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D-day for budget – Minister has no room in which to manoeuvre

D-day for budget – Minister has no room in which to manoeuvre

Since the artificial stimilus of the economy started in 2010, a favourite expression of a former Minister of Finance was “fiscal space.” At that point there was plenty with government debt an extremely modest 14% of GDP. Eight years later, that space has been exhausted with almost no fiscal room left. In the meantime, it is questionable how much bang we got for our buck.

Earlier this week, the International Monetary Fund released the country report for Namibia. As was apparent already at the end of last year, there is not much the IMF can tell us that we do not know. To me, the value of the country report lies in the projections for the next five years. It is here where the most obvious discrepancy is to be found between the assumptions and projections of the ministry and those of the IMF.

For the purpose of drawing up an economic road map for the short-term, I am ignoring the IMF’s projections for the fourth and fifth year. These are mostly academic and I am sure they will be adjusted many times before the end of 2020. It is however unsettling that the IMF predicts that our government debt will breach the 70% of GDP mark by 2022 if we carry on the same way we have since the end of 2015.

For next week’s tabling of the Appropriation Bill and the minister’s budget speech, I do not expect any surprises. There is nothing left to surprise us with. As was clear by the end of last year, the government is at the end of its available resources without any definitive plan to reduce the public sector wage bill, or to stop undermining the manufacturing sector with the continued hammering on the equitable economic empowerment framework, without thinking through either the strategy or the unintended consequences.

Whatever we will receive in the new budget, I believe has already been defined and quantified in the mid-year review of October last year. It is now merely a case of proceeding on the road we have chosen, extending the envisaged fiscal consolidation process, and being honest with all Namibians that it will take far longer than anticipated, to reduce the national debt to manageable levels.

On the expenditure side, the framework has been set. I believe that will not change since it has been addressed and adjusted, all that we can afford, in the mid-year review. The income side may see a bout of accounting gymnastics, but even here it seems reality has set in.

It is widely expected that the economy have emerged or is about to emerge from its slump. That we will not know for sure until we have received the 2017 fourth quarter GDP figures, which will probably happen only after the budget has been released. If, as I hope, the fourth quarter is marginally positive, you can bet there will be a substantial third quarter revision and that the contraction may be much less than previously published. There certainly are sufficient macro indicators that point to an improvement during last year’s second semester.

What this means in practical terms, is that we can not expect any additional stimilus from the budget. It is now on its bare bones, and it will take some time (years) for the private sector to catch up with government largesse.

Although the IMF’s country report was not exactly scathing, neither was it very uplifting. The underlying tone is one of caution and it is in this regard that I hope the message has sunk in. Not only do we need a national roadmap to get us out of the swamp, we also need a clear reinstatement of confidence in the private sector.

Ultimately, for the long haul, it is not government spending that will accelerate the economy, it is private enterprise. By this I do not mean the popular local notion that a business can only be successful if it supplies the government, or swindles the state’s coffers through fraudulent tendering. I am referring to the obvious crowding out by the government and by the fact that it has not produced any tangible results unless you still believe in the communist nirvana. The future economy must be private sector driven to be sustainable. There is no way around that self-evident statement.

Next Wednesday, is D-day for the Ministry of Finance. This week’s IMF report confirmed that. If we do not heed their caution, the 2018 Article IV consultations will not be pleasant.


 

 

About The Author

Daniel Steinmann

Brief CV of Daniel Steinmann. Born 24 February 1961, Johannesburg. Educated at the University of Pretoria: BA, BA(hons), BD. Postgraduate degrees are in Philosophy and Divinity. Editor of the Namibia Economist since 1991. Daniel Steinmann has steered the Economist as editor for the past 29 years. The Economist started as a monthly free-sheet, then moved to a weekly paper edition (1996 to 2016), and on 01 December 2016 to a daily digital newspaper at www.economist.com.na. It is the first Namibian newspaper to go fully digital. Daniel Steinmann is an authority on macro-economics having established a sound record of budget analysis, strategic planning and assessing the impact of policy formulation. For eight years, he hosted a weekly talk-show on NBC Radio, explaining complex economic concepts to a lay audience in a relaxed, conversational manner. He was a founding member of the Editors' Forum of Namibia. Over the years, he has mentored hundreds of journalism students as interns and as young professional jourlists. He regularly helps economics students, both graduate and post-graduate, to prepare for examinations and moderator reviews. He is the Namibian respondent for the World Economic Survey conducted every quarter for the Ifo Center for Business Cycle Analysis and Surveys at the University of Munich in Germany. He is frequently consulted by NGOs and international analysts on local economic trends and developments. Send comments to daniel@economist.com.na

Following reverse listing, public can now acquire shareholding in Paratus Namibia

Promotion

20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.