Namibia should diversify revenue sources
Namibia should diversify its revenue sources as the country could find itself in trouble should its share from the Southern African Customs Union (SACU) revenue pool be cut once a revised policy is implemented.
This is according to Xanthi Payi from Stanlib, an asset managing company based in South Africa.
“Namibia takes 28% of SACU revenue currently. If revised policies are implemented, it will go down to 15% and then to 9%. If this happens, Namibia will quickly fall into trouble and will have to find alternative means to raise revenue. Namibia should indeed, diversify its revenue markets,” Payi emphasised at a breakfast meeting hosted by Stanlib on Tuesday.
He said that investing more in uranium could increase revenue adding that the resource has become an important part of the country’s economic growth.
If implemented, an equitable revenue sharing formula introduced by South Africa last year, will likely result in a decline in Namibia’s revenue collection as the country will only have mining and a small tax regime to fall back on.
The country finances about 30% of its budget through revenue earned from SACU. If the new revenue sharing formula should be implemented, it will favour South Africa. South Africa, which manages SACU earnings, is pushing for production consummated formula claiming that it has been subsidising countries like Namibia and other lesser industrialised countries in the customs union.
The prevailing global and regional economic conditions could also result in the decline in SACU revenue for Namibia.
In her budget statement recently, Finance Minister, Saara Kuugongelwa-Amadhila, said SACU economies can expect lower growth than initially anticipated, which may result in the decrease in the SACU Common Revenue Pool in future.
“While the SACU Common Revenue Pool is estimated to have moved out of deficit in 2010/2011, the total pool deficit for 2009/2010 amounting to N$9.8 billion was due for repayment by SACU member states during 2011/2012. accordingly, Namibia has fully settled her share of deficit of N$2.4 billion. Renewed risks in global and regional economic prospects threaten to stall strong recovery in SACU revenues going forward,” said Kuugongelwa-Amadhila.
Despite this, total revenue and grants is projected to increase to N$35.4 billion; an increase of about 32% for the 2012/2013 financial year. This increase is mainly due to the rebound in SACU revenues for 2010, according to the Minister.
“The SACU Common Revenue Pool is estimated to have recorded a surplus during 2010/2011, as a result of which Namibia will receive an adjustment of N$2.5 billion in respect of the 2010/2011 shares. This adjustment is to be remitted to Namibia during 2012/2013 in addition to the country’s share for that year,” said Kuugongelwa-Amadhila.
As a result, the total SACU receipts for Namibia during 2012/2013 will nearly double to N$13.9 billion, up from N$7.1 billion received during 2010/2011.
The Southern African Customs Union (SACU) has five member countries including Botswana, Lesotho, Namibia, South Africa and Swaziland. It was established in 1969. Namibia joined the customs union after gaining independence from South Africa in 1990.