ECONOMISTS have bemoaned Namibia’s rating being revised by Fitch, from ‘stable’ to ‘negative’ outlining that this could have grave implications on the Harambee Prosperity Plan amongst other developmental and investment initiatives.
In a Confidente Inquiry Purvance Heuer, director of research at Simonis Storm Securities stated that Namibia must start ensuring that it increases the envelope of further diversifying its revenue base from being heavily reliant on SACU revenue. Therefore, addressing the inefficiencies in the administration of tax and levies collection is more critical than ever.
“One of the goals under the Harambee Prosperity Plan is to achieve Macroeconomic Stability by setting itself to maintain and improve on international credit rating of BBB-. Thus, the decision by Fitch is certainly a counter development in an attempt to achieve this target,” he said.
One of the major factors in this ratings opinion was the elevated level of public deficit to GDP observed in the 2015/16 financial year. This was chiefly the result of actual government revenue coming in below its target and a widening budget deficit from 0.1 percent of GDP in 2012 to 8.5 percent of GDP in 2015/16.
“This is against the national benchmark of five percent. Thus, Fitch reaffirmed our BBB- investment rating, but with a warning that a downgrade may be inevitable if the Government does not tighten its belt, but suspending expenditure on unproductive assets such as travelling allowance, vehicles, office furniture, and overtime.
“Furthermore, it should also be mentioned that this is not a Namibian issue, only. It is an emerging economy issue. Emerging economies or commodities-exporting economies such as South Africa have being experiencing the wrath of low commodity prices, which has exerted pressure on their export revenue and fiscal positions,” added Heuer. Suta Kavari, an investment strategist at Capricorn Asset Management (CAM) explained that the New Equitable Economic Empowerment Framework (NEEEF) has caused a lot of jitters and unease in the local economy, leading to a major slowdown and in foreign investment and that slowdown will continue so long as mutterings regarding NEEEF’s implementation continue unabated. “The very uncertain policy environment, not confined to NEEEF alone but also the major damage being caused by stringent immigration laws, are seriously eroding confidence in the Namibian economy, also have the which has the potential of inhibiting growth going forward. “Earlier this year, in either May or June, when the entirety of the market was fixated by the prospects of a South credit rating downgraded and talk of delinking from a sinking ship (the rand) resurfaced, we argued that while South Africa would be the anchor of our credit rating, Namibia would be assessed independently. We argued that Namibia was not immune to a downgrade, citing the country’s own frailties, particularly the country’s perilous fiscal position. It now might appear that Namibia’s chickens will come home to roost faster than South Africa’s,” he said.
Finance Minister Calle Schlettwein in addressing this challenge earlier in the week said that earlier in the year he had tabled the 2016/17 budget in parliament as a means of pro-growth fiscal consolidation which reflects a continuing commitment to making public service delivery more efficient, by reducing wasteful expenditure and achieving better value for taxpayers’ money.
“Allocations to areas such as travel allowances and overtime have been lowered significantly, while purchases of vehicles and furniture have been postponed in many cases, and Fitch has welcomed this approach in its statement. “Government will continue to address these challenges head on, and the Ministry of Finance will not shirk its duty in maintaining the macroeconomic and fiscal sustainability that is crucial to our development. Thus, the Government will reinforce its time-tested approach to responsible public finance management, pro-growth fiscal policy and macroeconomic stability in the upcoming Mid-Year Budget Review for 2016 and the for next MTEF,” he said.
Confidente. Lifting the Lid. Copyright © 2015