Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698747351459.pdf (Namibia)
Republic of Namibia Reply by the Minister of Finance On Matters Raised during the Discussions of the 2016/17 Appropriation Bill and the 2016/17- 2018/19 Medium Term Expenditure Framework Calle Schlettwein, MP Minister of Finance 15 March 2016 INTRODUCTION Honourable Speaker, Honourable Members, Fellow N amibians 1.

I rise to respond to the questions, comments and matters 2016117 raised the Second Reading Appropriation Bill and the 2016117 - 2018119 Medium Term Expenditure Framework.
during the of Honourable Speaker, 2.

I listened objectively the to the Honourable Members made on the various policy and allocations proposed in the budget.

interventions that since the tabling of the Budget, I had the 3.

Additionally, privilege to engage the civil society and the business community on the budget proposals in different regions of our country.

and 4.

I held five post-budget discussion fora here in Khomas Region business the community in Erongo, Ohangwena, Omusati and Oshana Regions.
And I look forward to the public discourse in other regions during the coming weeks and days.

engaged public and the 5.

During these public interactions, I had the opportunity to appreciate how the public largely embrace the Budget and track record the confidence expressed in the Government's of the I had Indeed, finance management.
opportunity to appreciate how Namibians aspire to make a meaningful contribution to national development, from the aspirations of Ohangwena Business Women passionate in collective Network Association aspiring to engage to a fine example of an income generating activities, Enterprising Namibian in the form of Roama Gates Manufacturing Pty Ltd in Ondangwa, specializing in farm gates manufacture with good local retail industry outreach.

6.
6.

The proposals put forth during these engagements, and the various interventions made in this august House, reflect the common aspirations in regard to the budget as an important fiscal policy tool that can unlock immense socio-economic development opportunities for our country.

7.

At the same time, the budget policy proposals have also benefited from the unfettered opinion of our credit rating Investor Services have agencies.
Both Fitch and Moody's our reaffirmed conferred confidence in the fiscal stance and policy interventions proposed in the budget before you.

position rating credit and 8.

Honourable Speaker, during the Second Reading of the the Honourable Members have expressed general for the Bill, budget have improve the allocative Bill, support good implementation been made, which will no doubt efficiency and spending quality going forward.

for the Bill.
for the Bill.

Alongside this support proposals and and sectoral reform interventions effective calls for 9.

I, therefore, wish to thank you Honourable Members, the respective political parties and the public at large for the support and for the specific suggestions made, which will no doubt will improve the budget going forward.

and Hon.

Elma Dienda 10.1 wish to thank Honourable Me Henry Venaani, Hon.

from the Official Muharukua, Opposition Party, for their input.
I the DTA of Namibia, thank Honourable Maamberua from Swanu, Hon.

Murorua and Hon.

Auchab from the UDF; Hon.

Mike Kavekotora 2 from the RDP, Hon.

Van Wyk from UPM, Hon.

Kaapala from the Workers Revolutionary Party and Hon //Gowases from the Republican Party for their valuable inputs.

11.It will be remiss of me if I did not thank the Honourable Members from the SWAPO Party who took the floor to make their contributions in support of the Appropriation I would like to thank Hon.

Deputy Bill.
Deputy Bill.

In this regard, Prime Minister Netumbo Nandi-Ndaitwah, Hon.

Minister Alweendo, Hon.

Minister Tweya, Hon.

Minister Nujoma, Hon.

Deputy Minister Klazen, Hon.

Deputy Minister Iipumbu, Hon.

Deputy Minister Mushelenga, Hon.

Deputy Minister Witbooi, Hon.

Deputy Minister Simataa, Hon.

Karupa, Hon.

Katoma, Hon.

Caley, Hon.

Hambyuka, Hon.

Kafula, Hon.

Jagger and Hon.

Kandumbu.


12.Honourable the interventions made refer J-U to Speaker, I will respond to the various sub-themes of the Budget.

questions and proposals raised from the perspective of these sub-themes.

I may not necessarily refer to the names of the Honourable members in relation to each contribution made.
13.The sub-themes made are mainly in regard to (i) the (ii) budget policy coherence with Vision 2030 objectives, (iii) macro- fiscal projections budgetary allocative efficiency, (iv) spending efficiency in the deficit (v) provisions financing and safeguards for debt sustainability and (vi) proposals reform and infrastructure development.
to Public Enterprises underpinning the budget, for budget sectors, related social 3 COHERENCE ALIGNMENT WITH VISION 2030 OF BUDGET POLICY PRIORITIES AND 14.Hon.Muharukua and Hon.

