Download Progress Report on parameters under The Minister of Finance

REPUBLIC OF NAMIBIA
MINISTRY OF FINANCE
Progress Report on parameters under
The Minister of Finance Performance Agreement
2015/16
(April - December 2015)
Submitted by:
Hon. Calle Schlettwein, MP
Minister,
Ministry of Finance
28 January 2016
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2015/16 Performance Agreement- Progress Report (April – December, 2015)
The Office of the President introduced the Performance Agreement System whereby all Ministers
are required to submit Annual Progress Reports on the achievements made with respect to the
milestones in the Performance Agreements.
This Progress Report covers the achievements realized against the set targets and Ministerial
objectives for the period of April – December, 2015. The Ministerial objectives have been
cascaded to all levels of the Ministry, including annual plans of the various directorates, as well as
performance agreements for managers and general staff. It is against this backdrop that the
Minister, through the Rt Honourable Prime Minister, is submitting this Progress Report to His
Excellency, the President for consideration and evaluation.
The Report specifies the ministerial commitment as it appears in the Performance Matrix, the set
targets and achievements recorded in respect of each target. A summarized Performance Matrix of
quantifiable indicators is annexed. Additional information is also provided where relevant.
In the Performance Matrix, fifteen (15) Ministerial Commitments are summarised and
achievements specified. The following is a description of the progress to date:-
[1] Ministerial Commitment: Oversee public finance management reforms to ensure
effective implementation of public finances
There are three (3) targets set for this commitment.
Target#1 Two (2) additional modules integrated into the IFMS by March 2016. This target is fully
achieved with the Budget Module having been developed and partially tested as at December 2015.
With the automation of the budget estimates this will now be directly linked to the IFMS, enabling
the monitoring of expenditure on a program and activity level. The full testing of this innovation
will be finalized by end of March 2016.
Substantial progress has been made with respect to a second initiative with respect to real time
integration of the payments above N$5 million into the IFMS – a review and advisory mandate
related to this initiative is due to be completed in January 2016, and following this the
implementation phase shall commence.
Target #2: Production of Government Accounts by the 30th September 2015. This target was
achieved. As per the State Finance Act of 1991, the 2014/15 Government Accounts were submitted
to the Office of the Auditor General on the 30th September 2015.
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Target#3: 70% progress for the finalization of the Public Finance Management Bill. As at the end
of December 2015, the first Layman’s draft was completed, thus fully achieving the set target. An
advisor has been recruited in the Attorney General’s office. The draft Bill will be scrutinized
legally and tabled before Cabinet by March 2016. The Office of the Attorney General has now
pledged support to the drafting of this Bill. It is expected that through these initiatives the rate of
progress regarding this initiative shall improve.
Additional Target: Public Private Partnership Bill approved by Cabinet and CCL by December
2015. This target was achieved. The PPP Bill was presented to the Cabinet for a principal approval,
and subsequently presented to and approved by the CCL during their meeting on 29 October 2015.
The Bill is planned to be submitted to the legal drafters in the present quarter of Jan-Mar 2016.
[2] Ministerial Commitment: Ensure prudent macro-economic stability and sustained
economic growth
There are six (6) targets under this commitment whose progress is as listed below
Target#1 Total debt stock should not be more than 32% of GDP. The Ministry undertook a MidTerm Budget Review for the year 2015/16.One of the results of the review was the revision of the
total revenue downwards and an upward revision of the GDP, while total expenditure remained
unchanged. Consequently, the budget deficit rose from an estimated 5.3% to 6.8%. The impact of
these revisions on total debt stock is a nominal increase of 1.7% from the baseline of 29.3% to
30.0% as a ratio to GDP. This ratio is within the set target.
Target #2 Inflation should be below 10%. As at the end of December 2015, Annual Inflation was
estimated at around 3.7%, well within the set target.
Target #3 GDP growth rate at 5.5% in 2015 As at December 2015, the annualized GDP growth
rate for the current fiscal is estimated to be around 4.3%, which is lower than the target of 5.5
percent. Thus, it is only about 80 percent of the target is likely to be achieved. The slower projected
GDP growth is largely due to external factors to impacting on Namibia as a small and open
Namibian economy, mainly lower global economic growth, lower commodity prices, but also the
prevailing drought and the impact of foot to mouth disease outbreak in the agricultural sector. It is
expected that the GDP growth outturn for the full financial year will be close to the prevailing
estimate of 4.3 percent.
