Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698746891405.pdf (Namibia)
A If IP (W ~ ~ (I q; \r-r l}J J) ~ ~ ) Republic of Namibia Response by the Minister of Finance on matters raised during the discussions of the 2019/2020 Appropriation Bill Calle Schlettwein, MP Minister of Finance 16 April 2019 INTRODUCTION 1.

Honourable Speaker, Honourable Members, relevant questions and proposals made on the FY2019/20 Appropriation Bill and the in Medium Term are budgetary Expenditure Framework and Fiscal Strategy.

framework policy forth set 2.

3.

4.


5. for the considerations for the Appropriation Bill.

The budget forward and the broad I am grateful support and formulation review continue to benefit from the insights by the legislature as we seek to enhance the budget efficiency as a national priority.

put Let me take this opportunity to thank the Honourable Members and the Political Parties who took the floor to contribute to the debate and make proposals.
In particular, International Relations Nandi Ndaitwah SWAPO Party for their contributions and support.

I thank the Deputy Prime Minister and Minister of and Cooperation, Honourable Netumbo from the the Honourable Colleagues and all I thank the Leader of Official Opposition Party, Hon.

Me Henry Venaani as well as other members of his Party, Hon.

Vipuakuje Muharukua and Hon.

Nico Smit for their contribution.

namely Hon.

Mike Kavekotora 6.


My appreciation is also extended to Members from other opposition parties; (RDP), Hon.

Tangeni Iijambo (SWANU), Hon.

Asser Mbai (NUDO), Hon.

Jan Van Wyk IIGowases (UPM), Hon.

Hon.

Clara (RP) and Honourable R. Nauyoma (APP) for raising pertinent issues and supporting the Bill.

7.

I will now wish to respond to questions and comments raised by Honourable Members during the Second Reading of the 2019/2020 Appropriation Bill.

8.
8.

Honourable Speaker, I will address areas under which specific questions the matters raised within the and contributions thematic were made.

Page 2 of 11 9.

Plans, These are in regard to the economy, budget alignment Development fiscal and government wage bill Enterprises and investment promotion.

development matters Partnerships and as other related proposals which were put forward.
to National Public sector touch on Private reforms, I shall and further Public, consolidation Procurement to Public measures, private related 10.

My Cabinet colleagues will provide more details at Committee including in the stage on the sector-specific programmes under their Votes, their performance Government Accountability Report for FY20 17/18.

outcomes most of which are detailed The state of the economy and growth outlook 11.
Honourable Venaani and Honourable Nico Smith raised issues centred around economic growth baseline outlook as a basis for the policy interventions contained in this budget.

Following the tabling of the budget, for 2018 were the Preliminary National Accounts released.

The outturn suggests a softer contraction of the domestic the estimated contraction of 0.5 economy at 0.1 percent as against estimated in the budget.
This outturn on the economic percent activity indicates that in 2017 and the economy is easing out of the contraction into growth territory.

the recession had peaked at 0.9 percent 12.

Honourable Speaker, the pace of domestic economic recovery is given that also impacted by regional economic, these dynamics that dictate the medium term economic projections of any are close to those of other economy.

institutions such as Bank of Namibia and the IMF.


and global developments, In fact, our projections interconnected.

and trade financial are is It 13.

In the first the global economic five months of 2019, activity reduced to 3.3 percent by the International Monetary Fund this from 3.7 percent projected in October 2018.
The economic month, growth outlook for our trading partners of South Africa risks growth, particularly those arising from the Sifle-US trade spat ~ emerged much faster in speed and impact, on growth and adversely remain tight.

~~c90wnside largest neighbouring and Angola to ::::) ~ ~ C'l f ;;'f,-fl r. r: Page 3 of 11 affecting financial market sentiments.

At the same time, the adverse effects of climate change have affected a number of economies including Namibia.
These are prevailing factors which we must contend with, without loss of generality.

14.

