+264 61244 300 / 081 155 9775


This paper is a collaboration between the OECD Development Centre and the Economic Association of Namibia.

It charts the evolution of social protection provision and expenditure, locates social protection within the context of Namibia’s broader fiscal framework and proposes options for enhancing its impact without increasing public spending.

Access the full report on

Budget needs to address civil service and budget deficit

With the date of the tabling of the national budget confirmed for Wednesday, 13 March, 2019, economists have pointed out the bloated wage bill, under-performing public enterprises, including a review of the public sector, and the budget deficit as some of the most crucial aspects that Finance Minister, Calle Schlettwein, needs to address.

“Natural attrition does not address the real issue of a bloated civil service; trade unions demand salary increments for public sector employees and economic growth projections for 2019 do not indicate a reduction in the number of public servants. State of public enterprises and fiscal risks concerning their ability to repay debts (even public enterprises that are currently regarded as doing well could come under financial pressure); how to finance major infrastructure projects such as the expansion of the Hosea Kutako International Airport; how to reduce the budget deficit and public debts; what is being done to ensure that Namibia can repay the first Eurobond in two years,” economist Klaus Schade said these are some of the major aspects of the budget that Schlettwein needs to address.

However, Schade cautioned that reducing the wage bill cannot be done in the short-term but needs a medium-term, coherent strategy. In addition, he suggests that the privatisation or partial privatisation of public enterprises could be considered.

Schade, a research associate at the Economic Association of Namibia, further note that if domestic liquidity allows, borrowing locally should be prioritised as it excludes any exchange rate risk and it provides income locally in the form of interest payments. “Government could issue longer-term government bonds rather than short-term Treasury Bills to improve public debt management,” Schade, recommended.

Commenting on the budget deficit, Schade noted that there might not be sufficient liquidity in the local market which would force government to borrow abroad, if the budget deficit cannot be reduced.

This borrowing in turn could increase the country’s budget deficit which would most likely result in Namibia being downgraded by sovereign rating agencies, which would increase the cost of borrowing and hence statutory expenditure. A downgrade, Schade cautioned, could prevent some foreign investors from investing in the country.

“In the current economic climate, it is certainly not advisable to increase taxes, except for the annual increase in excise duties which is decided at the Sacu level. Hence, government needs to focus on controlling expenditure including subsidies to public enterprises,” said Schade.

He continued that Income Tax and Value Added Tax could come under pressure due to increased unemployment and hence reduced income and spending power.

“Revenue from diamond royalties and income tax from diamond mining companies could come under pressure due to expected subdued demand for diamonds in the two major markets – China and USA.  Likewise, Sacu transfers could come under pressure because of sluggish economic growth in South Africa compounded by recent load shedding,” Schade concluded.

Also weighing in on the expected budget, economist and Managing Director of Twilight Capital Consulting, Mally Likukela, pointed out that Schlettwein is navigating troubled waters, not of his own making.

“I would rather have him push back the date for a balanced budget than continue to cut his way to one as doing so continues to hurt the economy as it is the case right now. This year, more than ever before, his budget speech, which is expected mostly to focus on debt reduction strategies, will undoubtedly trigger politically polarized debates,” said Likukela.

He emphasised that, currently standing at more than 45 percent, the public debt has become unsustainable and he expects this to soon cause bond yields (higher interest payments) to rise and in the worst case, lead to a loss of confidence in the government, as already hinted by various rating agencies such as Moody’s and Fitch.

Then, to reduce fiscal deficits, Likukela suggests using a combination of policies at its disposal, but said a key factor is the timing of deficit reduction strategies.

“If the country is already in recession, as is the case for Namibia, it is much more difficult to reduce the deficit because fiscal consolidation can simply worsen the economic situation leading to lower tax revenues. Continuing with fiscal consolidation right now will be self-defeating. The best way to reduce the budget deficit is to aim for positive economic growth, but in the long-term evaluate government spending commitments and reduce spending to sustainable levels,” said Likukela.

