4 On the record: Political party representatives challenged Part 2: Economic programmes

Robin Sherbourne1 November 2004

Foreword

1 Introduction

2 Size of government and fiscal policy

3 Government ownership in economy

4 Labour, poverty and welfare

5 Trade and economic integration

6 Conclusions

7 References

1Robin Sherbourne is the director of the Public Analysis Programme at the Institute for Public Policy Research. He can be reached on [email protected] these views are probably the same. Do you think company tax should be 1.INTRODUCTION Although the interviewer and the ques- 2.SIZE OF GOVERNMENT AND lowered, stay the same or raised? FISCAL POLICY This short paper aims to assess the tionnaire attempted to draw the dis- The corporate tax rate in is tinction, it ended up not always being positions of Namibia’s political parties Do you think government spending as a presently 35%, high by the standards of entirely clear. Two parties – National developed and developing countries on key economic policy issues. It is part proportion of GDP should be lowered, Unity Democratic Organi-sation (World Bank: 2002). With the exception stay the same or raised? of a larger study undertaken in co- (NUDO) and the United Demo-cratic of a single financial year, the ruling operation with the Namibia Institute for Front (UDF) did not respond. This paper The Minister of Finance estimates Swapo party has steadily brought Democracy (NID) and funded by the reports on the findings of these inter- public spending to come down to down the corporate tax rate since views. Konrad-Adenauer-Stiftung (KAS). The 34% of GDP in the 2004/05 financial independence. Furthermore, the go- vernment has introduced a plethora of Institute for Public Policy Research year from 36% during the last three tax incentives for manufacturers and (IPPR) sent questionnaires to the eco- financial years. This is considered high exporters. The DTA and RP are clear in nomic spokespeople of eight political for a developing country (World wanting a further reduction in the cor- parties during the three months Bank: 2002).While the WRP argues that porate tax rate, the DTA arguing that between May and July 2004. From the public spending “should not ne-ces- Namibia’s rate should “always be beginning the ruling Swapo party sarily be lowered”, only the CoD lower than company tax in ” and on par with Botswana to decided not to participate arguing argues for higher levels of public remain competitive. SWANU agrees that this research project was de- spending justifying this on the basis of that corporate taxes should be low- signed to help opposition parties. Five Namibia’s developing country status ered, especially for companies that parties – the Congress of Democrats and the need for a more “interven- carry out training and their “social (CoD) the Democratic Turnhalle tionist state” to develop infrastructure responsibilities to the community”. In Alliance (DTA), and human resources. The interview contrast, the CoD argues that “com- pany tax is not a major consideration (MAG), the National suggests that the CoD does not have for companies to invest here [in Union (SWANU) and the Workers Revo- a clear idea by exactly how much Namibia]” and therefore taxes can lutionary Party (WRP) responded to the spending should be raised, what it stay the same or even be raised. This questionnaire during face-to-face should be used to fund nor how extra appears to be the main source of the interviews while the Republican Party tax revenues should be found. The extra tax revenues required to fund the (RP) responded to the questions in writ- other parties share the belief that pub- increase in spending mentioned above. The WRP believes corporate ing. Transcripts of the five interviews lic spending is presently so wasteful taxes should be raised, especially for were produced by the IPPR. The inter- that it is possible to increase the effec- multinational companies. The one views were conducted with the party tiveness of spending without raising clear exception should be Namibian representatives responsible for eco- the level of spending. manufacturing companies, which the nomic issues namely: ● CoD – Tsudao Gurirab ● DTA – Johan de Waal Do you think government spending as a proportion of GDP should be lowered, stay the same or raised? ● MAG – Kosie Pretorius CoD DTA MAG RP SWANU WRP ● RP – Henk Mudge Lowered a lot X ● SWANU – Rihupisa Kandando ● WRP – Hewat Beukes Lowered a little X X With the exception of SWANU, these Stay the same X X party representatives proved difficult to Increased a little X meet and interview. Admittedly they are, or should be at least, people with Increased a lot busy schedules. Yet is was hard not to draw the conclusion that they were not exactly falling over themselves to Do you think company tax should be lowered, stay the same or raised? explain their parties’ views to a wider CoD DTA MAG RP SWANU WRP audience, especially perhaps a critical audience of researchers. It was often Lowered a lot difficult to distinguish whether the re- Lowered a little X X presentatives were explaining their own personal opinions or their party’s con- Stay the same X X sidered views.Some parties are so small Increased a little X – almost “one man band” parties – that Increased a lot X

