1. Financing the Inclusive Growth Development Agenda
A Presentation by
Hon. Calle Schlettwein, MP
Minister of Finance

2. 0. In this Presentation, we discuss ….
Overview and Namibia’s Development Agenda Policy Frameworks
Decomposition of Growth, Structural Challenges and Opportunities
Composition of Spending and Budget Revenue
Domestic Resources Mobilization and Funding Strategy & Financing the Development Agenda
Concluding Notes

3. I. Overview of the Republic of Namibia
Key Highlights
Strong governance and political stability
A stable Parliamentary democracy
Growing and diversified economy:
Diversified economic base supported by the services and mining sectors as key contributors
Stable macroeconomic environment:
Price stability, manageable public Debt to GDP ratio of 40.0%1 (2015/16)
Investment grade economy
Capital: Windhoek
Official Language: English
Population: approx. 2.2million3
Surface area: 824,292 sq km
Currency: Namibia Dollar (NAD)
Snapshot of Namibia
Credit Ratings
International
Domestic
Moody’s
Baa3 (stable)
Fitch
BBB- (negative)
BBB (negative)
2013
2014
2015
Nominal GDP (NAD bn)1
122,749
139,500
146,619
Real GDP Growth (%)1
5.7
6.5
5.3
Government Debt / GDP (%)1
24.3
23.2
40.0
1 NAD = 1 ZAR
(pegged)
1 USD = NAD4
Economic and Demographic Indicators (2014)2
Helvi to update debt information.
Namibia
South Africa
Botswana
Ghana
Nigeria
Senegal
Zambia
GDP per capita (USD)
5,720
6,448
7,757
1,462
3,185
1,071
1,722
GDP Growth (annual %)
5.33
1.3
4.4
4.2
6.3
3.9
6.0
Population Growth (annual %)
2.37
1.6
0.9
2.1
2.8
2.9
3.1
Life Expectancy at Birth (years) 63 57 47 61 52 58
Primary School Enrolment (% net)3 90
n/a 89 64 73 91
Infant Mortality Rate (per 1,000 live births) 33 36 74 44 43

4. I. Namibia’s Development Agenda is well set-out in the national development policy frameworks
Vision 2030, sets out the national long-term aspirations and development targets,
The National Development Plans provide policy cohesion, inter-sectoral coordination and alignment with the Vision,
The Medium-Term Expenditure Framework gives and alignment of the resource envelop and budgetary provisions,
Industrial Policy and Growth at Home Strategy set-out productive capacity interventions
The total Public Sector Investment frame is costed in the National Development Plans

5. Effective Governance and Service Delivery Economic Advancement
I. The Harambee Prosperity Plan is Namibia’s fast-track intervention strategy for inclusive growth and shared prosperity, with a focus on FIVE Key Pillars
Effective Governance and Service Delivery
Economic Advancement
Social Progression
Infrastructure Development
International Relations and Cooperation
Estimates put Namibia’s infrastructure funding gap at some N$50 Billion by Large deficits exist in social sectors too

6. II. Decomposition of Growth, structural challenges and opportunities
The economy is relatively diversified, with the tertiary sector at over 50% of GDP
The share of manufacturing has steadily risen, but low commodity prices have impacted on beneficiation activity
Price-induced production slowdowns for some metal commodities and meat processing led to slowdown in overall manufacturing output. Uranium production is expected to raise beneficiation activity

7. Investment Grade African Economies
II. Decomposition of Growth, structural challenges and opportunities
Namibia is only among the five African countries with investment grade credit rating
The strong growth, political and macroeconomic stability have been key ratings strengths for Namibia, but structural challenges remain
Country
Moody’s
Fitch
TE Rating
Investment Grade African Economies
Botswana
A Stable 73
Mauritius
Baa1 Stable 65
Namibia
Baa3 Stable
BBB- Negative 55
Morocco
Ba1 Stable
BBB- Stable 54
South Africa
Baa2 Stable 49
Medium-term Policy is directed at addressing structural challenges:-
Jobless, less-inclusive high economic growth: unemployment is broadly at 28.1%
High Income Inequalities: The Gini Coefficient Ratio of 0.58, though declining, is still among the highest in the world,
Technical skills base remains low, hence emphasis on education,
Deep pockets of poverty still remain, although bsolute poverty was halved since 1993/94, thanks to social safety nets,
Hence the policy emphasis on inclusive growth, reduction of inequality, eradication of poverty and achieving shared prosperity
The Government has responded to addressing ratings weaknesses by defining a balanced, medium-term fiscal consolidation stance

8. I. The economy may be relatively diversified, but mineral commodities make up over 50% of exports
There is a case for commodity-based industrialization for Namibia in areas of competitive advantages

9. III. Composition of Expenditure and Budget Revenue
Development budget, together with capital transfers to SOEs hover around 26% of budget
The Budget financing is mainly sourced from own revenue and debt capital. Grants are less significant
Transfers to SOEs are mainly targeted for development project financing, and social services delivery in the social sectors

10. IV. Domestic Resources Mobilization and Financing Strategy: Five-Pronged Approach.
The key measures for DRM and Financing are (i) diversification of revenue, protecting revenue base and implementing tax administration reforms, (ii) mobilization of domestic savings, (iii) SOEs reforms and (iv) leveraging PPPs and (v) Off-budget project financing
I. Revenue as % of GDP1 is one of the best in the region
III. Leveraging SOE reforms
Government wholly owns numerous SOEs, in economic, financial and social spheres
Some of the economic and financial SOEs are credit-rated and can raise own funding in execution of their mandates.
Partial listing of some of the SOEs offer opportunities for improving efficiencies and financial returns, while relieving reliance on the budget for project financing
IV. Harnessing PPPs and debt capital to finance infrastructure
II. Mobilizing Domestic Savings
Namibia is a net exporter of capital, due to high institutional investment savings (assets > GDP)
The economy experiences savings-investment gap, exacerbated by capital flight
Domestic Asset Requirements prescribe that 35% of total assets be invested locally and about 1.75% so invested be in unlisted assets.
The 35% threshold is now being lifted gradually to about 45-50%. This is expected to release about N$9.47 billion in the economy annually over the next 4 years
For the fiscal year 2015/16
8.9 bn N$
4.5 bn N$
Funding gap of N$4.3 bn
50,78%
49,22%
100%
Infrastructure investment need as per 6% of GDP
Development budget on core infrastructure programs
Source: BoN Annual Report 2015, MTEF 2016/17 to 2018/19

11. V. Conclusion: Funding the Development Agenda
A stable environment and medium-term growth prospects offer prospects for inclusivity and growth-friendly fiscal policy,
Scope for private sector has widened as Government fiscal policy assumes consolidative mode,
The currency peg with the ZAR offers price stability. Namibia remains an Investment Grade economy and thus a credible and safe investment avenue,
Exchange Control regulations have embedded pro-investor provisions
Tax policy provides for a variety of fiscal incentives. Corporate tax has been lowered by a cumulative of 3% in last 3 years
Financing for development obtains from (i) revenue diversification, (ii) SOE reforms, (iii) mobilization of national savings and harnessing PPPs
The
Cohesion is achieved through alignment of financing and national plans frameworks

12. Thank You