Maihapa Ndjavera
Edward Mumbuu
As finance minister Iipumbu Shiimi prepares to table the 2024/25 budget in the National Assembly next week, rampant youth unemployment is still expected to weigh heavily on the mind of the former central bank governor.
There is no doubt about the severe significance of youth unemployment, as was pointed out in the 2018 National Labour Force Survey. The results of that survey emphasised an increased need to address youth unemployment, which is estimated to have increased from 43% in 2016 to 46% by 2018. The most recent figures from the Namibia Statistics Agency (NSA) indicate that the country’s overall unemployment rate dropped slightly from 34% in 2016 to 33.4% in 2018.
However, analysts caution that youth unemployment could now be around 50%.
Group economist at RMB Namibia Ruusa Nandago said Namibia has a problem of jobless growth, and warned that this cannot be fixed by the national budget.
“Sometimes, it also puts a lot of pressure on the budget to fix a lot of structural problems. But the budget is just a mechanism to enable some of the other policies that we implement in the country. So, I don’t think budget pronouncements will necessarily solve the unemployment issue, especially for the youth. It’s more about really looking at the underlying structure of the economy, which is a much wider process than just the budget,” she noted. Structural unemployment can be defined as a longer-lasting form of unemployment caused by fundamental shifts in an economy.
Nandago and other economic experts were speaking on Tuesday during a pre-budget public discussion held under the theme ‘The National Budget in an Election Year: Prospects for Fiscal Expansion and Strategic Priorities’. It was organised by the Economic Association of Namibia (EAN), in partnership with the Capricorn Group, High Economic Intelligence (HEI) and GIZ Namibia.
A statement from the International Monetary Fund (IMF) last month noted that for Namibia to achieve its growth potential and tackle unemployment, particularly widespread for the youth, the country needs to streamline its public sector and address the public wage premium to foster a more diverse and dynamic economy that both creates jobs and reduces poverty and inequality.
Expansionary
Economist and founder of HEI, Salomo
Hei, said Shiimi’s budget will be presented at a time when global economic powerhouses such as the United Kingdom, Germany and Japan are all facing turbulent times economically. All in all, he expects Shiimi to table an expansionary budget next week.
Hei premises this expectation on improved revenue-collection through the Namibia Revenue Agency (NamRA), potential fuel levy increase, environmental levies, SACU revenue, and the potential Green Bond issuance from the Environmental Investment Fund.
The expansionary budget will seek to address issues such as reforming troubled parastatals such as the Meat Corporation of Namibia, the reintroduction of the SME Bank and the Roads Contractor Company – discussions which are rife in the corridors of power – as well as billions into the construction and agricultural sectors, he added. Shiimi is also expected to further bolster Namibia Wildlife Resorts, which has woken up from years of slumber, as well as invest more in the country’s lauded social safety schemes. However, there are grey areas which leave Hei with sleepless nights. It includes the absence of an Investment Promotion and Facilitation Bill, Oil and Gas Local Content Policy, nor a policy on the export of the country’s raw materials.
“We’ve never had an economic growth issue. [But our] growth has not been inclusive. We don’t take everyone along when we grow,” he diagnosed.
Past elections
In his presentation, Hei also went down memory lane to signal events which were decisive, or stood out in election year budgets. In 1999, that year’s budget was categorised by slashing corporate tax from 40% to 35%, which was seen as a move to attract investment by opening the economy of a nation that was just a decade into democracy.
Five years later, the talk of the town was the increase in pension fund contributions to the economy, the completion of the new State House – which boosted the construction industry and created some jobs – and the special disease programme.
Fast forward to 2009, where there were tax cuts for the ‘poor’ on items such as milk and sugar, tax exemptions for war veterans, and the first bailout for the now-defunct Air Namibia. The 2014 election budget came at the back of massive spending on the Targeted Intervention Programme for Employment and Economic Growth (TIPEEG), and the mass housing programme as well as
another Air Namibia bailout.
“TIPEEG had a problem with execution, but planning was okay,” Hei said.
Later, late president Hage Geingob would admit that he inherited a broke government when he took office in 2015.
The mass housing project was stopped in 2015, amidst wholesale irregularities in the tender awarding process, a situation that saw late president Geingob call for an audit in the mega project. The audit report from this process has not been made
public. The intention of Namibia’s N$45 billion mass housing initiative was to build 185 000 houses by 2030.
Meanwhile, things hit a brickwall in 2019 when the Covid-19 pandemic brought the global economy to its knees. The following year, the government released N$8 billion as part of its economic stimulus package, while the fuel levy increased by 25%. Environmental levies also increased. “Nobody could do much in 2019,” Hei stated. Giving a summation, he said: “We are highly dependent on income tax. More needs to be done in terms of diversification… Our spending in the election years doubled, except for 2004.”
Raking in at least 20% of the national budget, the results in the education sector still leave much to be desired.
“Education has been a huge recipient of the national budget; almost 20% of the budget from 1990 to 2023. But we have not seen the results. In Kunene, we have too many kids out of school, who should be in schools. We want a return on public investment. There’s also been huge expenditures in the health sector. But the services are not there - where is the money going?”, he asked rhetorically.
Taxing
Also at Tuesday’s event, Cameron Kotze, risk and compliance manager at Namib Mills, took issue with Namibia’s tax systems. “We are trying to compete in the region, while we have got the highest corporate tax rate. Our tax tables for individuals have not been amended for several years now. There’s a lot of money caught up in the tax system. I think the delay in value added tax (VAT) refunds is a big cause. If I’m an exporter, I should be getting back my refund within the two-month period that the Act prescribes. Sometimes, people wait a year to get the VAT refunds back. But essentially that’s my big gripe with our tax legislation, it is not business-friendly,” said Kotze.