02 03 WRP suggests could even be sub- taxation “should not be individu- On a scale of 0-10 (where 0 represents Many newly independent states sidised to promote industrialisation. alised”. SWANU goes so far as to state high taxation/big government and 10 around the world have taken private the top rate should come down to represents low taxation/small govern- industries into public ownership, osten- 32%. There appears to be little belief ment) where would you place: sibly to better direct national develop- Do you think individual income tax should among the parties that raising the top ment and reduce the role of foreign- be lowered, stay the same or raised? rate of individual income tax can do To complete the section on the size owned businesses in the economy. of government and fiscal policy, re- The top marginal tax rate for individ- much to redistribute income. However, none of the parties ques- presentatives were asked to place uals in Namibia is presently 35%, low by tioned favoured taking more industries themselves, their parties, their ave- into public ownership. Most represen- the standards of high-income coun- Under what circumstances should gov- rage party supporter and the average tatives were very clearly of the opin- tries. None of the parties argued for ernment borrow to finance a budget Namibian voter on a scale of 0 to 10 ion that nationalisation leads to poor higher income taxes. Four party repre- deficit? where 0 represented high tax and big management and low productivity. sentatives argued that individual Government has run a budget government and 10 low tax and small Even when pressed in the case of nat- income tax should be lowered while deficit every year since indepen- government. All parties assessed ural resources, none of the parties themselves, their parties and support- two argued for status quo. The DTA dence. In principle, all parties are appeared to be particularly con- ers to favour lower taxation and small- once again argued that Namibian happy for government to borrow pro- vinced that nationalisation would be vided these borrowings are invested er government than CoD. Parties a positive step. income taxes should always be slight- productively. All parties stated they clearly have very different percep- ly lower than the South African equiv- were against borrowing to pay tions of the electorate with only alents. salaries. The WRP believed that the SWANU assessing the average Na- Do you think some state-owned compa- source of borrowing was important mibian voter to be in favour of high nies should be privatised? Which ones? taxation and big government. The Do you think better-off people should and warned against borrowing from Why? the World Bank and International parties’ responses are broadly consis- Privatisation has become a world- pay a higher marginal rate of tax than Monetary Fund. All parties interviewed tent with their responses to questions wide trend over the past two de- the present 35%? agreed that borrowing should only on government spending and tax- cades as countries have sought to Namibia’s top rate of income tax take place to finance productive ation where the DTA, MAG and the RP reverse the problems caused by has traditionally been pegged to the investment although it was not always broadly in favour of lower taxes nationalisation. Most parties favoured corporate tax rate. At 35% it is low clear exactly what that meant. The and smaller government and CoD the mixed economy. The CoD de- compared to top rates in high-income DTA believes it is now time to balance generally in favour of higher taxes and scribed itself as “not rapid privatisers” countries with substantially lower le- the budget for a number of years larger government. believing that companies such as vels of income inequality. None of the since government has “depleted [the Telecom had a developmental role to parties interviewed believed the top country’s] reserve funds”. The DTA also play and should therefore remain in individual marginal tax rate should be believes government should borrow to 3.GOVERNMENT OWNERSHIP IN THE state hands. The CoD did not appear increased from 35%. The WRP argues facilitate strategic investments. ECONOMY to differ in any significant respect with the prevailing pattern of ownership in Do you think some private industries the economy. The DTA, on the other Do you think individual income tax should be lowered, stay the same or raised? should be taken into public ownership? hand, was very clear that any state- CoD DTA MAG RP SWANU WRP Which ones? Why? owned company competing with pri-

Lowered a lot

Lowered a little XX XX

Stay the same X X

Increased a little On a scale of 0-10 (where 0 represents high taxation/big government and 10 represents low taxation/small government) where would you place: Increased a lot CoD DTA MAG RP SWANU WRP

Do you think better-off people should pay a higher marginal rate of tax than the present 35%? Yourself 5 8 10 10 6 n/a

CoD DTA MAG RP SWANU WRP Your party 5 8 10 9 6 n/a

Yes Your average party supporter 5 6 10 10 5 n/a

No XXXXXX Average Namibian voter 5 5 10 9 3 10

Under what circumstances should government borrow to finance a budget deficit?

