Budget Overview - IPPR 060417€¦ · Construction, Renovation And … S.O.E Government...

The Namibian Budget 2017/18-2019/20

April 2017

T h e b e s t w a y to p re d i c t th e fu tu re i s to c re a te i t .

Background

The best way to pred i ct the fu ture i s to create i t .

Thesocialcontract

• VoteforGovernmentbasedonelectionand

policyproposals• PaytaxestoGovernmentfor

deliveryofservices

Setnationalagendaaround:

• Maintenanceoflawandorder

• Protectionofhumanrights

• Protectionofpropertyrights

• Provisionofnationaldefense

• Provisionofpublicgoods

• Correctionofmarketfailures

• Provisionofequalityofopportunity

• Redistribution

ThePublic

Publicsector

PerfectStorm

Drought

OilPriceshocks

Commodityprices

Constructionboomend

Bankliquidity

Interestrates

Publicexpenditure

Policyresponse

PerfectStorm- 2016

Positivesigns• Rain• Commodityprices• SACUreceipts• Recognitionofissues• CapitalinflowsLowbase(Husab)

Overhangs• ExternalPosition• Governmentfinances• Liquidity• ConstructionsectorConfidence

Thecurrentmacroenvironment

Revenue

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

N$Million

Revenue

Actual 2006Budget 2007Budget 2008Budget 2009Budget

2010Budget 2011Budget 2012Budget 2013Budget 2014Budget

2015Budget 2015Mid-TermBudget 2016Budget 2016Mid-TermBudget 2017Budget

RevenueBreakdown

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2016/17 2017/18 2018/19 2019/20

N$Million

RevenueBreakdown

TotalTaxRevenue TotalNon-TaxRevenue

NormalIncomeTax

onIndividuals,

DiamondMining

Companies$2.1

Non-MiningCompanies

VAT, $13.7

Taxesoninternationaltrade(SACU),

Othersources$4.7

RevenueBreakdown

Revenue

10,000

15,000

20,000

25,0002006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2019/20

N$Million

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

RevenuetoGDP

RevenuetoGDP RevenueGrowth GDPGrowth(nominal)

Revenue

N$Million 2016/17 2017/18 2018/19 2019/20

NormalIncomeTaxonIndividuals 10,814 10,715 10,851 11,653

DiamondMiningCompanies 2,202 2,056 2,268 2,466

Non-MiningCompanies 5,922 5,655 6,030 6,450

VAT 13,741 13,741 15,041 15,998

Taxesoninternationaltrade 14,071 19,597 17,978 18,891

Other 4,762 4,661 5,024 5,337

Total 51,512 56,425 57,192 60,795

§ Newrevenue/taxes§ Nomajorchanges:verypositive.§ Generalobjectiveof:

§ Deepeningandbroadeningtheexistingtaxbase.§ Curbingtaxbaseerosion.§ Curbingprofitshiftingandtaxplanningopportunities.§ Improvingoverallefficiencyinthetaxadministrationfunction.

Revenue

§ Newrevenue/taxes§ ProposalforaSimplifiedPresumptiveTax.§ Increaseofthefuellevy.§ TheprovisionsoftaxonCapitalGainswillbeexpandedtoprovideforwealth-basedtaxationoncertaincategoriesofcapitalassets.

§ TaxproposalsonwealthtaxwillbedevelopedtoembodytheprinciplesofSolidarityWealthTax.

§ ImplementationoftheTaxArrearRecoveryIncentiveProgramme.

§ EstablishmentofaSemi-AutonomousRevenueAgency.

Revenue

Expenditure

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Expenditure

Actual 2006Budget 2007Budget 2008Budget 2009Budget

2010Budget 2011Budget 2012Budget 2013Budget 2014Budget

2015Budget 2015Mid-TermBudget 2016Budget 2016Mid-TermBudget 2017Budget

Expenditure

-80.0% -60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0%

Vehicles

Transport

TravelAndSubsistenceAllowance

MaterialsAndSupplies

SocialGrant

Utilities

Construction,RenovationAnd…

GovernmentOrganisations

PersonnelExpenditure-Subtotal

DomesticInterestPayments

ForeignInterestPayments

Expenditureinsubdivision- %change(2016/17to2017/18)

