By Staff Reporter
Simonis Storm has cautioned that despite the finance ministry putting much emphasis on increasing foreign direct investments and providing ease of doing business, the re-tabling of the dividend tax is still a deterrent to investments.
“These issues have been raised repeatedly without resolutions,” says the firm in its post-budget analyses.
Simonis Storm economists have urged government, as per their 2018/19 Mid Term Budget review, Economic Outlook 2019 and Quarterly Reports, to manage the debt levels, reform unproductive SOE’s and promote an effective work ethic in government.
It is becoming even more difficult to make the tough decisions as the situation worsens, the firm has said.
Finance minister Calle Schlettwein’s mid-term budget prioritized fiscal sustainability; stimulating economic growth, job creation; revenue mobilization and implementing structural policy reforms to accelerate the pace of implementation.
The budget further looks to implement an economic recovery and stimulus package which includes lifting the threshold for unlisted investments in phases from 5.0%, 7.5% and ultimately to 10.0%, subject to performance criteria.
“We believe that the budget speech was neutral, but contains few moving targets such as the re-tabling of previously proposed tax policy amendments.
The establishment of the Namibia Revenue Agency (NAMRA) has been shifted out for the 3rd time, to the 1st of April 2020. The credibility of the budget promises and implementation has become questionable,” says the firm.
In summation, the firm underscored that the Mid-Term Budget was neutral from a revenue and expenditure perspective; however, the economists are of the view that there are continuous shifts in the implementation of certain vital targets (e.g. NIPA, NAMRA, PPP Act, etc.).
“The proposed multi-faceted investments in SME development and entrepreneurship through the capitalization of DBN and AgriBank coupled with the various aid schemes is a positive contributor in the speech.
Gauging from the past, we wait in anticipation for its full implementation.
Poor execution of the developmental projects has become common practice. This is contrary to the nation’s vision (Harambee, NDP5 and Vision 2030) towards sustainable economic growth and job creation as we believe that the sought-after growth will be achieved by an increase in productive capital expenditure.
Furthermore, the Minister highlighted that the total amount obtained from the Development Budget is realised from projects (i) below a 10% execution rate; (ii) with zero commitments; (iii) that have not yet started with the procurement process; (iv) with land disputes; and (v) abandoned projects with allocations,” says Simonis Storm.
On the monetary easing side, the Bank of Namibia’s Monetary Committee Policy Committee this week met and resolved to keep the repo rate unchanged at 6.25%.
The bank’s decision comes in the wake of calls by economists for a second interest rate cut to stimulate borrowing especially on the part of businesses.
The bank cut the repo rate two months ago in line with expectations and calls by the High Penal of Economic Advisors ahead of the economic growth summit.
The bank has also taken note of a global economic slow-down affected by trade wars between the world’s two largest economies, China and US.
At the same time, the domestic economy continues to over-heat with activity in mining, construction, agriculture retail and wholesale sectors registering suppressed growth.
However, manufacturing is the star of the recession as growth remains positive, but this is mainly on account of beverages.
Another major take away from this week’s monetary policy announcement is the decline in the levels of international reserves.
Simonis Storm summarizes the budget as seeking to stabilize economic growth over the long term, with a real GDP projection of 0.2% (MOF) in 2019 increasing to 1.5% in 2022.
“So far, GDP has been underperforming and we do not expect these projections to be achieved.
We believe that for macro-economic stability to materialize, structural changes are needed which include restructuring non-performing SOE’s and shaping development by steering investment towards strategic industries and promoting the technological upgrading of producers.
Hope for any economic recovery continues to be shattered as the economy ambles deeper into the depression. We expect GDP to contract by 1.1% in 2019, with the outlook moving towards our worst-case scenario of -2.0% for 2019,” says the firm.
The Ministry of Finance forecasted that revenue will increase over the FY2019/20 to N$58.4bn which will mainly be underpinned by an anticipated rise in SACU revenue (39% of total revenue).
However, consumption demand remains suppressed for the 1st half of the year and we expect income tax and VAT revenue to be low.
“We expect revenue for the FY2019/20 to be at N$58.1bn compared to MOF’s expectation of N$58.4bn during the same period.
We continue to treat SACU revenue with caution as the global and regional growth outlook remains sluggish and we believe this will have a bearing on SACU revenue.
The SACU countries continue to face downside pressure with slowing economic growth, high unemployment and a growing inequality gap.
Thus, we expect SACU revenue to face possible downside in the near future,” says the firm.