3
Macroeconomic Backdrop• Namibian economy growing at above trend rates
• Spurred by unprecedented fiscal and monetary policy, as well as FDI(particularly mining sector)
• Rapidly decoupling from languishing SA economy• Single currency concerns
• Growing macroeconomic imbalances starting to appear• Demand side inflation (particularly services)
• Education, utilities, transport, housing etc.• Hidden by falling cost-side inflation
• High PSCE growth• Increasing household debt
• Major BOP imbalance• Declining reserves
• Some changes structural, but others very cyclical
4
Revenue• Forecasts of revenue collection growth for FY15/16 of
11.4%.• Forecast revised down by 0.4% when compared to previous
forecast for current year.• Total revenue expected at N$58.4bn in 2015/16• Revenue forecast to grow by 7.9% in FY16/17 and 9.7% in
FY17/18.• More realistic forecasts than those of 2014/15 (20+%
growth).• Recognition of possible decline in SACU receipts – weak SA +
global situation.• Main revenue source still taxes, particularly tax on income
and profit.
5
Revenue
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
N$ M
illio
n
2006 Budget 2007 Budget 2008 Budget 2009 Budget 2011 Budget
2012 Budget 2013 Budget 2014 Budget 2015 Budget
Lower revenue forecast
6
Revenue Breakdown
49,081 55,848 60,525 66,179
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014/15 2015/16 2016/17 2017/18
Sources of Revenue
Grants
Return On Capital From Lending And Equity Participation
Non - Tax Revenue
Tax Revenue
Taxes OnIncome And
Profits24,981
Taxes OnProperty
351
DomesticTaxes On
Goods AndServices13,074
Taxes OnInternation
al TradeAnd
Transactions
17,123
Other Taxes318
Tax Revenue
Income TaxOn
Individuals15,222
CompanyTaxes9,198
Other TaxesOn IncomeAnd Profits
210
WithholdingTax On
Interests350
Taxes On IncomeAnd Profits
SACU
VAT
7
Expenditure• Expenditure is to increase to 67.08 billion in FY15/16• An increase of 11.6% from 2014/15.• Also up 4.7% when compared to the previous estimates for
2015/16.• Of this, N$63.2 billion is non-interest expenditure.• The remainder (just under N$4bn) being the interest costs
of Government’s debt.• The global increase is much more moderate than the 26.3%
increase of 2014/15.• This expansion can be (partially) justified by the rapid pace
of growth in the local economy.• Revenue forecast to grow 6.2 and 1.2% in FY16 and FY17,
respectively.
8
Expenditure• Expenditure remains heavily slanted towards wages and salaries• N$4.93 billion over the MTEF to support the Kudu Gas-to-Power
Project• N$3.27 billion allocated to road construction• N$1.25 billion was allocated over the MTEF for the Mass Housing
Project,• N$7.75 billion was allocated to agriculture, including the green
scheme.• Huge allocation to Defence, making it second only to Education in
receipt of funds• A number of social spending initiatives launched or extended,
most notably the increase in pensions from N$600 per month toN$1000 per month.
• In addition, provision of free secondary education is to be rolledout during the MTEF
9
Expenditure
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
N$ M
illio
n
2006 Budget 2007 Budget 2008 Budget 2009 Budget 2010 Budget
2011 Budget 2012 Budget 2013 Budget 2014 Budget 2015 Budget
Expenditure to flatten off? See history
10
Expenditure
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Actual Estimate Estimate Estimate Estimate Estimate
N$ M
illio
n
Expenditure Breakdown
Operational Budget Devevelopment Budget Total
11
Expenditure
17,912 21,989 23,433 24,219 24,719
12,31615,297
17,642 19,468 19,2296,551
8,4609,345 8,890 8,829
4,331
6,3937,833
9,575 10,050
1,796
2,517
3,8764,596 5,256
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2013/14 2014/15 2015/16 2016/17 2017/18
N$ M
illio
n
Personnel Expenditure Goods And Other Services