CoD DTA MAG RP SWANU WRP

Only for Only for To finance To finance For manufactur- For productive Do you think some private industries should be taken into public ownership? Which ones? Why? development productive economic economic ing investment investment projects, infra- investment growth development not for salaries CoD DTA MAG RP SWANU WRP structure and skills development None None None None None None

04 05 vate companies should be privatised On the question of ownership in the Should government introduce a mini- pensions. The RP believes all compa- but also that monopolies should be economy, the DTA, MAG and the RP mum wage to help low-paid workers? nies should be forced to introduce carefully regulated to avoid excessive generally believed in less state owner- How much should it be in N$ per hour? pensions for their employees but go- pricing. The DTA singled out Nam- ship than the CoD, SWANU or the Minimum wages have been intro- vernment should continue to pay the water as a parastatal that should be duced in many countries as a way WRP and also that the electorate state pension. SWANU talked of the converted back into a government of helping low-paid workers but the believed in more public ownership department. The DTA believed that measure is controversial since it can need for communalism and the spirit there should be one water price than they did. impact negatively on employment of African solidarity. around the country and that rich con- or end up helping the already better sumers should cross-subsidise poorer off. Namibia has introduced mini-mum Do you think people should pay the full ones. One striking policy of the DTA is 4. LABOUR, POVERTY AND WELFARE wages in the construction the suggestion to privatise communal and agriculture sectors. The DTA and cost, some of the cost, none of the cost land. According to De Waal this will Who has the main task of creating jobs MAG were adamantly opposed to the for health, education and water? again form part of the DTA pro- in the economy: the government, introduction of a minimum wage since If less than the full cost, who should gramme for the forthcoming elections private business or both? they feared this would lead pay the rest? as it did in 1999. Such a policy if imple- Since independence Namibia has to a reduction in employment. The mented would have far-reaching con- The cost of water and education seen tremendous employment growth other parties were in favour with the sequences for the majority of Nami- featured highly in the responses of in government and the parastatals RP, SWANU and the WRP wanting bia’s population. MAG expressed different minimum wages for different most parties. The CoD believes in free but only limited employment growth in concern about resettlement farms sectors of the economy. Only the WRP universal education up to university where clear private ownership did not the rest of the formal economy (IPPR: was prepared to state an actual mone- level. The DTA believed water should exist. The RP stated that “the less state 2003). The CoD and MAG sta-ted that tary amount of N$2,000 a month as a be subsidised by the taxpayer through interference the better productivity both government and private busi- “living wage” for a 40-hour week. and profitability”. The WRP insisted that a government department not a ness have the task of crea-ting jobs in “basic services” should not be priva- commercialised parastatal company. the economy. The DTA and the RP Should government provide a financial tised and that corruption in parastatals The RP believes basic services must be “should not be used as a reason to pri- believe that government’s job is to safety net for the poor? How much affordable to employed people but vatise state-owned enterprises”. create the environment within which should it be? should be free to the unemployed. private industry can flourish and cre- All parties agreed that government MAG and SWANU believe people On a scale of 0-10 (where 0 represents ate jobs although the DTA sees a more should provide a financial safety net have to make a contribution to the total government ownership/no privati- interventionist role for government in for the poor. The DTA was the most costs of basic services while the WRP sation and 10 represents no government new industries and major infrastruc- specific stating that the idea of a believes they should be free to the ownership/full privatisation) where would ture. basic income grant should be investi- very poor. you place: gated further and that pensions should be raised to N$500 a month. On a scale of 0-10 (where 0 represents a MAG supported the idea that 10% of comprehensive welfare system and 10 the budget should be set aside for represents no welfare system) where Do you think some state-owned companies should be privatised? Which ones? Why? cash transfers to the poor, especially would you place:

CoD DTA MAG RP SWANU WRP Should government introduce a minimum wage to help low-paid workers? None ● Air Namibia ● Meatco ● Air Namibia None None ● Telecom ● Roads How much should it be in N$ per hour? Contractor Company CoD DTA MAG RP SWANU WRP ● Namibia Yes No No Yes Yes Yes Development Corporation

Should government provide a financial safety net for the poor? How much should it be?

