WINDHOEK – Experts say the construction industry is likely to continue boosting the economy largely because of the large chunk of money channelled to development projects in the 2015/16 Budget tabled last week.
“The outlook for the economy remains bright as the prospects of further growth in the construction sector remain solid. The demand side of the economy was robust as key demand indicators remained positive for much of the period,” said Mally Likukela, the Manager of Economic and Market Research at Standard Bank Namibia, in a post-analysis of the budget.
Likukela said the domestic economy performed satisfactorily during the last 12 months as it was driven by growth in the secondary and tertiary sectors. “The construction activities in the secondary industry provided the much-needed growth impetus during the period under review,” he said, while noting that the economy further benefited from the easing of inflation pressure over the past 12 months as inflation eased on the back of low food and energy prices.
“The outturn during the year accorded additional and much-needed space for expansionary fiscal and monetary policy to stimulate the domestic economy,” Likukela said.
The year 2014, however, was not without the presence of some of the persistent challenges such as unemployment, poverty and widespread inequality that have continued to occupy policy makers. The persistency of these challenges dictated that the government adopt a pragmatic approach to address them, which called for rigorous policy reform initiatives in order to align the budget with key priorities, noted Likukela.
Figures of the tabled budget show that revenue is estimated to be N$53.9 billion and estimated expenditure stands at N$67.1 billion.
The budget places strong emphasis on infrastructural development. In this regard, government has proposed to spend N$11 billion in the budget year, and average around N$12.1 billion over the Medium Term Expenditure Framework (MTEF). This allocation translates to 6.7 percent of the gross domestic product.
The budget also addresses the capacity needs of some state-owned enterprises (SOEs) by allocating an operational budget for transfer to these SOEs. The main beneficiaries in this allocation being SOEs investing in infrastructure projects such as Kudu gas-to-power, railway and road network rehabilitation, the Walvis Bay port expansion and mass housing.
In line with the theme, the budget has allocated N$24 billion to the social sector, a total of 38.9 percent of the non-interest budget expenditure. The allocation will be channelled to education, health and social safety net systems.
Government has indicated that consummate attention will be paid to the housing sector and has stressed its focus on investing in peace, public safety, security and rule of law by making a notable allocation to the tune of N$14.3 billion to this area.
As a result of the expanded budget, total debt is projected to increase to an average of 31.5 percent of GDP over the MTEF. The public debt outturn remains below the threshold of 35 percent of which government intends to finance a substantial portion of it domestically.
Commenting on the tax amendments in the budget, Stefan Hugo, tax partner at PwC, welcomed that tax rates for mining companies remained unchanged at 37.5 percent and 55 percent.
“However the proposed taxes on commodity exports like minerals, fish and meat, will increase the tax burden for these industries,” noted Hugo.
He added that as expected, no changes were made in the tax brackets for individuals but there are increases in excise duties, which includes sin tax on alcohol, cigarettes and other non-essentials.
“The minister confirmed the reduction in the corporate tax rate from 33 percent to 32 percent, as announced in the previous year, although uncertainty exists as to whether this rate will be applied retrospectively,” remarked Hugo.
He said that as expected, the minister confirmed the increase in the value added tax (VAT) threshold from N$200 000 to N$500 000. In addition to the VAT threshold, a guarantee facility is required to be put up for importation of goods into the country.
The minister also confirmed the introduction of environmental taxes on old technology light bulbs, car tyres, vehicle carbon emissions and plastic bags and bottles.