Inflation pushes up food prices: EAN

WINDHOEK, 17 FEB (NAMPA) – Consumers have been paying more for food and non-alcoholic beverages as prices continued the upward trend, owing largely to the high inflation rate in January compared to December 2018.
This observation was made by the Economic Association of Namibia (EAN) in its review of the latest Consumer Price Index (CPI) released by the Namibia Statistics Agency.
The month-to-month inflation rate rose to 5.7 per cent in January 2019, up from 5.2 per cent in December 2018, while food prices increased by 6.1 per cent in January compared to 5.4 per cent in December.
Overall, the annual inflation rate dropped further to 4.7 per cent in January from 5.1 per cent in December and 5.6 per cent in November 2018.
It is, however, 120 basis points higher than in January 2018 (3.6 per cent).
In a media statement released on Sunday, the EAN said this marks the highest inflation rate in almost two years.
The main drivers of the high inflation are price increases for bread and cereals of 8.3 per cent in January after 7.9 per cent in December, and meat prices which rose slightly faster in January (3.6 per cent) than in December (3.5 per cent).
These two categories contribute almost 57 per cent to the total food price inflation.
Food and non-alcoholic beverages bear the second highest weight (16.5 per cent) in the consumption basket, as both alcohol and tobacco products contributed to the increase in the inflation rate from 5.9 per cent to 6.4 per cent for the category ‘alcohol and tobacco’.
The inflation rate for housing, water, electricity, and other services however continued to decline, reaching the lowest level since December 2015.
Prices for such services increased by 2.9 per cent in January compared to 3.1 per cent in December 2018 and to 2.7 per cent in December 2015.
Rental payments, according to the EAN, contributed 23.3 per cent to the total inflation rate and 82.1 per cent to the inflation rate for the category ‘housing etc.’
“Prices for rental payments increased by just 2.3 per cent, while prices for the maintenance of dwellings rose by 3.3 per cent in January 2019 up from 2.5 per cent in December,” the EAN statement said.
The EAN further warned that prices for basic food commodities will come under pressure in the coming months, as the current economic dry spell continue.
In addition, further price increases for alcoholic beverages and tobacco products can be expected this month with the annual increase in excise duties, the EAN noted.
The EAN further said despite upward price pressure in some categories, inflation is however, expected to remain well within the 3 per cent to 6 per cent band targeted by the South African Reserve Bank.
According to the statement, lower global oil prices contributed further to the lower inflation rate, which could positively impact some sectors.

Escalating Job Losses to Ripple Through Domestic Economy – Schade

The latest data from the Ministry of Labour, Industrial Relations and Employment Creation indicates that during the second half of 2018 close to 2 500 people were retrenched from 128 locally-based companies. The majority of companies cited economic reasons for letting their workers go while others mentioned restructuring and business closure as explanations for dismissing their employees as the domestic economy struggles to recover from a recession.

Local economist, Klaus Schade, noted that the data refers only to retrenchments reported to the ministry of labour. “Most likely, not all retrenchments are being reported. Therefore, the actual number will be higher. On the other hand, the tables do not provide information about jobs created, since they are not reported to the ministry,” said Schade.

Schade, a Research Associate at the Economic Association of Namibia, added that retrenchments in mining, mainly due to the termination of operations at the Langer Heinrich Uranium mine, and in construction, mainly due to the completion of the Neckartal dam, were expected.

“Factors such as increasing unemployment and rising inflation have an impact on the disposable income and therefore affect the wholesale and retail trade sector. The job losses in the sector are also not surprising. These three sectors account for the bulk of retrenchments,” said Schade.

He continued that in addition to the direct impact of job losses on the retail trade sector, closure of businesses and retrenchments have a negative impact on tax revenue and hence on the national budget. “Furthermore, the demand for other goods and services, such as transport services, financial services, intermediate inputs, etc., will decline when businesses close or scale down their activities and hence will ripple over time through the whole economy,” Schade cautioned.

