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National Budget should be responsive to structural trends in the economy

Mon, 9 November 2015 21:22
by Press Release: Standard Bank
Business


Standard Bank Namibia’s Manager of Economic and Market Research Mally Likukela.

Standard Bank: National Budget should be responsive to current and emerging structural trends in the economy

The Ministry of Finance and its current and former Ministers should be commended for successfully using the fiscal policy (National Budget) to steer the economy to greater heights, however, it’s about time that the fiscal policy take cognizance of the new emerging trends that requires new and innovative growth paths.

Namibia’s relatively strong Human Development Record is testimony to the successes of the effective fiscal policy (Budgeting). Its score of 0.624 on the 2014 UN Human Development Index (HDI) is 13.5 % higher than the scores in the 1980s, making it a medium ranked country and positioning it well above the sub-Saharan African average of 0.502. More success stories are reflected in the poverty reduction and social protection programmes that Government has pursued and continues to pursue

. Namibia has made great progress in reducing poverty. The old age grants and various other generous Government social safety net programmes have led to a slight improvement in the GINI coefficient (0.593) – although it remains one of the highest in the world. The unemployment rate has also come down considerably to around 29%.

NEW TRENDS

With these general improvements in the standard of living in Namibia comes new challenges and these are the challenges that needs a refocused and re- engineered intervention angles. Below is a summary of the key emerging structural trends to which our budgeting process should be aligned.

Urbanization: Recently, there has been an escalation of movement of people from rural areas and small towns to cities. This movement has been associated with notable changes in the lifestyles of both rural and urban people.

Transportation: With this additional number of people in urban area, the need for public transportation has increased tremendously. The surge in urban centers has also seen a rise in the demand for general and urban amenities as well.

Education: Another trend that has been observed is the increased demand for education and the use of social media and access to internet. Service Industry: The improvement in the standard of living also gave rise to a new trend in the form of a growing importance of service industries and tourism.

Globalization: Furthermore, Namibia has become more and more linked to Africa and the global economy.

NEW GROWTH PATH

Looking at our transformation journey it becomes clear that Namibia indeed needs a new growth path or budgeting model that will enable us to unleash the development potential associated with these structural trends. The National budget should take cognizance of these trends so as to effectively and efficiently respond to the needs associated with these trends. Simply building houses is no longer enough. We are at a time where we have to use the budget to re- shape our cities and towns and create integrated and productive living environment for the masses that are streaming into the cities and towns.

The Minister announced in his maiden mid-term budget speech an additional allocation of N$121.0 million to the Mass Urban Land Servicing program, but the question is whether this will help in creating an integrated and productive living environment or merely responding to the Affirmative Repossession demands. Our education and training capacity is no longer enough. We have to now invest in quality improvements that will meet the new skills set requirement.

The question is whether the additional allocation of N$738.7 million for civil servants salaries mainly for teachers and N$218.9 million for bush allowances will improve the quality of education and meet the industry requirement. Our levels of investment are no longer enough. The minister announced the additional allocation of N$458.0 million for the construction of Neckartal Dam and a further N$381.0 million for Roads Projects Construction. We should ensure that these projects are modern to enable us to compete in the global economy. Our present retirement and insurance arrangement are no longer enough. We need a more comprehensive approach to social security if we are to make a dent on poverty and inequality. The reallocation of funds (N$539.7 million) from the Ministry of Poverty Reduction and Social Welfare as announced by the Minister does not augur well with the fight against poverty.

The minister also announced further additional reallocations to supposedly more pressing priorities, but the question still remains as to whether they are warranted and if so whether they are appropriately allocated. These are Drought Relief Procurement /distribution of food (N$531.0), Purchasing of Anti-Retroviral and Other Pharmaceuticals (N$500.0), Leasing of Locomotives for TransNamib (N$ 291.0), Efforts to Combat Foot and Mouth disease (N$210.0), Anti-Poaching Activities (N$95.0).

CONCLUSION

The recent mid-term budget review brought to the fore yet again some more key concerns and observations. Firstly, the elephant in the house: Government expenditure mix which is heavily skewed in favor of recurrent expenditure remains a concern and should be addressed as a matter of urgency. Recurrent expenditures are necessary but they must be controlled and managed. Secondly, the ever caring mother GRN: Government’s tolerance of Non-performance in several parastatals remains a key concern as it remains a major source of resource wastage. Thirdly, low execution rate of budget mandates is a critical concern that Government should address as a matter of urgency as well. Funds must not be returned or even be re-allocated because the implementing agency or ministry was slow to execute.