As I stated in the budget Statement, the pace and scale of the recovery is predicated on the timeliness of the pro-growth measures I concur with the Honourable Members announced in the budget.

on who Offices/Ministries capacity and momentum.


and to scale-up the implementation implementation and Agencies speedy urged call for I 15. results the 2018 National Labour Force In addition, Honourable Speaker, Survey youth elevated unemployment which is estimated to have increased from 43 percent in 2016 to 46 percent by 2018, while the net effect on the overall rate is assessed to be generally neutral.

unemployment address needs point to to 16.


The budget before us seeks to strengthen macroeconomic stability, regain economic growth with jobs and fiscal sustainability.

The to support broad-based economic growth and youth interventions in employment and self-employment this budget.

are of priority considerations structural Speaker, 17.

Honourable inequalities and what Honourable Members because the extent of their manifestations political economy of our country's historic policies of the old order.
the they can lead to, be man-made, have postulated and as some is result of the emerged.

This of poverty is a direct challenges have 18.

However, progress inequalities current estimated 0.56 percent.

it cannot be denied that we have made meaningful reduced in ratio to the from high rates of 0.71 Gini Coefficient challenges.

We addressing these have 19.


Absolute poverty has also been reduced from levels above 40 to about 17.4 percent by 2016, with extreme poverty falling in recent income percent from about 30 percent of the population to 10.7 percent years.

Certainly, these are high rates relative to national Page 4 of 11 levels and further structural challenges targeted programmes.

targeted efforts are needed to address growth economic inclusive these and through Alignment with National Development Plans 20.
Honourable Speaker; observations were made about realignment of to National Development Plans.

In this respect, I wish to the budget state that the national budget is an instrument of fiscal policy and a key tool for contributing to the achievement of national development objectives.

21.

Of First, therefore, objectives.


the National Development is how the budget advances the national interest, Plans development benchmarks are set within a dynamic environment and are affected by short to medium-term developments nationally and globally.

We have recalibrated the fiscal policy on a sustainable path, which is a fundamental condition to advance the targets and objectives set out in the national development plans.

22.
22.

Honourble Venaani, I should indicate that all programmes that are proposed for funding under this Budget are directly linked to the aspirations of the Vision 2010, NDPV and Harambee Prosperity Plan and specific evidence can be provided during the Committee stages.

Economic growth, fiscal consolidation and Debt Dynamics and growth economic 23.

Honourable Speaker, questions were raised with regard to the link The between to fiscal relationship between growth and government debt is central policy.
The budget Statement this subject and has established the medium-term policy stance to achieve economic growth and stabilizing the increase in public debt stock.

I therefore call upon all Honourable Members to familiarise themselves with the content of the Fiscal Strategy.

talks at length about dynamics.

public debt 24.

Honourable Nico Smit, remains between debt sustainability and supporting demand.
Therefore, fiscal policy flexible and growth friendly and it strikes the right cord the I should indicate that our Page 50f11 high economic growth which we achieved between 2010 and 2015 was mostly funded through debt capital, resulting in an economic boom in some sectors of the economy due public investment point of view.
At the end of the boom period and the onset of a perfect storm, government debt increased due to a sharp decline in output and public revenue and a reduction in public expenditure which had to be done and resulted in severe pain in the domestic economy.

25.

Discernible progress is made of growth the FY2018119 in the deceleration in government debt since we collectively adopted the targeted fiscal consolidation program in 2016.
As such, the increase in government debt over year-on-year, stood compared to the average increase of 32.4 percent between 2013/14 and 2016117.

Over the FY2019/20 the growth in debt to debt stabilization policy measures.

This budget continues on this policy framework, underscoring to stabilize the Government's the growth in government debt and reduce debt over the medium to long term.

at an average of 9 percent, - 2021122 MTEF, at 17 percent is projected intentions thanks 26.
Notably Honourable Speaker, Honourable Members, specific clarification as to why government debt is still rising is explicitly set out in the medium-term fiscal policy stance.

As much as the budget deficit could not be significantly reduced in the short-term and a positive primary budget balance achieved faster, public debt would tend to rise.

27.
27.

The FY2016117 Budget Review and Medium Term Policy Statement sets out a fiscal stance that brings about faster closing of the budget deficit and debt stabilization.

The steeper consolidation generated unintended consequences on economic growth and expenditure over of spending arrears.

