Rowland BrownIPPR Research Associate

rowlandbrown@gmail.com

2

Outline

• Macro Backdrop• Revenue• Expenditure• Budget balance• Shortcomings• Suggestions

3

Macroeconomic Backdrop• Namibian economy growing at above trend rates

• Spurred by unprecedented fiscal and monetary policy, as well as FDI(particularly mining sector)

• Rapidly decoupling from languishing SA economy• Single currency concerns

• Growing macroeconomic imbalances starting to appear• Demand side inflation (particularly services)

• Education, utilities, transport, housing etc.• Hidden by falling cost-side inflation

• High PSCE growth• Increasing household debt

• Major BOP imbalance• Declining reserves

• Some changes structural, but others very cyclical

4

Revenue• Forecasts of revenue collection growth for FY15/16 of

11.4%.• Forecast revised down by 0.4% when compared to previous

forecast for current year.• Total revenue expected at N$58.4bn in 2015/16• Revenue forecast to grow by 7.9% in FY16/17 and 9.7% in

FY17/18.• More realistic forecasts than those of 2014/15 (20+%

growth).• Recognition of possible decline in SACU receipts – weak SA +

global situation.• Main revenue source still taxes, particularly tax on income

and profit.

5

Revenue

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

N$ M

illio

n

2006 Budget 2007 Budget 2008 Budget 2009 Budget 2011 Budget

2012 Budget 2013 Budget 2014 Budget 2015 Budget

Lower revenue forecast

6

Revenue Breakdown

49,081 55,848 60,525 66,179

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014/15 2015/16 2016/17 2017/18

Sources of Revenue

Grants

Return On Capital From Lending And Equity Participation

Non - Tax Revenue

Tax Revenue

Taxes OnIncome And

Profits24,981

Taxes OnProperty

351

DomesticTaxes On

Goods AndServices13,074

Taxes OnInternation

al TradeAnd

Transactions

17,123

Other Taxes318

Tax Revenue

Income TaxOn

Individuals15,222

CompanyTaxes9,198

Other TaxesOn IncomeAnd Profits

210

WithholdingTax On

Interests350

Taxes On IncomeAnd Profits

SACU

VAT

7

Expenditure• Expenditure is to increase to 67.08 billion in FY15/16• An increase of 11.6% from 2014/15.• Also up 4.7% when compared to the previous estimates for

2015/16.• Of this, N$63.2 billion is non-interest expenditure.• The remainder (just under N$4bn) being the interest costs

of Government’s debt.• The global increase is much more moderate than the 26.3%

increase of 2014/15.• This expansion can be (partially) justified by the rapid pace

of growth in the local economy.• Revenue forecast to grow 6.2 and 1.2% in FY16 and FY17,

respectively.

8

Expenditure• Expenditure remains heavily slanted towards wages and salaries• N$4.93 billion over the MTEF to support the Kudu Gas-to-Power

Project• N$3.27 billion allocated to road construction• N$1.25 billion was allocated over the MTEF for the Mass Housing

Project,• N$7.75 billion was allocated to agriculture, including the green

scheme.• Huge allocation to Defence, making it second only to Education in

receipt of funds• A number of social spending initiatives launched or extended,

most notably the increase in pensions from N$600 per month toN$1000 per month.

• In addition, provision of free secondary education is to be rolledout during the MTEF

9

Expenditure

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

N$ M

illio

n

2006 Budget 2007 Budget 2008 Budget 2009 Budget 2010 Budget

2011 Budget 2012 Budget 2013 Budget 2014 Budget 2015 Budget

Expenditure to flatten off? See history

10

Expenditure

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Actual Estimate Estimate Estimate Estimate Estimate

N$ M

illio

n

Expenditure Breakdown

Operational Budget Devevelopment Budget Total

11

Expenditure

17,912 21,989 23,433 24,219 24,719

12,31615,297

17,642 19,468 19,2296,551

8,4609,345 8,890 8,829

4,331

6,3937,833

9,575 10,050

1,796

2,517

3,8764,596 5,256

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2013/14 2014/15 2015/16 2016/17 2017/18

N$ M

illio

n

Personnel Expenditure Goods And Other Services

Subsidies & Other Current Transfers Interest Payments & Borrowing Related Charges

Acquisition Of Capital Assets Capital Transfers

Goods And Other Services Acquisition Of Capital Assets

Capital Transfers

12

Expenditure Breakdown

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013/14 2014/15 2015/16 2016/17 2017/18Personnel Expenditure Goods And Other Services

