Edgar Brandt
WINDHOEK – In anticipation of the Mid-Term Budget Review in about two weeks’ time, Finance Minister Calle Schlettwein and a high-level delegation, including Bank of Namibia Governor, Iipumbu Shiimi, met with captains of private sector industries yesterday. At the well-attended meeting in the Ministry of Finance boardroom, Schlettwein expressed concern about declining private sector investment levels and increasing outflow of local capital.
“The private sector investment in the real and services sectors of the economy remains low and, in fact, have been declining over the past two years. At the same time, the economy has witnessed a perpetual outflow of investment and reinvestments elsewhere,” Schlettwein told the gathering.
He added that the productive and processing capacity of the economy remains narrow with the country still importing the most basic consumables. This high-level of importation continues to erode the country’s balance of payments. “In fact, our trade current account and international reserve balances are only getting better now in as much as domestic demand conditions are weak,” said Schlettwein.
The finance minister however conceded that the government’s fiscal consolidation continues to weigh on economic growth. “There are times when the private sector investments in the real and services sectors are needed to support domestic economic activity and use this opportunity to elevate its role in the economy. On the contrary, the evidence obtained from the International Investment Position data suggests that year-on-year and quarter-by-quarter direct investment flow continuously flows out of the country,” said Schlettwein.
He quoted the data on overall outflows in direct investment which indicates that a total of N$8.4 billion, or N$2.3 billion per quarter, left the country during the last year. “This”, Schlettwein noted, “does not support the role of the private sector as the engine of growth.”
He added that despite a wide range of production possibilities across a broad range of goods and services, imports of foodstuffs still account for over 11 percent of the total import bill, which translates into about N$10 billion annually.
“Looking at the structural challenges of our economy, the robust growth rates over the past years prior to 2016 have largely been driven by public investments and government consumption of goods and services and the large foreign direct investment in the mining sector.
As soon as the government fiscal policy receded into the consolidative mode and mining sector foreign investments ran their course, economic activity plummeted and the needed fiscal consolidation is assessed to be the main cause of slackness as if fiscal expansion is over,” Schlettwein stated.