Hence the commitments recalibration frameworks which further balances between growth and fiscal sustainability.
As a result:- and accumulation the policy of • • last year, though prolonged, has not deepen and stood at the recession, 0.1 percent the budget deficit from high levels of is reducing annually, 8.1 percent of GDP in FY20 15/16 to the budgeted 4.1 percent in FY2019/20 in it moderates 2021/2022, 2.8 percent before at Page 6 of 11 • • condition economic growth is rebounding to positive territory, which is a necessary and revenue generation, revenue faster condition for budget deficit reduction going forward, than expenditure, a necessary stabilization is growing for debt • we aim to achieve a positive primary balance by FY2021122, which is a necessary condition for not only stabilizing growth in debt, but also reducing the proportion of debt to income.
28.

The decline in the Budget government's towards the implementation of the fiscal consolidation is always provided commitment policy.

The performance indicators of the budget in the Mid-Year Budget Review.

reaffirms deficit Public Enterprises and Wage Bill Reforms 29.

Honourable Speaker, comments and proposals were also made on the Public Enterprises and the wage bill reforms.

30.

These two elephants in the room are not new and so were the comments and proposals made.
Of material importance is whether we are making meaning progress on these reforms, and I wish to highlight a few milestones as follows:- • • • • to the those especially framework governance inefficiencies, is now address in the commercial the Public Enterprises Governance Amendment Bill setting passed, governance and operational from the national budget point of view, the transfers to Public and own Enterprises, revenue generating space has been markedly reduced in order to wean them from budget overrel iance, the Government proposes to shed a portion for the first time, of its asset base in MTC and utilise the sale of the shares to funding capital projects without having to take up equivalent public debt, a principle stance is also put forth to have a uniform approach to remuneration increases across the public sector during the fiscal adjustment phase for which the Ministry of Public Enterprises will issue a directive.
31.

Honourable Speaker, Honourable Members, reforms on the civil service wage bill have been instituted and produced results as far as Page 7 of 11 net growth in the size of contammg service without compromising service delivery in key sectors such as education and health.
the civil 32. to questions I indicated that raised during discussions the In my response 2018/2019 Budget, the Right Honourable Prime issued policy measures and procedures to be implemented Minister by Government in the to control personnel and other expenditures public service of Namibia.

These measures and procedures are not only aimed at addressing the wage bill but also to enhance efficiency in the management and use of public resources.

of 33.
of 33.

The specific measures being implemented include, among others freezing the creation of new positions in government, abolishment of all positions that remain vacant for more than 6 months, introduction of compensatory reduction of vacant positions and approval by the Secretary to Cabinet, the filling of vacant positions.

The policy intention is to reduce the wage bill as a proportion of GDP from the to about 12.5 percent over the medium to long- current 15.5 percent term.

areas 34.
areas 34.

Concerns on spending efficiency and the quality of outcomes remain sectors.

A public action important expenditure review in the health sector is due for completion in the coming months in collaboration with the World Bank and also assessing the cost considerations of a universal health care.

of policy in these Private Sector Development and Support to SMEs 35.

Honourable Speaker, let me also respond to matters raised with regard to the private sector participation and SME developments.
is necessary for new pattern of The flow of private sector investment sustainable growth going forward.

Three years ago, the Government has reduced the corporate income tax rate for non-mining companies that we from 34 percent to need to implement ensure that the tax system is equitable in terms of coverage and fairness as well as our ability to deal with new emerging financial Issues.

the necessary tax administration measures rate of 32 percent.

to the current I concur 36.


One of the recent investment which have befitted the domestic economy as a result of investment promotion efforts is the Peugeot Page 8 of 11 Plant in Walvis Bay.

We have Car Assembly a consultative platform to address the needs of the private sector and assessing measures raised on the policy and impacting on the ease of doing business administrative frameworks and business confidence.

It is on this basis that some of the proposed tax policy amendments have been reversed.
to address concerns established 37.

With regard to the financing instruments now progressing mentorship program being frontloaded.

to implementation to support SMEs, we are stage, with the training and 38.

An allocation provision for commencement of this program IS provided for in this budget.

Proposed alternative intervention measures 39.

Honourable Speaker, target budgetary better forward lie in the areas already contained the budget.

