WHILE Namibia’s new master of coin, Ericah Shafudah, read out a budget speech, no doubt prepared by her predecessor, Iipumbu Shiimi, few Namibians will realise their country’s finances are about as dire as their own.
Despite the upbeat tone of one of the shortest budget speeches ever read, between servicing debt and keeping around 110 000 civil servants in a job, the new finance minister has very little left for any of the lofty promises made on the campaign trail.
Shafudah tabled a N$106.3 billion budget consisting of N$79.8 billion operational expenditure, N$12.8 billion in development expenditure, including N$3.2 billion in development projects funded through external loans and grants. This means that construction of new schools, hospitals, roads, water and electricity infrastructure, thus creating new jobs, will have to come out of the N$16 billion capital budget.
Government will also have to spend N$13.7 billion in interest payments.
This budget represents an increase of 4.9% from the revised estimates of the preceding financial year.
BURDEN
Namibians, you are paying more to debt than spending on the development budget, which could create jobs.
It would be rather unfair to equate a household budget to that of a country but if your expenses become more than your income you have a problem, whether individual, parastatal or government. Countries taking on huge amounts of debt for infrastructure development aimed at bringing about better living conditions for people is never frowned upon.
Given that theoretically a state can continuously take on more debt as things like sudden unemployment that may influence income earning potential, aren’t real possibilities.
Governments can just issue bonds, collect the money, spend it on luxury vehicles and when it needs money again, just auction ‘debt’ again to pay for milk, bread and electricity.
Households can’t.
Because debt needs to be paid back with usually ridiculously limited funds. The more debt, the higher the installments.
Obviously!
When countries have their IDs and ATM cards at the cash loan it’s the grassroots that suffer.
Because eventually, countries too must pay back the money and this level of debt and the payback burden is preventing us from reacting effectively to crises.
The minister too is concerned that we expend more resources on debt servicing than we plough back into growing the economic potential through the development budget.
“We are, therefore, committed to maintain public debt on a reduction path and ensure that debt is raised in the most cost-effective manner,” she said. I’m sure her predecessors were also familiar with this line.
Actual interest repayment and guarantees stood at N$7.1 billion in 2018/19 and only N$7.7 billion immediately post-Covid in 21/22, N$9.4 billion in 22/23. The 23/24 fiscal year saw a significant increase to N$11.7 billion in the revised budget. As opposed to the anticipated N$12.8 billion, the actual allocation on interest repayment and debt guarantees for this financial year stands at a staggering N$13.7 billion, over N$1 billion over their calculations and representing a marked increase of over N$1 billion year on year since 21/22.
On the other hand, only N$7.2 billion is allocated for social grants in this year’s budget, while N$320 million is set aside for TransNamib and N$100 million will go to MeatCo.
A further N$350 million is earmarked for unforeseen emergencies.
It’s one thing to have high debt but have proper infrastructure and low unemployment, it’s, however, another thing to have high debt, poor infrastructure, high unemployment and rampant poverty.
When President Netumbo Ndaitwah said, “we’re too few to be poor”, during her maiden Cabinet opening statement, she put more pressure on her administration, who is adamant on delivering Swapo’s manifesto implementation plan.
The plan aims to create 250 000 jobs, provide free tertiary education, build sports facilities, reduce the number of informal houses by half, by building 10 000 houses annually, and construct a desalination plant at a cost of N$3.5 billion.
Nandi-Ndaitwah also promised pensioners N$3 000 while running for president. The President no doubt understands that her legacy and the success of her administration will depend on delivering these promises.
Not delivering could mean observing governance from the opposition benches after the 2029 general election.
Only a miracle, or if the opposition scores more own goals, will arrest Swapo’s slide towards political obscurity. This considering the ruling party’s popularity has reduced from 80% in the 2014 general election to 65% in 2019 and 53% in 2024.
The increasingly impatient electorate is waiting for jobs, houses, access to land, quality, affordable health care and education and for an ethical professional civil service working in the interest of the public. Even the ones who received their jobs as political favours. The electorate also expects state institutions to work in their interest and not the narrow interests of the elite or those they are supposed to regulate and govern.
GRANTED
Government has rinsed every bit of good-will it could out of Shiimi’s once off N$750 Covid grant but everyone knows it was way too little, didn’t reach everyone it needed to and was supposed to be a continuous grant because of the government’s actions over almost two years that disrupted businesses and destroyed people’s livelihoods.
The move to have the grants under the finance ministry hopefully indicates that a universal basic income grant (BIG) is finally on the cards. It’s the only answer to the vast need for relief for thousands of households, both rural and urban, and even those in work need help. Any of the other attempts at providing grants will be too exposed to the current glitches in the system, including the long bureaucratic selection process, expensive administration and corruption. While the minister organises her desk, introducing a universal BIG should be a priority. There are too many people who do not participate in the economy.
But with this little wiggle room for the minister of finance, it is going to be an impossible task.
Namibia is finding out how difficult the aftermath of taking on debt as if it’s going out of fashion and as if there are no consequences for spending like payday fell on a Friday.
When Namibia struggled to keep the lights on, a US$750 million (around N$14 billion at current exchange rates) Eurobond was issued on 29 October 2015. Bank of Namibia is, however, on schedule to repay their obligations, having so far put away US$463 million out of the required US$500 million by 29 October 2025, the largest single debt maturity in our history. The rest will be refinanced locally.
Like when you buy that unnecessarily expensive car that you can’t afford and don’t need, so you have to finance it through a balloon payment deal.
The country is finding itself on a Sunday morning scrolling through all last night’s booze-fuelled bank card spending notifications.
As far as I know, we have not uncovered a chest filled with gold bars in an old cellar all of a sudden. And our green hydrogen dreams are disappearing faster than you can say pie in the sky. The oil glimmer is also fading fast.
We’d need to borrow again.
So, in the absence of a sugar daddy from somewhere, we have to broaden the tax base.
While NamRa has done an admirable job in communicating their work and how much they’ve managed to claw from the taxpayers, they must increase the number of taxpaying individuals. Their amnesty to write off interest and penalties to taxpayers in arrears is commendable and has definitely helped SMEs who continue to struggle to recover after Covid. SME owners often feel the government is a silent partner in their business who never puts anything in but demands a third of everything. There must be more relief for SMEs so they can become formalised and employ three or four people.
The agency must also show more teeth with areas and businesses that stubbornly insist on dealing with and handling large amounts of cash, especially if it looks like it’s an attempt to dodge tax.
Maybe they can dust off the old solidarity tax idea.