Subsidies & Other Current Transfers Interest Payments & Borrowing Related Charges
Acquisition Of Capital Assets Capital Transfers
Goods And Other Services Acquisition Of Capital Assets
Capital Transfers
12
Expenditure Breakdown
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013/14 2014/15 2015/16 2016/17 2017/18Personnel Expenditure Goods And Other Services
Subsidies & Other Current Transfers Interest Payments & Borrowing Related Charges
Acquisition Of Capital Assets Capital Transfers
Goods And Other Services Acquisition Of Capital Assets
Capital Transfers
• S&T• Transport
• Material & Supplies• Utilities
• Pensions• Transfers to SOEs
• Vehicles• Furniture• SOEs
• Interest on debt
13Government’s Involvement inEconomy
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
-
50,000
100,000
150,000
200,000
250,000
N$ M
illio
n
Expenditure GDP Expenditure to GDP (RHS)
14
Expenditure Growth
0%
5%
10%
15%
20%
25%
30%
35%
40%
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
Expenditure Growth GDP Growth
15Expenditure by vote (2015/16)
Educ
atio
n, A
rts a
nd C
ultu
reDe
fenc
eHe
alth
and
Soc
ial S
ervi
ces
Polic
eTr
ansp
ort
High
er E
duca
tion,
Trai
ning
and
Inno
vatio
nFi
nanc
eUr
ban
and
Rura
l Dev
elop
men
tPo
vert
y Era
dica
tion
and
Socia
l Wel
fare
Agric
ultu
re, W
ater
and
Fore
stry
Land
Ref
orm
Indu
stria
lisat
ion,
Trad
e an
d SM
EIn
tern
atio
nal R
elat
ions
and
Coo
pera
tion
Nam
ibia
n Co
rrec
tiona
l Ser
vice
Vete
rans
Affa
irsGe
nder
Equ
ality
and
Chi
ld W
elfa
reJu
stice
Wor
ksPr
esid
ent
Envi
ronm
ent a
nd To
urism
Prim
e M
inist
erIn
form
atio
n an
d Co
mm
unica
tion
Tech
nolo
gyHo
me
Affa
irs a
nd Im
mig
ratio
nSp
ort,
Yout
h an
d Na
tiona
l Ser
vice
Fish
erie
s and
Mar
ine
Reso
urce
sLa
bour
, Ind
ustr
ial R
elat
ions
and
Empl
oym
ent C
reat
ion
Min
es a
nd E
nerg
yEl
ecto
ral C
omm
issio
nNa
tiona
l Pla
nnin
g Co
mm
issio
nNa
tiona
l Ass
embl
yNa
tiona
l Cou
ncil
Atto
rney
Gen
eral
Audi
tor G
ener
alAn
ti-Co
rrup
tion
Com
miss
ion
Publ
ic En
terp
rises
4,000,000
2,000,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
N$ 0
00
Development
Opperational
16
Operational Budget (2015/16)
Education, Arts and Culture ,10,682
Defence , 6,575
Health and SocialServices , 5,790
Police , 4,125Higher Education, Training
and Innovation , 3,951
Finance ,3,857
Poverty Eradication and SocialWelfare , 2,714
Urban and RuralDevelopment , 1,796
Transport , 1,644
Agriculture, Water andForestry , 1,169
Gender Equality and ChildWelfare , 808
International Relationsand Cooperation , 786
Veterans Affairs , 779
NamibianCorrectionalService , 700 Works , 680
Justice , 592
Industrialisation, Trade andSME Development , 565
Other, 4,907
N$ Million
17
Development Budget (2015/16)
Transport , 2,825
Urban and RuralDevelopment ,
1,326
Agriculture, Water andForestry , 1,246
LandReform ,
882Health and Social Services ,699
Defence ,654
Police , 648
Education, Arts and Culture ,640
Industrialisation, Trade andSME , 425
President , 167
Home Affairs andImmigration , 153
Environment and Tourism ,153 Namibian Correctional
Service , 151
International Relationsand Cooperation , 150
Justice ,145
Prime Minister ,131
Other,702
N$ Million
18Development budget – largeprojects
• State Security Infrastructure – N$1.5bn
• Construction of the Second Office of the Prime Minister – N$646 million
• Construction of a New Parliament Building – N$613 million
• Construction of Head Office for MHAI – N$778 million
• Upgrading of Police Stations – N$981 million
• Construction of Police Accommodation – N$851 million
• Purchasing, Constructing and Renovating of Diplomatic Premises – N$1.4billion
• Research and Development (Defense Force) – N$6.7billion
• Renovations of School Nation Wide – N$700 million
• Extension of Existing National Council Building – N$300 million
