FINANCE

The Bank of Namibia (BoN) projects that the domestic economy will decelerate to 3.7% in 2024 and has attributed the slowdown to weaker global demand and slower growth in the primary industries. The bank, however, projects that gross domestic product (GDP) growth will improve to 4.1% percent in 2025 on account of increased activities in the mining and agriculture sectors.

Finance Minister Iipumbu Shiimi tabled a budget of N$100 billion, inclusive of N$3.2 billion in development projects funded through external loans and grants, as well as N$12.8 billion in interest payments for the 2024/25 financial year, in the National Assembly on 28 February 2024. This represents an increase of 12.4% from the revised estimates of the 2023/24 financial year.

State revenue collections of N$90.4 billion are estimated for the 2024/25 financial year. Customs and excise account for 34% of projected income, value-added tax (VAT) for 24%, individual income tax for 24% and corporate tax for 14%. The budget deficit is projected at N$8.9 billion in nominal terms, which is 3.2% of the gross domestic product (GDP) in the 2024/25 financial year.

The minister announced several tax policy and administrative reforms in his 2024/25 budget speech:

• The threshold for income tax on individuals will increase from N$50,000 to N$100,000.

• The non-mining company tax rate will be reduced to 31% effective in April 2024 with further reductions to 30% in April 2025 and 28% during the 2026/27 financial year.

• The VAT threshold will increase from N$500,000 to N$1 million in the 2024/25 financial year.

• A corporate tax rate of 20% for small and medium enterprises (SMEs) with an annual turnover below a predetermined threshold (still to be determined).

• The introduction of the Internship Tax Incentive Programme aimed at incentivising employers to enrol more interns by providing an additional corporate tax deduction. The total programme is expected to cost an estimated N$126 million.

Shiimi also announced that the Special Economic Zone (SEZ) bill would be tabled in the National Assembly during the 2024/25 financial year before the expiry of the Export Processing Zone (EPZ) regime in 2025. Incentives would include a corporate income tax rate of 20% with normal capital allowances, while value-added tax (VAT) would be zero rated.

With regard to the repayment of the US$750 million (N$14.3 billion) Eurobond, the largest single-day debt maturity in the history of Namibia, which matures on 29 October 2025, Shiimi said the government would transmit N$3.5 billion during the 2024/25 financial year and about N$2 billion of Southern African Customs Union (SACU) receipts in the 2025/26 financial year to the sinking fund to place the government in a position to retire two-thirds (US$500 million) of the Eurobond at maturity.

He said the remaining one-third of the bond (US$250 million) would be refinanced using the most cost-effective instrument in the 2025/26 financial year, cognisant of the prevailing high interest rate environment and the need to manage debt servicing costs. In this regard, consideration will also be given to the domestic markets as well as financing from development finance institutions (DFIs).

BUDGET TRANSPARENCY

Namibia has been ranked third on the African continent for its budget transparency by the Open Budget Survey for 2023. The country scored 54 out of 100 points for transparency (compared to 42 points in 2021) and 46 out of 100 for budgetary oversight (48 in 2021).

The survey, which is conducted biennially by the International Budget Partnership, measures budget transparency (public access to key national budget information), public participation (opportunities for public participation in budget processing) and budget oversight (the role of formal oversight institutions). Countries are scored on a scale of 0 to 100.

REPO RATE

The Monetary Policy Committee (MPC) of the BoN decided to keep the repo rate, which was increased to 7.75% in June 2023, unchanged at its June 2024 meeting.

The MPC said although the domestic economy continued to recover, challenges remained and while the international stock of reserves was adequate, subdued domestic credit growth was a concern. According to the committee, it was “wary of the recent deterioration in inflation, which could jeopardise the progress that has been made over the past year in containing inflation and safeguarding price stability.” The MPC added, “This policy stance will continue to safeguard the one-to-one link between the Namibian Dollar and the South African Rand and support domestic economic activity.”

INFLATION

Namibia’s annual inflation moderated from 6.1% in 2022 to 5.9% in 2023 and is projected to average 4.8% in 2024. The annual inflation rate for June 2024 decreased to 4.6% compared to 5.3% in May 2023. On a monthly basis, the inflation rate for June decreased by 0.2% compared to an increase of 0.3% in May 2024. The Namibia Statistics Agency (NSA) attributed the slowdown to price stabilisation in the food and non-alcoholic beverages categories, which make up 16.5% of the consumer basket. Inflation in this category decreased from 11.7% in June 2023 to 4.3% in June 2024, which has been attributed to price decreases in subcategories like bread, cereals and vegetables.

MOODY’S UPGRADE

Moody’s Ratings has maintained Namibia’s sovereign credit rating at B1 but upgraded the country’s rating from stable to positive. The ratings agency said that the positive outlook reflects Namibia’s improved growth prospects, which are supported by renewed investments in the mining and energy sectors, especially the nascent oil and gas and green hydrogen industries. The agency, however, warned that the future of these promising new industries remains “highly uncertain”.

NAMIBIA GREYLISTED

Namibia was greylisted by the Financial Action Task Force’s (FATF) Plenary on 23 February and placed under increased monitoring, due to concerns over remaining effective implementation compliance with international anti-money laundering (AML), combating the financing of terrorism (CFT) and counter-proliferation financing (CPF) standards.

Chairperson of the AML/CFT/CPF Council, Johannes !Gawaxab, said Namibia had made significant progress by addressing 59 of the 72 recommended actions. However, he pointed out that 13 action items within the domains of six national AML/CFT/CPF combating stakeholders remain outstanding, requiring urgent attention.

“Recognising the urgency of the situation, the National Focal Committee, comprising representatives from public and private sector stakeholders, will enable an Execution Plan to carry out the FATF’s prescribed Action Plan, and ensure that the outstanding action items are addressed timeously. This comprehensive approach ensures coordinated efforts to strengthen Namibia’s AML/CFT/CPF regime and restore international confidence in Namibia’s financial system,” !Gawaxab said.

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