The Bank of Namibia says the country faces a projected decline in Southern African Customs Union (SACU) revenue from N$28 billion in 2024 to N$21 billion in 2025.
Head of Investments at Simonis Storm, Max Rix, explained that the main contributors to the decline are global economic factors and shifts in SACU’s revenue-sharing formula.
“The projected decline is a stark reminder of Namibia’s vulnerability to external economic forces and internal structural challenges. This decline is driven primarily by the global downturn in commodity prices, particularly in the sectors that underpin SACU’s revenue calculations. Namibian exports, notably in mining and energy, have suffered from this downturn, reducing the overall revenue pool available for distribution among SACU members,” he said.
He also noted that adjustments to the SACU revenue-sharing formula have worsened the situation.
“Complicating matters further, adjustments in the SACU revenue-sharing formula have shifted the fiscal landscape in ways that magnify the impact on Namibia. This is not a marginal adjustment; it represents a substantial contraction that exposes the inherent risks of overreliance on external revenue streams,” Rix said.
The decline in SACU revenue is expected to have an immediate impact on Namibia’s national budget.
Rix explained that the government would need to make tough decisions about spending priorities, particularly in areas like social programmes and infrastructure.
He further warned that this could lead to fiscal instability as the prospect of increased borrowing to make up for the revenue shortfall also looms large.
“The prospect of increased borrowing to offset the shortfall looms large, bringing with it the spectre of fiscal instability and the long-term risk of unsustainable debt levels. In an economy where fiscal discipline is already a challenge, this contraction could force a rollback of essential services and social safety nets, further entrenching economic vulnerabilities,” he said.
To address these challenges, Rix emphasised the need for Namibia to diversify its revenue sources and strengthen its domestic fiscal base.
“To navigate this fiscal tightening, it is imperative that Namibia explores alternative revenue sources and enacts substantive policy adjustments. A critical step forward would be to strengthen domestic revenue mobilisation through an overhaul of the tax system. Improving tax administration, expanding the tax base, and reducing evasion are necessary, albeit politically sensitive, measures that could yield a more stable and predictable revenue stream,” he said.
Rix also highlighted the importance of economic diversification to reduce Namibia’s reliance on SACU transfers and argued that investing in sectors such as renewable energy, mining value addition and tourism is crucial for long-term sustainability.
“Economic diversification is not merely an option but a necessity. The government must invest in sectors that promise sustainable growth, whether through value addition in the mining sector, investment in renewable energy, or the promotion of agribusiness and tourism. Diversification will not only provide a buffer against future external shocks but also fortify the broader economic framework, reducing the fiscal risks associated with an overdependence on SACU transfers,” he said.
Rix emphasised that the projected decline in SACU receipts should serve as a catalyst for decisive action.
“It is a clear signal that Namibia must reform its fiscal architecture and diversify its economic activities to safeguard long-term fiscal stability and economic sovereignty,” he said.