Maamberua have asked if the budget is back-tracking on the Vision 2030 objectives and whether this reflects implicit change in policy.

15.To the contrary, Honourable Speaker, the Budget Policy Statement, right up front, articulates the key priorities for the budget and the MTEF.
The Statement articulates the priorities for achieving shared prosperity for all Namibians, developing the skills base, eradicating poverty; diversifying and industrializing the economy and improving the living standards of Namibians in an inclusive manner.

These are the defining goals for Vision 2030, and indeed for NDP4.

16.

This policy coherence is embedded in the proposed spending priorities of the budget.
It is of policy significance the increasingly provides that implementation of programme initiatives to achieve these national goals.

funding for the budget thus, the Vision; we 17.

I have also emphasized that to achieve these national goals the and, implementation of the funded programmes, drive internal administrative efficiency reforms to realize value for money and optimise outcomes.

implement accelerate policy need and and to 18.


The thematic focus of the budget emphasizes the growth and pro-poor dimensions which are critical elements of Vision 2030 and the budget split reinfornces this thematic In this way, with the forthcoming budget we approach.

realign our approach to emphasise outcome rather than merely inputs; this concept has already taken shape via the been performance management systems which have 4 introduced in the civil service, and being rolled out parastatals.
to Thus, the coherence between the Budget and Vision 2030 goals is provided for in the following respect:- • The budget prioritizes and funds interventions for inclusive growth and sustainable development, wealth creation and shared prosperity, poverty eradication and the improvement of social welfare as well as improved service delivery, • The alignment of the MTEF to NDP4 and, subsequently, the pillars of the high-impact, "Harambee Prosperity Plan" to provide development momentum as we transition to NDP5, and • NDPs to which the budget and the MTEF are aligned are a stepwise progression to achieving national aspirations contained in Vision 2030.
MACRO-FISCAL BUDGET PROJECTIONS 19.

Some concerns were raised in this House regarding the accuracy of the projections for economic growth, which is in the light of lower growth for projected at 4.3 percent South Africa (estimated at 0.9 percent), as well as the projected revenue growth that underpins this budget.

Hon.

in Kavekotora, Hon.

Muharukua and Hon.Venaani have, particular, spoken on these matters.

5 20.
5 20.

Indeed, Honourable Speaker, the South African economy has faced a number of key constraints that do not afflict Namibia, chief among which are load-shedding and major industrial relations issues.

In 2014, for instance, Namibia registered a 6.4 percent economic growth rate, compared to 1.5 percent estimated for South Africa, while corresponding growth figures for 2015 are 4.5 percent and there is some level of 1.5 percent, decoupling, into take consideration the relative sizes of the two economies.
respectively.

Thus, although comparisons should the 21.

On the other hand, Namibia's growth rate is set to slow more marginally in the medium-term as boom cycles in services taper off.

The construction, a temporary cyclical nature of suggests structural phenomenon, trend.

environment which requires adjusting to changing circumstances.

retail and financial these effects is, of course, a dynamic than a more permanent rather It 22.
We are of the opinion that, in spite of weak commodity prices and relatively slow growth in external demand, the coming into operation of large-scale mining projects will levels of economic growth.

Namibia's support decent output of uranium in 2017, for example, is projected to be more than three times the volume produced in 2015, thanks in large part is similarly expected to more than triple in 2016 relative to 2014, with the B2Goid mine at Otjikoto reaching full production.

to the Husab uranium mine.


Gold output 23.

This considerable improvement is expected to be accompanied in growth in the mining sector by an eventual from the low base created by recovery in agriculture drought, and a relatively mild slowing in growth in major intermediation.

service sectors such as retail and financial industries are tourism and export-oriented Furthermore, 6 expected to benefit considerably in 2016 from the recent depreciation of the Namibia dollar.

reform measures.
reform measures.

to revenue outlook and tax administration 24.

In respect I have announced a broad range of tax base reforms, tax and deepening as well as a host of broadening administration the on establishment of a Revenue Agency is on course with the Draft Legislation having been approved by Cabinet.

The Bill will be subjected to further public consultation and the legal establishment of the Agency by 2017.
The work to develop the Integrated Tax System (ITAS) has also progressed for the launch of the new tax system over the same calendar.

certification The work and we gearing are up to 25.

