South African budget ‘a hard act to follow’

THE South African budget for 2006-07, tabled by SA Finance Minister Trevor Manuel last week, will be a tough act for Namibia to follow, says a local economist.

Manuel presented an expansionary budget that would see tax relief of R19 billion and additional spending of R82 billion. As a result of these measures, the South African economy is projected to grow by close to five per cent.The Namibian budget is influenced by the South African budget, as the two are in a common monetary area (CMA) and are members of the Southern African Customs Union (Sacu).South Africa also influences economic movements and sets trends because it is the largest economy in the region.Namibia imports most of its products – 85 per cent – from there.With Namibia’s national budget beckoning, local economists have various views on the implications of the South African budget on Namibia.Emile van Zyl of Simonis Storm Securities said Manuel’s budget was illustrative of the “tough road since 1994 and the benefits that South Africa reaps today”.He said although South Africa’s current expenditure would grow by 13 per cent, transfers and subsidies by 14 per cent and total expenditure by 13 per cent, its deficit as a percentage of the gross domestic product would be a mere 1,5 per cent.Van Zyl hailed the fact that even though total revenue would only increase by 8,6 per cent, Manuel was able to give personal relief to all taxpayers, increase the level of interest and dividend exemption, give significant tax relief in respect of transfer duties, donations tax, estate duty and capital gains tax, increase the level of interest and dividend exemption, and increase old-age grants.”Namibia’s southern neighbour is very actively developing an environment attractive for investors, which will be difficult for Namibia to follow,” said Van Zyl.Another prominent economic commentator, Martin Mwinga of First National Bank Namibia, said the R19 billion tax relief would benefit consumers and increase their spending power, while the R82 billion spending would benefit infrastructure in South Africa.Mwinga said the promised economic growth would definitely have positive spin-offs for Namibia.”The high economic growth in South Africa will have a spill-over …through increased consumption of Namibian products and increase in tourists visiting from South Africa.The reduction in budget deficit to 0,4 per cent will lead to less pressure on interest rates, which automatically is transmitted to Namibia,” he said.Mwinga also said the South African budget would help pull along lagging and non-performing economies within the SADC region.A senior researcher with the Namibian Economic Policy Research Unit (Nepru), Dr Klaus Schade, said Manuel had done a good job with the fiscal policy and economic management of South Africa.He said increasing social grants should be something that Namibia should look into and reconsider, as it would assist in poverty eradication.Schade said the company tax rate, which Manuel left unchanged at 29 per cent, was “competitive”, but added that it was not only tax rates that attracted investment to a country but many other factors, including stability and infrastructure.Namibia’s company tax rate is high at 35 per cent, and Schade said the country should improve the other factors to attract investors.The economists said because Namibia is a member of the CMA, South Africa’s relaxation of foreign exchange controls would be followed by the Bank of Namibia – an announcement could be expected this week.This would benefit Namibians, as they could then increase their offshore investment.In the budget, Manuel increased the limit of offshore individual allowances from R750 000 to R2 million.The increase in excise duties on tobacco products and alcoholic beverages would automatically filter to Namibia because of the Sacu agreement.The increases in the duties are between 12,5 per cent and 20 per cent for sparkling and unfortified wines; between nine and 10 per cent for other alcoholic products and between five and 10 per cent for cigarettes, tobacco and cigars.As a result of these measures, the South African economy is projected to grow by close to five per cent.The Namibian budget is influenced by the South African budget, as the two are in a common monetary area (CMA) and are members of the Southern African Customs Union (Sacu).South Africa also influences economic movements and sets trends because it is the largest economy in the region.Namibia imports most of its products – 85 per cent – from there.With Namibia’s national budget beckoning, local economists have various views on the implications of the South African budget on Namibia.Emile van Zyl of Simonis Storm Securities said Manuel’s budget was illustrative of the “tough road since 1994 and the benefits that South Africa reaps today”.He said although South Africa’s current expenditure would grow by 13 per cent, transfers and subsidies by 14 per cent and total expenditure by 13 per cent, its deficit as a percentage of the gross domestic product would be a mere 1,5 per cent.Van Zyl hailed the fact that even though total revenue would only increase by 8,6 per cent, Manuel was able to give personal relief to all taxpayers, increase the level of interest and dividend exemption, give significant tax relief in respect of transfer duties, donations tax, estate duty and capital gains tax, increase the level of interest and dividend exemption, and increase old-age grants.”Namibia’s southern neighbour is very actively developing an environment attractive for investors, which will be difficult for Namibia to follow,” said Van Zyl.Another prominent economic commentator, Martin Mwinga of First National Bank Namibia, said the R19 billion tax relief would benefit consumers and increase their spending power, while the R82 billion spending would benefit infrastructure in South Africa.Mwinga said the promised economic growth would definitely have positive spin-offs for Namibia.”The high economic growth in South Africa will have a spill-over …through increased consumption of Namibian products and increase in tourists visiting from South Africa.The reduction in budget deficit to 0,4 per cent will lead to less pressure on interest rates, which automatically is transmitted to Namibia,” he said.Mwinga also said the South African budget would help pull along lagging and non-performing economies within the SADC region.A senior researcher with the Namibian Economic Policy Research Unit (Nepru), Dr Klaus Schade, said Manuel had done a good job with the fiscal policy and economic management of South Africa.He said increasing social grants should be something that Namibia should look into and reconsider, as it would assist in poverty eradication.Schade said the company tax rate, which Manuel left unchanged at 29 per cent, was “competitive”, but added that it was not only tax rates that attracted investment to a country but many other factors, including stability and infrastructure.Namibia’s company tax rate is high at 35 per cent, and Schade said the country should improve the other factors to attract investors.The economists said because Namibia is a member of the CMA, South Africa’s relaxation of foreign exchange controls would be followed by the Bank of Namibia – an announcement could be expected this week.This would benefit Namibians, as they could then increase their offshore investment.In the budget, Manuel increased the limit of offshore individual allowances from R750 000 to R2 million.The increase in excise duties on tobacco products and alcoholic beverages would automatically filter to Namibia because of the Sacu agreement.The increases in the duties are between 12,5 per cent and 20 per cent for sparkling and unfortified wines; between nine and 10 per cent for other alcoholic products and between five and 10 per cent for cigarettes, tobacco and cigars.