• Construction and upgrading of Primary Health Care Clinics Nationwide – N$905 million
• Construction and upgrading of Primary Health Care Centers Nationwide – N$647 million
• Rural Electrification – N$683 million
• Upgrading and Construction of Lower Courts – N$ 534 million
• Various urban + rural development – township upgrading + formalization, rural + urban sanitation
• Construction of MICT Head Office – N$290
• Acquisition/Construction of Offices for MoV HQ & Regional Offices – N$308 million
19Development budget – largeprojects
• Construction and Upgrading of MET Headquarters – N$274 million
• Construction of Ministry of Trade Headquarters – N$400 million
• Construction of Sites and Premises Industrial Estates – N$923 million
• Special Industrialization Programme – N$1 billion
• External Trade Infrastructure Development – N$1.6 billion
• Product Development and Group Purchasing Project – N$400 million
• Construction of MAWF Regional Offices – N$480 million
• Green Scheme – N$3.1 billion
• National Horticulture Development Initiative – N$1.2 billion
• Construction of Large Dams, Desalination and Provision of Water to larger Settlements – 3.1 billion
• Railway Network Upgrading – N$5.3 billion
• Development of the Cape Fria- Katima Mulilo Railway Line – N$2,4
• Northern Railway Line Extension – N$2.1 billion
• Various roads
• Land Purchase Project – N$2.4 billion
• Development of National Fundamental Data Sets – N$201 million
• Construction of Ministerial Head Quarter – N$300 million
20Transfers to SOEs (MTEF)
Public Service Medical AidScheme, 6,118,000
Nampower, 4,928,932
Namibia StudentsFinancial Assitance
Fund (NSFAF),4,461,856University of Namibia,
3,358,838Air Namibia, 1,931,765
Polythecnic of Namibia,1,739,550
NTA, 1,573,169National BroadcastingCooperation, 1,067,342
Trans-Namib, 945,842
Epangelo Mining, 817,500
Veteran subversion Fund,652,500
Namibia Airport Company,589,345
SME Bank, 498,084
Namibia Statistics Agency,426,941
NAMCOL, 387,431Agribank, 321,300
National Youth Service,303,812
Development Bank ofNamibia, 252,000
NHE, 220,000 Mass Housing, 200,000 Namibia StandardInstitute (NSI), 124,000
21Staffing – Positions by OMA
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000Ed
ucat
ion,
Art
s and
Cul
ture
Polic
eDe
fenc
eHe
alth
and
Soc
ial S
ervi
ces
Agric
ultu
re, W
ater
and
For
estr
yNa
mib
ian
Corr
ectio
nal S
ervi
ceFi
nanc
eW
orks
Envi
ronm
ent a
nd T
ouris
mHo
me
Affa
irs a
nd Im
mig
ratio
nRu
ral a
nd U
rban
Dev
elop
men
tJu
stice
Gend
er E
qual
ity a
nd C
hild
Wel
fare
Spor
t, Yo
uth
and
Natio
nal S
ervi
ceLa
bour
, Ind
ustr
ial R
elat
ions
and
…Tr
ansp
ort
Land
s and
Res
ettle
men
tFi
sher
ies a
nd M
arin
e Re
sour
ces
Prim
e M
inist
erIn
tern
atio
nal R
elat
ions
and
Coo
pera
tion
Indu
stria
lisat
ion,
Tra
de a
nd S
ME…
Pres
iden
tM
ines
and
Ene
rgy
Offic
e of
the
Atto
rney
-Gen
eral
Info
rmat
ion
and
Com
mun
icatio
n…Au
dito
r Gen
eral
High
er E
duca
tion
Pove
rty
Erad
icatio
n an
d So
cial W
elfa
reVe
tera
ns A
ffairs
Natio
nal A
ssem
bly
Natio
nal P
lann
ing
Com
miss
ion
Natio
nal C
ounc
ilAn
ti-Co
rrup
tion
Com
miss
ion
Elec
tora
l Com
miss
ion
Publ
ic En
terp
rises
Filled Funded
22Salaries
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Pres
iden
tPr
ime
Min
ister
Natio
nal A
ssem
bly
Audi
tor G
ener
alHo
me
Affa
irs a
nd Im
mig
ratio
nPo
lice
Inte
rnat
iona
l Rel
atio
ns a
nd C
oope
ratio
nDe
fenc
eFi
nanc
eEd
ucat
ion,
Art
s and
Cul
ture
Natio
nal C
ounc
ilGe
nder
Equ
ality
and
Chi
ld W
elfa
reHe
alth
and
Soc
ial S
ervi
ces
Labo
ur, I
ndus
tria
l Rel
atio
ns a
nd…
Min
es a
nd E
nerg
yJu
stice
Rura
l and
Urb
an D
evel
opm
ent
Envi
ronm
ent a
nd T
ouris
mIn
dust
rialis
atio
n, T
rade
and
SM
E…Ag
ricul
ture
, Wat
er a
nd F
ores
try
Nam
ibia
n Co
rrec
tiona
l Ser
vice
Fish
erie
s and
Mar
ine
Reso
urce
sW
orks
Tran
spor
tLa
nds a
