Budget on a plate 2019/2020
Presentation by PwC in collaboration with Standard Bank Namibia Safari Hotel and Conference Centre March 2019 Three-linked and Interconnected Fiscal Policy Actions
1 3 Growth 2 Stimulus Structural Reduced Package: Policy Budget Deficit Agricultural, Reforms Youth, SME
PwC Namibia Budget Review 2019/2020 2 Key Focus Areas
Enhanced infrastructure investment 01 ( 42%), private sector participation
Reduce non-core expenditure 02
03 Core Spending on Social Sectors
Strengthens allocations to social safety nets 04
PwC Namibia Budget Review 2019/2020 3 Debt Stock Debt Stock as % of GDP
FY2018/19 46.3%
2018/19 N$87.5bn N$96.3bn 2019/20
FY2019/20 48.9%
FY2021/22 52.3%
PwC Namibia Budget Review 2019/2020 4 2019 BUDGET REVIEW Achieving Growth and Fiscal Stability Naufiku Hamunime Challenges Facing the Fiscus
Budget Rigidity
Budget High Public Deficit Debt
Government
Fiscal Overreliance Weakness on SACU Challenges Facing the Fiscus
Fiscal Weakness Public Debt Budget Deficit
80 45 2 1
0 70 40 0
-1 35 60 Debt threshold -2 -2 30 50 -4 -3 25 40 -6 -4 20 -5 30 -8
Billions (N$) 15 Billions (N$) -6 20 -10 Percent (%) GDP of Percent 10 (%) GDP of Percent -7
10 -12 5 -8
0 0 -14 -9 2012/13 2013/14 2014/15 2015/16 2016/17 2012/13 2013/14 2014/15 2015/16 2016/17
Domestic Debt Stock Foreign Debt Stock Total Debt as % of GDP Actual (N$) Deficit as % of GDP
Source: Ministry of Finance Challenges Facing the Fiscus
Budget Rigidity Expenditure by Subdivision
100%
90%
80%
70%
60%
50%
40%
30%
20%
10% Percent of Total Expenditure (%) Expenditure Total of Percent
0% 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Revised Projection Projection
N$11.9bn Increase in Personnel Expenditure N$30.6bn
Personnel Goods and Services Subsidies and Current Transfers Interest Payments Capital Assets Capital Transfers
Source: Ministry of Finance Challenges Facing the Fiscus
Overreliance on SACU SACU Revenue
25 45
40
20 35
30
15 25
Billion (N$) 20 10
15
10 5 of Percentage Total Revenue (%)
5
0 0 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Revised Projection Projection
SACU Revenue (N$) SACU Revenue as % of Total Revenue
Source: Ministry of Finance Revenue vs. Expenditure
PwC Namibia Budget Review 2019/2020 10 Operational Expenditure
PwC Namibia Budget Review 2019/2020 Comparison 2018/2019 to 2019/2020 (N$ millions) 01
PwC Namibia Budget Review 2019/2020 12 Expenditure Allocation per Department 2019/2020 (N$ millions)
PwC Namibia Budget Review 2019/2020 Expenditure Execution Rates
99.60% 94.60% 100% 87.40%
80%
60%
40%
20%
0%
PwC Namibia Budget Review 2019/2020 Spending Priorities
1 2 3 4 5
Old Age Grants Increase Social Sector Public Safety Economic & – Monthly Development Allocation 49.3% Sector Infrastructure Increase N$50 Budget Allocation Allocation Sector by 42.2% 21.7% Allocation 19.2% – Road Capital Projects
