Giving their initial analysis and reaction to the N$67.9 billion budget for the 2021/22 financial year, in a panel discussion organised by Nedbank Namibia and Simonis Storm Securities immediately after the budget was tabled, experts seemed cautiously optimistic about Namibia’s recovery, highlighting as noteworthy the consultations by Minister Iipumbu Shiimi throughout the budgeting process
During Wednesday’s tabling of the budget and the subsequent speech, Shiimi focused on increasing resilience and recovery in the face of recession and the global corona pandemic. He emphasised that, via interventions in sectors such as agriculture and the green and blue economies, the economic recovery plan is expected to usher the country into sustainable growth and systemic economic transformation.
An economist with Simonis Storm Securities, Elwis Katuwo, was delighted with the return of the consultatory approach of the pre-Covid-19 era, noting that “consultation was the driving force” behind this budget and hailed the minister for also engaging on social media and asking for submissions as “the budget affects everyone”.
Moreover, the experts pointed out that the minister’s discussions with the youth resulted in interventions for scaled-up funding for small and medium enterprises (SMEs) and youth entrepreneurs, for employment and wealth creation. Consultation with the business fraternity through the Namibia Chamber of Commerce and Industry (NCCI) resulted in a conscious decision not to increase the general tax rates, especially at this point when economic recovery is a primary objective.
Further public considerations were evidenced in the provision that the supply of sanitary pads will be VAT zero-rated to enhance affordability. He urged suppliers and retailers to pass on this relief to consumers once it is enacted.
The new budget reflects requests made by the Namibia Savings and Investment Association (NaSIA) about tax deductibility on pension fund and educational policy contributions.
As previously announced, this amount will be increased from the current N$40 000 to a maximum of N$150 000 in order to encourage savings for retirement purposes.
Pierre Knoetze, executive director of PKF Financial Consulting Services, expressed appreciation that the minister comes over as approachable.
“Hopefully, this will filter down to the Namibia Revenue Agency (Namra),” he said, adding “there has been a feeling that Inland Revenue is not approachable”.
Karl-Stefan Altmann, Nedbank’s executive: CIB and Treasury, concurred.
“There is evidence of discipline from the Ministry of Finance in actual expenditure,” he said, adding: “One of the cornerstones of economic recovery is trust. You get trust and buy-in when there’s consultation.”
Knoetze further maintained he is happy with the general tone of the budget and that there seems to be control in the expenditure.
“There’s no panic. We need to recover. We know where we are, but there’s a way going forward. People want to hear that there is fairness and that the administration of the fiscus is being taken seriously,” he said.
During Wednesday’s annual budget speech Shiimi reassured the public: “The tax policy and tax administration reforms will aim to strengthen the fairness and equity principles of the tax system and to achieve greater compliance through effective tax administration.”
Among the reforms, the minister announced his intention to introduce a 10% withholding tax on dividends paid to Namibians, similar to the withholding tax provision for foreign shareholders for equity consideration. This is to be done in a manner that ensures dividends are not taxed more than once. He will also introduce a 15% value-added tax (VAT) on management fees for listed asset managers, similar to that for unlisted asset managers.
Overall, the panel discussion, facilitated by the managing director of Simonis Storm Securities, Bruce Hansen, was positive about the envisaged changes in the tax regime and the prospective launch of Namra, scheduled for 7 April.
Altmann remarked: “If everything works out from a Namra perspective we can widen the net, and be more efficient with the people from whom tax is due.” He cautioned, however, that there must be more diligence, and called for turnaround times for VAT refunds to be minimised. “That money can be turned back into the market and stimulate the economy,” he said.
The experts, however, are concerned about public debt and the deficit, estimated at about 9.7% of GDP which is lower than the budgeted deficit of 12.5% due to better year-to-date outturn on GDP and revenue. The panel was in agreement that revenue collection should be widened and improved.
Total debt is estimated at 68.8%, moderately lower than the budget.
Debt servicing is estimated at N$7.7 billion or 14% of revenue, reflecting the hitherto elevated cost of borrowing; and contingency liabilities are estimated at 7.3% of GDP in relation to the 10% threshold. In the budget N$8.5 billion is earmarked for interest payments, which is 16.3% of revenue.