Budget on a plate 2019/2020 Presentation by PwC in collaboration - - PowerPoint PPT Presentation

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Budget on a plate 2019/2020 Presentation by PwC in collaboration - - PowerPoint PPT Presentation

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Budget on a plate 2019/2020 Presentation by PwC in collaboration with Standard Bank Namibia Safari Hotel and Conference Centre March 2019 Three-linked and Interconnected Fiscal Policy Actions 1 3 Growth 2 Stimulus Structural Reduced

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SLIDE 1

Budget on a plate 2019/2020

Presentation by PwC in collaboration with Standard Bank Namibia Safari Hotel and Conference Centre March 2019
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SLIDE 2 PwC Namibia Budget Review 2019/2020

Three-linked and Interconnected Fiscal Policy Actions

2

3 Structural Policy Reforms 2 Reduced Budget Deficit 1 Growth Stimulus Package: Agricultural, Youth, SME

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SLIDE 3 PwC Namibia Budget Review 2019/2020

Key Focus Areas

3

01

Enhanced infrastructure investment ( 42%), private sector participation

03 Core Spending on Social Sectors 02

Reduce non-core expenditure

04

Strengthens allocations to social safety nets
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SLIDE 4 PwC Namibia Budget Review 2019/2020

Debt Stock

4

48.9%

2018/19 N$87.5bn

N$96.3bn

2019/20 Debt Stock as % of GDP

52.3%

FY2021/22 FY2019/20

46.3%

FY2018/19

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SLIDE 5

2019 BUDGET REVIEW

Naufiku Hamunime

Achieving Growth and Fiscal Stability

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SLIDE 6

Government

Budget Rigidity High Public Debt Overreliance
  • n SACU
Fiscal Weakness Budget Deficit Challenges Facing the Fiscus
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SLIDE 7 Fiscal Weakness Challenges Facing the Fiscus

Public Debt

5 10 15 20 25 30 35 40 45 10 20 30 40 50 60 70 80 2012/13 2013/14 2014/15 2015/16 2016/17 Percent of GDP (%) Billions (N$) Domestic Debt Stock Foreign Debt Stock Total Debt as % of GDP

Budget Deficit

Debt threshold Source: Ministry of Finance
  • 9
  • 8
  • 7
  • 6
  • 5
  • 4
  • 3
  • 2
  • 1
1
  • 14
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2
2 2012/13 2013/14 2014/15 2015/16 2016/17 Percent of GDP (%) Billions (N$) Actual (N$) Deficit as % of GDP
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SLIDE 8 Budget Rigidity Challenges Facing the Fiscus N$11.9bn N$30.6bn 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Revised 2019/20 Projection 2020/21 Projection Percent of Total Expenditure (%) Personnel Goods and Services Subsidies and Current Transfers Interest Payments Capital Assets Capital Transfers

Expenditure by Subdivision

Source: Ministry of Finance Increase in Personnel Expenditure
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SLIDE 9 Overreliance
  • n SACU
Challenges Facing the Fiscus 5 10 15 20 25 30 35 40 45 5 10 15 20 25 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Revised 2019/20 Projection 2020/21 Projection Percentage of Total Revenue (%) Billion (N$) SACU Revenue (N$) SACU Revenue as % of Total Revenue

SACU Revenue

Source: Ministry of Finance
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SLIDE 10 PwC Namibia Budget Review 2019/2020

Revenue vs. Expenditure

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SLIDE 11 PwC Namibia Budget Review 2019/2020

Operational Expenditure

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SLIDE 12 PwC Namibia Budget Review 2019/2020

Comparison 2018/2019 to 2019/2020 (N$ millions)

12

01

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SLIDE 13 PwC Namibia Budget Review 2019/2020

Expenditure Allocation per Department 2019/2020 (N$ millions)

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SLIDE 14 PwC Namibia Budget Review 2019/2020

Expenditure Execution Rates

94.60% 87.40% 99.60%

0% 20% 40% 60% 80% 100%

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SLIDE 15 PwC Namibia Budget Review 2019/2020

Spending Priorities

15 Social Sector Allocation 49.3% Increase Development Budget Allocation by 42.2% Old Age Grants – Monthly Increase N$50

1 2 3 4 5

Public Safety Sector Allocation 21.7% Economic & Infrastructure Sector Allocation 19.2% – Road Capital Projects
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SLIDE 16 Priority Areas of Consolidation Reigning in Expenditure Quality Spending Revenue Mobilization Structural Reforms
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SLIDE 17 Reigning in Expenditure Priority Areas of Consolidation 5 10 15 20 25 30 35 40 45 10 20 30 40 50 60 70 80 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Revised 2019/20 Projection 2020/21 Projection Percentage of Total Revenue (%) Billion (N$) Expenditure (N$) Expenditure as % of GDP

