…as Simonis Storm dissects prosperity plan
Several the targets listed under the economic advancement pillar in the Harambee Prosperity plan are either unachievable or unrealistic, according to a local stockbrokerage and investment research firm.
Simonis Storm Securities outlined policy coherence as a key factor for the success of the Plan, at the same time calling for fiscal space through the reduction of the N$25 billion public wage bill.
President Hage Geingob’s Harambee Prosperity Plan has been met with praise-especially in the political circles-but those operating in the financial sector continue to questions whether all targets will be met in the remaining timeframe.
“A closer view of the plan shows that there is admittedly a comprehensive recognition of the prevailing social and economic challenges. However, there still remains lingering concerns particularly on how some targets may be realized,” said the firm in its report released earlier this week.
The report titled “Harambee Prosperity Plan…Is the plan for Economic Advancement realistic or not?” focuses only on targets listed under the Economic Advancement Pillar.
It pointed out the prevailing water crisis, energy uncertainty, declining government revenue, looming government debt, high and increasing youth unemployment and deteriorating national infrastructures as some of the biggest challenges to the economy.
Focusing solely on targets under the Plan’s Economic Advancement Pillar, the company is not convinced that within the Harambee period government can
Targets such as a debt to GDP ratio by 2020, maintaining and improving international credit ratings, ten investment projects attracted through investment promotion activities, increasing access to finance to SMEs from 22% to 50%, introducing new financial instruments to overcome hurdles of collateralized credit for start-ups, establishing 121 development agencies as well as transforming Namibia into the most competitive economy in Africa by 2020 is not achievable.
With government’s debt set to exceed N$72.4 billion over the medium term, the company is of the opinion that economic growth will decelerate due to a widening trade deficit.
On the investment front, the company said: “Because of the current industry’s concerns around the proposed ownership threshold of 25% and 50% for Board and Management Control under the New Equitable Economic Empowerment Framework (NEEEF), in our view, may discourage investments.”
As for the SME sector, the brokerage firm called for a dedicated policy instrument towards addressing the collateralized credit for MSMEs, and if that is not in place, “this target seems unachievable to us.”
With regards to overcome collateralized credit for start-ups, the firm is equally unconvinced on how it will be achieved, especially when considering “the vaguely defined policy developments such as the draft NEEEF bill in this respect.”
Plans to establish 121 development agencies has also come under scrutiny, Simonis Storms believe the target is overly unrealistic due to the current stance of fiscal consolidation, which includes postponing the construction of new buildings.
It also has its reservations about government’s ambitious plan for Namibia to be rated as the most competitive economy in Africa by 2020 as measured by the World Economic Forum and World Bank.
“This target seems unachievable. The basis of our argument is that, it would prove difficult to transform the Namibian education system within four years, especially primary and vocational training. Moreover, Namibia has not signed the SADC Protocol on Trade in Services, which is viewed as one of the main determining instruments of a competitive economy in the 21st century,” it said.
“It is our conviction that the HPP aspires to achieve a lot over a limited time period. While we generally don’t see anything wrong with achieving so much over a short period, this may require, among others, an implementing agency, prudent mobilization of financial resources and careful prioritization of national development needs.
This, according to the firm, can include the establishment of an Inter-Ministerial Committee to oversee the implementation of the Plan.
“Furthermore, given that this Plan is purported to be action-oriented to accelerate development, we believe that it would require a multi-sectoral approach and streamlining of all national policies to get the buy-in of all stakeholders concerned,” the company recommended.
The company said the maintenance and improvement of Namibia’s credit rating should be a function of a continued contraction in Government spending and debts throughout the Harambee period.
“This should be done through continued prioritisation of Government spending in addressing the essential development needs such as water and electricity, as well as investing into sectors with a higher economic multiplier effect such as agriculture, agro-processing and tourism.”
There is also significant scope to contain the public wage bill, which is currently at N$25 billion or representing 37% of the 2016/17 National Budget, urged the company.
“Introducing an early voluntary retirement incentive scheme could be one possible avenue to create the fiscal space, through a reduction in the public wage bill.”