Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698753777851.pdf (Namibia)
Republic of Namibia Reply by the Minister of Finance On Matters Raised during the Discussions of the 2013114 Appropriation Bill and the 2013114 - 2015116 Medium Term Expenditure Framework Honourable Saara Kuugongelwa-Amadhila, MP Minister of Finance 02April2013 Honourable Speaker 1.

I take this opportunity to respond to comments questions raised during the Second Reading of the 2013/14 Appropriation Bill.

and 2.
and 2.

I would like to express my gratitude to the Honourable members of the House and the public at large for putting forth pertinent improve the budget process going forward.

issues.

This will no doubt 3.

I have clustered the matters raised according to relevant themes.

As such, I will not refer to particular members who issues raised raised the issues.

I will address the general I and only refer to some specific cases for clarification.
count on the support of my Cabinet colleagues to provide more their ministries.

sector programmes on the under detail MTEF BUDGET PROVISIONS FOR TRANSPARECY & ACCOUNTABILITY.

METHODOLOGY CYCLE, AND Honourable Speaker, Honourable members, 4.

Several comments were made regarding the participatory character of the budget preparation process.

This is in regard to (i) the public and opposition parties input into the formulation and (ii) transparency in the budget budget formulation process.

5.
5.

Namibia adopted a multi-year, Expenditure Framework in 2003. financial The MTEF does not only enhance planning, but it also improves transparency by providing income and inform~tionJ2-1 ~~anticipated expendltunil(?y 'VOte~anWPrdgramme.

6.

This the accords legislature ample opportunity to provide input into the expenditure proposals, before and presented to Parliament.

the annual Appropriation Bill and the finalized public is 7.
I thus encourage the Honourable Members of the House to two financial also scrutinize the proposals years and make timely and well considered input.

for the next at the Vote 8.

I should also point out that the budget formulation, in fact, aIM!

As starts level, with formulating their budget requests based on sectoral needs.

This process has the involvement of Regional Authorities and other stakeholders.

individual country's openness in budgeting 9.


Indeed, Namibia's in the been in the reflected internationally recognised Open Budget Survey.
Namibia's score has risen from 46 to 55 over the past four years, which saw the country placed third in all of Sub-Saharan Africa in 2012. improving scores has 10.As we are faced with limited resources, there is a need for prioritization to ensure that Government spending remains the within levels, while sustainability important needs of total additional expenditure requests advanced by aIM!

As for 2013/14 alone were in excess of N$15 billion, against N$6.5 billion which could be accommodated.
still addressing the country.

As an example, 11.

This is the essence of budget hearings which is an interactive process between the Line Ministries and the Treasury before the budget is finalized.

This extensive cannot be equated with central participatory planning.

process 2 12.I agree that we should continue to embrace reform and continually assess our performance in relation to our peers and the region.
We will continue with further reforms to our budget, but this has to be done in such a way that we do not unduly overburden the budget process.

PLAUSIBILITY OF MACROECONOMIC PROJECTIONS 13.

Let me also respond to comments made on the plausibility of macroeconomic and revenue projections.

14.

An important of macroeconomic for credible projections is the professional autonomy under which they are made.

tenet 15.
tenet 15.

Economic by officials undertaken forecasting of Further, macroeconomic the IS Macroeconomic Working Group (MEWG), which is stakeholder comprised institutions.

is preceded by an assessment of the performance of the industrial global economy.

In addition, a national annual survey is undertaken to assess medium-term prospects as well as to test the validity of projection assumptions.

from various forecasting 16.


With respect to the economic forecast for the MTEF, we are cognisant that Namibia is an open economy.

This degree of openness means that developments in the global impact on our economy.

As economy have significant generally such, our historical tracks global economic developments.

economic performance 17.

The global economic growth is projected to proceed at a relatively subdued pace.

3 18.
3 18.

This militates against and it robust growth in the domestic the domestic that is in this context economy, economic growth is projected to proceed at an average rate of 4.4 percent over the medium-term, which is only moderately above the projected growth in the global economy.

Domestic policy interventions are expected to support this pace of projected recovery.

19.
19.

The Preliminary National Accounts released a fortnight the estimated GDP growth rate for 2012 at 5 ago put percent, which was higher than the 4.0 estimated in the Macroeconomic Framework.