Subsidies & Other Current Transfers Interest Payments & Borrowing Related Charges

Acquisition Of Capital Assets Capital Transfers

Goods And Other Services Acquisition Of Capital Assets

Capital Transfers

• S&T• Transport

• Material & Supplies• Utilities

• Pensions• Transfers to SOEs

• Vehicles• Furniture• SOEs

• Interest on debt

13Government’s Involvement inEconomy

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

-

50,000

100,000

150,000

200,000

250,000

N$ M

illio

n

Expenditure GDP Expenditure to GDP (RHS)

14

Expenditure Growth

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Expenditure Growth GDP Growth

15Expenditure by vote (2015/16)

Educ

atio

n, A

rts a

nd C

ultu

reDe

fenc

eHe

alth

and

Soc

ial S

ervi

ces

Polic

eTr

ansp

ort

High

er E

duca

tion,

Trai

ning

and

Inno

vatio

nFi

nanc

eUr

ban

and

Rura

l Dev

elop

men

tPo

vert

y Era

dica

tion

and

Socia

l Wel

fare

Agric

ultu

re, W

ater

and

Fore

stry

Land

Ref

orm

Indu

stria

lisat

ion,

Trad

e an

d SM

EIn

tern

atio

nal R

elat

ions

and

Coo

pera

tion

Nam

ibia

n Co

rrec

tiona

l Ser

vice

Vete

rans

Affa

irsGe

nder

Equ

ality

and

Chi

ld W

elfa

reJu

stice

Wor

ksPr

esid

ent

Envi

ronm

ent a

nd To

urism

Prim

e M

inist

erIn

form

atio

n an

d Co

mm

unica

tion

Tech

nolo

gyHo

me

Affa

irs a

nd Im

mig

ratio

nSp

ort,

Yout

h an

d Na

tiona

l Ser

vice

Fish

erie

s and

Mar

ine

Reso

urce

sLa

bour

, Ind

ustr

ial R

elat

ions

and

Empl

oym

ent C

reat

ion

Min

es a

nd E

nerg

yEl

ecto

ral C

omm

issio

nNa

tiona

l Pla

nnin

g Co

mm

issio

nNa

tiona

l Ass

embl

yNa

tiona

l Cou

ncil

Atto

rney

Gen

eral

Audi

tor G

ener

alAn

ti-Co

rrup

tion

Com

miss

ion

Publ

ic En

terp

rises

4,000,000

2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

N$ 0

00

Development

Opperational

16

Operational Budget (2015/16)

Education, Arts and Culture ,10,682

Defence , 6,575

Health and SocialServices , 5,790

Police , 4,125Higher Education, Training

and Innovation , 3,951

Finance ,3,857

Poverty Eradication and SocialWelfare , 2,714

Urban and RuralDevelopment , 1,796

Transport , 1,644

Agriculture, Water andForestry , 1,169

Gender Equality and ChildWelfare , 808

International Relationsand Cooperation , 786

Veterans Affairs , 779

NamibianCorrectionalService , 700 Works , 680

Justice , 592

Industrialisation, Trade andSME Development , 565

Other, 4,907

N$ Million

17

Development Budget (2015/16)

Transport , 2,825

Urban and RuralDevelopment ,

1,326

Agriculture, Water andForestry , 1,246

LandReform ,

882Health and Social Services ,699

Defence ,654

Police , 648

Education, Arts and Culture ,640

Industrialisation, Trade andSME , 425

President , 167

Home Affairs andImmigration , 153

Environment and Tourism ,153 Namibian Correctional

Service , 151

International Relationsand Cooperation , 150

Justice ,145

Prime Minister ,131

Other,702

N$ Million

18Development budget – largeprojects

• State Security Infrastructure – N$1.5bn

• Construction of the Second Office of the Prime Minister – N$646 million

• Construction of a New Parliament Building – N$613 million

• Construction of Head Office for MHAI – N$778 million

• Upgrading of Police Stations – N$981 million

• Construction of Police Accommodation – N$851 million

• Purchasing, Constructing and Renovating of Diplomatic Premises – N$1.4billion

• Research and Development (Defense Force) – N$6.7billion

• Renovations of School Nation Wide – N$700 million

• Extension of Existing National Council Building – N$300 million

• Construction and upgrading of Primary Health Care Clinics Nationwide – N$905 million

