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No misstep in allocating largest chunk of budget to social sector

2020-06-08  Edgar Brandt

No misstep in allocating largest chunk of budget to social sector
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While Namibia’s relative budgetary allocations are subject to realignment over time, key development priorities for the country lie in balancing the needs of the social sector and that of the economic sector to bring about improved quality of life, economic diversification, inclusive growth and shared prosperity within an environmentally sustainable manner. This was the response by finance minister Iipumbu Shiimi in response to questions regarding the FY2020/21 Appropriation Bill in Parliament last week.  

Some of Shiimi’s fellow members of Parliament and opposition parties criticised the recent national budget for not reflecting the developmental objectives and the underlying theme of “Together Defeating Covid-19, Together thriving again”. 
“In the social sectors, human capital development, skills formation and the provision of basic amenities are fundamental to addressing the triple challenges of unemployment, poverty and income inequalities.  
There is, therefore, no contention that social sectors have historically received, and continue to receive, the highest share of the budgetary allocation,” said Shiimi. 

He noted that the priority allocation is retained in this most recent budget, whereby almost 50% of the total non-interest expenditure is allocated to the social sectors. This, said Shiimi, reflects the scaled-up allocations to the health sector to enable the country to better respond to the Covid-19 pandemic. There is, therefore, no misstep in ensuring that the largest share of the budget is accorded to addressing challenges in the social sector. 

 The allocations to the social sector include, among others, provisions for social safety nets, ranging from old age pension grants to orphans and vulnerable children grants. The budget also allocated funding for mass land servicing, sanitation and affordable housing. 
In his responses, Shiimi emphasised that the economic and infrastructure sector was allocated the second-highest funding in this budget – at 23.2% of total non-interest expenditure. This, he said, underpins the importance placed on economic growth as a necessary condition for poverty reduction and job creation. 

Said Shiimi: “The completion of the new container terminal at the port of Walvis Bay has, for example, expanded the port container and cargo handling capacity, thus adding to our national competitiveness and logistics hub advantage”. 
 Meanwhile, ongoing infrastructure projects are funded within the development budget. Shiimi explained that off-budget project financing is deliberately undertaken to invest in growth-enhancing infrastructure in the rail, road and port infrastructure. In addition, this year’s budget avails N$929.2 million to the water sector to complement the African Development Bank’s N$1.8 billion and the envisaged German Development Agency funding amounting to N$800 million.  In the energy sector, Nampower unveiled its investment program in the wind and solar energy generation and distribution, with an investment of no less than N$10 billion envisaged over the next three years. 
 Shiimi continued that specific funding is still allocated to elevate the role of the SME sector in the economy, job creation and wealth generation. 

“Following the closure of the SME Bank, the SME window was transferred back to the Development Bank of Namibia. An SME financing strategy was also rolled-out last year to provide for the Credit Guarantee Facility, Mentoring and Coaching Program and eventually the Venture Capital Fund. These suites of SME product offerings are targeting youth entrepreneurs, covering both professionals and artisans. Funding and government guarantees are provided in this budget to support DBN loan book offerings to the SME sector and arrangements for the implementation of this programme are at an advanced stage,” Shiimi stated. 

 Replying to concerns about relative allocations to the agricultural sector, Shiimi noted already heavy investments in the sector and said: “What needs to happen now is to ensure that these assets are functioning at full capacity for the country to reap the necessary benefits of these investments”. 

 Admitting that more government investment in agriculture is needed to unlock private sector investment and domestic productive capacity, he emphasised that agriculture is a commercial activity and, therefore, greatly benefits from commercial funding through Agribank and commercial 

“In this regard, increased funding and a government guarantee package is deployed to AgriBank to support activities in the agricultural sector. Over the past three years, AgriBank has extended up to N$1.0 billion of loans to farmers in various regions of the country, thus greatly enabling economic activity in the agricultural sector. Drought relief disbursements amounting to N$245 million has also been provided by AgriBank over the past year,” said Shiimi. 

2020-06-08  Edgar Brandt

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