Fresh from refusing to pump N$500 million of taxpayers’ money into the SME Bank for its continued existence, Finance Minister, Calle Schlettwein, warned on Thursday about stern measures to be taken on ministries and State-owned companies that abuse budget votes and then seek bailouts from Treasury.
The minister confirmed that the N$200 million that the SME Bank invested in South Africa cannot be repatriated. He said it was better to close the bank and use the current assets to settle liabilities.
Schlettwein, however, stressed that the Government still attaches great importance to small and medium enterprises (SME) funding.
The minister said this while addressing a wide range of issues at a media briefing in the capital, including the recent Fitch ratings, the state of the economy and the progress on Government contractual obligations.
Government has been tightening spending, against the backdrop of a slowing economy, which has in turn exposed a number of vices and lack of financial prudence in payments for road construction tenders, and those of the Government medical aid scheme, PSEMAS.
In the road construction industry, the Government has been forced to pay for projects that were not budgeted for, which forced Treasury to use money from the Road Fund Administration to pay invoices owed for road tenders.
The Government has set aside N$1,7 billion in the current budget to settle outstanding invoices arising from the previous year. Out of this amount, N$400 million was front-loaded for PSEMAS services in April this year.
Since then, a further payment of N$315,6 million was paid for these services, bringing the total spending on PSEMAS to N$715,6 million in the new financial year.
Schlettwein said N$181 million was paid out to service providers in the road sector and a further N$250 million was also paid out through a further arrangement with RFA.
“Some of the projects were over-committed,” he said, seemingly not too impressed about the fact that the Government was being forced to pay for projects not budgeted for.
“The law should be seen to take its course for those officials who negligently disregard the provisions of the law,” he said on Government officials violating the Finance Act and over-committing on projects.
Schlettwein disclosed that the N$3 billion loan received from the African Development Bank is now being used to settle outstanding payments for construction and medical companies.
He said outstanding payments for the medical aid fund have been reduced from three months to about 50 days.
Schlettwein said other departments with outstanding payments include the Government Garage and some State-owned enterprises.
He also disclosed that 30 medical entities were under investigation for false payment claims, while admitting that PSEMAS has loopholes, which are being mended.
Service providers have between 1 September and 1 October to sign new service agreements, after which the current contracts will expire.
The minister was also not happy with the current situation at the State broadcaster, Namibian Broadcasting Corporation (nbc), which has failed to pay obligations for workers’ medical aid and pensions. He said the money was allocated under the budget, and said using money for other purposes amounts to theft.
But NBC board Chairperson, Sven Thieme, told the Windhoek Observer that there was no mis-appropriation of funds on their part. He said the shortfall was caused by the N$200 million budget cut over the past two years.
Thieme said they were still working on a plan to settle the outstanding invoices with the company’s medical aid fund in the next four weeks.
“We are in the process of developing a plan now and we will have to find means of cost-cutting elsewhere in the shortest time possible and maybe within the next four weeks, we should implement the plan,” he said.
On the tax incentive scheme, Schlettwein said he was worried that not many people have taken up the Government offer. Of the N$4 billion owed to the Government in tax arrears and penalties, only N$242 million has been paid by those who owe the taxman.
“When the Incentive Programme lapses, the Receiver of Revenue will have to step up actions to recover these outstanding balances,” the minister said.
Schlettwein said the June 2017 ratings opinion by Fitch had recognised the materiality of the Government’s fiscal policy as implemented to date.
Commenting on the state of the economy, Frans Uusiku of Simonis Storm Securities said the reality of Namibia’s fiscal situation is that the country has historically placed a high reliance on SACU allocation with approximately 35 percent of budgeted revenue coming from the SACU pool in the past five years.
“Over the last five [financial] years (2010/11-2015/16), this reliance has become more strained due to the increase in the budget deficit by 166 percent,” he said.
On the up side, Uusiku said Namibia is expecting an additional increase in SACU receipts, amounting to N$19.5 billion for the 2017/18 fiscal period, which would ease pressure on the budget deficit and therefore support the fiscal consolidation cause.
“On the downside, the South African economy is trapped in a technical recession, which may imply a slowdown in South Africa’s trade with the rest of the world. This would also mean that the SACU revenue pool is likely to shrink next year,” he said.
The economist further said that Namibian consumers are under pressure, as evidenced by a declining trend in the importation of higher valued goods such as vehicles.