Price Water Coopers And Standard Bank Namibia Budget Review 2008 Gala Dinner
5 March 2008
Windhoek, Namibia
Key note address by the SACU Executive Secretary Ms Tswelopele Moremi at the Namibia Budget Review 2008 Gala Dinner
- First let me take this opportunity to thank the organisers of this dinner (Standard Bank and PwC) for inviting me to this important event.
- As a representative of the Southern African Customs Union, essentially the five Member States, I will take a regional perspective in my remarks this evening.
- My remarks will not so much focus directly on what the Minister has presented today but will raise some regional issues that we need to think about as partners in this Customs Union.
- Some of these have been referred to by the Minister in her presentation. Because of their importance these issues should necessarily find their way into the Budget Statement and indeed the Statements of the other Finance Ministers in the region.
- I will therefore talk about the challenges facing the SACU region and somehow look at the extent to which the different Ministers of Finance plan to address these issues, if at all they do.
What are the key challenges facing the SACU economies?
From the Budget Statements read by the Ministers of Finance from the SACU Member States, I have identified the following issues:
- Top of the list and ofcourse coming from SACU, we see a relatively high dependence on SACU receipts by the BLNS member countries o (Botswana approximately 27%; Lesotho about 58%; Namibia at 41%; Swaziland at about 65%)
- Education and health challenges.
- High poverty levels and these will be exacerbated by high oil prices and the energy crisis.
- A growth and development imperative.
- A huge HIV/AIDS problem.
- Ofcourse the list goes on but I will focus on this list.
Having identified these challenges the question becomes what then?
What are the responses proposed by the Ministers in their Budget Statements?
In order to address the dependency issue, Ministers need to diversify revenue. I therefore look at the tax proposals that are contained in the Budget Statements read by the Finance Ministers.
- At the outset, it is important to note that given the low tax base in most of these economies, revenue diversification is going to be a difficult task and may have severe impacts on the populace.
- A glance through all the Statements indicates some fair degree of planned reform in the area of taxation. Given the magnitude of the problem though, one wonders if it is not too little.
- Common in all the Statements is a proposal to extend relief to taxpayers through implementation of bracket creep, measures to increase the threshold in respect of interest and dividend income, etc. There are also some few measures to broaden the tax base.
- In Swaziland there is plan to establish a Revenue Authority; Botswana plans to table a tax administration bill and Lesotho is focussing more on improving financial management particularly in the areas of accounting, auditing and procurement. Namibia is planning to improve tax administration and diversify the revenue base.
- All of these measures are necessary and they represent steps in the right direction. However, in view of the scale of the scale of the problem effort needs to be placed more on improving tax administration and enhancing compliance, given that the revenue base is low. On the expenditure side, more resources need to be targeted at strengthening Revenue Collecting Agencies through training, computerisation etc.
Turning now to the Education and Health Sector challenges, the Budget Statements contain a number of positive proposals.
- In all the Budget statements we see priority being given to the health and education sectors. Focus by the BLNS countries is mainly on improving access through expansion and improving the quality of education.
- South Africa also focuses on improving access but also looks at improving the conditions of service of the educators and health practitioners. They also plan to improve the quality of the education system.
- In my view, all the SACU countries are doing the right thing by focussing in this area as it has potential to benefit the growth and development of the economies over time.
Addressing Poverty
- Poverty levels remain high among SACU member states and there is a commitment to address this problem in all the Budget Statements.
- This year is going to be a particularly difficult one in view of the rising interest rates, electricity crisis and the high oil prices. As is always the case, the brunt of rising prices is felt disproportionately by the poor.
- The responses that we are seeing form the budget statements are more in the form of adjusting people’s incomes, through bracket creep and increasing the levels of social grants. At the same time we are seeing increased efforts to promote employment either through SME development and increased public infrastructure programme.
- Again we ask the question whether the efforts and resources being channelled in this area are enough. There are no straight forward answers to this question. This is a problem that faces the whole continent and it is pleasing that it remains in the radar screens of the Finance Ministers. We need novel ideas to address this and maybe more debate should be focussed on this.
The Growth and Development Imperative
- This is another area that all the Budget Statements try to address.
- There is recognition by most member states to create a conducive business environment and the important role played by SMEs in the SACU economies.
- Infrastructure development is allocated a considerable budget across all Member States. This is supposed to reduce transaction cost and the general cost of doing business in these economies.
- South Africa goes further to bailout ESKOM in an attempt to ensure that the power crisis does not stay with us for too long.
- In the area of policy, a number of initiatives are proposed for SMEs. South Africa goes on to look at a tax relief for the corporate sector and some incentive to promote industrial growth.
- This is an area in which there are usually not many problems as the stakeholders are able to articulate their needs and in most of the countries are well organised. The only drawback is that the benefits in this area usually take time to bear fruit.
Turning now to the Area of HIV/AIDS
- This is another problem that has been with us for some time. Efforts to find a cure remain elusive and the magnitude of the problem continues to grow every year.
- All the Budget Statements outline some plans to address this problem. The response includes the provision of drugs and implementation of preventative measures.
- Again given the scale of the problem, questions are always asked about the adequacy of the measures taken.
Overall, the Budgets presented by the Finance Ministers largely address the development challenges facing the region. All of them conform to the standards prescribed by International Organisations on appropriate ratios. All the budget balances fall below the 3% target for GDP.
The fundamentals in all of these countries look sound. In the past few years most of these economies have recorded positive budget outturns. These have provided a good base for these economies to weather the storms appearing on the horizon.
What is required is a system of checks to ensure that we anticipate the challenges and plan appropriately.
Namibia
Turning now to the Budget presented by the Minister this afternoon, I wish confirm that it addresses the key challenges facing the region.
- The budget identifies the following priorities: o Stimulating growth o Improving social safety nets, o Health and education o Human resource development o Infrastructure
- The budget goes further to outline key reforms in public expenditure, taxation and the financial sector.
- I must also applaud the Minister for the prudence she has shown in the utilisation of windfall gains in revenue over the past few years. The surpluses in the budget have been used to retire debt as a way of freeing resources to address future spending priorities.
Other Regional Challenges
In conclusion, I would like to point out that these are not the only challenges facing SACU Member States. Beyond these there are the issues of the proposed establishment of the SADC Customs Union in 2010. There is also the interim SADC EPA Agreement initialled in December 2007.
- As part of the efforts to consolidate SACU, measures are being put in place to ensure that the experience that SACU has gained over the years as a Customs Union is properly harnessed.
- On the SADC EPA interim agreement, efforts are being made to maintain the cohesion of SACU. A meeting was held between the EU and SADC EPA group earlier this week and some progress has been made.
I thank you.