DevelopmentExpenditure

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2019/20

N$Million

BudgetBreakdown

Development Operational Development(%total)RHS

10,000

12,000

14,000

N$Million

DevelopmentBudget

Actual 2010 2011

2012 2013 2014

2015 2015Mid-Term 2016

2016Mid-Term 2017

2015-16 2016-17 2017-18 2018-19 2019-20Actual Revised Budget Projection Projection

PersonnelExpenditure 24,000 24,443 28,095 28,402 28,906GoodsandOtherServices 9,085 8,291 6,546 6,362 6,663Subsidiesandothercurrenttransfers 17,834 17,334 16,691 14,790 15,038Interestpaymentsandborrowingrelatedcharges 3,130 3,875 5,001 4,264 3,131Acquisitionofcapitalassets 9,083 6,297 5,035 6,085 6,623CapitalTransfers 1,923 1,230 1,146 1,931 2,332LendingandEquityParticipation 22 26 27 28 28GRANDTOTAL 65,076 61,496 62,541 61,862 62,721

PercentofTotalPersonnelExpenditure 36.9% 39.7% 44.9% 45.9% 46.1%GoodsandOtherServices 14.0% 13.5% 10.5% 10.3% 10.6%Subsidiesandothercurrenttransfers 27.4% 28.2% 26.7% 23.9% 24.0%Interestpaymentsandborrowingrelatedcharges 4.8% 6.3% 8.0% 6.9% 5.0%Acquisitionofcapitalassets 14.0% 10.2% 8.1% 9.8% 10.6%CapitalTransfers 3.0% 2.0% 1.8% 3.1% 3.7%LendingandEquityParticipation 0.0% 0.0% 0.0% 0.0% 0.0%GRANDTOTAL 100.0% 100.0% 100.0% 100.0% 100.0%

YearonYearGrowthPersonnelExpenditure 1.8% 14.9% 1.1% 1.8%GoodsandOtherServices -8.7% -21.0% -2.8% 4.7%Subsidiesandothercurrenttransfers -2.8% -3.7% -11.4% 1.7%Interestpaymentsandborrowingrelatedcharges 23.8% 29.1% -14.7% -26.6%Acquisitionofcapitalassets -30.7% -20.0% 20.9% 8.8%CapitalTransfers -36.0% -6.8% 68.6% 20.7%LendingandEquityParticipation 20.3% 3.0% 3.0% 3.0%GRANDTOTAL -5.5% 1.7% -1.1% 1.4%

BudgetBreakdown

N$Million

PersonnelExpenditure

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2015/16 2016/17 2017/18 2018/19 2019/20

N$Million

PersonnelExpenditureTotal TotalExpenditure Personnelas%ofTotalExpenditure(RHS)