The Large Taxpayers Office has proved services efficient providing leveraging international capacity on matters of audit, planning.

to taxpayers in critical and we are local transfer pricing and tax tax cooperation to boost 26.
The Government's forecasts for economic growth are in line with the equivalent projections from the IMF, which foresaw 5.0% growth in 2016, Fitch Ratings, which forecasts 4.6% growth, and Moody's, which sees growth averaging 50/0 over the coming few years.

there will indeed be to SACU revenues, 27.

In respect challenging has already times ahead, but Government demonstrated its flexibility in coping with these conditions.
Both the Mid-Year Review of the 2015116 Budget and the contain significant Budget we restraint development and of in order to align the expenditure lines to the expenditure, are currently non-core debating operational 7 revised revenue outlook.

Simply put, when times are relatively tougher, we have shown that we can do more with less.

fallen in relative 28.


There were also concerns raised regarding the impact of low global commodity prices on revenue, suggesting that economy this impact has been underestimated.

Namibia's and the tax base are considerably more diversified now than was the case in past decades, so that commodity- importance.

The linked revenue has mining sector accounted for just 29.5% of company tax also being receipts income tax, significantly less prominent VAT and SACU receipts.
For this reason, we feel the impact of low commodity prices has been incorporated as accurately as possible into the published revenue forecasts.

It is also encouraging to note that a gradual recovery in the prices of gold and diamonds has taken root since the beginning of2016.

in 2014/15, with company taxes than individual 29.


With regard to the plausibility of the projected revenue, the Year-on- Year growth in revenue for FY2016117 is only estimated at about 2 percent, compared to 14.2 percent achieved in the last three years.

This projected slowdown reflects the extent to which downside risks to economic and revenue growth have been considered in the projections.
BUDGETARY ALLOCATION AND SPENDING EFFICIENCY IN SOCIAL SECTORS 30.Honourable Speaker, several interventions were made in regard to the budgetary allocations to the Social Sectors of education, health and housing in relation to the quality of outcomes.

8 31.

The Honourable Members have expressed their support for the priority attention accorded to these basic enablers of our economic and social development.

32.
32.

Indeed, the quality of outcomes that are commensurate with the levels of spending in these sectors remain a matter of national concern.

I share this concern.

The respective line Ministries are seized with the implementation of the necessary reforms.

From the public finance management point of view, I have announced in this budget that we will Reviews, undertake particularly to assess outcome-based spending quality and value for money.
No doubt, outcomes from such fund-tracking undertakings will contribute to the system reforms in these sectors.

targeted in the social Expenditure in order sectors; Public 33.

In respect to the sector-specific measures to improve the I efficiency of the systems and service delivery models, would rely on my colleagues to provide the details during our discussions at the Committee Stage.

RELEVANCE OF INFRASTRUCTURE AND STATE-OWNED ENTERPRISES IN THE BUDGET 34.
Honourable Speaker, there is general concurrence on the need to invest in efficient public infrastructure, especially in economic and ICT spheres.

Through interventions in this sector, we have been able to build good harbour and road infrastructure.

Funding is provided to refurbish the railway sector as a key component in trade facilitation and regional integration agenda.

35.
35.

Concerns were raised over the risk of water shortages and impact on economic performance their potentially harmful as well as the needs in the electricity generation sector.

9 36.

Water security is being addressed through the activities of the Department of Rural Water Supply of the Ministry of Agriculture, Water and Forestry and the operations of Namwater.
Among the many initiatives underway in this to area are water and treatment to is lower water encourage furthermore emerging as a viable option in the water sector.

improvements efforts and consumption.

Desalination recycling programmes, facilities reclamation 37.

On the energy sector, the capacity of some of the existing power generation stations has been improved and new renewable power generation capacity has come on stream.
Government's policy stance on this area has adopted the soon as aim of achieving possible, while sources outwards toward solar, wind, hydro and biomass energy generation, areas in which there is great potential for Power Purchasing Agreements, thereby injecting competition and a diversified supply of energy.

energy self-sufficiency also diversifying as energy our 38.As a result of the affordability concerns, the Kudu Gas-to- Power project has had to be deferred.

39.
39.

In of these utilities crucial and water, recognises the importance of pricing, both in Government ensuring the consumer's interests are kept at heart, and in maintaining the country's competitiveness as a place to do business.

electricity 40.

With regard to the scarcity of serviced land in various Local Authorities, scaled-up allocations for land servicing over the MTEF to fast-track delivery of affordable housing in line with the national proposes budget the 10 in this regard.
These allocations and related commitment budgetary and various Traditional Authorities will be made through the Ministry of Urban and Rural Development.

of Local support levels to 41.