Towards the end of 2018, New Era reported that nearly 1 700 people were retrenched between October 2017 and March 2018. This was confirmed by the labour minister Erkki Nghimtina.

“The Labour Act is currently being revised by a tripartite committee and suitable proposals addressing retrenchment may be considered for inclusion,” said Nghimtina at the time.

Another initiative, he said, is the improved enforcement of the labour law, which the Labour Commission has prioritised in terms of retrenchment-related dispute referrals to fast-track arbitrator/conciliation processes.

“Employers are requested to provide detailed information on retrenchments and the relevant provisions of the Labour Act, i.e. section 34, are strictly monitored,” said the labour minister.

 Furthermore, he said cooperation with other ministries, like the Ministry of Finance, requires a confirmation from the Labour Commissioner that the provisions of the Labour Act are complied with by companies before issuing tax directives permitting retrenchment payouts to be made tax-free.

Namibian Economy Expected to Improve in 2019


AFTER experiencing negative growth over the last 10 quarters, the Namibian economy is expected to rebound in 2019, going forward.

The Bank of Namibia (BoN) said in their economic outlook report for December 2018 that despite economic challenges, they are expecting the economy to recover to a positive growth rate of 1,5% in 2019 from a contraction of 0,2% in 2018.

The central bank observed that the main risks to domestic growth include a weak recovery in the country’s trading partners, and a slow recovery in international commodity prices, particularly for uranium.

According to the BoN, if Namibia was to encounter a slow demand for minerals from their trading partners such as China or France, then the country’s projected growth will be at risk, especially for the primary industry.

Based on the BoN’s predictions, the growth for the primary industry is expected to massively decline from 8,3% in 2018 to 0,7% in 2019.

However, overall growth in the secondary industry is expected to slightly improve to 2,2% in 2019 from 0,3% in 2018.

The tertiary industry has incurred negative growth of 1,4% in 2017 and 1,5% in 2018. However, the bank predicts that in 2019, the industry will incur a positive growth rate of 1,8%.

The slower growth in the primary industry is a result of the closure of one mine in the diamond sector. Growth for uranium is also expected to slow to 3,6% in 2019.

“Growth for the agricultural sector is expected to stabilise around 4% in 2019 and 2020,” the BoN stated.

Although the fishing industry was estimated to contract by 4,7% towards the fourth quarter of 2018, the central bank is expecting it to grow moderately by 1,4% in 2019.

Growth forecasts for the secondary industry are expected to expand by 2,2% in 2019 from 0,3% in 2018, from severe contractions of 6,7% in 2017 and 6,4% in 2016, respectively.

“The projected recovery in the secondary industries is expected to originate from an improved growth in manufacturing and lesser contractions in the construction sector,” the bank said.

Furthermore, the manufacturing sector is expected to expand further by 2,3% from growth rates of 1,7% and 1,3% in 2018 and 2017, respectively.

This expansion in 2019 would be supported mainly by grain mill products and beverages.

The electricity and water sector, on the other hand, is expected to decline slightly in 2019. However, construction is projected to gradually improve to a positive growth rate of 1,6% in 2019 from a contraction of 5,2% in 2018.

Even though the bank predicted the tertiary industry to incur positive growth of 0,3% in the economic outlook report of July 2018, the outcome is that the industry was projected to have contracted by 1,5% by the last quarter of 2018.

“The downward revision was mainly based on weak outcomes in sectors such as wholesale and retail trade, real estate and business services, transport and communication as well as the public sector,” the Bank of Namibia said.

Simonis Storm Securities said in their economic outlook for 2019 that although these sectors have experienced slower growth in 2018, they are expected to improve in 2019.

They added that despite adverse global developments which occurred in 2018, the local mining sector outlook for growth remains strong, with the real gross domestic product to grow by 1,1% in 2019.

A research associate at the Economic Association of Namibia, Klaus Schade told The Namibian that high production levels at the Husab mine would also benefit the mining sector to some degree in 2019.

