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Namibia and the world economy. Philip Clayton Windhoek 15 March 2007. A longer term and regional perspective. 16 September 2005. Namibia. Namibia: fiscal health (% of GDP). Source: EIU Namibia report. Doing business: good in a regional context. Doing Business Starting a Business

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namibia and the world economy

Namibia and the world economy

Philip Clayton

Windhoek 15 March 2007

A longer term and regional perspective

16 September 2005


Namibia: fiscal health (% of GDP)

Source: EIU Namibia report


Doing business: good in a regional context

Doing Business

Starting a Business

Dealing with Licenses

Employing Workers

Registering Property

Getting Credit

Protecting Investors

Paying Taxes

Trading Across Borders

Enforcing Contracts

Closing a Business

Source: IFC


Government spending: Namibia out of line

Burden of government high. Public sector share of

formal employment out of kilter with region.

Need to focus on bang for tax buck

Government suggests 2009/10 spending at 29.7% of GDP

Source:World Markets


Deficit: much work still to be done

Revenue can be very variable – fishing, diamonds

SACU. Need to look for new sources, while keeping

overall burden low. Need to assess value of spending

Government pencilling in deficit of 1.1% of GDP over MTEF

Source:World Markets


Share of revenue, revised 2006/07

Two fifths of revenue – SACU transfers – will be under

pressure in real terms

Source: EIU


SACU payments, as % of SA revenue

Source: SA National Treasury

corporate tax
Corporate Tax

Corporate income tax, labour tax, and other taxes, Source: PWC

individual tax highest rate
Individual Tax – highest rate

Monaco 0%

Singapore 21%

Namibia 35%

SA 40%

Norway 51%


today s budget balance sheet positives
Today’s Budget: Balance sheet - positives
  • Pro poor – tax threshold up 50%, to N$36 000 pa, pension allowance up 33% to N$40 000; Grants for 78 000 children over MTEF
  • Education 22.2% of spending in MTEF (bang for buck?).Continued stated focus on growth
  • Budget surplus this year of 2.1% of GDP (but specials influence this).
  • In MTEF, expenditure projected to decline to 29.7% of GDP, from 34.2% IN 06/07
  • Development budget up further $800m under MTEF
  • Debt management improved – prevents lumpy redemptions
  • Focus on tax compliance – revenue and grants 36.3% GDP in 2007/08
today s budget balance sheet negatives
Today’s Budget: Balance sheet - negatives
  • Rising operational expenditure – 77.7% of total in 06/07, to 82.1% in MTEF. Need is to improve capital stock; looks like economic services gets only 11%
  • Short on details regarding underperforming parastatals – particularly Air Namibia (and is this subsidy pro-poor?)
  • Loan funding – even if concessional – to plug hole in revenue. But deficit at 1.1% of GDP over MTEF is sustainable. But, is the decline in share of GDP on government consumption - and declining real spend pegged at $17bn or so for three years - realistic?
  • Massive underspending on development budget in 06/07 thus far – suggests capacity constraints. Will this continue?
  • Burden of state on economy not addressed (but perhaps not just Minister’s job)
budget conclusion
Budget conclusion
  • Within tough constraints, Minister has done a good job. Focus on poor, job creation, transforming the economy – all to be applauded.
  • Thrust of focus on indigenising investment – on unlisted companies, and decreasing share of dual listed that counts – a positive sentiment. But – concern regarding unintended consequences (misallocated capital; another building bubble, etc)
  • eed critical look at development, and particularly job creation, obstacles. It is not only the measured tax burden that is at issue; the unmeasured regulatory and other compliance is also an obstacle.
  • With the constraints – a good job. But, need to focus on diversifying revenue; looking critically at all what government does (a third of formal sector works for the state).
  • MTEF process a good start. With vision – Namibia can achieve a better life for all – despite the tough periods it has gone through
emerging markets now pushing ahead
Emerging markets – now pushing ahead

Source: IMF

Sustainable thrust


International issues affecting southern Africa

  • Emerging market sentiment shifts – global risk shifts
  • Commodity demand and prices (China key)
  • Middle East, Iraq
  • North Korea
  • Zimbabwe
  • United States and recession; global housing market

Population trends – median age

Population dynamics moving absolutely – and relatively – in favour of Africa, Latin America, Asia – against developed worldSource: Group Economics (from UN World Population Prospects)

china and india
China and India
  • China and India together, account for two fifths of the world’s population. And greater region (with Indonesia, Vietnam, etc), over half
  • China has been growing at 10% pa for two decades; the Hindu giant has begun stirring
  • Demand for commodities is huge. High value agriculture imports likely to surge (in similar fashion to China shifting from oil exporter, to second-biggest importer).
  • China now exporting inflation – not deflation: thanks to impact on commodities, and small – but significant – revaluation of Renmimbi. Also, labour costs pushing up even manufactured prices
  • Note increasing influence of China, and India, in African investments
china s demand commodity prices
China’s demand, commodity prices

Does the China, India effect mean the boom will last much longer than average? Source: Economist, 22 July 2006


Africa and global growth

Long-term uptick in Africa’s performance - but still below AsiaSource: IMF World Outlook, April 2006

economic growth
Economic growth

Growth sustainable –

Shift from consumption,

to uptick in capital spending

(private sector and

government). Concern

is the skills gap; AIDS.

Good fiscal policies

opening up ability

to spend more on

social issues

Source: SARB, Standard Bank Group

Sustainable step-lift?

fixed investment
Fixed investment

Source: Standard Bank Group, SARB

The big dig

  • Exchange rate
  • Global inflation and competition
  • Credible inflation target framework
  • Capacity utilisation
  • Vulnerable to external shocks, especially exchange rate

Source: SARB, Standard Bank Group

Structurally lower

economic forecasts
Economic forecasts

Growth and inflation outlook benign, but talk about bottlenecks rising. Not sure I am as positive on rand as group is.

Source: Standard Bank Group

28 February