Lower taxes to boost Namibia’s competitiveness

07 Sep 2021

Lowering import taxes will reduce the cost of doing business and attract additional number of shipping lines and port calls at Namibia’s two ports.

While this leads to lower tax revenue, which is already under pressure, lower taxes would make Namibia more competitive. Theo Klein, Economist: Simonis Storm

 

Between 30 percent to 40 percent of Namibia’s exports are transported through ships. Photo Nampa

 

During 2020, Namibia received less vessel traffic as a result of lockdown related restriction globally. According to Simonis Storm’s economist Theo Klein, the lack of empty containers worldwide and blank sailings negatively impacted operations at Namibia’s ports, most notably on the exports of copper between 30percent and 40percent of Namibia’s total exports on average in recent months.

Warehouses in Walvis Bay were at full capacity, “but cargo could not be evacuated timeously due to reduced port calls by the shipping lines and container shortage,” according to Namibia Ports Authority (NamPort).

Some of the copper stockpile was shipped off by a bulk vessel in July 2021. “We can therefore expect higher exports in the trade statistics which will be released beginning of September. The situation is normalizing and both ports, Walvis Bay and Lüderitz are experiencing an increasing number of vessel calls,” he said.

Some West African countries lowered import taxes in order to attract additional shipping lines because import taxes form the largest component of import costs. Lowering import taxes will reduce the cost of doing business and attract additional number of shipping lines and port calls at Namibia’s two ports. While this leads to lower tax revenue, which is already under pressure, lower taxes would make Namibia more competitive. Given the social unrest in South Africa which led to the closure of Durban’s port, Namibia is more attractive given the lack of major social unrest and violence. Namibia has not followed suit and could consider doing this, Klein pointed out.

According to the Namibia Statistics Agency (NSA), the composite cargo index that consists of rail, road, air and sea cargo recorded a decline on a monthly basis of 15.0percent in July 2021 compared to a growth of 20.3percent registered in June 2021.

 

Tax

Additional volumes of ships and cargo flowing through our ports can lead to higher tax revenue despite import tax rates being lowered. The reason being that increased cargo volumes have greater potential to offset lower tax rates given the global supply bottlenecks currently being experienced. Lower import taxes also lead to lower consumer prices of imported goods, providing somewhat less upward pressure to inflation. NamPort will be able to handle additional cargo volumes due to the increased capacity at Walvis Bay’s cargo terminal. The terminal can handle 750 000 containers per annum, compared to its previous capacity of 350 000 containers per annum. It could well be that Namibia can benefit from higher volume growth in terms of vessels docking at Walvis Bay and this then offsets the effect of lower tax rates on public revenues, Klein added.

“Between 30percent to 40percent of Namibia’s exports are transported through ships from our two ports, whereas exports constitute about 6.5percent of Gross Domestic product (GDP). Conditions in the global shipping industry is definitely something worthy on our watchlist, given the sizeable contribution to our economy from exports. We do remain optimistic that due to increased mining production and normalized port operations, we can see growth to some measure in net exports,” Klein said.-phillep@nmh.com.na

 

SOURCE: Namibian Sun

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