Target #4 Improve foreign reserves from 1.5 month import cover to 3 month import cover. The
high value of imports continues to be dominated by machinery and mechanical appliances, fuel,
imported motor vehicles and consumer goods. These imports contributed to the deficit in the
current account for the country. As at the end of December, the stock of international reserves
increased to about 3.4 months of imports cover due to intervention measures to support the reserves
and protect the sovereign credit rating. In particular, this substantial increase in foreign currency
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reserves was attributed to the part of the proceeds (USD 300m) of the recent Eurobond issuance
that was allocated to boost the stock of reserve and asset swap arrangements with GIPF.
Target #5 Contain interest servicing costs at below 6.6% of government revenue. It is estimated
that the interest servicing cost on government debt as at December 2015 stood at 5.2 percent of
government revenue, thus meeting the set target. The sharp depreciation of the ZAR/NAD against
major currencies is, however, exerting pressure of debt servicing, thus contributing to an effective
increase in servicing cost of foreign debt. Namibia however continues to have very manageable
debt servicing costs; governments of several comparable developing economies have interest costs
of close to 10% of fiscal revenue.
Target #6 Contain Contingent liabilities at or below 6.5% of GDP. Contingent liabilities can be
in the form of guarantees, letters of credit, letters of comfort, etc. During the period under review,
very minimal new contingent liabilities were agreed to. Consequently, along with the impact of
increased GDP base in the current fiscal, the value of contingent liabilities as its proportion stands
at close to 4%, which is well within the set target.
[3] Ministerial Commitment: Strengthen and improve an outcome based programme budget
system
This commitment is to be fulfilled by the attainment of four (4) set targets.
Target #1 Revised template and evaluation framework by 31 March 2016. This target will be
reached by March 2016. To date, half of the target is met, with the draft template developed and
consultation with O/M/As held.
Target #2 First Mid-Term Budget Review Report tabled in Parliament before end of October
2015. The maiden Review was undertaken and completed, thus fully meeting the target. While
work towards finalization of the mid-term budget review was concluded by October 2015, this was
tabled at the National Assembly in early November 2015. What is crucial to report is that the
review was successfully conducted being the first of its nature in Namibia. The review facilitated
in reassessing the revenue estimates and efficient reallocation of expenditure budgets in view of
priority initiatives and up to date spending patterns.
Target #3 Funds tracking survey for one Vote conducted. Measures have been put in place for the
work to be concluded before the end of the financial year. About one-quarter of this target is
completed, with a development partner being identified to undertake the survey by the remainder
of the financial year. The related activity that was carried out was the identification of 9 non-core
budget items and the corresponding review of the amounts allocated to them. This exercise resulted
in substantial savings, which were re-allocated to priority activities of the Government, through
the amended Appropriation Act.
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Target #4 Appropriation Bill tabled in the National Assembly not later than the 31st March 2016.
As at December 2015, Ministerial and technical budget hearings as well as presentation of the
proposed budget to the Cabinet Committee on Treasury were carried out. CCT and Cabinet
(deliberative cabinet) have recommended the budget and fiscal stance. The Fiscal Strategy
document that informs the preparation of the budget was compiled by December 2015. It is
envisaged that the target will be met and fully on track as planned and required by the statute.
[4] Ministerial Commitment: Promote global, continental and regional economic integration
There are two (2) targets that will give effect to the fulfilment of this commitment.
Target #1 Customs and Excise Amendment Bill approved by Cabinet and CCL by July 2015. The
target was met and the Layman’s Draft Bill has been submitted to the Ministry of Justice for further
processing, thus fully meeting the target set for this period. These proposed (‘priority’)
amendments are aimed at aligning the current provisions in the Customs and Excise Act, 1998 to
international Customs Instruments such as the World Customs Organization’s Revised Kyoto
Convention on the Simplification and Harmonization of Customs procedures, (WCO RKC, 1999)
and to cater for new technological advancements. It is expected that the Draft Amendment Bill
will be certified and ready for tabling in Parliament during its next Session that commences in
February 2016.