PwC Namibia Budget Review 2019/2020 15 Priority Areas of Consolidation
Revenue Mobilization
Quality Spending Reigning in Expenditure
Structural Reforms Priority Areas of Consolidation
Reigning in Expenditure Expenditure
80 45
70 40
35 Governments Measures to 60 Contain Wage Bill 30 50
25 Incremental Wage 40 Increases Billion (N$) 20
30 15 Natural Attrition 20 10 Percentage of Percentage Total Revenue (%)
10 Hiring Freeze 5
0 0 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Revised Projection Projection
Expenditure (N$) Expenditure as % of GDP
Source: Ministry of Finance Priority Areas of Consolidation Revenue Mobilization & Structural Reforms Revenue Structural Reforms
70
61.3 59.9 60 58.6 57.7 58.3 56.7 56.6 56.7 Tying Project Funding to 50.8 50.8 Development Plans 50
Increased Level of 40 Oversight e.g. Billion (N$) 30 Central Procurement Board
20
Amendments to Public 10 Enterprises Governance Act
0 2016/17 2017/18 2018/19 Revised 2019/20 2020/21 Projection Projection
Source: Ministry of Finance 2018/19 Forecast 2019/20 Forecast Priority Areas of Consolidation
Turning the Fiscal Corner Budget Deficit Public Debt
2 1 120 60
0 0 100 50 -1 -2 -2 80 40 -4 -3 Debt threshold
-6 -4 60 30
-5 -8 40 20 -6 Billions (N$) -10 Billions (N$) -7 Percent (%) GDP of Percent
Percent (%) GDP of Percent 20 10 -12 -8
-14 -9 0 0
Actual (N$) Deficit as % of GDP Domestic Debt Stock Foreign Debt Stock Total Debt as % of GDP
Source: Ministry of Finance Low Growth and the Fiscus
GDP Growth (%)
10.1
7.5 7.2 6.5 6 4.9 4.8 4.4 3
-0.1 -0.2 -0.1 -0.3 -0.9 -0.8 -0.6 -0.8 -1.3 -1.7
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18
Global Economic Outlook (%) 8
6
4
2
0 2015 2016 2017 2018 2019 -2
-4
World Africa Angola Namibia South Africa
Source: IMF; Bank of Namibia; National Statistics Agency Revenue vs. Expenditure
PwC Namibia Budget Review 2019/2020 Tax Revenue vs. Non-Tax Revenue
PwC Namibia Budget Review 2019/2020 22 Total Tax Revenue (N$ 58 billion)
PwC Namibia Budget Review 2019/2020 23 SACU Receipts & Indirect Tax Comparison
PwC Namibia Budget Review 2019/2020 24 Low Growth and the Fiscus
GDP Growth (%)
10.1
7.5 7.2 6.5 6 4.9 4.8 4.4 3
-0.1 -0.2 -0.1 -0.3 -0.9 -0.8 -0.6 -0.8 -1.3 -1.7
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18
Global Economic Outlook (%) 8
6
4
2
0 2015 2016 2017 2018 2019 -2
-4
World Africa Angola Namibia South Africa
Source: IMF; Bank of Namibia; National Statistics Agency Low Growth & the Fiscus Revenue Lines Under Pressure Revenue vs. Expenditure Projections
80
70
60
50 Billions (N$) 40
30
20
10
0 2018/19 2019/20 2020/21
Revenue (2018 Proj.) Revenue (2019 Proj.) Expenditure (2018 Proj.) Expenditure (2019 Proj.)
