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Iono - Behind the Bulletins

Capricorn Asset Management Budget Forecast 2017/18

If you, like us, are curious about what Minister of Finance Calle Schlettwein will have to say in today's presentation of the National Budget for the 2017/18 period, and what the tax implications for citizens and residents of Namibia will be Claudia Boamah, Economic Analyst at Capricorn Asset Management has a few ideas, here is her prediction for what we could see this afternoon:

OVERVIEW
 
According to the October 2016 Medium Term economic Framework (MTEF) the main agenda of the 2017/18 Budget can be summarized as pro-growth fiscal consolidation. This objective might seem like a paradox because in times of recession, it is rather fiscal stimulus and not tightening that is required to revive the economy. Consequently, greater emphasis will likely be placed on priority spending and improved revenue collection. Prevailing high interest rates are already exerting a contractionary force on economic growth (2.5% 2016 est.); therefore, disproportionate fiscal consolidation could extend the recession.
 
As a Namibian national policy, its objective would have implications towards the realization of the Harambee Prosperity Plan (HPP). The Solidarity Wealth Tax will surely be a prominent feature in this year’s budget as it addresses poverty eradication which is one of the objectives under the social progression pillar of HPP. The establishment of the independent Namibia Revenue Agency will not only enhance effective governance, another pillar of the HPP, but will address an issue closer to the fiscal policy which is efficient tax revenue collection. Commitment to other Harambee goals such as economic advancement and infrastructural development should reflect in expenditure allocation.
 
REVENUE
 
Revenue was estimated last at N$51.5bn, 12.4% (N$6.4bn) lower than the 2016/17 budget had projected. This disappointment was due to the effects of the drought, unfavourable commodity prices (uranium price lost 50% in value in January 2016), reduced government expenditure (construction slump), contractionary monetary policy and less Angolan commercial tourism on GDP growth. The lower growth in turn had implications for the highest contributors to revenue namely income tax, VAT and company tax which had to be revised down by N$4.3bn, N$23bn and 12.5% respectively. International tax revenue, yet another major contributor to revenue also fell severely short of estimates to N$14.1bn.
 
The medium term estimate for revenue in 2017/18 is N$54.6bn. In order to achieve this, the usual upward adjustments will be made with respect to sin taxes and fuel levies. The following proposals that were mentioned in the MTEF will also feature in this year’s budget:
 
* Wealth tax – Solidarity Tax and Capital Gains Tax
 
* Narrowed scope on exemptions and non-taxable items
 
* Introduction of the presumptive tax
 
VAT might be another avenue for revenue generation; however, it has implications for low-income earning households that might be counterproductive to the national aim of poverty reduction. Between widening the tax base, increasing certain taxes and instituting better tax collection mechanisms the 2017/18 revenue collected might put a dent in the deficit.
 
EXPENDITURE
 
There’s no question that policy makers have more control over expenditure reduction than they do over revenue generation in the interest of reducing the budget deficit. However, budget cuts will have to be strategically executed otherwise much needed economic growth will be delayed and that will in turn impede revenue generation and further increase the deficit. The 2016/17 expenditure estimate is 61.5bn
 
NAD while the forecast for 2017/18 is 59.9bn NAD. The MTEF suggests a cut amounting to N$10bn this financial year which would bring expenditure to 31% of GDP from a current estimate of 38.8% in 2016/17.
 
The expectation for the 2017/18 budget is the reinforcement the MTEF’s strategy of targeting consumptive and non-productive expenditure for cuts. The MTEF identified a 5.5bn NAD cut; N$4.5bn represents operational and development expenditure that have been suspended, while N$1bn will be reallocated to the following priority areas:
 
* N$ 350mil – Neckartal Dam completion
 
* N$ 150mil – Drought relief
 
* N$ 150mil – Welfare: Vulnerable Children
 
* N$ 100mil – Mass housing
 
* N$ 200mil – UNAM & NUST (even split)
 
* N$ 50mil – VISA Stickers project
 
DEFICIT AND FINANCING
 
The revised MTEF 2016/17 budget deficit stood at 6.3% which is an improvement from the previous financial period but it falls short of the budget estimated 4.3%. As such the borrowing requirement necessitated a debt level that amounted to 42.4% of GDP. In 2017/18 the deficit is expected to fall to 3% of GDP. Domestic issuance is the main source of financing the deficit; in line with this the local asset requirement has been increased from 35% to 50%. During this financial year, it is not expected that the debt-to-GDP ratio will fall below 40%.
 