Expenditure

Source: Ministry of Finance Incremental Wage Increases Natural Attrition Hiring Freeze Governments Measures to Contain Wage Bill
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SLIDE 18 Revenue Mobilization & Structural Reforms Priority Areas of Consolidation 50.8 56.7 56.6 57.7 61.3 50.8 58.6 56.7 58.3 59.9 10 20 30 40 50 60 70 2016/17 2017/18 2018/19 Revised 2019/20 Projection 2020/21 Projection Billion (N$) 2018/19 Forecast 2019/20 Forecast

Revenue

Source: Ministry of Finance Tying Project Funding to Development Plans Increased Level of Oversight e.g. Central Procurement Board Amendments to Public Enterprises Governance Act

Structural Reforms

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SLIDE 19 Turning the Fiscal Corner Priority Areas of Consolidation
  • 9
  • 8
  • 7
  • 6
  • 5
  • 4
  • 3
  • 2
  • 1
1
  • 14
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2
2 Percent of GDP (%) Billions (N$) Actual (N$) Deficit as % of GDP

Budget Deficit

10 20 30 40 50 60 20 40 60 80 100 120 Percent of GDP (%) Billions (N$) Domestic Debt Stock Foreign Debt Stock Total Debt as % of GDP

Public Debt

Debt threshold Source: Ministry of Finance
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SLIDE 20 Low Growth and the Fiscus 7.5 4.9 3 10.1 6.5 7.2 6 4.8 4.4
  • 0.9
  • 0.8
  • 0.1
  • 0.6
  • 0.2
  • 1.3
  • 1.7
  • 0.1
  • 0.3
  • 0.8
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

GDP Growth (%) Global Economic Outlook (%)

  • 4
  • 2
2 4 6 8 2015 2016 2017 2018 2019 World Africa Angola Namibia South Africa Source: IMF; Bank of Namibia; National Statistics Agency
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SLIDE 21 PwC Namibia Budget Review 2019/2020

Revenue vs. Expenditure

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SLIDE 22 PwC Namibia Budget Review 2019/2020

Tax Revenue vs. Non-Tax Revenue

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SLIDE 23 PwC Namibia Budget Review 2019/2020

Total Tax Revenue (N$ 58 billion)

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SLIDE 24 PwC Namibia Budget Review 2019/2020

SACU Receipts & Indirect Tax Comparison

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SLIDE 25 Low Growth and the Fiscus 7.5 4.9 3 10.1 6.5 7.2 6 4.8 4.4
  • 0.9
  • 0.8
  • 0.1
  • 0.6
  • 0.2
  • 1.3
  • 1.7
  • 0.1
  • 0.3
  • 0.8
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

GDP Growth (%) Global Economic Outlook (%)

  • 4
  • 2
2 4 6 8 2015 2016 2017 2018 2019 World Africa Angola Namibia South Africa Source: IMF; Bank of Namibia; National Statistics Agency
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SLIDE 26 Revenue Lines Under Pressure Low Growth & the Fiscus Source: Ministry of Finance 10 20 30 40 50 60 70 80 2018/19 2019/20 2020/21 Billions (N$) Revenue (2018 Proj.) Revenue (2019 Proj.) Expenditure (2018 Proj.) Expenditure (2019 Proj.)

Revenue vs. Expenditure Projections

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SLIDE 27 PwC Namibia Budget Review 2019/2020

Comparisons: Corporate Tax Rates

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Namibia Angola Botswana Zambia

04

Zimbabwe

35%

25.75%

32% 30% 22% 28%

South Africa

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SLIDE 28 PwC Namibia Budget Review 2019/2020

Comparisons: VAT Rates

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Namibia Angola Botswana Zambia Zimbabwe

16% 15% 15% 10% 12% 15%

South Africa

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SLIDE 29 PwC Namibia Budget Review 2019/2020

Namibian Economic Statistics

29 ANGOLA ZAMBIA ZIMBABWE BOTSWANA SOUTH AFRICA Tombua Cahama Caiundo Mavinga Luiana Kataba Sesheke Livingstone Tsau Orapa Ghanzi Kang Mamuno Tshabong Mafikeng Kuruman Springbok Bitterfontein Victoria West De Aar Kimberley Upington Gaborone

NAMIBIA

Kongola Rundu Opuwo Tsumeb Okakarara Khorixas Epata Omaruru Gobabis Aranos Maltahöhe Lüderitz Aroab Karasburg Walvis Bay Windhoek South Atlantic Ocean 50 50 100 100 150 Kilometers 150 Miles