With respect some of repeated bail-outs of to the operations of Public Enterprises, I should state that these enterprises constitute a drain on state coffers, while the under-performance of others denies the public reliable and services.

Hence the on-going review by the efficient Ministry of Public Enterprises is timely.
The proposed assessment listing of some of these entities is designed to reduce reliance on the budget, regain efficiency and provide good returns on the shareholders, while improving the reliability of service delivery from these entities.

for partial ALLOCATIVE EFFICIENCY ACROSS VOTES 42.

Several interventions were made with regard to the relative weight of budgetary allocations to various Budget Votes.

points increased by 5 percentage 43.


The share of non-interest expenditure on the social sector to 47 percent, has reflecting the Government's to improving access to services in this sector.

In spite of the fall in the overall non-statutory expenditure ceiling, the Ministry of Education, Arts and Culture has seen its allocation rise by 13.0% to N$12.79 billion, and the Ministry of Health and Social Services has likewise seen an increase of 11.4% to N$7.23 billion.

commitment 44.
commitment 44.

While the relative share of non-interest expenditure to the economic sector has moderated to 14 percent in FY20 16/17 the in FY2015116, from 16 percent reflects this II economic of expenditure on non-productive the outlays.

streamlining from the Additionally, targeted capital budgetary transfers to Public Enterprises.

and the This is the sector to leveraging infrastructure development.

in which PPP arrangements of private can most contribute benefits capital sector 45.
I concur that and stabilise the balance of payments, to realize our Growth at Home in order improve the trade Strategy and make a dent on poverty, foster balance food security and domestic domestic productive capacity, agro-processing, we need to, among other interventions, improve both the budgetary allocation to, and productivity in the agricultural sector.

46.
46.

While current to the social need allocation the sector has been the strengthened, expenditure for consolidation requires that fiscal expansion be curtailed in order to stabilize public debt within sustainable levels and regain fiscal space that will subsequently allow us to provide optimal funding.

47.

It is for this reason that allocations to other sectors have the not expanded appreciably in this budget and over MTEF.
that It is only through this short-term adjustment we ensure long-term sustainable operations.

48.

As such, proposed the allocation to the Defence Vote has been reduced from N$7.23 billion in FY2015116 to N$6.60 billion the consolidation framework, but also to free up resources to sectors and in the social and economic protect gains without compromising on safety and security.

in the budget result as of a 12 49.


The National Defence is a professional force, which needs to be mobile to be able to cover the geographical spread of our vast country.

During times of civil national need, the force has provided the necessary support to social courses.

international Additionally, Namibia solidarity and and support international for which the defence force plays a critical role.
Clearly, the reduction in the proposed allocation to defence is a trade-off that has to the backdrop of an increasing need to be made, against servicemen and improve the living conditions of our women.

- as a product of - participates peace keeping operations in regional BUDGET DEFICIT FINANCING AND SAFEGUARDS FOR DEBT SUSTAINABILITY Honourable Speaker, 50.
With regard to the financing of the projected budget deficit for FY2016/17, I have indicated that an amount ofUS$190 million from the Eurobond proceeds was support the financing of budget deficit.

set aside to 51.

The remainder of the financing needs will be sourced from if need be, from the regional the domestic market and, market.

lower-than-projected 52.

Comments have been made in regard to the growth in public debt during the FY2015/16.
This was necessitated by the need to meet the budgetary commitments against the economic growth and backdrop of the country's revenue international the stated, expected gains from recent new in increased exports projects and the related moderation in heavy machinery imports reserve same projects will rebuilding efforts over the long-term.

as well as the need to support reserve position.

As I have support the for 13 53.


However, this does not accelerated and targeted measures productive capacity going forward.

take away the urgent need for to improve domestic CONCLUDING REMARKS 54.

Honourable Speaker, to conclude, allow me once again to express my gratitude for the support shown for the budget by the Honourable Members and the public at large.

55.
55.

Significant emphasis was laid on the need for effective implementation of the budget, policy reforms to amplify the impact of the budget on development outcomes and innovative reforms to improve internal efficiency.

This cannot be further re-emphasized.

56.

In this fiscal consolidation framework, we are called upon to work collaboratively for sustainable development results and to do more with less.

57.
57.

I may not have answered each and every question individually, but I have attempted to cover the main topics.

My Cabinet colleagues will provide detailed clarifications, specific to their respective Votes and sectors, during the Committee stage.

58.

With these remarks Honourable Members, I thank you all for your support of the Appropriation Bill.

I thank you 14