This suggests that economic economic thanks activity has picked up, policy and improving global market conditions, although risk factors remain elevated.

to domestic MEASURES FOR REVENUE PROJECTIONS 20.


In regard to revenue projections, objective criteria are maintained by ensuring that projections are independently made by a different Department other than the Receiver of Revenue.

This delineation of responsibility ensures that projected levels constitute collection targets which the Receiver should strive to achieve.

21.

A GDP-based methodology is applied in forecasting revenue.
This essentially means that the performance of a specific tax revenue stream is determined by the projected growth in its underlying economic activity.

If economic activity turns out to be better-than-anticipated, this would have the resultant positive effects on revenue and vice- versa.

are also generating positive outcomes.

revenue reform measures In addition, 22.


In recognition of the importance of revenue forecasting in public finance management, the Ministry has adopted a 95 4 percent ministerial targets.

revenue forecasting accuracy as one of its the projected revenue 23.

With respect to the previous MTEF, the budgeted revenue for 2009/1 0 was N$22.8 billion against an outtum of N$24.0 billion, giving a forecast accuracy of94.7 percent.
For 2010/11, and outtum was N$22.7 billion and N$23.4 billion, respectively, giving a 97.1 percent forecast accuracy, while for 2011112, the forecast accuracy was 93.6 percent.

This translated in an average of 95.1percent forecast accuracy over the MTEF, factors which was in line with the target.

Exogenous environment affecting global and domestic would generally impact on forecasting accuracy.

economic • has 24.
economic • has 24.

In spite of this achievement, we shall continually improve the forecasting capacity and tools.

As such, on our Ministry an Integrated Forecasting Model, alongside human resources capacity- and building exercises revenue forecasting, as well as simulation of fiscal policy impacts on the economy.

to serve both macroeconomic to develop undertaken 25.
During the tabling of the budget, I have indicated that total revenue outtum for 2012/13 is estimated at N$3 7.1 from the billion, which was an upward adjustment budgeted N$35.4 billion.

26.

Some Honourable Members have enquired if such an upward adjustment this is attainable.

By the end of February, preliminary revenue outtum stood at N$34.9 about 94.1percent of the revised estimates.

is realistic.
is realistic.

We believe that billion, which was 5 TAX POLICY CHANGES: POLICY RATIONALE AND SOCIO· ECONOMIC IMPLlCA TlONS Honourable Speaker, Honourable Members, 27.

In regard to tax reductions, there is general consensus that the proposed changes are necessary and plausible.

28.
28.

The rationale for the proposed measures is to relieve the enhance promote supports of and businesses, system and economy, which on individuals tax the of economic the activity tax burden progressivity competitiveness increased inequities.

reduction and the of 29.Anecdotal assessment has attested to the progressivity of the proposed measures.
The low-income groups are the largest beneficiaries of this policy change, with savings for the income earners below N$180,000 expected to save as the upper tax much as N$ l3,800 per annum.

As presented, rate of 37 percent has remained unchanged, although the brackets have been defined more clearly.

30.

These adjustments to encourage voluntary compliance by taxpayers as compliance costs have now reduced.

also expected are 31.


I should also state that our reform efforts will continue in order revenue collection, and the Ministry will elevate the profile of taxpayer's education campaign going forward.

administration improve and tax to 32.

As I have indicated in the Budget Statement, the proposed tax changes is taken into account projected revenue for the MTEF.

the cost of in the 6 33.


On whether fiscal policy has any impact on the economy, fiscal and monetary policy have I wish to emphasize that to the economy during the especially provided support difficult period of the global economic downturn by stimulating domestic demand and addressing domestic supply-side constraints.

34.

The fiscal policy nexus for inducing economic activity and long-term growth lies in the development of growth- capital enhancing development.
infrastructure as human as well SOCIO-ECONOMIC PROGRESS & CHALLENGES Hon.

Speaker, 35.

Namibia's Human Development Index (HDI) score for five years, 2012 shows an improvement over the last placing Namibia's ranking at 128 out of 186 global countries.
This places us mid-way in the 'Medium Human Development' Index Report shows that non-monetary poverty (as measured by education and health outcomes) has reduced in recent years, with life expectancy rising from 60 years in 2007 to 63 improved in considerably.

category.

The Human Development 2012.

Literacy have rates also 36.

