For two years now, President Geingob has been trying to build a more transparent and accountable government – he has declared his assets, and called on his ministers to do the same. So far, only the Honourable Minister of Finance, Calle Schlettwein, has done so. It appears that the culture of transparency takes a while to become entrenched, and become the roots for an accountable government. However, that does not mean the fruits of it are not yet readily available.
Last week, the honourable minister tabled
his mid-year budget review and medium-term budget policy statement, and perhaps
appropriately for the Honourable Minister, it included an overview of global
economic developments, and the outlook for the domestic economy. This uniquely
allows the Namibian citizens insight into the Ministry of Finance’s, and by
extension, our national government’s view of the economy. While the Minister’s
statement to parliament has been more widely disseminated, I believe the full
policy statement is perhaps a more important read.
The government recognises that the advanced
economies of the world have not been performing to expectation, growing by
1.9%, and that they will slow to 1.8% next year. Sub-Saharan Africa’s growth,
however, is expected to slow down to 1.4% for 2016, from 3.4% last year. This
is as a result of Nigeria’s economic contraction of 1.8% due to low oil prices,
as well as South Africa’s woes, which will keep its economy flat in real terms
for the year.
In the local economy, government has seen
inflation almost double, due to the persistent drought doubling food inflation,
and the lack of housing almost tripling housing and other fuel inflation. Our
linked exchange rate has also depreciated, which the ministry sees as Namibia
gaining competitiveness against our key trading partners. This, however, has
also resulted in the continuation of our interest rate hikes.
Unfortunately, these developments and
weakness in external markets have resulted in exports growing by only 3%, while
imports grew by 13% - causing our trade deficit to widen by 30.5%! This has
resulted in money flowing out of the country, resulting in liquidity problems
and affecting our foreign exchange reserves. Our import cover reached a low of
1.7 months, and consequently, the foreign reserves had to be boosted with
proceeds from the governments Eurobond issue, raising it back up to 2.9 months
cover.
What does our government see for the coming
year, though? The Honourable Minister Schlettwein already mentioned our growth
being revised downwards in his speech, but why? In 2016, our primary industries
contracted by 0.6%, mainly fuelled by the 9.9% contraction in agriculture due
to the persistent drought and imposition of veterinarian restrictions in South
Africa and fishing’s contraction of 2.9%. Fishing is expected to improve with
climatic conditions, and the primaries industries as a whole is expected to
grow by 12.3% in 2017, driven by 18.3% growth in mining and quarrying as Swakop
Uranium and B2Gold go into operation. Agriculture is additionally expected to
recover based on expected rainfall patterns.
Our secondary industries are expected to
contract by 2.3% this year, due to an 8.1% contraction in construction. This is
attributed to the completion of several mega-projects, while manufacturing was
stunted by the water crisis in the central regions and the struggling
agricultural sector. As the adverse effects of the drought dissipates,
manufacturing is expected to bounce back to 3.7% growth, but construction is
still expected to contract by 3.9% next year. Power Purchase Agreements and new
Independent Power Producers from renewable energy sources will give the
electricity and water sector a boost 7.2%, allowing the secondary industries to
expand by 1.2% in 2017.
Our tertiary industries, then, are the sole
reason Namibia will post positive growth, with an expected growth of 4.8% in
2016. Wholesale and retail is expected to contribute 4.9% this year, but slow
down to 3.8% next year due to the interest rates, and the weakened Angolan
economy that filters through these sectors. On the other hand, financial intermediation
is expected to grow by 5.2% this year and 5.5% next year, also due to the
higher interest rates.
Exports are expected to grow by 4.5% this
year and by 4.8% next year, on the back of operations commencing at B2Gold and
Swakop Uranium. Imports, however, are
expected to contract by 8.6% this year and 1.8% next year, with imports
declining due to the mega-construction projects completing. Our trade deficit
is therefore set to stabilize, but that will not alone bring back the liquidity
it sucked out of our economy. In aggregate the government expects only 2.5%
growth for this year, recovering to the expected 4.5% next year.
With estimates like these, it should be no
surprise that government has found itself backed a bit into a corner. While
government expected tax revenue of N$ 58 billion, it found itself with a
remarkable expected shortfall, expecting only N$ 52 billion. Our country’s
expected budget deficit thus skyrocketed to 8.3%, from 5.3% - necessitating the
intervention of the Ministry of Finance. Minister Schlettwein’s cuts of N$ 2.8
billion was thus quite prudent in the light of the above information.
But it is due to this level of increased
transparency of the Ministry of Finance that we can tell these cuts are
necessary. Transparency not only facilitates the participation of citizens with
its democratic government – it also builds trust. In a nation with a plan for
eradicating poverty that depends not only on our citizens’ participation in
that plan, but also their trust in a government that will levy additional taxes
to support that plan, trust is essential.
Developing a culture of transparency can
connect our citizens to development in unprecedented ways – it creates buy-in!
The Honourable Minister Schlettwein has shown he personally is invested in
transparency, and his ministry is following suit. The time has come for the
rest of the ministers and their ministries to follow the example set by the
Ministry of Finance, and perhaps then we’ll see greater support for them as
well.
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