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Other Articles from The Villager

State must privatise loss-making SOEs

Tue, 8 November 2016 15:33
by Ester Simon
News Flash

Economic analysts have proposed that Government privatise or semi-privatise poorly performing state-owned enterprises to improve their revenue streams as compared to slashing down their budgets as proposed by the treasury chief, Calle Schlettwein.

They also concur that the proposed imposition of a raft of taxes next year to improve Government revenue streams could easily scare away potential foreign investment at a time when it is needed the most to stimulate economic performance and create jobs.

Economic Analyst Danie van Vuuren argues that, “Government should privatise loss-making SOEs like TransNamib, Air Namibia, Namibia Wildlife Resorts (NWR) and the Roads Contractor Company (RCC) and will save billions to provide quality free education and health services”.

He added that “Investors are already reluctant to invest in Namibia due to many regulations already in force. Investors who want to invest in Africa first of all evaluate how easy or difficult it is to do business in a country due to the number of regulations that apply.”

He added that corruption and insufficiencies within government should be addressed with the savings derived from the privatisation of non-performing SOEs, and that funds derived from the exercise be used to finance a world class education and health system.

He also emphasized that the private sector in Namibia is already giving back to the most target sectors, which are health and education.

However, the Government which makes out 50% of the total economy and state spending still makes up 42% of the GDP, which is unhealthy, he explained.

University of Namibia based economic analyst, Dr Omu Kakujaha-Matundu said that the state has to work on better incentives if it plans to impose taxes on the corporate sector.

 “Government should introduce good incentive methods such as tax rebate in order to boost private sectors performance in areas of scholarships and donations respectively,” he told The Villager.

Director at SMEs Compete, Danny Meyer, explained that since taxation on profit generated by business entities was first introduced decades ago, enterprises and more generally the private sector has made a significant contribution towards funding education and health care. 

“It is part of the tax paid by the private sector that goes towards the funding of schools, universities, colleges and vocational training centers” he noted.

Therefore, he argued, it is erroneous to believe that the private sector is not giving back or making a huge contribution towards the education and healthcare sectors.

Meyer, added that if government wants to encourage the private sector to contribute even more towards healthcare and education, then incentives must be developed and put in place. 

“Incentives that entices the private sector to make an additional voluntary contribution over and above taxes already paid. Such incentives could for example come in the form of a double tax claim against any voluntary contribution made,” he said.

President Hage Geingob while speaking at his Presidential Gala Dinner last year, also braced the nation for a solidarity tax, which in essence was mechanism to push revenue generating tax for the poor to high earning individuals and corporate sector.

Also commenting, is Economist Henning Melber who added that government will be faced with a challenge to compel the private sector to contribute more on education and health. 

“Companies would argue that by means of in-house training or own health insurance schemes they already provide services. These are however limited to their employees. Their contribution to the general governance of a society happens through taxes they pay” Melber said.

He added that the only legitimate instrument for a government to make the private sector a contributor to such sectors is through taxation, which is already happening.

“But a tax policy as an instrument requires a careful balancing act to maintain incentives for private investors while at the same time creating opportunities for the state to benefit from profits accrued. Enacting laws which compel companies for other financial contributions would be rather arbitrary and would undermine the investment climate,” he said.

According to the National Budget review 2015/2016 by PriceWaterhouseCoopers (PwC) education, arts and culture takes up 18%, while health consume 10% of the national budget. 

 

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Over the past years the expenditure bar has been higher than the revenues. Government has been spending more than the generated money over a period of time. Statistics from the budget review 2015/2016 indicates that the revenue of 2014 stood at N$42 103 million while as the expenditures was N$49 088 million, government’s expenses was N$6 985 million more than its revenues. In 2015 revenue was N$52 473 million whereas expenditure was N$62 699 million, hence the government’s expenses was N$10 229 million more than the revenues. In 2016, revenue is N$58 442 million and expenditure is N$67 083 million, expenditures are more than the revenues with N$8 641 million.

 

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