SACU a key revenue stream for Namibia
15 November 2021 | Economics
Finance minister Iipumbu Shiimi tabled the mid-term budget review earlier this month and proposed several policy reforms. Institutions have been analysing the revised budget.
In an interview with Business 7, Chantell Husselman, country senior partner at PricewaterhouseCoopers (PWC) noted that for the 2020/21 financial year (FY), about N$58 billion revenue was collected. For the current financial year 2021/22, about N$52 billion was expected to be collected, however, the revised revenue increased by 2.95% to N$53.6 billion.
The Southern African Customs Union (SACU) remains a key revenue stream for Namibia. According to Husselman, the revised revenue of N$53.6 billion is expected to be generated from various tax streams such as the Southern African Customs Union (SACU) (29.9%), individual tax (29.5%), Value Added Tax (VAT) (24.0%), company taxes (14.3%) and the remaining accounts for property and other taxes.
For the 2020/21 FY, Namibia collected about N$22 billion from SACU. The figure dropped significantly by 24% in both the initial and revised budgets for the 2021/22 FY to N$14.7 billion, she pointed out.
On the expenditure front, Shiimi reallocated funds from the development budget towards operational expenditure, a regular occurrence in past years.
The operational budget is increased by N$2.2 billion from N$53.9 billion to N$56.1 billion, while the development budget is reduced by N$279.8 million from N$5.5 billion to N$5.2 billion.
The increased expenditure increased the revised budget deficit by 1.20% from N$15.8 billion to N$16 billion, Husselman said.
Foreign debt stood at N$93.7 billion in the initial budget and was revised to N$94.8 billion, while domestic debt will remain stagnant at N$32.8 billion. Given these developments, the revised debt to gross domestic product (GDP) ratio increased from 68.5% to 68.7%.
Shiimi highlighted some key policy priorities such as the Special Economic Zone (SEZ) policy to offer investment incentives in order to pave a way to attract investors. Other policies include tax and wage bill reforms, small medium and enterprise (SME) financing facilities and investment in green hydrogen.
He further proposed an increase deductibility on pension fund contributions and educational policy deductions to a maximum of N$150 000 from N$40 000 per annum.
Also contributing to the discussion is Monique Cloete, managing director (MD) at Liberty Life Namibia who explained on how the proposal will impact the insurance industry and the economy as a whole.
She notes that the minister’s proposal is welcomed by the industry as the value of accumulation for retirement would be more for members, however, the affordability factor will be at play. For the economy, the proposal will lead to a growth in net savings for the country, Cloete pointed out.
She further explained that there is an advantage of contributing towards pension when a member is young as the requirements or rates would usually be low.
Commenting on the impact of the Covid-19 pandemic, she said the domestic economy was already in rough situation and the economic condition were worsen by the pandemic. Key economic sectors were at a standstill due to restrictions imposed to curb the spread of the virus.
“We witnessed retrenchments is the insurance industry and the economic effects were more that the mortality effects,” the MD said.
During 2021, there were more death claims which was triple compared to what they use to pay, she said. Lastly, Cloete concluded that vaccination hesitancy is one of the challenges facing Namibia as the uptake is the lowest in the region.