Another economist, Mally Likukela, observed that 2019 will be less hard than 2018 as economic agents have found ways to survive and keep afloat.

He added that positive growth in Namibia’s trading partners would boost the local economy, and the usual economic activities that spring to life in the election build-up will spur the economy to some extent.

“Getting out of the woods will take longer, mainly because the balance sheets of most corporations and individuals were shattered severely, and the deeper-than-expected impact of the fiscal consolidation will further slow down the recovery process,” Likukela said.

He added that the growth rate would most probably remain flat, and inflation would hover around 5%.

Recovery in the international prices of commodities could help the mining sector, but the looming drought will work against it, he noted.

Fuel price decrease should not result in complacency

THE Economic Association of Namibia has cautioned consumers, oil producers and policymakers not to become complacent because oil prices are decreasing. Instead, they should continue embarking on more fuel-efficient transport, production equipment, and further move to electrical vehicles and equipment.

The EAN’s analysis comes after the mines and energy ministry on Friday announced that fuel pump prices will decrease by N$1 per litre for petrol and 40 cents per litre for all diesel grades, effective from 5 December 2018. This means fuel prices at Walvis Bay will now be at N$12,95 per litre for petrol; N$14,08 per litre for diesel 500ppm; and N$14,13 per litre for diesel 50ppm. The prices for the rest of the country will be adjusted accordingly.

In the EAN analysis released last Friday, research associate Klaus Schade said once consumers, producers, and policymakers use fuel-efficient transport, it will not only reduce Namibia’s dependency on oil imports, but would also support the country’s ‘Growth at Home’ strategy by harnessing the country’s natural resources such as solar, wind and biomass to generate electricity.

“Policymakers need to take the initiative to design a joint strategy to promote the use (and production) of electrical vehicles, not only in Namibia, but in the southern African region. Namibia and the southern African region at large are rich in lithium and cobalt, the main inputs into the production of lithium-ion batteries that power electrical vehicles. Instead of exporting the minerals as raw materials, policymakers need to design a strategy to add value to the minerals, and produce the batteries in the region,” he urged.

Schade added that the fuel price decrease is good news as it is providing the much-needed relief to Namibian producers and consumers who have to cope with the slow economic recovery and increasing inflation.

“It will ease the burden on the consumer during the upcoming festive and holiday season. The drop in fuel prices is more generous than the previous under-recoveries would have suggested. However, the current drop in oil prices highlights once more the volatility in the global oil market that is influenced not only by the performance of the global economy, but also by geopolitical factors such as the tensions in the Middle East,” the research associate added.

Mines and energy minister Tom Alweendo said fuel consumers in the country had to tighten their belts to cope with exchange rate uncertainties and the oil supply cuts introduced by the Organisation of Petroleum Exporting Countries (Opec) earlier in the year, which took full effect at the beginning of May.

“The ministry, through the National Energy Fund, is continually pulling in the same direction with the fuel consumers by ensuring that the full costs of oil supply are at no point passed on to consumers,” the minister said.


Download (PDF, 848KB)

The Economics Association of Namibia (EAN), the Namibian newspaper and Hans Seidel Foundation are hosting a National Conference on Inequality in Windhoek on the 5th of September 2018. To broaden perspectives on inequality, members of the public are invited to submit entries to a competition of photos that clearly and vividly depict the many realities and causes of inequality in Namibia as well as solutions.

All entries should be taken within Namibia ,in digital jpg format and each image being no larger than 5 mb. Entrants are limited to 3 (three) entries each which should be emailed to Photos can also be shared on Twitter using the Conference hashtag #InequalityConf2018.

The closing day for entries is 31 August 2018. Each entry should be accompanied by an emailed statement giving the name and telephone number of the entrant, the place and date where the photo was taken.

A selection of entries will be published in the Namibian and on Twitter (@EANamibia) and displayed at the conference venue. Winning entries will be announced at the conference on the 5th of September. The top prize will be N$5,000, with N$3,000 going for 2nd place, and N$1,000 for 3rd place.