REPUBLIC OF NAMIBIA

Statement to Parliament

Request for Approval of Budget of Vote 09

Presented by the Hon. C. Schlettwein

Deputy Minister of Finance

11 May 2010
I. INTRODUCTION AND GENERAL OVERVIEW

Honourable Speaker,

Honourable Members of the National Assembly,

I take pleasure in presenting the budget for Vote 09, Ministry of

Finance, for your consideration and support. The mandate of the
Ministry of Finance is broad. On the one hand, it covers the
management and control of central government and public funds and
on the other hand, the ministry also fulfils a very focused mandate and
Ministry specific functions. The main objectives of the Ministry of
Finance are to:

• Sustain equitable socio-economic development

• Optimise public revenue collection

• Ensure that public expenditure delivers results and value for

money

• Manage Public Assets and Liabilities, and

• Ensure effective management of human capital and other

resources

Its ministerial targets are as follows:

• Maintain debt as a ratio of GDP within 25% to 30% by 2012/13

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 • Achieve 98% average revenue forecast accuracy during the
2010/11-2012/13 MTEF

• Maintain average budget deficit as a ratio of GDP around 5%

over the 2010/11-2012/13 MTEF

• Maintain a variance of less than 2% of expenditure on overall

budget ceilings, yearly.

• Maintain contingent liability below the target of 10% of GDP,

yearly.

In pursuit of the objectives I mentioned, Ministry of Finance fulfils

several core functions.

Ministry of Finance plays a broad role in the financial sector. Its

scope encompasses the supervision and implementation of the
regulatory framework for the banking and non-banking industry. This
is in addition to the development and implementation of fiscal policies
and allocation of financial resources in support of improving the
socio-economic conditions in our country.

Government has developed a public finance management strategy to

strengthen fair revenue collection, better plan and control public
expenditure, improve transparency and accountability, and reinforce
the identification and management of macroeconomic and fiscal risks.
Consequently, the Ministry has put measures and financial systems in
place to implement the public finance management or PFM strategy.
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Namibia, alongside developed and other developing countries, has
signed the Paris Declaration on Aid Effectiveness and has since been
able to mobilise some development funding which is disbursed
through the state revenue fund. The relatively small amount of grant
funding disbursed through the state revenue fund, that is, N$ 83
million and N$ 275 million in 2008/9 and 2009/10 respectively, has
had a far-reaching positive effect and development actions have
become easier to monitor. It is clear though that many of our
development partners prefer to avail their support as extra budgetary
support. This is evidenced by the anticipated support outside the
Budget of N$ 1.1 billion in 2010/11. We maintain our stance that the
promises of the Paris Declaration relating to untied aid should be fully
complied with. This would be more cost effective and would
strengthen both our financing system and country ownership of aid.

While Government is committed to canvas for further budget support

and continues to engage development partners to honour their
commitments, Namibia’s classification as a middle-income country
presents a hurdle to mobilise donor support and concessional
borrowing. This classification disguises wide-spread poverty and
highly skewed distribution of income which has characterised
Namibia’s socio-economic landscape for over a century. Government
thus implores the donor community and development finance

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institutions not to lose sight of this misnomer when considering
support and lending options for Namibia.

Honourable Speaker,

Honourable Members of Parliament,

I will now turn to the planned programmes relating to Vote 09 for the
period 2010/11 to 2012/13. I will provide a synopsis of the envisaged
results these programmes will render and how each programme
relates to the ministry’s core functions. I will also highlight our
flagship projects and review our past performance against ministerial
targets falling within each programme.

I. PROGRAMMES, EXPECTED OUTCOMES and PAST

PERFORMANCE

Similarly to many other countries, Namibia’s budget is a cash-based

budget. Nonetheless, a move towards programme budgeting holds the
promise of enhanced financial resources planning and control, as well
as commensurate outcome or output audits.

