President to Scrutinise Price Mitigation Recommendations

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By Petronella Sibeene

WINDHOEK

Political decisions aimed at relieving Namibians of biting food and fuel prices are ready and President Hifikepunye Pohamba will consider them before implementation.

“I am told the committee has finished its work and now that I am back, I will get the report that will direct Government on the course of action to be taken,” Pohamba told New Era at the Hosea Kutako International Airport on Friday morning upon his arrival from Italy.

Last month during the Cabinet retreat, the Office of the Prime Minister was tasked with investigating appropriate intervention measures that would mitigate the impact of rising fuel and food prices.

Prime Minister Nahas Angula also confirmed to New Era that the report was ready and that it would be submitted to the President.

“I want to assure the Namibian population that the Government has not been doing nothing. We have embarked upon work that would lead to action,” the President said.

He added that soaring food and fuel prices are of great concern to leaders the world over. The issue formed the centre of discussion during the recently ended World Food Security conference in Rome, Italy.

Pohamba said, “All leaders are willing to find a solution to the problem of the current high food and fuel prices in developing countries.”

One such solution, the President said, is through technical and financial support to developing countries. This will enable them to effectively engage in food production.

Despite the conference discussing solutions to the current crisis, it could not come up with a timeframe for implementation.

The President said the other main issue discussed by world leaders was the competition between food production for human consumption and that of bio fuel.

According to Pohamba, food and fuel are essential products and without them, there will be no meaningful development.

“Both food and fuel are essential for human survival and without fuel, it is difficult for people to engage in full food production because fuel is needed to run the agricultural machinery,” he added.

Skyrocketing food and fuel prices in Namibia, like any other part of the world, have resulted in calls for Government to intervene lest the poverty situation in the country worsens.

Earlier, Angula told New Era that the Government could exclude consumers from paying Value Added Tax (VAT) on some products as part of the many options under consideration to aid debt-pressed Namibians.

But the Acting Director of the Namibian Economic Policy Research Unit (NEPRU), Klaus Schade, in an opinion piece, argues that although the 15 percent VAT on some food items could be scrapped, the final consumer has to bear the tax, while producers can reclaim VAT paid on inputs from the Receiver of Revenue.

He also says VAT exemption is likely to be there in theory because in practice, there are always leakages along the whole value adding chain, as suppliers could always try to increase their profit margin, so that the final consumer benefits usually by less than 15 percent, if at all.

He said it would be possible (for government) to identify products that account for a larger proportion of food expenditure of the poor by analysing the National Household Income and Expenditure Survey data.

However, whatever products are selected, the beneficiaries of this tax relief are the people who account for most of the consumption and these are the people who can afford to buy these products – the wealthy in society.

Undoubtedly, at least some of the vulnerable households will also benefit but to a far lesser extent depending on their consumption basket, he said.

Should the Government look at subsidies, Schade says these do not have a reputation for being an efficient intervention measure in terms of achieving the intended objective.

“Subsidies result in market distortions and lead to less efficient allocation of resources. Again, it is doubtful that the consumer will benefit to the full extent from subsidies provided to producers and/or retailers,” he said.
Artificially, low prices through subsidies on some products in Namibia can well result in these products being sold on neighbouring markets because of a high profit margin.

He said, “In addition, the Government would need to decide whether to provide a fixed amount as subsidy for a certain product – which would provide only for a once-off relief to the consumer – or to set a price limit and subsidise the difference between the set price and the actual market price.”

He said, “With tax exemption, the beneficiaries are not necessarily the neediest but the ones who consume most of these products.”

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