Successive National Household Income and Expenditure Surveys also showed a gradual decline in poverty over the years.
Relative poverty fell from 38 percent in 1993/94 to 20 percent in 2009110.

7 37.

Extreme poverty also declined over this period, from 9 in 1993/94 to 4 percent in 2003/04 and further to percent 2.0 percent in 200911O.

38.

The Gini coefficient ratio has improved from 0.7 at independence to 0.58 in 2009110, compared to the Vision 2030 target of 0.55 by 2015.

39.

I should hasten to add that the Gini Coefficient ratio of 0.58 is still high and measures to further reduce poverty need to be strengthened.
However, indicate positive results of Government policy which shows that the policy direction is right.

statistics therefore, 40.

Government will, continue with efforts, including under inter alia, promote job and creation, economic growth, welfare improvements equitable wealth distribution.

These are the objectives set forth in NDP4.

this budget to, EXPENDITURE ALLOCA TlON AND BUDGET REFORMS 41.

Comments were made and execution of the budget.


I would like to respond to the main concerns raised as follows:- regarding targeting the 42. the 31 March 2013, As at the Total Preliminary Expenditure outturn amounted to N$34.4 billion out of an implementation rate of91 percent.

billion budget, which gives the N$37.7 43.

For operational expenditure, the preliminary budget execution rate stood at 92 percent, while for the 8 development budget, it amounts to 86 percent.

These of rates information.


are preliminary, reconciliation pending 44.

However, I share the view that any under-utilization of the budget is undesirable, especially in the context of socio-economic challenges facing our country and the need for is, improved service therefore, of utmost importance that all stakeholders work together to address the causes of budget under- utilisation and, most the outcome from our expenditure are improved.

to ensure that important, delivery.


It EFFECTIVENESS OF FISCAL COUNTERCYCLlCALlTY 45.

Honourable members know the effectiveness of the expansionary fiscal policy undertaken since the onset of the global financial crisis five years ago.

also wanted to 46.

The objective of fiscal countercyclicality is to serve as a stimulus to growth during a period of economic downturn.

47.

Evidence suggests that the fiscal expansion has served our economy relatively well.
The domestic economy only in 2009, experienced a mild contraction of 1.1 percent compared to an average of 2.3 percent contraction for SACU economies and it has rebounded strongly since 6.6 percent achieved in then with a strong growth of 2010.

48.

The resurgence of the Euro zone sovereign debt crisis in trade and 2011 has had a depressing effect on global economic growth and consequently on our economy.

49.

However, economic recovery is now picking up speed.
The growth rate of 5 percent estimated in the Preliminary 9 National Accounts for 2012 is marginally better than the in the Macroeconomic initial 4.9 percent projected Framework.

This result is in part due to the effectiveness of to improvements in the global market conditions.

interventions domestic addition policy in DEBT MANAGEMENT In this regard, the expenditure 50.

There is a consensus that expenditure and public debt need to be stabilized.
ceilings proposed in the MTEF indicate a consolidation path.

The is obviously at a higher level than earlier projected deficit projected under the previous MTEF, but it is still in line with the consolidation path and well within sustainability that fiscal policy not only supports the economy during periods of difficulties, but that it also addresses structural challenges and establish a solid basis for long-term sustainable growth.

GT1~ ...-levels.
GT1~ ...-levels.

It is important ~L.<:L ~ ~ ~"l STOCK OF INTERNA TlONAL RESERVES 51.

The country's increased from level of foreign reserves N$14.4 billion in 2011 to N$14.7 billion in 2012.

While is low compared to more mineral endowed level this it is, however, sufficient to support the currency countries, peg which is the most in the the reserves level current exchange rate regime.

Moreover, is also above the international benchmark of three months import coverage.
This implies that Namibia IS 10 a of position to honour its international obligations.

important policy parameter 52.

Foreign reserves are determined by two main channels: exports and imports.

Therefore, for the country to be able to have a high level of reserves, its export capacity to an unprecedented level.

it must boost 10 -eC-D'-' 53.

I believe the efforts underway to build up the economic capacity as envisaged in the NDP4 are steps in the right direction.
Other measures such as Regulation 28, which contributed deals with positively to foreign reserves and will continue to do so in the future.

outflows, capital have also TlPEEG IMPLEMENTA TlON OUTCOMES AND NEXT STEPS Honourable Speaker, 54.