CoD DTA MAG RP SWANU WRP On a scale of 0-10 (where 0 represents total government ownership/no privatisation and 10 represents Yes Yes Yes Yes Yes Yes no government ownership/full privatisation) where would you place:

CoD DTA MAG RP SWANU WRP

Yourself 5 8 10 10 3 4

Your party 5 8 5 10 3 4

Your average party supporter 5 8 2 10 4 4

Average Namibian voter 5 5 2 7 5 6

06 07 Most parties believe in a welfare sys- industry protection clause in the SACU fully regulated trade and 10 represents Drawing together the results of the tem and furthermore believe most agreement. completely free trade) where would you questionnaires and interviews, a num- Namibian voters want such a system. place: ber of tentative conclusions can be How it should be funded and adminis- Should government impose import tariffs The DTA, MAG and the RP assessed drawn: tered, for example, who should be or other restrictions to protect local themselves to be more in favour of The CoD representative consistently counted as unemployed in a country industries? Which industries? free trade than the CoD and SWANU. rated his own and his party’s views to of widespread underemployment, are All parties agreed that a certain MAG and the RP saw themselves as be completely in line with the views of not issues the parties appear to be more liberal when it came to trade the average voter. By contrast, the troubled by. amount of tariff protection was neces- sary to protect new industries, espe- than the average Namibian voter. other party representatives were ge- cially manufacturing. None appeared nerally happy to admit that their per- concerned about the cost this would sonal views or their party’s views were 5.TRADE AND ECONOMIC impose on consumers. MAG stated not entirely in line with those of the average voter. In particular the DTA, INTEGRATION that “strategic industries” required pro- tection but declined to state what MAG and the RP generally put them- Should government encourage free they were. selves more to the right (smaller and less interventionist government with trade with the region and the rest of the lower taxes and welfare) of the ave- world? Even when it damages a local Should Namibia try to become self-suffi- rage voter. industry? cient in certain things like staple grains, water and electricity or should it rely on The opposition parties interviewed The past decade has seen trade other countries if they can produce do not have very clearly worked out barriers come down around the world these things more cheaply? and detailed economic policies. They in general and in the Southern African The two main opposition parties have not put much effort into re- Customs Union (SACU) region in par- were not convinced that self-sufficien- searching economic policy ideas and ticular as the benefits from freer trade cy was worth striving for since the fleshing them out into robust and practical policies. One can only con- have been recognised. All parties costs were likely to outweigh the be- clude that they do not believe that shared the belief that trade was basi- nefits. Production should concentrate on where the country has an advan- economic policy ideas play much of cally good but that some degree of tage. SWANU and the WRP thought a role in gaining votes among the protection was necessary to develop Namibia should strive towards more electorate. Opposition parties clearly industries (especially manufacturing self-sufficiency in food, water and do not represent a source of original industries) that could become inter- electricity. thinking on economic policies al- though the DTA’s ideas to turn Nam- nationally competitive. The CoD and 6. CONCLUSIONS DTA specifically mentioned the infant On a scale of 0-10 (where 0 represents

Should government impose import tariffs or other restrictions to protect local industries? Which industries?

Do you think people should pay the full cost, some of the cost, none of the cost for health, education CoD DTA MAG RP SWANU WRP and water? If less than the full cost, who should pay the rest? Unclear Aggressive Strategic Food and Manufacturing Manufacturing CoD DTA MAG RP SWANU WRP protection of industries manufacturing new industries Education should Water should be Some Must be Some Free to very poor be free subsidised contribution affordable contribution but free to unemployed Should Namibia try to become self-sufficient in certain things like staple grains, water and electricity or should it rely on other countries if they can produce these things more cheaply?