I am grateful for some of the considerations to interventions.
Most of the proposals put 40.

For instance, the scaled up interventions in the agricultural and water sectors aim to improve domestic productive capacity, water security and enable opportunities for value addition and agro-processing by the private sector.

41.

The opportumties developmental public law must be greatly enabled and implemented.

To this procurement effect, to designated products north of the Cordon fence as regulations for the economy at large are being finalized.
I have issued exclusive bidding directives presented the by offers opportumties in 42.

Public, Private Partnership In specific cases where national security private sector participation.

financing considerations will be undertaken, to ensure value for money.

This may be the case with the envisaged revamping of the Hosea Kutako International Airport.

risks loom large, direct project together with quality assurance arrangements, for crowding and fiscal 43.
Honourable Nauyoma, Scheme I wish to point out that contribution by Members has to Medical regards aid as contribution, Page 9 of 11 It is important remained unchanged at N$60 during the period from independence to 2012/2013.

The first changes to the scheme was the introduction of the two options, namely the standard option at N$120 and high option at N$240 during 2013 for main members.
to note that this scheme which is voluntary is extremely generous when the benefits are compared to the actual cost to the scheme leading to a significantly subsidised health care scheme for the public service.

The wage bill has more than doubled from N$13.925bn during to note that this 2012113 to the current N$29 .193 bn.

It is important increase is largely driven by the re-grading exercise implemented during the year 2013/2014 to that, salary increases granted to the public service employees.
At no point during these periods was there a contribution increase by the employees to the medical aid, however contribution has increased to the employer's meet the actual costs of the scheme.

and subsequent 44.

This is non-increase in medical costs which have been above inflation.

Leaving the scheme unchanged will lead to the scheme becoming unsustainable.

is not withstanding the annual increases 45.

Finally, on the proposal by Hon.


Venaani for the establishment of this is not a new in the UK tried to resolve the income is biased in the Delivery Unit, I have the following answer: phenomenon.

The Blair Government problem of the way we account favour of private over public provision of services.

for national 46.

In 2001, Blair established a high-level 'Delivery Unit' mandated to take the lead in directly measuring public service efficiency.
This would be done through setting targets for all activities across the and civil public service.

servants help accountable for the delivery of the targets for these services.

Public services would be benchmarked 47.


The initiative recognised that the Government could not measure the public service provision well, and that simply pouting more money into health and education for example could be a waste of the Unit money with developed a wide range of measurable outcomes for example: for how long you have to wait percentage of pupils passing exams; percentage of training arriving on time.

for a hip-replacement; no measurable Therefore, outcomes.

Page 10 of 11 48.
Page 10 of 11 48.

The 'Delivery Unit' was not the 'silver bullet' that solved the problems of effective and timely delivery of quality public services.

as with can be However, all the desired outcome.

This manipulated of the to suit led to for example, hospitals treating minor measurable outcomes thereby, than more serious procedures heart surgery cases faster inflating the number of procedures and meeting the targets.

they 'gaming' based models statistical CONCLUDING REMARKS 49.

50.
50.

In conclusion, Honourable aspects arising from the Second reading of the Bill.

Speaker, these have been the main I once again wish to express my appreciation support expressed by the Honourable Members.

for the principle 51.

My Cabinet colleagues will clarify the more detailed sectoral and functional issues where necessary.

52.

With these remarks, I appeal for your support for the 2019/2020 Appropriation Bill and the 2019/2020-202112022 MTEF.
I thank you Page 11 of 11 the issues in our economy is the best approach to meet these challenges.

We are I need to thank the business community for hosting and attending the various.

post budget events held during the past weeks.

The discussions were frank and fruitful.

The conclusions were equally encouraging.

From these discussions we took home that consultations and a deeper debate about comforted by the general support the budget and its underlying policies have received.

We.
We.

Are convinced that with this budget we have found the right balance to sustain macro economic and fiscal stability and sustainability.

We have turned the economy back into positive growth, albeit slow growth only.

We have policy measures in the pipeline to improve quality of spending and quality of economic growth.

Lately, we are now in a better place than last year, we have secured our fiscal sovereignty.