As I have indicated previously, TIPEEG is an integral part of the development budget, whose overall execution rate is by the end of the year estimated at 86 percent.

55.
55.

According to the information provided by the National Planning Commission which is the coordinator of the the total number of jobs created TIPEEG programmes, under TrPEEG stood at 15,152 or a total of 41,444 jobs since 2011112.

56.

In terms of the contribution to growth, the preliminary National Accounts for 2012 indicates that the construction industry recorded growth rates of 19 percent and 12 Public percent infrastructure projects under the TIPEEG significantly contributed to this outcome.
respectively.

2012 2011 and in 57.

While TrPEEG was designed as a short-term programme, for job-creation and long-term inclusive the objectives growth will be pursued in terms ofNDP4.

11 58.

The lessons underscore evaluation.

learnt the need from the TIPEEG dispensation and improved monitoring for PUBLIC FINANCE MANAGEMENT LA W REFORMS 59.

Questions were raised with regard to the status of the review of the State Finance Act.
I wish to indicate that the Ministry has finalized the Layman's Draft of the Public Finance Management Bill.

The Bill will undergo a drafting process and tabled in this House, hopefully still this year.

60.

The Bill should be seen as forming part of a broader in the public strategy on improving fmancial management sector, financial the management systems, public procurement and tax reforms.

budgeting including process, STA TE-OWNED ENTERPRISES: PERFORMANCE Honourable Speaker, 61.
Much has been said about the performance of the State- Owned Enterprises.

I agree that the performance of some of the SOEs need to substantially improve.

62.

As I have indicated, the SOE Governance Council has developed policy guidelines for the operations of SOEs.

63.

It is now incumbent on the portfolio Ministers to ensure implementation and monitoring of these measures.

rely is not some SOEs perpetually and this on budgetary 64.

Indeed, sustainable.


Through Public transfers Finance reforms, we shall strive to ensure that budget transfers strategic that will help optimise growth and public interventions service delivery.

aimed at to SOEs financing are 12 65.

With regard to the funding of Air Namibia on which there has been extensive discussions, allocations for 2013114 to N$l.1 billion.

For 2014115 and 2015116, the amount allocations are N$362.2 million and N$304.1 million respectively.
This information is contained under the vote of Transport.

The allocations are made for the acquisition and maintenance of the aircrafts and the lease of aircrafts.

Allocations were also made to enable the airline company liabilities related to outstanding fuel payments.

to meet There was no intention to conceal this information and any lack of clarity is regretted.

THE TENDER BOARD AND PUBLIC PROCUREMENT REFORMS 66.

With to regard concern was expressed regarding the amounts exempted from open bidding.
procurement, public for municipal include payments 67.

In this regard, I would like to clarify a few operational there are standard expense items for matters.

Firstly, which O/MI As, including the National Assembly, get Tender exemptions annually for practical reasons.

These items rental fees, subsistence and travel allowance and subscription organisations.
and membership TIPEEG projects were from tender procedures only in regard to the period of tendering, which was reduced from 21 days to 14 days in an attempt to fast-track the implementation of the projects.

However, the transparency procedures as required under the Tender Board Act and Regulations applied.

This is in line with the spirit and procedures of the Tender Board Act.

to international also exempted services, fees 13 68.
You could just imagine the red-tape that you would have if there to overcome in order to undertake a trip abroad, was no tender exemption granted for this.

69.

Other forms of procurement which require exemptions as a matter of necessity are those pertaining to emergency relief.

In the new law, different tender procedures will be established for emergency procurement to obviate the need for exemptions, while still allowing for fast-tracking of procurement during emergencies.

70.
70.

Transfers are also to SOEs and Regional Authorities included in tender exemptions.

However, procurement involving these funds is subjected to the procurement systems of those institutions.

71.

Finally, the procurement benchmark amount is currently provided for in the Act.

This means that procurement involving amounts that may be small are subjected to in bidding.

To procurement, ensure tender exemption is granted.

efficiency avoid this and 72.


The new procurement bill provides for the threshold for tenders to be set in gazetted regulations, rather than in the Act.

This will facilitate for regular adjustments to ensure that small tenders are not subjected to the procedures that large tenders are subjected to, as this may not be efficient.

73.

I, however, agree that some of the tenders that were exempted, especially large ones, needed not to have been exempted.
Such exemptions weaken the ability for tender board to ensure that public procurement delivers value for money.