A more comprehensive review of the Act, with the purpose of harmonizing customs laws
pertaining in the SACU Common Customs Area has been undertaken in parallel and the Draft is
at 85%. It is envisaged that a final Layman’s Draft Bill will be shared with stakeholders for
comments and inputs during the last Quarter (January –March) of FY 2016.
Target #2 One Stop Border Post Agreement between Namibia and Botswana signed by November
2015. Two key documents relating to the establishment of a one-stop-border-post between
Namibia and Botswana have been developed (as an agreed SACU pilot exercise), namely a
Bilateral Draft Agreement between the two customs authorities and a Layman’s Draft Bill which
has been considered by CCL. As directed by the CCL, the Office of the Attorney General has been
tasked with finalizing the legal framework. It is envisaged that the draft Bill will be tabled in
Parliament during its first session commencing in February 2016.Thus, about 95 percent of the
target has been achieved.
Another related activity carried out under this commitment is the hosting of the SACU Summit in
December 2015 that resulted in the Heads of State and Government re-affirming their commitment
to SACU and directed the Council to resuscitate the full functioning of all SACU Institutions to
ensure the implementation of the approved SACU Work Programme.
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[5] Ministerial Commitment: Review existing legal regime and policies to reform financial
sector so that the sector serves the interests of Namibia better
There are two (2) targets under this commitment
Target #1 Micro Lending Bill tabled in the National assembly by November 2015. The Bill was
approved by CCL and submitted to the Ministry of Justice for certification. The certification
process has not been finalized by November 2015. This progress constitutes about 80 percent of
the needed action, which was the set target. It is expected that the Bill will be certified by March
2016.
Target #2 Domestic asset Requirement Regulations 90% reviewed by March 2016. In the review
period, consultations with Namfisa and industry have commenced on the review of domestic asset
requirements, thus meeting about 75 percent of the target. The remaining set of consultation and
the formulation of the Regulations will be completed by March 2016 during Jan-Mar 2016 period.
Additional target: Regular meetings with the financial sector representatives especially those
financial institutions that are under the auspices of the Minister of Finance. Several consultation
meetings have been held with various institutions, industry players and stakeholders. This includes
regular meetings with SOEs under the purview of the Ministry.
[6] Ministerial Commitment: Provide leadership and take full responsibility for the
ministry’s results. Further support the leadership and staff of the ministry to achieve its core
functions.
There are two targets to be attained under this commitment.
Target #1 Quarterly review management meetings held. As at the end of December 2015, three
management meetings as well as weekly top management meetings were held in line with the set
target and work programmes. One of the key agenda items of the management meetings has been
to review progress on planned departmental annual targets and related guidance as needed.
Target #2 Bi- Annual General Staff Meetings held. During the period under review one general
staff meeting was undertaken. The second such staff meeting is planned for the month of February
2016. This parameter shall be achieved by the end of the financial year.
[7] Ministerial Commitment: Ensure broad-based economic empowerment of Namibians
and local sourcing of goods and services
Two (2) targets are set for the accomplishment of this commitment.
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Target#1 100% progress towards the enactment of the Procurement Bill by December 2015. This
target was achieved, with the approval of Public Procurement Act by the Parliament. As a further
step, provision of trainings for the implementation of the Act also commenced in November 2015.
Target #2 Gazetting of the Procurement Regulations gazetted by February 2016. The drafting of
the Regulations is completed. The Regulations will be gazetted in February 2016 as expected, thus
fully meeting the target.
[8] Ministerial Commitment: Promote the Whole of Government Approach to the
implementation of the national development programmes and projects.
This commitment is to be attained by the execution of one target.
Target# 1 Quarterly inter-ministerial/institutional meetings held. Monthly CCT meetings are held,
with joint CCT and CCTD also mainstreamed. Ministerial consultations have been held for both
the Mid-Year Budget Review and the 2016/17 Budget and MTEF. Other consultations with
O/M/As are undertaken on a needs basis. This arrangement has contributed to the meeting of the
set target.
[9] Ministerial Commitment: Engage and listen to the voices of civil society, particularly
grassroots organizations with the ultimate goal to improve the living standards of Namibians.