On a scale of 0-10 (where 0 represents a comprehensive welfare system and 10 represents no welfare CoD DTA MAG RP SWANU WRP system) where would you place: Should not try Should not try Unclear Unclear More self-sufficient More self-sufficient CoD DTA MAG RP SWANU WRP to become to become in food, water in food, water self-sufficient self-sufficient and electricity and electricity Yourself 5 5 10 5 4 0

Your party 5 5 5 5 4 0 On a scale of 0-10 (where 0 represents fully regulated trade and 10 represents completely free trade) Your average party supporter 5 5 5 5 4 0 where would you place: Average Namibian voter 5 3 0 3 4 0 CoD DTA MAG RP SWANU WRP

Yourself 5 8 10 8 4 n/a Should government encourage free trade with the region and the rest of the world? Even when it damages a local industry? Your party 5 8 10 7 4 n/a

CoD DTA MAG RP SWANU WRP Your average party supporter 5 8 10 7 5 n/a

No No No No No No Average Namibian voter 5 8 5 5 5 n/a

08 09 water back into a government de- nisms would then have to be found to partment and privatise communal target these people and exclude oth- farm land are possible exceptions. ers. With the possible exceptions of Opposition parties appeared little SWANU and WRP, opposition parties concerned with the impact of their are not particularly ideological but are policy suggestions on different groups. rather pragmatic and middle of the For example, introducing tariff protec- road believing neither in the power of tion can increase prices to Namibian capitalist enterprise nor in the power of consumers and hit the poorest in soci- the state to accelerate economic ety hardest. Forcing companies to growth and development. The impres- introduce pension schemes for em- sion is given that this lack of belief and ployees raises the cost of labour and ideology leaves them with little convic- decreases the incentives to create tion to fire up the electorate and little jobs. The one clear exception to this on which to base a consistent and lack of understanding was on the mini- practical economic programme. mum wage where the DTA, MAG and even the RP (which seemed to favour Opposition parties do not appear to a minimum wage) recognised that have singled out specific areas of dis- there was a danger that the policy agreement with the economic poli- could destroy jobs for the poorest that cies of the ruling Swapo party and the have nothing to offer but their labour. status quo. None of the spokespersons While opposition parties do not were eager to differentiate their par- manifest any strong ideological com- ties from ruling party policies. Two strik- mitment to small government and free ing differences are from the DTA which market economics, they are all aware states it wants to turn Nam-water back of the dangers of excessively large and wasteful, corrupt and ineffective into a government de-partment and government as well as the destabilis- change water pricing policy and also ing effects of over-borrowing and high privatise communal farm land. public debts. Thus, although there is a general belief that government inter- The problems of loss-making para- vention through subsidies and tariff statals was recognised by all parties protection is required to develop a but privatisation did not appear to more diversified economy, especially them to be a solution. This is consistent manufacturing industry, this belief is framed in rather general terms with no with the lack of belief in private enter- very specific ideas on what should be prise and markets. done that is not being done already by the ruling party. This provides, per- With the possible exception of MAG, haps, one reason why economic all parties wanted more welfare debate in parliament is so limited. spending and a more generous wel- There is fundamentally little diffe-rence fare state though none had particu- between the ruling party’s economic larly far-reaching or radical ideas policies and those that would be pur- about how it should be financed sued by the opposition parties. and which groups of beneficiaries should be targeted. Furthermore, none of the parties appeared to recognise the administrative complex- ities involved in, for example, providing unemployed people with benefits given that large numbers of people are under rather than unemployed. The target group would first have to be clearly defined (who is unem- ployed?) and administrative mecha-

10 11 7. REFERENCES

World Bank, 2002. World Development Indicators 2002. Washington: World Bank.

IPPR. 2003. Less than 30,000 jobs in ten years? Employment trends in Namibia since 1991, IPPR Briefing Paper No. 24, October: IPPR.

Konrad-Adenauer-Stiftung PO Box 1145, , Namibia Tel +264 61 232 156 Fax +264 61 225 678 Published by: Namibia Institute for Democracy PO Box 11956, Klein Windhoek, Namibia Tel +264 61 229 117 Fax +264 61 229 119