The need for tender exemptions can be obviated if OIM/A's project preparations are done in good time so that there is enough time to follow the open-bidding procurement procedures.

14 74.

In regard to decentralisation of project implementation to Regional Councils, the this falls under Decentralisation Act.
Once a Ministry has delegated the implementation of a project the procurement that project will be done by the Regional Tender Board in terms of the regional Council's Act.

to a Regional Council, the ambit of under FIGHTING CORRUPTION Honourable Speaker, 75.

As an effort to strengthen support to the fight against corruption, we have provided additional funding to both the National Police and the Anti-Corruption Commission.

76.
76.

Additional funding is also provided to the Ministry of Justice to strengthen the administration of justice and the capacity of courts.

SKILLS DEVELOPMENT 77.

Several Honourable members have underscored the critical need for of market-related the development vocational skills to promote job creation and reduce the cost of doing business.

The Ministry of Education will put in place the Human Resources Development Plan to address skills shortages in the economy.

78.
78.

In the context of the proposed budget and MTEF, allocations to education and training remain significant to fund, among others, Basic education and increased intake for vocational and tertiary education.

However, I concur with the various contributions made in regard to the need 15 commensurate for educational outcomes.

improvement III the quality of SECURE SOURCES OF ENERGY & WA TER 79.
In respect to energy supply, in addition to the funds made and Energy, of Mines is engaged with the Ministry on guarantees available Government to be provided for the Kudu Gas Project.

the Ministry to 80.

With regard to the budget allocation to development there was an programmes, increase of N$l.4 billion above the allocations of the previous year.

to note that is important it 81.


For 2014/15, it development is important the bulk of to note that is still significantly reduction to although there is a slight N$8.12 billion compared to N$8.l5 billion i~t~ ~l.

;3/14, this amount highet~Han 2.

'"N$7.04 billion estimated for that year under the previous MTEF.

the Further, infrastructure the are undertaken through SOEs.
Part of the Government infrastructure funding development In addition, a significant amount of funding is provided off- this amounts to N$1.4 budgeted loans.

Over the MTEF, then the total public billion.

When this is considered, funding to infrastructure is much higher is cL ~ provided through the budget.

• M _ A'I.

is secured by Government guarantees.

raised by SOEs programmes than what <iLo.r0>" raJ that Q.,/- \'L' for of is 1'... ~ \"\9-r \""~~~ \ - <:t 1<- ~~ ~ ~ ~.~"~wc{ .,....--vJSt 82.
Finally, concerns were raised about the adequacy of Old- 0.+- the ~ and ove grants.

As age Government is cognizant than adequate.

However, indicated that the current they are what can be currently levels are less ~~ ~ already, .\",-VL!..~"'N '").J:L<\nL<L ~ ~ :3<:J l'->LUL.\.l"o.

.n<I_ t- ~~ -::±,r, ~~ .."J'-D ~ afforded by the economy.

We have to balance betw~~n t~\::~ ~-t1tf'%i"~.

.1);- )hi~::-:e...~*- .~~ //~~~;': l.- ~ 1~ w.v.\{ <v3~.J~r,~ tp:.1:n-Q .
t , .h 0 .f\1\~l-t".Mt: poverty funding welfare programmes) that we agree are important in growth for enhancing fiscal sustainability and long-term sustainable growth.

alleviation/and interventions, to safeguard investment in order 83.

The Government remains committed to continuously review these grants as more resources become available.

CONCLUDING REMARKS 84.


In closing, I want to express my appreciation once more for the support expressed by Honourable Members and the public at large with respect to the Budget.

85.

I also appreciate the valuable proposals made, which no doubt will help us to improve the budget further.

I cannot agree more with the proposals to reduce the time allocated for the budget debate in order to allow more time for implementation.

86.
86.

This is especially true given that we have a three-year MTEF where budget allocations are known two years in advance and discussed at introducing the MTEF.

I trust that the next stages of the budget will take this into consideration and facilitate for an expedited passage of the budget.

the time of 87.

I may not have answered each and every question individually.

However, I have attempted to cover the main issues.
My Cabinet colleagues will clarify in more detail issues sectors during the Committee stage.

concerning their respective 17 88.

With these remarks, I profoundly thank you for your the for your support for and appeal contributions Appropriation Bill.

I thank you!

18