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Wednesday 24 July 2019
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Fiscal consolidation and rating agencies

Namibia’s economic outlook was revised from stable to negative as recently as last week. Although this does not automatically lead to a ratings downgrade, it must be taken seriously. The Honourable Minister of Finance, Calle Schlettwein, has been a busy man since last week Friday in assuring the public, investors and businesses of what Government will do to protect Namibia against a downgrade. South Africa has been on a ratings watch since the beginning of this calendar year and a potential downgrade in South Africa later in the year will have a negative impact on Namibia’s ratings as well. When rating agencies start changing their views on Government finances everybody automatically expect a strong drive in saving on expenses and capital projects to take place, which is also eminent from local opinions expressed. The current drought in Namibia, the drop in commodity prices and the drop in revenue from SACU have all been pundit as reasons for the increase in the Namibian budget deficit. Comments have been made and consultations have been started to investigate how Government can leverage state assets through private-public partnerships and even equity participation. Engagement with the local financial services industry regarding domestic financing and infrastructure development needs have commenced.
These are all steps that will assist in addressing the concerns raised by the ratings agencies. There are however very few comments and opinions being expressed about the income side of Government finances and what should be done on that side.  Comments have been made that taxpayers will be pursued and legal actions will be brought against taxpayers not paying their dues. When these steps are considered it is imperative that one ensures that the taxpayer records are factually correct and up to date. We have heard of various cases where they are not and that will lead to considerable time and money being spent on defending claims against taxpayers that are not accurate. Ensuring that a claim is relevant will be of the utmost importance before pursuing legal means. We are happy to see that business and persons that are not paying their dues and are not registered taxpayers will also be pursued since we have in the past expressed an opinion that unfortunately only those in the system bear the brunt of investigations by the Revenue Authority. We are of the opinion that there are large amounts of income, low hanging fruit, available in the market currently that will also assist Government in its endeavours to decrease the budget deficit on the income side of the equation.  We are however concerned as to who will do these investigations. These investigations will be technical, can take considerable time if not done effectively and can be costly. We believe that with some basic insight from industry specialists the Revenue Authority’s staff can be equipped to perform these functions.
We have heard in the past that industry specialists have been criticized for not being available to perform this function or being too expensive. We are however of the opinion that there are some Namibians with the relevant knowledge and experience to perform this function and at an affordable cost and with significant benefits to Government in its particular situation.  The challenge for people that would like to make a difference in this regard is to get an audience with the appropriate people in decision making positions. Maybe it is time to start trusting local knowledge and experience in making a difference in our own country.  Maybe the time is right to consider unconventional methods and ways of addressing issues in our country and ensuring that we avert the possibility of a ratings downgrade. Maybe it is time to consider using knowledge and experience of people that are not part of the usual suspects in getting this done. Maybe the time is right to move away from being politically or racially sensitive and getting everybody around the table that are willing and able to make a difference.
We are looking forward to the next couple of weeks and seeing what pans out in this regard.




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