CONCLUSION
 
It is safe to expect a modest increase in revenue; the SA budget has given cause for optimism regarding Namibia’s SACU revenue allocation; the performance of uranium and diamond exports might have a counteractive effect on the international tax.
 
Expenditure will have to be strictly implemented and monitored. The operational budget should be given special attention and should not be allowed to exceed the threshold.
 
The achievement of a sustainable debt to GDP ratio is attainable in the medium term; it all depends on fiscal operations being tailored to fiscal policy and not vice versa.

Namibia Chamber of Environment worried about pilchard quotas

The Namibian Chamber of Environment, which is an umbrella NGO with a current membership of some 44 environmental organisations, has issued a statement expressing their concern over the allocation of pilchard quotas by the Minister of Fisheries and Marine Resources, Bernard Esau. 

The NCE explains that says that the Pilchard (sardine) is one of Namibia’s most threatened species. It has declined to perhaps less than 1% of its former biomass. It is also a vital part of the marine food chain. Many important fish species feed on the Pilchard, and it should be the basis of a large and vibrant fishing industry with good employment. It should also provide good quality, healthy, low cost food to Namibians. The Chamber is however concerned that "despite the fact that the industry was able to catch less than 4,000 tons last year against a quota of some 14,000 tons, and that the scientists in the Ministry of Fisheries & Marine Resources strongly advised that no quota should be allocated in 2017, the Minister decided to “take a gamble” and issue a quota of 14,000 tons on his personal belief that the Pilchards could have gone further out to sea."

Here is the full text of their statement:

The Namibian sardine fishery – taking a “gamble” on a sustainable future?
 
Various newspaper articles in the last two weeks quoted the Minister of Fisheries and Marine Resources, Bernard Esau, as admitting that he ignored the scientific evidence and resulting recommendations for a moratorium on sardine (pilchard) fishing from his own fisheries scientists. Instead, he “took a gamble” in allocating a fishing quota for sardines for 2017. This is most disturbing at many levels.
 
Namibia has been praised internationally for its forward-thinking Constitution which, in Article 95, safeguards the “maintenance of ecosystems, essential ecological processes and biological diversity of Namibia and utilization of living natural resources on a sustainable basis for the benefit of all Namibians, both present and future […]”. Moreover, the Ministry of Fisheries and Marine Resources (MFMR) has been recognized internationally as a proponent of the Ecosystem Approach to Fisheries (EAF) Management, for its commitment to responsible fisheries management (with the former Minister Abraham Iyambo being a co-chair of the committee drafting the Reykjavik Declaration on Responsible Fisheries in the Marine Ecosystem in 2001), and for being a signatory to Agenda 21 and adopting the Plan of Implementation that was drafted at the World Summit on Sustainable Development (WSSD) in 2002. Among many other relevant commitments related to improving food security, efforts to reduce the rate of loss of biodiversity, the implementation of an ecosystem approach to fisheries etc., this plan calls specifically for the adoption of urgent measures to rebuild depleted fisheries stock to maximum sustainable yield levels by the year 2015.
 
The Namibian sardine stock was first targeted by the purse-seine industrial fishery after World War II. The industry grew rapidly during the 1960s, with a peak in 1968, when declared catches were 1.4 million tonnes. Actual catches were probably much higher as much of the sardine caught was used for fishmeal and the stock was also fished in southern Angola. This level of exploitation was grossly unsustainable and as a result the stock crashed between 1970 and 1972. Following this decline, the fishery targeted anchovy and juvenile horse mackerel, which in turn led to a crash of the anchovy stocks but did not result in a recovery of the sardine. Most canneries closed down in the late 1970s and early 1980s, with the loss of several thousand jobs and a drastic drop in production of an abundant, healthy and affordable food. Already in 1982 fisheries scientists called for a moratorium on sardine fishing in order to let the stock recover to sustainable levels but were ignored. In the 1950s and 1960s sardine stocks were first estimated, varying between 5 and 11 million tonnes. Since then, it appears that the biomass of sardine in our waters has declined currently by 99% or more. In recent decades, scientists worldwide have demonstrated the key role that “low trophic level” forage fish species (i.e. those that feed on plankton and in turn provide food for marine predators) - such as sardines and anchovy - play in the marine ecosystems, and how a drop in biomass of such species to low levels severely affects the marine food chain, various fisheries and top predators.
 