NAMIBIA

Unemployment Rate 37% GDP Growth 1.0% Inflation at February 2019 4.4% USD: NAD Exchange Rate N$ 14.60
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SLIDE 30 Achieving Long Term Growth Export Basic Commodities 34% Unemployment (2016) Import 60% of Food Requirements
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SLIDE 31 Achieving Long Term Growth Source: National Statistics Agency

Percentage Contribution to GDP (%)

5.3 4 4.3 5.1 5 4.9 3.4 3.9 3.3 3.4 4.5 0.6 0.5 0.5 0.4 0.5 0.5 0.6 0.4 0.4 0.4 0.2 2.4 3.3 2.9 2.5 2.6 2.3 2.5 2.5 2.5 2.9 2.8 1 2 3 4 5 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Agriculture & Forestry Meat Processing Grain Mill and Other Food Products Trends in Agriculture & Food Production
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SLIDE 32 Achieving Long Term Growth

Opportunities Budget Sectoral Allocations FY18/19 (%)

Source: Ministry of Finance Growth in Agro Processing Access to Regional Market Angola 29 Million Botswana 2 Million South Africa 56 Million Zimbabwe 16 Million Zambia 17 Million Administrative 8% Economic 14% Infrastructure 7% Public Safety 22% Social 49%
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SLIDE 33 PwC Namibia Budget Review 2019/2020

Structural Policy Reforms

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1 2 3 4 5

Mid Year Budget Review PPP Legislative Framework Public Procurement Act Domestic Asset Requirements Energy Regulatory Authority Bill

6 7 8 9 10

Public Enterprise Governance Bill Witness Protection Act, Whistle Blowers Act 2nd Land Conference NEEEB Investment Promotion Act

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SLIDE 34 PwC Namibia Budget Review 2019/2020

Other Reforms

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Inland Revenue Reforms

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SLIDE 35 Bottlenecks to Growth Address Policy Uncertainty Procurement as an Empowerment Tool SME Development Regulatory Bottlenecks
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SLIDE 36 PwC Phasing out Preferential Tax Treatment - Manufacturers

1 2 3

Tax Proposals – N$ 400 Million – FY2020

36 Repealing EPZ Act - Special Economic Zones Fees & interests to NR – WHT paid

4 5

Charitable/Religious/ Educational with commercial activities – subject to be taxed Taxation of foreign income

6 8 7

Resident Dividend Tax = 10% Trust Taxing – Abolish conduit principle

9 10

VAT on income of listed asset managers

11 12

Fuel levy increase – 25c Sale of shares/cc membership in property company Vatable

13

Expansion of the export levy on agriculture, forestry, game & other mining products Increased threshold – tax deduction of pension & AF contributions (27.5% 150K N$) Disallow royalties / non-diamond mining
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SLIDE 37 PwC

Introduce export levy of 15% for timber

1 2

Tax Proposals (Newly Mentioned)

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Remove zero rating of sugar Increase export levy dimension stones from current 2% to max 15%

3 4

Lubricant oil levy N$1.80 p/ltr 5% Environmental levy primary cells / batteries Plastic carrier bags

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SLIDE 38 PwC

Thin capitalization rules

1 2 3

Tax Proposals (Previously Noted, Not Mentioned Again)

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Individual Tax: Lower bracket – 17% from 18%

4

Individual Tax: Higher brackets > N$1.5mil 39%, > N$2.5mil 40%

5 6

Betting and gaming activities – 37% Additional excise duty

  • n imports of tobacco

and alcoholic products No carry forward

  • f tax losses
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SLIDE 39 PwC Namibia Budget Review 2019/2020

Sin Taxes

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2019/20 Excise Duty effective 20 February 2019 Product Quantity 2018/19 Cost (N$) 2019/20 Cost (NS) Increase in (N$) dollars Spirits per 750ml bottle 61.30 65.83 4.54 Cigarettes per packet of 20 15.52 16.66 1.14 Sparkling wine per 750ml bottle 9.32 10.16 0.84 Fortified wine per 750ml bottle 4.91 5.27 0.37 Unfortified wine per 750ml bottle 2.93 3.15 0.22 Ciders & Alcoholic fruit beverages per 340 ml 1.62 1.74 0.12 Malt Beer (5% alcohol) per 340 ml 1.62 1.74 0.12

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SLIDE 40 Role of Private Sector Investment in Local Economy The Role of the Private Sector The Role of the State Public Private Partnerships
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SLIDE 41

Budget on a plate 2019/2020

Thank you