Source: Ministry of Finance Comparisons: Corporate Tax Rates
25.75% 32% 30% 22% 28%04 35%
Namibia Angola Botswana South Africa Zambia Zimbabwe
PwC Namibia Budget Review 2019/2020 27 Comparisons: VAT Rates
15% 10% 12% 15% 16% 15%
Namibia Angola Botswana South Africa Zambia Zimbabwe
PwC Namibia Budget Review 2019/2020 28 Namibian Economic Statistics Caiundo Tombua Kataba Cahama ANGOLA Mavinga ZAMBIA
Sesheke Luiana Livingstone Opuwo Kongola Rundu ZIMBABWE NAMIBIA Tsumeb Tsau Khorixas Okakarara
Epata Omaruru Orapa Ghanzi
Windhoek Gobabis Mamuno
Walvis Bay Kang Aranos BOTSWANA Maltahöhe Gaborone South Atlantic Ocean Unemployment GDP Growth Inflation at USD: NAD Tshabong Rate February 2019 Exchange Rate Mafikeng 1.0% Lüderitz Aroab 4.4% N$ 14.60 Kuruman 37% Karasburg Upington Kimberley
Springbok SOUTH AFRICA
De Aar Bitterfontein NAMIBIA Victoria West 0 50 100 150 Kilometers 0 50 100 150 Miles
PwC Namibia Budget Review 2019/2020 29 Achieving Long Term Growth
Import 60% of Food Requirements
34% Unemployment (2016)
Export Basic Commodities Achieving Long Term Growth Trends in Agriculture & Food Production Percentage Contribution to GDP (%)
6
5.3 5.1 5 4.9 5 4.5 4.3 4 3.9 4 3.4 3.4 3.3 3.3
2.9 2.9 3 2.8 2.6 2.5 2.5 2.5 2.5 2.4 2.3
2
1 0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.2
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Agriculture & Forestry Meat Processing Grain Mill and Other Food Products Source: National Statistics Agency Achieving Long Term Growth
Growth in Agro Processing Opportunities Budget Sectoral Allocations FY18/19 (%)
Administrative 8% Zambia 17 Million
Botswana 2 Million Economic 14% Angola 29 Million Access to Regional Market Social Infrastructure 49% 7%
South Africa 56 Million Public Safety 22% Zimbabwe 16 Million
Source: Ministry of Finance Structural Policy Reforms
1 2 3 4 5
Energy Mid Year Budget PPP Legislative Public Domestic Asset Regulatory Review Framework Procurement Act Requirements Authority Bill
6 7 8 9 10
Public Witness 2nd Land Investment NEEEB Enterprise Protection Act, Conference Promotion Act Governance Bill Whistle Blowers
PwC Namibia Budget Review 2019/2020 Act 33 Other Reforms
Inland Revenue Reforms
PwC Namibia Budget Review 2019/2020 34 Bottlenecks to Growth
SME Development
Procurement as an Empowerment Tool
Regulatory Bottlenecks
Address Policy Uncertainty Tax Proposals – N$ 400 Million – FY2020
3 Charitable/Religious/ 1Phasing out 2 4 5 Repealing EPZ Act - Resident Dividend Trust Taxing – Preferential Tax Special Economic Tax = 10% Abolish conduit Educational with commercial Treatment - Zones principle activities – subject to be taxed Manufacturers 8 9 Increased threshold – tax VAT10 on income of listed 7 Disallow royalties 6Taxation of Fees & interests to foreign income deduction of pension & AF NR – WHT paid / non-diamond asset managers contributions (27.5% 150K N$) mining 12 13 11Sale of shares/cc Fuel levy Expansion of the export levy on membership in property increase – 25c agriculture, forestry, game & other PwC company Vatable mining products 36 Tax Proposals (Newly Mentioned)
1Remove zero Increase2 export Introduce3 export Lubricant4 oil levy rating of sugar levy dimension levy of 15% for N$1.80 p/ltr stones from timber 5% Environmental current 2% to levy primary cells / max 15% batteries Plastic carrier bags
PwC 37 Tax Proposals (Previously Noted, Not Mentioned Again) 2 1 Additional excise duty 3 Thin capitalization Individual Tax: rules on imports of tobacco Lower bracket – 17% and alcoholic products from 18%
5 4Individual Tax: 6 Betting and gaming No carry forward Higher brackets activities – 37% of tax losses > N$1.5mil 39%, > N$2.5mil 40%
PwC 38 Sin Taxes
2019/20 Excise Duty effective 20 February 2019 Product Quantity 2018/19 2019/20 Increase Cost Cost in (N$) (NS) (N$) dollars Spirits per 750ml bottle 61.30 65.83 4.54 Cigarettes per packet of 20 15.52 16.66 1.14 Sparkling wine per 750ml bottle 9.32 10.16 0.84 Fortified wine per 750ml bottle 4.91 5.27 0.37 Unfortified wine per 750ml bottle 2.93 3.15 0.22 Ciders & Alcoholic fruit per 340 ml 1.62 1.74 0.12 beverages Malt Beer (5% alcohol) per 340 ml 1.62 1.74 0.12
PwC Namibia Budget Review 2019/2020 39 Role of Private Sector
The Role of the State
The Role of the Private Sector
Public Private Partnerships
Investment in Local Economy Budget on a plate 2019/2020
Thank you