Many of these studies have highlighted the degradation of the Namibian marine ecosystem as a “worst case scenario in the 21st century”, where a depleted sardine stock has led to drastic changes in the essential ecological processes of the Benguela ecosystem that also affects other fisheries resources such as valuable predatory fish like hakes and perhaps tunas. Some of Namibia’s seabirds, once reliant on sardines, have been forced to switch to less suitable, poor-energy prey. This has  been the primary reason for the declines of endemic seabirds such as African Penguins, Cape Gannets and Cape Cormorants, all of which are now at serious risk of local extinction. Several regional studies made under the auspices of the Benguela Current Large Marine Ecosystem programme (BCLME) found that the low biomass of sardine, the continuation of fishing and lack of serious measures to promote the recovery of this stock in Namibia had serious detrimental consequences on the ecosystem, its biodiversity, levels of unemployment, the economy of the coastal towns, as well as food security in the region. Those studies called for a more rational and scientifically based management of this fish stock to allow its recovery, as well as more transparency in the determination and allocation of fishing quotas.
 
A sardine stock rebuilt at maximum sustainable yield level (as mandated by the Namibian Constitution, the WSSD Plan of Implementation and the fisheries policies in place since Namibian independence) would mean a potential annual catch of close to a quarter million tonnes or more in most years. This would make the sardine sector the primary fisheries sector in terms of food
 production, and second behind the hake industry in export value. This in turn would mean several thousand additional jobs, as opposed to the few hundred temporary seasonal workers at present which, in part, have been sustained recently through the import of frozen sardines from Morocco for the canneries. The marine ecosystem processes would be greatly improved and other sectors of the Namibian fishery would probably benefit from a more productive and healthier ecosystem. The main cause of the decline of our endangered seabirds would be resolved - a great step towards halting the loss of biodiversity.
 
Given the current state of the sardine sector, a moratorium of several years could be achieved at minimal costs. Current jobs could be maintained with the sourcing of fish from elsewhere as is being done already, or by redeploying employees temporarily in other sectors. However, repeated calls by scientists for a moratorium on sardine fishing to allow stocks to recover have been ignored, apart from a single year (2002) when no quota for sardine was granted. However, this measure was defeated that year by sardines being caught as bycatch of other fisheries, as well as vessels registered in Walvis Bay seeking fishing licences in southern Angola.
 
Bearing in mind the key role that sardines play in our marine ecosystem, the collapsed state of the stock, and Namibia’s commitment to sustainable resource use, the recent announcement of a 14,000 tonne quota for 2017 by Minister Esau raises serious questions on the soundness of the decision-making process that is being followed. While the “Minister may, from time to time …. set a total allowable catch to limit the quantity which may be harvested …” he shall do so “on the basis of the best scientific evidence available ...” (Marine Resources Act 27 of 2000). Given the pivotal nature of sardines in the Benguela ecosystem, a seriously precautionary approach should be taken, erring on the conservative side. Minister Esau seems to dismiss scientific recommendations, including that of his own scientists, as a “misconception”, despite overwhelming evidence to the contrary. Instead, he suggests that sardines simply may have moved to deeper waters, a statement that appears to be a personal view that is seemingly not backed by any solid data. Minister Esau is gambling with the ecological stability, biodiversity, productivity and economy of Namibia’s marine ecosystem. Is it sound governance to allow such decisions, on the long-term future of Namibia’s marine ecosystem, to be taken by one person on a gamble?
 
