Namibia to save N$200m from SA tax reform

TAX reforms announced in the South African budget, tabled on Wednesday by Finance Minister Trevor Manuel, could see up to N$200 million more being injected into Namibia by insurance and pensions funds.

Chief Executive Officer of Old Mutual Namibia, Johannes Gawaxab, said Manuel’s announcement of a technical correction to the South African tax act, not to tax residents of the common monetary area (CMA) on interest earned in South Africa, will have a significant impact on Namibian pension funds and insurance companies. Namibia, Lesotho, Swaziland and South Africa are members of the CMA.Gawaxab said that the 10 per cent which will no longer be taxed means that Namibian pension funds and insurance companies that invest in South Africa will be able to bring between N$150 million and N$200 million more back to local shores.Gawaxab said the other positive thing from the SA budget was that Manuel had taken pressure off monetary authorities and policies which was positive for the Rand and therefore the Namibian currency.The Namibia Dollar should stay at similar levels to the US Dollar for longer than expected, a situation not good for exports, he said.Finance Permanent Secretary, Calle Schlettwein, said that the commitment from the SA Finance Minister not to tax pension funds was positive.He also said South Africa’s decision to take a regional approach regarding its finances was very welcome.Tilman Friedrich, Managing Director of Retirement Fund Solutions Namibia elaborated on the effect of Manuel’s announcement on the Namibian pension fund industry, pointing out that local funds operating in South Africa had been carrying a contingent liability since at least early last year.”We were aware that South Africa intended to tax Namibian funds and have been grappling with this problem for about a year,” he said.Now, Friedrich said, there was great relief as this possibility will fall away.The other area of concern highlighted in Manuel’s speech, he noted, concerned increases in duties on alcoholic beverages.However, First National Bank Namibia’s Portfolio Manager Martin Mwinga said that Manuel’s budget did not change much as far as Namibians were concerned.He noted previous trends towards tax relief evidenced in earlier budgets and that this trend unexpectedly did not continue this year despite it being an election year.Mwinga said this was evidence of financial prudence on the part of the SA government.However, since the budget demonstrated a fairly high deficit, South Africa may issue more government bonds or look to borrow money off-shore.This, says Mwinga, would add to higher interest rates which would have an effect on Namibians.Namibia, Lesotho, Swaziland and South Africa are members of the CMA. Gawaxab said that the 10 per cent which will no longer be taxed means that Namibian pension funds and insurance companies that invest in South Africa will be able to bring between N$150 million and N$200 million more back to local shores. Gawaxab said the other positive thing from the SA budget was that Manuel had taken pressure off monetary authorities and policies which was positive for the Rand and therefore the Namibian currency. The Namibia Dollar should stay at similar levels to the US Dollar for longer than expected, a situation not good for exports, he said. Finance Permanent Secretary, Calle Schlettwein, said that the commitment from the SA Finance Minister not to tax pension funds was positive. He also said South Africa’s decision to take a regional approach regarding its finances was very welcome. Tilman Friedrich, Managing Director of Retirement Fund Solutions Namibia elaborated on the effect of Manuel’s announcement on the Namibian pension fund industry, pointing out that local funds operating in South Africa had been carrying a contingent liability since at least early last year. “We were aware that South Africa intended to tax Namibian funds and have been grappling with this problem for about a year,” he said. Now, Friedrich said, there was great relief as this possibility will fall away. The other area of concern highlighted in Manuel’s speech, he noted, concerned increases in duties on alcoholic beverages. However, First National Bank Namibia’s Portfolio Manager Martin Mwinga said that Manuel’s budget did not change much as far as Namibians were concerned. He noted previous trends towards tax relief evidenced in earlier budgets and that this trend unexpectedly did not continue this year despite it being an election year. Mwinga said this was evidence of financial prudence on the part of the SA government. However, since the budget demonstrated a fairly high deficit, South Africa may issue more government bonds or look to borrow money off-shore. This, says Mwinga, would add to higher interest rates which would have an effect on Namibians.