Expenditure

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

28,000

29,000

30,000

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

N$millions

2017/18MTEF 2016/17MTEF

GlobalComparison

tserrat

Zimbabw

eLesotho

Cyprus

Maldives

Jordan

incentand

theGren

adines

Swaziland

Afghanistan,Isla

micRep

ublicof

St.Kittsa

ndNevis

eSyria

nArabRep

Botswana

Tunisia

Anguilla

riaMorocco

St.Lucia

Dominica

Belize

ublicof

Paraguay

Angola

Kuwait

Bhutan

rbados

Seyche

Croatia

SouthAfrica

Iceland

Bahrain,Kingdom

Lebano

rtugal

Bahamas,The

Zambia

Israel

Malaysia

Luxembo

Serbia,R

ElSalvado

rLaoPe

ople'sDe

mocraticRep

Panama

Coted'Ivoire

Mauritius

Thailand

Belgium

KyrgyzRep

Iran,IslamicRep

ublicof

Uruguay

Albania

Turkey

Algeria

ntralA

fricanRep

Gambia,The

Jamaica

Philipp

Nicaragua

SierraLeo

neCameroo

nSriLanka

France

CostaRica

onia,FYR

minicanRep

Lithuania

Nigeria

Congo,Dem

ocraticRep

ublicof

Georgia

SlovakRep

Bulgaria

Tanzania

Bolivia

ngo,Rep

ublicof

Rwanda

Guatem

zuela,Rep

ublicaBo

livarianade

Hungary

dArabEmira

Austria

Ukraine

Singapore

Latvia

Sloven

Norway

Azerbaijan,Rep

ublicof

Estonia

Uganda

Banglade

shNethe

sSpain

Colombia

RussianFede

Finland

China,P.R.:Macao

Romania

Argentina

CzechRe

public

Korea,Rep

ublicof

Poland

Canada

dStates

Equatoria

lGuine

aMexico

Ethiop

iaBrazil

Kazakhstan

Tajikistan

Pakistan

Switzerland

CivilServiceWageBillas%ofGDP

Wagesandsalaries

50,000

100,000

150,000

200,000

250,000

AverageSalary

AverageSalaryIncrease(RHS)

AverageCostToCompanyIncrease(RHS)

AverageSalary

AverageCostToCompany

50,000

100,000

150,000

200,000

250,000

Mar-10

Aug-10

Jan-11

Jun-11

Nov-11

Apr-12

Sep-12

Feb-13

May-14

Oct-14

Mar-15

Aug-15

Jan-16

Jun-16

Nov-16

AverageAn

age(N$)

AverageNamibianGovernmentWagevsInflation

InflationSuggestedAverageWage ActualAverageWage

Averagewages

200,000

400,000

600,000

800,000

1,000,000

1,200,000

AverageWagebyVote

Defence Spending

Militaryexpenditure(%ofGDP)

N$Million

DefenceSpending

2010Budget 2011Budget 2012Budget 2013Budget

Defence Spending

Sub-SaharanAfrica

SouthAfrica

Percen

DefenceSpendingtoGDP

BreakdownofDefenceSpending

2015/16 2016/17 2017/18 2018/19 2019/20

N$Million

DefenceSpendingBreakdown

Acquisitionofcapitalassets

Subsidiesandothercurrenttransfers

GoodsandOtherServices

2015/16 2016/17 2017/18 2018/19 2019/20

N$Million

DefenceSpendingBreakdown

OfficeoftheMinister Administration Training

NamibianArmy 21stBrigade NamibianAirForce

MilitaryHospital NamibianNavy DefenceAttache'

Vote ProjectTotalProjectCost

(N$Million)Education EstablishmentofHostelsatSchoolsNationwide 9,000Defence ResearchandDevelopment 6,658Transport RailwayNetworkUpgrading 5,457Transport KeetmanshoopviaAroabtoKleinMenasseBorderPost6km) 5,000

TransportRehabilitationoftheTR1/16:Windhoek-OkahandjaRoad(67km) 3,310

Rural/UrbanDevelopment ImplementationoftheMasterPlanforOshakatiTown 3,290Lands LandPurchaseSub-Programme 3,007Agriculture De-bushinginCommercialandCommunalareas 2,975

AgricultureConstructionofLargeDams,DesalinationandProvisionofWatertolargerSettlements 2,758

TransportUpgradingtheTR1/4:Windhoek- Rehobothroadtoadualcarriageways(84km) 2,715

TransportUpgradingtheTR9/1:Windhoek-HoseaKutakoroadtoadualcarriage(44km) 2,700

Agriculture GreenScheme 2,442Rural/UrbanDevelopment ConstructionofServicesInfrastructureinOutapi Extension8 1,967Transport NorthernRailwayLineExtension 1,771Mines SeismologyandGroundGeophysics(SGG) 1,515

LargeProjects

Vote Project

TotalProjectCost(N$Million)

InternationalCooperation

Purchasing,ConstructingandRenovatingofDiplomaticPremisesAbroad 1,478

Agriculture Horticulturesupportprogramme 1,432HigherEducation UpgradingandrenovationofRunduVocationalTrainingCenter 1,432Education BasicEducationFacilitiesUpgrading 1,400Transport Maintenanceofpavedandunpavedroads 1,299President StateSecurityInfrastructure 1,262

TransportUpgradingofMR91Gobabis- Aminius&MR40Aminius- Aranos(245Km)tobitumenstandard 1,241

Education ConstructionofTeachersHouses 1,141HigherEducation ConstructionofEenhanaVocationalTrainingCenter 1,114