• Construction and upgrading of Primary Health Care Centers Nationwide – N$647 million

• Rural Electrification – N$683 million

• Upgrading and Construction of Lower Courts – N$ 534 million

• Various urban + rural development – township upgrading + formalization, rural + urban sanitation

• Construction of MICT Head Office – N$290

• Acquisition/Construction of Offices for MoV HQ & Regional Offices – N$308 million

19Development budget – largeprojects

• Construction and Upgrading of MET Headquarters – N$274 million

• Construction of Ministry of Trade Headquarters – N$400 million

• Construction of Sites and Premises Industrial Estates – N$923 million

• Special Industrialization Programme – N$1 billion

• External Trade Infrastructure Development – N$1.6 billion

• Product Development and Group Purchasing Project – N$400 million

• Construction of MAWF Regional Offices – N$480 million

• Green Scheme – N$3.1 billion

• National Horticulture Development Initiative – N$1.2 billion

• Construction of Large Dams, Desalination and Provision of Water to larger Settlements – 3.1 billion

• Railway Network Upgrading – N$5.3 billion

• Development of the Cape Fria- Katima Mulilo Railway Line – N$2,4

• Northern Railway Line Extension – N$2.1 billion

• Various roads

• Land Purchase Project – N$2.4 billion

• Development of National Fundamental Data Sets – N$201 million

• Construction of Ministerial Head Quarter – N$300 million

20Transfers to SOEs (MTEF)