Government is in the process of modifying the Expenditure

Management and Accounting System so that each
Office/Ministry/Agency will account for its budget expenditure in line
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with programme-based budgeting. Four Votes have been identified
for piloting this initiative: the Ministry of Environment and Tourism,
National Planning Commission, the Office of the Auditor General and
the Ministry of Finance. All piloted Votes have not only identified
programmes which are now disaggregated, but these programmes
encompass activity expenditure points which are also included in the
Chart of Accounts. We have thus started a phased implementation by
moving away from line item and incremental budget planning and
expenditure controls towards programme and activity-based
budgeting and results-based expenditure controls. The pilot phase will
continue until 31 March 2011 when all Votes will be placed on the
“new” system. However, there will be continuation of cash-based
accounting and auditing of state funds, meaning that we will not yet
be able to deploy a rolling or accrual accounting system. This goes
hand-in-hand with the provisions in the State Finance Act, Treasury
Instructions and the manner how we proceed to approve the
Appropriation Bill on an annual basis.

With this very important explanation, I now take pleasure in

presenting this House with the Vote 09, Ministry of Finance
programme highlights and their expected results for the period
2010/11 and the remainder 2011/12 and 2012/13 MTEF period. For
each programme I will also outline the past performance against
ministerial targets.

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Vote 09 comprises seven programmes, each having between five and
seven costed activities. The total requested funding amounts to N$
2.650 427 billion in 2010/11, catering for both developmental and
recurrent expenditure of the activities as follows:

• Programme 1: Economic Policy Advice. The main purpose of

this programme is to assess national, regional and international
economic developments and formulate relevant policies. The
programme activities entail macroeconomic analysis, projection
and policies, financial programming, monitoring impacts of
regional and international economy, managing GFS reporting,
and undertaking research studies. A total of N$2.841 million is
requested for this programme during 2010/2011.

I am pleased to report that all macroeconomic targets were met.

Monitoring and reporting on our performance against the SADC
macroeconomic convergence targets is ongoing, and efforts
must continue to ensure that Namibia reaps optimal benefits
from regional integration.

In 2008/09 however, work commenced to acquire in-house skills

and an integrated, analytical financial programming tool. As a
result, revenue forecast accuracy improved from 89 percent in
2008/9 to 92.4 percent accuracy in 2009/10. Our efforts will lead
to even greater accuracy in the coming years.
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• Programme 2: Revenue Management. The purpose of this
programme is to ensure efficient administration of tax
legislation and to optimize the collection of public revenue. The
programme activities entail law enforcement and public
education, trade facilitation, duty and tax administration, trade
negotiations, revenue infrastructure and revenue collection
systems. A total of N$310.675 million is requested for this
programme during 2010/2011.

I would like to note some of our achievements within this

programme as well as impending challenges:

Regarding sustainability of tax revenue growth, I am pleased to

state that all tax categories have grown on average by 12.2
percent on a year-on-year basis over the 2006/7 to 2008/9 MTEF
period. Through the forensic auditing initiative alone we have
been able to recover over N$1 billion in tax revenue per year
over the last four years.

Focusing on customs, we have completed a review of the

customs structure and have approval to implement an improved
structure that accommodates the demands of a modern customs
administration within a regional customs union, SACU.

It is anticipated that improved tax administration, partly through

our training efforts, and tax law compliance will greatly enhance
sustainability of domestic tax revenue growth and our capacity
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to accurately forecast revenue over the medium to long-term.
The most poignant risk on revenue regards taxes on international
trade, with income from SACU set to decrease by 30.4 percent
in the current financial year, and by a further 52.7 percent in
2011/2012. Other medium-term risks that may exert pressure on
revenue growth include impeding tariff liberalisation under
various free trade arrangements. I therefore call upon all
members of the public to cooperate with us in registering as tax
payers along with paying their dues to the state, and not only
call upon the state when in need of financial concessions.

As the trade liberalisation agenda gains momentum and

consequent pressure on revenue from Customs tariffs grows,
Government must find alternative sources of revenue.
Environmental levies, royalties on natural resources (non-
renewable and renewable), export taxes on raw materials,
especially for non-renewable resources are options for
alternative revenues. Centralising all tax is an essential
administrative tool to optimize revenue outturn.

Here it should further be highlighted that pursuit of the EPA

should not compromise our efforts to follow a Namibian
development agenda. We must not allow the EPA to
compromise our efforts to enhance revenue through royalties
and other export taxes, nor should we compromise our industrial
development policy.

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• Programme 3: Public Expenditure Management. The
purpose of this programme is to ensure that public expenditure
delivers results and value for money. The programme activities
consists of budget & accounting operations, contingency
allocation, Public Finance Management (PFM) capacity
building and electronic funds system development. A total of
N$353.404 million is requested for this programme during
2010/2011.

