Economists worried about capacity to roll out budget

FINANCE Minister Saara Kuugongelwa-Amadhila might have succeeded splendidly in tabling a much-awaited expansionary Budget on the eve of Namibia’s 19th Independence celebrations, but unless Government moves fast and ensures that projects are implemented, its stimulus package will fail the slumping economy and its people.

Economists last night cautiously welcomed the 2009-10 Budget and the Medium Term Expenditure Framework (MTEF) for the next three years. Unfortunately Government’s poor track record when it comes to fully implementing its Development Budget dampened their spirits.’If Government doesn’t get out there and run tenders for these projects within the next three months, then the Budget will not meet its objectives,’ Tarah Shaanika, Chief Executive Officer of the Namibian Chamber of Commerce and Industry (NCCI), warned.His fears were shared by all the other economists interviewed by The Namibian.Hopefully the Minister will deliver on the promise in her Budget statement yesterday that Government will take measures to prevent bottlenecks in the roll-out of projects, said Daniel Motinga, Senior Manager of Research and Development at FNB Namibia.At first sight, the Minister’s expenditure priorities seem impressive, Emile van Zyl of Simonis Storm Securities (SSS), admitted.Spending on infrastructure is up by some 33 per cent, while 36 per cent more money is allocated to the economic sectors and 14 per cent more is geared towards social services. Spending on administration, on the other hand, is up by only one per cent, he pointed out. The proof of the pudding now is in the eating, or in allowing the Capital Budget to do the work it is meant to do.Of bigger concern to Van Zyl, however, is the size of the deficit.According to Minister Kuugongelwa-Amadhila, this year will see a deficit of 4,5 per cent of the gross domestic product (GDP), which will balloon to 5,8 per cent of GDP in 2010-11, before receding to 4,9 per cent of GDP in 2011-12. It’s not that simple, Van Zyl maintains.The Minister is counting on an additional N$750 million from the Southern African Customs Union (Sacu), as well as N$4,5 billion from Government’s cash balance, to finance the deficit. These are one-off windfalls without which Government would have faced a deficit of closer to seven per cent of GDP – more than twice its target of three per cent, Van Zyl said.The fact that Government debt is expected to increase to nearly 30 per cent of GDP by 2012 is making this scenario even more worrisome, he added.The economists also agreed that they were caught off-guard by the extent of tax reforms.Van Zyl anticipated the introducing of the new super-tax bracket, but was surprised by some of the other measures. Motinga said he was pleased that the Minister allowed for bracket creep by adjusting the brackets.Shaanika welcomed the drop of one per cent in company tax, saying that it will not only help businesses to be more profitable and even expand in these turbulent times, but it will also enhance Namibia as an investment destination.Dr Omu Kakujaha-Matunda, Deputy Dean of Economics and Management at the University of Namibia (Unam), wasn’t all that pleased with the tax breaks, describing it as a ‘desperate measure’ in the current economic climate.Increasing super tax by two per cent will chase away highly skilled employees and managers – precisely the people Namibia needs most, he warned. They are salary earners of more than N$750 000 a year who will now be taxed at 37 per cent.One must be careful not to approach the Budget sympathetically just because the Minister has cut taxes and is trying to redistribute income, one must look at the fine print of it, Dr Kakujaha-Matunda said.One observer who is extremely happy with Minister Kuugongelwa-Amadhila is Sakkie Coetzee, Executive Director of the Namibia Agricultural Union (NAU).The Minister’s announcement that value-added tax (VAT) will no longer be charged on milk will not only benefit the consumer, but will also give the dairy industry a much-needed boost, he said. Coetzee furthermore welcomed the N$200 million more that was allocated to agriculture, as well as the increase of N$124 million for veterinary services.