nd R
eset
tlem
ent
Natio
nal P
lann
ing
Com
miss
ion
Spor
t, Yo
uth
and
Natio
nal S
ervi
ceEl
ecto
ral C
omm
issio
nIn
form
atio
n an
d Co
mm
unica
tion…
Anti-
Corr
uptio
n Co
mm
issio
nVe
tera
ns A
ffairs
High
er E
duca
tion
Pove
rty
Erad
icatio
n an
d So
cial W
elfa
rePu
blic
Ente
rpris
esOf
fice
of th
e At
torn
ey-G
ener
al
Aver
age
Pack
age
PA (N
$)
Average Salary Overall Average
23Budget Balance• Projected budget deficit of 5.3 percent of GDP• On the high end given the extended period of expansive fiscal
policy seen in the country since 2011.• That said, the deficit is expected to be reduced in the latter years
of the MTEF, although such forecasts are usually unreliable ifhistory is anything to go by.
• Total debt is projected to increase to an average of 31.5% of GDPover the MTEF, below the 35% threshold, but still high comparedto five years ago when the level was little over 16%.
• Still low by global standards• Contingent liabilities are projected to increase to an average of
8.7% of GDP over the MTEF, below the 10% benchmark.• Construction of a dual carriage between Windhoek and Okahandja• National fuel storage facility, fuel pipeline and the fuel offloading jetty
at Walvis Bay• Kudu Gas-to-Power Project• Mass Housing Programme.
24
Budget Balance
-10,000
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
N$ M
illio
n
Revenue Expenditure Deficit
25
Deficit
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
N$ M
illio
n
Revenue Expenditure (REAL) Deficit to GDP Deficit to GDP (RHS)
Funding outside of budget
26
Debt
0%
5%
10%
15%
20%
25%
30%
35%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
N$ M
illio
n
Total debt Debt to GDP (RHS)
27
Shortcomings
• Must consider reason we pay tax• Redistribution• Social support• Service delivery
• Water, electricity, education, health, police etc.
• Does budget achieve these?• Very poor on redistribution, unless you consider government
salaries etc. redistributive.• Limited social spending, but improving• Some service delivery, but highly inefficient.
• Does it align to NDP4?• Definite improvements, still not entirely
28
Shortcomings
• Inefficient allocation driven by hugely flawedbudgeting process
• Last minute changes• Rolling 3 year budget• Poorly aligned to development plan cycle• Little analysis of funding applications• Little M&E• Little idea of developmental outcomes• Questionable forecasts• Limited data availability
29
Concerns
• MAJOR under allocation to housing• Little structural change in economy – cyclical
growth?• Interest charges to N$10 billion per year by
2017/18• Crowding out risk?
• Should growth slow• Should
• Expenditure envelope stretched to themaximum
• Next few years will be critical
30
Concerns
• Fast growing expenditure increasing deficit and debtstock
• Means MOF has VERY LITTLE policy space should furthercounter-cyclical policy be needed in future
• We need look no further than SA to see this in action• Without any changes to expenditure, will be at the top of the
prudential limit by 2016/17, and expenditure always revisedup.
• Very difficult to reduce operational expenditure• Development expenditure most important, and most likely to
suffer• Exploiting all avenues to increase spending – guarantees,
outside budget, etc.
31
Suggestions• Introduce genuine 3-year MTEF budgets• Align budget cycles with development plan cycles• Align budget expenditure with NDP priorities• Ensure project & programme alignment to NDP priorities• Ground up budgeting every 3 or 6 years• Minimise additional budgets (5%)• Introduce regular audits of vehicle, furniture and other assets• Ensure proper analysis and appraisal of projects and programmes• Review the roll of MOF in budgeting• Focus on returns on expenditure• Develop watertight indicators• Introduce M&E on results (not just expenditure)