!Gawaxab urges shock therapy for economy

16 March 2010, New Era
URL: http://www.newera.com.na/article.php?articleid=9975&sid=9521adfc13348a4682390cfc541f65da

Windhoek:  With weeks before the national budget is unveiled, the Managing Director of Old Mutual’s African Operations, Johannes !Gawaxab, is asking the Minister of Finance, Saara Kuugongelwa-Amadhila, to go on a spending binge.

!Gawaxab says this is the only way to shock the fragile and uncertain economy into life again, in a time that world economy is on a slothful pace towards recovery.  “The budget plays a critical role in determining overall demand in the economy and carrying out the investment needed to bring about higher and sustained economic growth and employment,” says !Gawaxab.

The treasury’s concern should be for the long-term, that Government does not accrue a bucket load of debt with attendant interest payments that would burden future generations unnecessarily.

Government has been prudent in its handling of the nation’s finances in the years prior to the crisis. Budget surpluses, rather than deficits, undoubtedly made it possible for Government to use fiscal policy as an instrument to counter the downturn when it came. The Bank of Namibia also played a vital role in complementing Government’s efforts, controlling inflation and contributing to economic growth.

!Gawaxab is nevertheless disappointed that Government did not implement many of the measures announced in the last financial budget. Encouraging as it was, the non-implementation of budget is now a cause for great concern, he says.

“We believe there is much to be done in terms of improving the way Government designs, implements and monitors policy measures and projects and we encourage the Minister of Finance to take steps required to ensure this takes place,” says !Gawaxab.

His other opinion is that the country’s over-dependence on revenues from the Southern African Customs Union (SACU) is unlikely to prove sustainable. He suggests that this source of income be treated as windfall revenue to be used for key investments that bring returns to the country rather than as current income.

“Namibia needs to establish alternatives to the current SACU revenue arrangement, identify new sources of revenue and limit expenditure to sustainable levels,” he says.

!Gawaxab also expressed the hope that the much-talked about changes to Regulations 28 and 15, and in particular those related to investment in unlisted instruments and infrastructure, will be implemented soon.

The latest revisions in Regulations 28 and 15, which have been circulated to the industry for comment, not only indicate hesitancy on the part of Government, but also would be meaningless in assisting the country with job creation and economic growth.

“The unemployment rate remains far too high and is bound to create social tension and instability if it is not addressed in a way that makes a meaningful difference,” he says.

!Gawaxab expects tax rates across the various categories such as personal income tax, corporate income tax and VAT to remain unchanged, while an adjustment to the thresholds for personal income tax stands to benefit the real economy. Government should not raise taxes this time around, but should rather increase revenue through broadening the tax base and improving tax compliance. The real economy also stands to benefit by bringing in greater efficiencies in tax refunds to individuals and companies.