisation is a foreign concept,” Brusa said.She said it was a wise move as it would safeguard Namibia’s tax base from being eroded.Transfer pricing (TP) is when goods or services are supplied or acquired in terms of an international agreement, while thin capitalisation is a term used to refer to loans made to companies by investors which are disproportionately large in relation to the equity of the company.In line with a worldwide trend, and in an effort not to erode Namibia’s tax base, the Ministry of Finance has decided to promulgate TP legislation as soon as possible. Bank Windhoek’s Chief Treasurer Tertius Liebenberg said the country’s debt, though still generally low, needed to be properly managed.He also felt that the N$50 million for land reform was inadequate given that “it is certainly one of the big issues in the country at the moment”.A senior economist from ABSA in South Africa, John Loos, cautioned Namibians to brace themselves for more hard times during 2004 as revenue from mining and fishing exports would continue to be affected by a strong Namibia dollar.He also predicted that the low interest rates prevailing in Namibia and South Africa could start rising as soon as June.The Namibia Economic Policy Research Unit (Nepru) said this year’s Budget “sets clear spending priorities”.”It will need a tough stand by the Finance Minister and the backing by higher ranks to keep expenditure within limits and to reject requests for additional expenditure as has not been the norm in the past,” Nepru said.