Three (3) targets were identified for this commitment.
Target#1 10 budget stakeholder’s consultations held. After the tabling of the 2015/16 Budget 7
budget stakeholders consultations were conducted. Of these, five took place in Windhoek, One in
Oshakati and another in Walvisbay. A total of three stakeholder consultations were also undertaken
prior to, and after the tabling of the Mid-Year Budget Review, thus meeting the set target.
Target #2 Two (2) public hearings achieved. Three different sets of public hearings were
undertaken in the review period, thus meeting the set target. These were in regard to consultations
with the non-bank industry segments during the drafting of the standards and regulations under the
envisaged FIM Bill; public engagements on the Public Finance Management reforms as well as
engagements on the development of financing instruments for SMEs.
Target #3 Budget translated in local indigenous languages and published. The Citizen’s Budget
for the 2015/16 Budget is translated in seven (7) local vernacular languages and booklets were
distributed through the print media.
[10] Ministerial Commitment: review tax policy and administration to ensure a fair and
broad tax system, efficient revenue collection.
Five (5) targets were agreed to be realized to give effect to the attainment of this commitment.
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Target #1 100% completion of the Revenue Agency Layman’s Bill and its submission to Cabinet
by March 2016. The Revenue Agency Policy was approved by Cabinet in November 2015 and the
Layman’s Bill is planned to be submitted to Cabinet in February 2016, thus fully meeting the
target.
Target#2 Income Tax and VAT Amendment Bills tabled in the National Assembly by December
2015. This target was successfully achieved, not only the Amendment Bills tabled in Parliament,
but they were also enacted into laws in December 2015.
Target#3 Tax proposal for export taxes tabled in the National Assembly. During the review period
the draft ‘proposal for export taxes’ was prepared and submitted to the CCL and legal drafters. The
CCL and the legal drafters recommended, through various interaction with the MoF, provisions
for processes for the introduction and collection of export taxes. It is envisaged that in the Jan-Mar
2016 period the processes for introduction and collection of export taxes shall be finalized and the
certification of the Bill will be finalized. To date, about 80 percent of this target has been
completed.
Target #4 Tax Policy aimed at curbing illicit tax evasion and tax avoidance developed by the end
of the financial year. In the review period investigative activities were undertaken in order to take
stock of the current situation with respect to observed instances of tax evasion / avoidance. Cabinet
approval has been secured for Namibia to joint International Tax Cooperation initiatives. Given
the specialized nature of these areas of tax policy, technical support will be sourced from this
cooperation arrangement to develop a robust domestic policy and administrative arrangements.
Thus, about half of this target has been met during the remaining period.
Target#5 100% progress with respect to the automation of tax returns and collections. The
implementation of the Integrated Tax System project is progressing well with the preparatory
process for pilot testing having commenced in December 2015. The process of testing is
anticipated to conclude by mid-2016. Automation of tax returns will form part of the tested
components. The system is expected to go live in 2017.
Other developments aimed at improving collections were the introduction of speed-point machines
at the cash offices, the non- acceptance of personal cheques except where they are guaranteed by
the local commercial banks and the speed adopted to clear the backlog on assessment of the tax
returns.
[11] Ministerial Commitment: Improve the monitoring and management of fiscal and
financial risks.
This commitment is envisaged to be fulfilled by the attainment of two (2) targets.
Target #1 Annual Article VI Consultation Report submitted to Cabinet. This target was achieved.
Further progress was made with regard to the implementation of some of the recommendations
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contained in the Report, one of which was to ensure that the level of the stock of the international
reserve is boosted from the 1.5 months of imports cover to an acceptable level of 3 months of
imports cover. The other recommendation that was considered was the fiscal consolidation by
containing the growth in expenditure, the budget deficit and consequently the debt stock.
The Public Expenditure and Financial Accountability (PEFA) assessment carried out by the
African Development Bank in collaboration with various Government departments was another
related achievement as it pointed to many achievements by Government in the management of
public finance while highlighting also few areas of developments. The Report will be submitted to
Cabinet before the end of 2015/16 financial year.