AgricultureNationalHorticultureDevelopmentInitiative(HorticultureProduction,ProcessingandMarketing) 1,100

Trade ConstructionofSitesandPremisesIndustrialEstates 1,096Police ConstructionandRenovationofOfficialAccommodation 1,037Transport UpgradingoftheMR44:Swakopmund-WalvisBayRoad(44km) 1,015Education RenovationsofSchoolNationWide 1,000Agriculture BulkWaterSupply 1,000

LargeProjects

Vote Project

TotalProjectCost(N$Million)

Agriculture IntegratedForestResourceManagement 992Police UpgradingofPoliceStations 981Agriculture RuralWaterSupplyCoverage(RuralSecondaryPipelineConstruction) 981HigherEducation

ConstructionoftheNationalScienceTechnologyandInnovationValleyinWindhoek 949

Transport ConstructionofSwakopmund- HentiesBay- KamanjabLink(412KM). 944Transport DevelopmentoftheCapeFria- KatimaMuliloRailwayLine 900Rural/UrbanDevelopment

UpgradinganddevelopmentofInformalSettlements&LowIncomeTownshipsinWindhoek 842

Transport ConstructionandTarringoftheroadfromOpuwotoEpupa 806Transport UpgradingandRehabilitationofAus-LuderitzRailwayLine 801Defence UpgradingofLeopardsValleyMilitaryBase 801Health ConstructionandupgradingofPrimaryHealthCareClinicsNationwide 738Transport ConstructionofanewAreaControlTowerfortheWindhoekFIR 728Rural/UrbanDevelopment ConstructionofServicesInfrastructureinKatimaMulilo 719Mines RuralElectrification 707Transport RehabilitationoftheKeetmanshoop- Marientalroad(386km) 696

LargeProjects

TransferstoSOEs

N$Millions

NSFAF, 962

UniversityofNamibia, 926

NamibiaUniversityofScienceandTechnology,

AirNamibia, 486

NamibiaTrainingAuthority(NTA),392

TransnamibHoldings, 220

NBC, 180

NamibiaStatisticsAgency, 106

NamibiaQualificationAuthority(NQA), 83

NamibiaAirportCompany(NaCC), 75

Other, 639

TransferstoSOEs:2017/18

TransferstoSOEs

N$Millions

NSFAF, 2,881

UniversityofNamibia, 2,786

NamibiaUniversityofScienceandTechnology, 1,587

AirNamibia, 1,478

NamibiaTrainingAuthority(NTA), 1,212

TransnamibHoldings, 650

NBC, 570

NamibiaStatisticsAgency, 313

NamibiaQualificationAuthority(NQA), 282

NamibiaAirportCompany(NaCC), 243

Other, 1,948

TransferstoSOEs:MTEF

Debt+InterestCosts

62,000

64,000

66,000

68,000

70,000

72,000

74,000

76,000

78,000

2016/17 2017/18 2018/19 2019/20

GovernmentdebtvsInterestcost

DebtOutstanding[lhs] TotalInterestCost[rhs]

Costsoffunds

2014/15 2015/16 2016/17 2017/18

Impliedinterestrate

Debtservicingcost%asperMTEF

1-Jan-05

1-Mar-06

1-Oct-06

1-May-07

1-Jul-0

8 1-Feb-09

1-Sep-09

1-Nov-10

1-Jun-11

1-Jan-12

1-Mar-13

1-Oct-13

1-May-14

1-Jul-1

5 1-Feb-16

1-Sep-16

3yearvs10yearyields

3year 10year

Specific projects/ examples

StateSecurityInfrastructure

Prioritizedoverhousing+12,500Namibians

Defence DevelopmentExpenditure

ResearchandDevelopment

Angra FriaHarbour

VoterEducation

AverageSalaryofN$3.14million

21st Brigade

VIPProtection

Policecommandandcontrolcentre

Ongha PoliceStation

Debt and Deficit

Deficit

-10.0%

(14,000.00)

(12,000.00)

(10,000.00)

(8,000.00)

(6,000.00)

(4,000.00)

(2,000.00)