Concerning the ministerial target of maintaining a variance

of less than 2 percent of expenditure on overall budget
ceilings, I am pleased to note that we have been successful.

With the implementation of IFMS, all except for two Votes’

maintained their actual spending for the 2008/09 financial year
within the target band of 2 percent of budgeted expenditure.
Overall variance was 0.98 percent. I commend the diligent
cooperation of the Accounting Officers to ensure accountable
and transparent spending of public funds. We are however
concerned with the item remuneration where subdivision
overspending is not curbed sufficiently.

• Programme 4: Procurement. The main purpose of this

programme is to administer the Tender Board Act, whose
primary objective is to regulate the procurement of goods and
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 services. The programme activities comprise streamlining of
tender processes and providing secretarial services to, among
others, improve efficiency of the Tender Board and promote
local content of tenders. A total of N$4.375 million is requested
for this programme during 2010/2011.

An achievement to be highlighted here is the amendment of

the Tender Board Act with stronger provisions to maximise
benefits to the local economy, and strengthen participation of
BEE and SME entrepreneurs.

• Programme 5: Asset and Liabilities Management. The purpose

of this Programme is to manage the risks associated with short
and long-term borrowing or lending and administer the law with
respect to the management of Government assets. The
programme activities embody debt and liquidity management,
regulation of Government assets management, oversight of
SOE’s financial performance and provision and management of
subsidies to SOEs. A total of N$550.533 million is requested for
this programme during 2010/2011.

On this point, I would like to mention some of our main

achievements: dividends from SOEs have increased from
N$173 million in 2008/09 to N$306 million in 2009/10. We
have already announced that henceforth, all SOEs are to operate
according to performance agreements between the central
government agencies or Votes and the SOEs under their

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supervision. This would result in realisation of value for money,
more transparency, identification of possible risks and their
management within operations of SOEs. Moreover, government
will be able to hold managers of SOEs personally liable and
accountable for non-performance. We are thus counting on the
cooperation of accounting officers of all Votes to facilitate the
speedy implementation of these reform initiatives.

Concerning past performance against Ministerial Targets

within this programme, debt as ratio to GDP fell from 18
percent in 2008/09 to 15.1 percent in 2009/10, and the target
of keeping it below 25 percent was achieved. In fact, the debt
to GDP ratio averaged 21.4 over the 2006/7 to 2008/9 MTEF
period, mainly on the back of bold fiscal consolidation. Fiscal
consolidation involved the implementation of the Sovereign
Debt Management Strategy (SDMS) which reduced the cost of
borrowing, especially from external sources by prepaying
expensive foreign loans.

Total sovereign guarantees as a percentage of GDP for the

fiscal years 2006/07-2008/09 are still within target,
remaining below the benchmark of 10 percent of GDP.
Government-issued guarantees show a downward trend and fell
from 8.6% of GDP in 2006/07 to 4.2% of GDP in 2008/09. The
reduction is attributed to the repayment of loans by creditors
with guaranteed borrowing and a strong reduction of defaulted
loans.
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• Programme 6: Medical and Statutory Pension Scheme. The
purpose of this programme is to assist Public Service Employees
Medical Aid Scheme members and their dependants in meeting
medical aid expenses. The programme activities consist of
PSEMAS administration, managing pension of judges and
administration of pension guarantee payment to some Members
of Parliament and other Office Bearers. A total of N$1.049
billion is requested for this programme during 2010/2011.

We are currently reviewing the benefit structure alongside

the Office of the Prime Minister, and improving our claims
administration so as to avoid any abuses of the system.

• Programme 7: Coordination and Support Services. The

purpose of this programme is to provide administrative support
to the Vote’s programmes and to ensure proper financial
management, optimal deployment of resources and capacity-
building. Its activities entail, among others, Staff training &
development, general administrative support services,
acquisition and maintainance of IT equipment and systems,
implementation of Ministry capital projects, risk management
and coordinating the fight against HIV and AIDS. A total of
N$379.850 million is requested for this programme during
2010/2011.
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Lastly, I would like to highlight our success in meeting our
ministerial budget deficit target, by achieving three consecutive
budget surpluses in the period 2006/7 to 2008/09. In 2009/10, a
smaller than forecast budget deficit of 1.7 percent was recorded..

