By Mbatjiua Ngavirue WINDHOEK No sooner had Finance Minister Saara Kuugongelwa-Amadhila tabled the 2007/08 budget did the post-mortem begin with no shortage of pundits willing to dissect and carefully scrutinise every aspect of the spending bill. Overall, however, most analysts appear to have received this year’s budget positively, with only a few criticisms voiced here and there. Minister Kuugongelwa-Amadhila had an exhausting schedule immediately after tabling the Appropriations Bill, first as the guest speaker at the annual PricewaterhouseCoopers, Standard Bank, Stanlib Budget Review Dinner. In the early hours of the next morning, she was again the invited speaker at an FNB Holdings and Deloitte Budget Analysis Breakfast. At the budget review dinner, she noted that many people regarded last year’s expansionary budget, which resulted in a surplus, as a fluke. She was however pleased to announce that government had again produced a substantially increased budget aimed at growth and investment to alleviate poverty. “I have been able to return some of those revenues to the taxpayer. All this, while retaining a budget surplus,” she said with some satisfaction. Kuugongelwa-Amadhila repeated that this year’s budget is a pro-growth budget, adding however that government could not bring about this growth alone. The budget contained a record level of capital investment (N$2.6 billion this year), and provided increased buying power for citizens through the raised tax threshold. “That represents tremendous opportunities for the private sector in this country: for Namibians to start new enterprises and for existing Namibian businesses to expand,” she suggested. Quite clearly, the raising of the tax threshold from N$24 000 to N$36 000 will be of great benefit to low-income earners. Managing Director of PricewaterhouseCoopers, Albe Botha, however pointed out that all income earners would benefit, not only those on low incomes. According to Botha, everyone will save approximately N$2 100 on his or her taxes annually. Although how this wondrous circumstance is to come about, probably no one but an accountant will understand. At both post-budget reviews, commentators praised Kuugongelwa-Amadhila for largely following conservative fiscal policies aimed at fiscal stability and for using part of the surplus for reducing the deficit. The main criticisms of the budget followed a common theme – the continued large size of the public service and the new requirement forcing pension funds and long-term insurers to invest 5 percent in unlisted Namibian shares. Another area of concern is what happens when government cannot rely on windfalls from the MTC sales, and what the revenue outlook will be when the bonanza from the SACU pool ends. Although most analysts generally welcomed the increase in capital expenditure, some questioned whether the minister could not have acted more boldly while others were sceptical about the quality of capital expenditure. Namfisa Chief Executive, Rainer Ritter, said he was very pleased the country once again had a conservative minister of finance, a sentiment echoed by RMB Asset Management Portfolio Manager, Martin Mwinga. “She is sending a message to the outside world that Namibia is serious about fiscal stability,” Mwinga said. Ritter welcomed the N$800 million extra in the development budget, but felt the government needed to act more boldly. He would also have liked to see the government act more boldly in reducing corporate and income tax. Mwinga welcomed the 40% increase in capital expenditure but questioned the quality of the expenditure, noting that most of it is not invested in assets that build capacity. He felt that N$1.2 billion of the N$3.8 billion in capital expenditure planned over the next few years is not productive expenditure, but will rather be spent on items such as furniture, vehicles and financial items. “Is it really necessary to buy furniture every year. If you look at capital expenditure, it is not really productive. Whereas, if you look at our neighbour Botswana capital expenditure is used to address rural development issues,” Mwinga said. Both Mwinga and Senior Manager: Country Risk at Standard Bank Africa, Phillip Clayton, questioned whether the continued subsidies to Air Namibia could justifiably be described as pro-poor. Mwinga compared the N$538 million subsidy of Air Namibia with the N$62 million budgeted for the NBC, describing Air Namibia as an organisation serving the elite while the NBC could more convincingly be described as pro-poor. His mention of the N$25 million budgeted for the Katima Mulilo Waterfront Project provoked a great deal of laughter – no doubt because from one year to another it is difficult to determine exactly where the Katima Mulilo waterfront is. This year for instance it is probably several hundred kilometres inland from its normal location, and people were probably questioning whether this is not literally a case of throwing millions into one vast drain. The discussions at both events were very open and transparent, with Minister Kuugongelwa-Amadhila willing to accept both the praise lavished on her, as well as fend off what Mwinga jokingly referred to as the “bazookas” launched at her in good spirit. She said that while she realised there would be risk in investing 5% of pension fund and long-term insurance money in unlisted shares there were safe investment avenues. She proposed pension funds and insurers could invest in institutions such as the Development bank of Namibia and the Kudu Gas Field, as a separate entity from Nampower. “We know that the funds are set aside for a rainy day. We want pensioners to have that money when they retire. We are not saying it should be squandered. We will monitor the situation and continue the dialogue with the industry,” she pledged. She also would not agree with Mwinga’s assertion that capital expenditure is used for non-productive assets such as furniture and vehicles. She said that sometimes government has important projects that impact on growth and poverty that would not be able to function without furniture and vehicles. “The Government Garage is depleted and in some cases is still relying on UNTAG vehicles from independence. We also have the paradoxical situation that more teachers and nurses require more furniture,” she explained. The N$400 million for Air Namibia, she explained, was not necessarily a subsidy, because the airline was so heavily indebted that even if they were to turn around the business they would not be able to manage the debt. This is why government decided to take over the airline’s debt and “ring-fence” it. She disputed the argument that Air Namibia is elitist, and not pro-poor, arguing Air Namibia plays an important role in boosting tourism – the only industry that could employ people with virtually no education. The minister cited one study, which concludes that Air Namibia contributes roughly N$900 million to the national economy annually. The government boosted expenditure on defence, because a recent study on the readiness of the Namibia Defence Force showed red lights flashing, with most of the force’s equipment shown to be decrepit and obsolete.