Minister Esau further states that the decision was done in consultation with the Marine Resources Advisory Council (MRAC), which currently comprises 13 members, of which at least five members represent the fishing industry or have fishing interests. Only one practising fisheries scientist serves on the council (and notably none from MFMR), essentially biasing decisions in favour of the fishing industry. It is unclear what advice the MRAC gave to the Minister, as so many aspects of marine  fisheries lack transparency. Transparency is urgently needed on estimated fish stocks, on decisionmaking processes, on the minutes of the discussions held with the MRAC, as well as the scientific and socio-economic recommendation report.
 
And most important, urgent measures are needed to promote the recovery of the stock. These should include:
  • a moratorium on sardine fishing (including fines on sardine caught as bycatch) until the stock has recovered to sustainable levels – for at least three years - as per the Namibian Constitution, national policies and international commitments;
  • rigorous scientific research on stock size and related ecosystem aspects to be continued and intensified;
  • implementation of agreed EAF management principles, including long term sustainability of ecological (including biodiversity), economical and social wellbeing;
  • development of Marine Protected Areas, specifically to protect key spawning and nursery areas;
  • an agreement with Angola on the sustainable management of shared sardine stocks, ideally via a joint sardine/pilchard management plan.
Namibia’s sardines belong to all Namibians. As the official custodian, MFMR is tasked with their sustainable management. Instead of being merely “a gamble”, this task needs to be carried out in a transparent, equitable manner that is based on science-based decisions that heed national and international obligations. 

 

Peace Corps in Namibia: The Untold Story

By: Lloyd Pierson
I think this is an important story, a part of history, that needs to be told. In late 1989 Director of the Peace Corps Paul Coverdell and me started discussing the possibility and the importance of a Peace Corps program in what would be the new country of Namibia.
 
The concern he had, rightfully so, was that due to the war in Angola and landmines placed in the northern area along the river, that Volunteers would not be safe. Since I had been in the area several times and had seen hundreds of local Namibians safely walking around, I jokingly made a pact with Director Coverdell. I told him I would go to the area and if I called him back, everything would be a go; however, if I did not, there would not be an entry. We laughed, knowing I would be safe. The Director authorized me to begin having discussions with the soon to be government of Namibia and to gauge their interest. Once those discussions started, it was clear they not only wanted the Peace Corps, but would enthusiastically welcome them.
 
We then started discussions about where the Peace Corps Volunteers (PCVs) could best serve and it was determined the greatest need was at the Teachers Training facility at Katima Mulilo and along the Caprive Strip to Rundu. When Director Coverdell and then Chief of Staff Jody Olsen were convinced the PCVs would be safe, he gave a thumbs up for an entry. One week after independence on March 21, 1990, I met with Minister of Education Nahas Angula (later to be Prime Minister) and he said while they wanted Peace Corps, they were so new they did not have any government letterhead to issue a formal request. I told him about the Gettysburg Address and said we did not need a formal letterhead … the request would serve that purpose. Immediately, he pulled a blank sheet of paper from his desk drawer and dictated to his assistant a request for the Peace Corps to enter Namibia.
 
That request on a blank sheet of paper set in motion the selection and arrival of the first group of PCVs into Namibia and it is now part of the Peace Corps exhibit at the Smithsonian. Later, in another article, more on the selection, arrival (hint: a special dinner at the State House) and the achievements in Namibia of the first group of Volunteers.
 
The program in Namibia continues to thrive and there are so many to thank, in particular, the first group of Volunteers, plus the wonderful staff that made it all happen. Staff included our beloved Hope Phillips (who has now passed away), Tim Olsen (now Dr. Olsen), Kim Ward, Judy Baskey, Nurse Clara Donkor, and so many others. In fact, all of the Peace Corps Botswana staff should be thanked because it was their diligent and compassionate work that allowed the Peace Corps/Namibia program to open. I also specifically mention Steven Gibson, Mary Lanning, and Deborah Cottrell and all of our local staff. Sure miss Mercy.
 
About the Author: Lloyd Pierson - Senior International Adviser at United States Africa Sports and Education Foundation Peace Corps in Namibia.