Target # 2 Improvement in sovereign credit rating. Other important development that occurred
during that time which could serve as surveillance to fiscal and financial risks are the credit ratings
that were carried out during the reporting period. Both Moody and Fitch Ratings Agencies rated
Namibia with a stable outlook and Fitch has upgraded Namibia’s national rating on the back of
South Africa’s ratings downgrade. This reaffirmation of Namibia’s credit rating comes at a time
of subdued global and regional macroeconomic performance, and therefore is a positive outcome.
[12] Ministerial Commitment: Enter into performance target-oriented agreement with the
Deputy Minister and Permanent Secretary. Give political and facilitation to the
implementation of the performance agreement by the PS
This commitment has only one (1) target to give effect to its realization.
Target#1 Performance Agreement with DM and PS signed by October 2015 and are being
executed. The performance agreement between the Minister and Deputy Minister was finalized
and submitted. The performance agreement of the PS was signed by the Secretary to Cabinet and
noted by the Minister before October 2015, thus realizing the set target.
[13] Ministerial Commitment: Oversee the development and implementation of Customer
Service Charters in all key departments/directorates of the Ministry
There is one (1) target set for the realization of this commitment.
Target #1 8 functional charters launched in December 2015. All Directorates drafted their
Charters and these were sent to the Office of the Prime Minister for quality assessment before they
are launched, thus meeting about 95 percent of the target. The Charters are planned to be launched
before the end of March 2016.
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[14] Ministerial Commitment: Ensure that public officers suspected of engaging in corrupt
practices or any other irregular conduct step aside to pave way for independent
investigation.
There is one (1) target set for the attainment of this commitment.
Target #1 Mechanism for reporting official misconduct in place and fully operational. The
Ministry has placed suggestion boxes at offices where complaints/concerned can be deposited.
Alternatively, any misconduct issues can also be sent to the Human Resource Division. During the
period under review, nine (9) such cases where reported. All nine hearings were conducted and as
a result, three officials were suspended and two cases have been submitted to the Public Service
Commission. Three officials are prosecuted. In summary, the ministry treats cases of misconduct
seriously and has established processes for thorough and expeditious adjudication in such
instances.
[15] Ministerial Commitment: Perform duties assigned by the Constitution and other
relevant statutes diligently.
There is one (1) target set for the attainment of this commitment.
Target #1 The President is 100% satisfied that the Minister’s performance meets the Government’s
expectations. The above progress will assist the Minister to assess his performance and compile
his report to the President by the due date for assessment and outcome.
CONCLUSION
The Report highlighted areas of achievements, challenges as well as measures initiated to mitigate
the challenges.
There are four key areas of achievements. These relate to objective areas in respect of (i)
maintaining macroeconomic stability, (ii) policy interventions and structural reforms to optimize
outcomes, (iii) leadership and improvement of internal process and (vi) openness and stakeholder
consultation. Measures for macroeconomic stability have been maintained or improved, amidst a
challenging external economic environment. A commendable level of economic growth has been
achieved, with sustainable fiscal operations and relatively better price stability. Key policy reforms
have been achieved, particularly in the field of public procurement and tax policy with new
initiatives being undertaken. Staff engagement and monitoring of activities at all levels of
management have allowed for timely achievement of some of the targets. Active stakeholder
engagement has been pursued, especially in regard to budget and policy formulation. The maiden
introduction of the Mid-Year Budget Review is among the initiatives for improving public finance
management and a more participatory process.
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Challenges: The challenges experienced are mainly in regard to limited technical capacity,
especially in the areas of legal design and systems development. Legal reviews and drafting is
increasingly dependent on a limited critical mass of expertise of the Ministry of Justice. In some
instances, limited technical capacity within the Ministry would need to be supplemented by insourced external capacity. With regard to economic performance, external developments weigh on
the resilience of the domestic economy, given the decree of openness.
Measures to mitigate the challenges: Several measures have been initiated to mitigate the
impacts of the challenges experienced and optimize outcomes going forward. The Ministry has
instituted technical consultations with line O/M/As in order to facilitate timely progress on
activities. To the extent possible, scarce skills have also been sourced and paired with internal
capacity to drive the priority initiatives.
The report gives assurance that the Ministry has made substantial progress towards its strategic
targets, and is on course to achieve majority of these performance objectives. It also points on
areas for improvement going forward and matters on which guidance is due.
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