Public Service Medical AidScheme, 6,118,000

Nampower, 4,928,932

Namibia StudentsFinancial Assitance

Fund (NSFAF),4,461,856University of Namibia,

3,358,838Air Namibia, 1,931,765

Polythecnic of Namibia,1,739,550

NTA, 1,573,169National BroadcastingCooperation, 1,067,342

Trans-Namib, 945,842

Epangelo Mining, 817,500

Veteran subversion Fund,652,500

Namibia Airport Company,589,345

SME Bank, 498,084

Namibia Statistics Agency,426,941

NAMCOL, 387,431Agribank, 321,300

National Youth Service,303,812

Development Bank ofNamibia, 252,000

NHE, 220,000 Mass Housing, 200,000 Namibia StandardInstitute (NSI), 124,000

21Staffing – Positions by OMA

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000Ed

ucat

ion,

Art

s and

Cul

ture

Polic

eDe

fenc

eHe

alth

and

Soc

ial S

ervi

ces

Agric

ultu

re, W

ater

and

For

estr

yNa

mib

ian

Corr

ectio

nal S

ervi

ceFi

nanc

eW

orks

Envi

ronm

ent a

nd T

ouris

mHo

me

Affa

irs a

nd Im

mig

ratio

nRu

ral a

nd U

rban

Dev

elop

men

tJu

stice

Gend

er E

qual

ity a

nd C

hild

Wel

fare

Spor

t, Yo

uth

and

Natio

nal S

ervi

ceLa

bour

, Ind

ustr

ial R

elat

ions

and

…Tr

ansp

ort

Land

s and

Res

ettle

men

tFi

sher

ies a

nd M

arin

e Re

sour

ces

Prim

e M

inist

erIn

tern

atio

nal R

elat

ions

and

Coo

pera

tion

Indu

stria

lisat

ion,

Tra

de a

nd S

ME…

Pres

iden

tM

ines

and

Ene

rgy

Offic

e of

the

Atto

rney

-Gen

eral

Info

rmat

ion

and

Com

mun

icatio

n…Au

dito

r Gen

eral

High

er E

duca

tion

Pove

rty

Erad

icatio

n an

d So

cial W

elfa

reVe

tera

ns A

ffairs

Natio

nal A

ssem

bly

Natio

nal P

lann

ing

Com

miss

ion

Natio

nal C

ounc

ilAn

ti-Co

rrup

tion

Com

miss

ion

Elec

tora

l Com

miss

ion

Publ

ic En

terp

rises

Filled Funded

22Salaries

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Pres

iden

tPr

ime

Min

ister

Natio

nal A

ssem

bly

Audi

tor G

ener

alHo

me

Affa

irs a

nd Im

mig

ratio

nPo

lice

Inte

rnat

iona

l Rel

atio

ns a

nd C

oope

ratio

nDe

fenc

eFi

nanc

eEd

ucat

ion,

Art

s and

Cul

ture

Natio

nal C

ounc

ilGe

nder

Equ

ality

and

Chi

ld W

elfa

reHe

alth

and

Soc

ial S

ervi

ces

Labo

ur, I

ndus

tria

l Rel

atio

ns a

nd…

Min

es a

nd E

nerg

yJu

stice

Rura

l and

Urb

an D

evel

opm

ent

Envi

ronm

ent a

nd T

ouris

mIn

dust

rialis

atio

n, T

rade

and

SM

E…Ag

ricul

ture

, Wat

er a

nd F

ores

try

Nam

ibia

n Co

rrec

tiona

l Ser

vice

Fish

erie

s and

Mar

ine

Reso

urce

sW

orks

Tran

spor

tLa

nds a

nd R

eset

tlem

ent

Natio

nal P

lann

ing

Com

miss

ion

Spor

t, Yo

uth

and

Natio

nal S

ervi

ceEl

ecto

ral C

omm

issio

nIn

form

atio

n an

d Co

mm

unica

tion…

Anti-

Corr

uptio

n Co

mm

issio

nVe

tera

ns A

ffairs

High

er E

duca

tion

Pove

rty

Erad

icatio

n an

d So

cial W

elfa

rePu

blic

Ente

rpris

esOf

fice

of th

e At

torn

ey-G

ener

al

Aver

age

Pack

age

PA (N

$)

Average Salary Overall Average

23Budget Balance• Projected budget deficit of 5.3 percent of GDP• On the high end given the extended period of expansive fiscal

policy seen in the country since 2011.• That said, the deficit is expected to be reduced in the latter years

of the MTEF, although such forecasts are usually unreliable ifhistory is anything to go by.

• Total debt is projected to increase to an average of 31.5% of GDPover the MTEF, below the 35% threshold, but still high comparedto five years ago when the level was little over 16%.

• Still low by global standards• Contingent liabilities are projected to increase to an average of

8.7% of GDP over the MTEF, below the 10% benchmark.• Construction of a dual carriage between Windhoek and Okahandja• National fuel storage facility, fuel pipeline and the fuel offloading jetty

at Walvis Bay• Kudu Gas-to-Power Project• Mass Housing Programme.

24

Budget Balance

-10,000

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

N$ M

illio

n

Revenue Expenditure Deficit

25

Deficit

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

N$ M

illio

n

Revenue Expenditure (REAL) Deficit to GDP Deficit to GDP (RHS)

Funding outside of budget

26

Debt

0%

5%

10%

15%

20%

25%

30%

35%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

N$ M

illio

n

Total debt Debt to GDP (RHS)

27

Shortcomings

• Must consider reason we pay tax• Redistribution• Social support• Service delivery

• Water, electricity, education, health, police etc.

• Does budget achieve these?• Very poor on redistribution, unless you consider government

salaries etc. redistributive.• Limited social spending, but improving• Some service delivery, but highly inefficient.

• Does it align to NDP4?• Definite improvements, still not entirely

28

Shortcomings

• Inefficient allocation driven by hugely flawedbudgeting process

• Last minute changes• Rolling 3 year budget• Poorly aligned to development plan cycle• Little analysis of funding applications• Little M&E• Little idea of developmental outcomes• Questionable forecasts• Limited data availability

29

Concerns

• MAJOR under allocation to housing• Little structural change in economy – cyclical

growth?• Interest charges to N$10 billion per year by

2017/18• Crowding out risk?

• Should growth slow• Should

• Expenditure envelope stretched to themaximum

• Next few years will be critical

30

Concerns

• Fast growing expenditure increasing deficit and debtstock

• Means MOF has VERY LITTLE policy space should furthercounter-cyclical policy be needed in future

• We need look no further than SA to see this in action• Without any changes to expenditure, will be at the top of the

prudential limit by 2016/17, and expenditure always revisedup.

• Very difficult to reduce operational expenditure• Development expenditure most important, and most likely to

suffer• Exploiting all avenues to increase spending – guarantees,

outside budget, etc.

31

Suggestions• Introduce genuine 3-year MTEF budgets• Align budget cycles with development plan cycles• Align budget expenditure with NDP priorities• Ensure project & programme alignment to NDP priorities• Ground up budgeting every 3 or 6 years• Minimise additional budgets (5%)• Introduce regular audits of vehicle, furniture and other assets• Ensure proper analysis and appraisal of projects and programmes• Review the roll of MOF in budgeting• Focus on returns on expenditure• Develop watertight indicators• Introduce M&E on results (not just expenditure)

32

Thank you