Overall, the programmes are aimed at improving fiscal policy

formulation and management of public finances. The successful
implementation of these programmes will contribute immensely to the
attainment of the national development objectives as outlined in
NDP3.

Further details on the specific outputs of each programme and its

commensurate activities are provided in the budget documentation
laid before this house.

However, Honourable Speaker, Honourable Members, I am apt to

stress here that the output of all the programmes under Vote 09
impacts on the lives of all Namibians, in one way or the other. We
have taken utmost care to design the contents of these programmes
and ensure their outputs can improve the welfare of our people in a
meaningful manner. The economic and fiscal policies that are
developed in the Ministry in consultation with various stakeholders,
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which are implemented by the public and private sector, are an
important ingredient to the functioning of our economy and the
revenue our economy can deliver to improve socio-economic
development in Namibia.

For that reason we are vigilant in finding dynamic solutions to

economic challenges and developments globally, regionally and
domestically. This goes along with commensurate research of a
specific situation, advancement of in-house skills and concerted
efforts to improve the public systems infrastructure and administrative
procedures of all areas of the Vote’s mandate, notably policy matters,
revenue, expenditure, procurement and assets and liabilities
management. I wish to highlight that infrastructure is being put in
place to facilitate electronic funds transfers for incoming and outgoing
state funds, a process that will be implemented gradually. Measures
are underway to ameliorate the public procurement process in general,
to promote local content and job creation, and strengthen the
transparency of the bidding process.

With the on-going reform efforts, we are on the right track. However,
mitigating socio-economic and financial stability risks and managing
economic crisis should not be the task of government alone. Rather,
we are calling upon all stakeholders, businesses and citizens in their
personal capacities, to contribute to an economic system which is able
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to convert opportunities into sustainable ventures and thereby address
existing and future challenges of our country in a pro-poor, pro-
growth manner. After all, it is the private sector which is the engine of
growth and job creation. The public sector acts to lubricate the
functioning of that engine by nurturing a business environment
conducive to private sector operation. The global economic crisis
which ravaged the World’s developed and developing economies
might have dissipated. However, the crisis has not disappeared. The
current unfolding events in Greece and the Eurozone unveil how
excess public debt bubbles could burst into a crisis of regional and
global proportions. Such events reveal the fragility of the economic
recovery path and post a clarion call for fiscal prudence over the
current MTEF. On Vote 09’s part, we are continuously striving for a
public finance system that delivers results and value for money.

I. CONCLUSIONS

Honourable Speaker,

Honourable Members of Parliament,

The total envisaged budgetary allocation for Vote 09 amounts to N$

2.650 427 billion. With these few words I request the Honourable
Members of the House to approve the ceiling, the programmes and

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the activities of Vote 09 for the financial year 2010/11 and provisional
ceilings for 2011/12.

I thank you!

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Annex I: Summary programmes, activities and costs for Vote 09: 2010/2011 – 2012/2013
MTEF

Programme Programme Total MTEF MTEF Main Focus Area

Code Name Budget Projections Projections
Requested for 2011/12 for 2012/13
in 2010/11

01 Economic N$ 2.841 N$ 3.337 N$ 3.399 Macroeconomic analysis,

Policy Advice million million million financial programming and
economic/fiscal policies
research

02 Revenue N$310.675 N$ 351.438 N$ 565.854 Tax and customs laws

Management million million million administration and
optimising revenue
collection
03 Public N$ 353.404 N$ 293.281 N$ 346.355 Budget planning,
Expenditure million million million expenditure
Management controls,contingency
allocation and reporting
04 Procurement N$ 4.375 N$ 6.003 N$ 6.855 Administration of public
million million million procurement
05 Asset and N$ 550.533 N$ 295.833 N$ 288.223 Fixed, non-fixed assets and
Liabilities million million million liabilities management as
Management well as oversight of SOE
financial performance
06 Medical and N$ 1.049 N$ 1.178 N$ 1.472 PSEMAS administration,
Statutory billion billion billion judges / pension scheme
Pension administration and arrear
Schemes payment to MoOPB Pension
Fund
07 Coordination N$ 379.850 410.578 375.812 All administrative, Human
and Support million million million Resources and development
Services projects management
Total 2.650 2.539 billion 3.059 billion
billion
Source: Ministry of Finance

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