2,000.00

4,000.00

Deficitas%ofG

N$Million

Deficit

CostofDebt PrimaryDeficit Overalldeficit OverallDeficit(%GDP) PrimaryDeficit(%GDP)

Deficit

(20,000)

(15,000)

(10,000)

(5,000)

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

DeficitForecasts

2014Budget 2015Budget 2015Mid-TermBudget 2016Budget

2016Mid-TermBudget 2017Mid-TermBudget Actual

BudgetBalance

-14000

-13000

-12 000 -11 000

-10000

-9 000 -8 000 -7 000 -6 000 -5 000 -4 000 -3 000 -2 000 -1 000

- 1000

20002013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

BudgetBalance

Budgetbalance(March2016) Budgetbalance(October2016)

OwnForecast(Interest+Personnel+SACUoverpayment) Budgetbalanceas%ofGDP(March2016)

Budgetbalanceas%ofGDP(October2016) Budgetbalanceas%ofGDP(March2017)

OwnForecast(Interest+Personnel+SACUoverpayment)as%ofGDP(RHS)

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

N$Million

PublicDebttoGDP

GDPatmarketprices Debt DebttoGDP

Debtstock

Selfimposedthreshold

Ratingthreshold

DebtvsBenchmarks

Benchmark(%) 2016/17 2017/18 2018/19 2019/20Totaldebt/GDP 35,0% 39,6% 41,9% 40,1% 37,7%Domesticdebt/GDP 28,0% 24,5% 25,3% 23,9% 22,8%Foreigndebt/GDP 7,0% 15,1% 16,6% 16,2% 14,9%TotaldebtService/Revenue 10,0% 6,3% 8,0% 6,9% 5,0%TotaldebtService/GDP 3,0% 2,3% 2,9% 2,3% 1,6%Domesticdebt/Totaldebt 80,0% 61,9% 60,3% 59,7% 60,5%Externaldebt/Totaldebt 20,0% 38,1% 39,7% 40,3% 39,5%Debtfallingduewithin12months 30,0% 39,8%TotalGuarantees/GDP 10,0% 3,8% 5,5% 6,2% 6,8%BondsasPercentofTotal(Domestic) 60,0% 63,0%TBsasPercentofTotal(Domestic) 40,0% 37,0%

Creditrating-Relativeabilitytoservicedebt

Fiscaldeterminants-Debtstock-Debtservicingcost-Deficit

Policyfactors-Factorsimpactingongrowth

Macroeconomicfactors-Currentgrowthlevels-Growthdriversandoutlook

-Inflation,externalpositionetc.

Creditrating

The good, the bad and the

TransparencyintransferstoSOEs

Permanentremovalofwastefulprojects– notputonicetillrevenuerecovers

Rebuildingofbuffers- potentialrevenuedisapointment

Forecastcredibility

Macroeconomicforesight(growth,debtstock,currencypegetc.)

Restructuringofdebtstock

Generalmistakes

Areasforfurtherimprovement

Positives§ Generallyquitepositive.§ Increaseinexpendituregood–

shouldhelptosmoothouttheadjustmentprocess.

§ Acknowledgementofchallengingcircumstances.

§ Deficitprojectionspositive-questionremainsaboutcredibility,butcommitmentseemsstrong.

§ Many“soft”positivesaroundthepolicyspace– mentionofNEEEF,InvestmentPromotionAct,ProcurementAct,SOEsandoverspendingbyaccountingofficers.

§ Reg 28– pragmaticapproach.

Thegood,thebadandtheugly

Negatives§ Civilservicewagebill.

§ 15%increaseinanalreadybloatedexpenditureline.

§ Defence spending.§ Cut,butremainsfartoohigh.

§ “Wealthtax”.§ Constructionpressure.

§ Goodtoremovewastefulexpenditure–governmentofficesetc.

§ Cautionstillrequiredaroundrevenue.§ SACUpaymentabnormallylarge–

repaymentin2018possible.§ Feedbackfromgrowthslowdown

unclear.§ Deficitfundingquestions.

§ Debtprofile§ Creditratingissues

Cirrus Capital (Pty) Ltd45 Nelson Mandela, Windhoek, Namibia

e info@cirrus.com.na | c +264 81 675 6401

www.cirrus.com.na

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