The Namibian Social Accounting Matrix:

How Economic Modelling Contributes to Vision 2030 and Economic Planning

Glenn-Marie Lange

(Columbia University, USA)

Klaus Schade (NEPRU)

Outline of Presentation1. What is a SAM and how is it used?

2. Review the Namibiam SAM, data sources, assumptions, relationship to National Accounts

3. Vision 2030’s economic goals and strategies for achieving them — how is Vision 2030 represented in a SAM?

4. Results of preliminary analysis: GDP growth, employment and income distribution

5. Policy questions and recommendations – how can this help with NDP3?– how can the SAM be extended to look at other policy issues

Part 1. What is a Social Accounting Matrix – a “SAM”?

Economic database/model in table format based on data from the National Accounts and statistics about Households and other institutions, showing– Production structure of each industry– Supply of products from imports and domestic

production– Generation of income for each industry– Redistribution of incomes among households, from govt

to households, etc. – Detailed expenditure patterns of households and other

institutions

How Does a SAM Differ from Other Economic Models?

Explicitly designed to address

• How income is generated in an economy—determining GDP

• How it is distributed—determining income distribution and poverty

Who Uses SAMs?Most countries have SAMs, developed &

developing

Range of applications:

• Trade policy: impact of trade liberalisation on exports, imports, govt revenue from tariffs

• Tax policy: impact on poor households of different forms of taxation • Sectoral planning for cross- cutting issues such as water, energy, land

use—what is the economy-wide impact of new projects and policies, infrastructure development, Etc.

• Vulnerability to external “shocks”—energy price increases, drought,

exchange rate changes, etc.• Education and labour force planning: anticipating future need for

workers with specific skills/training• Other cross-cutting issues, such as HIV/AIDS

How Does a SAM Contribute to Economic Planning?

Economic models help us reason systematically about the future identify actions needed today in order to achieve long-

term goals

Economic models quantify scenarioswith models we can calculate economic results such as

• Number of Jobs created & Wages paid (by skill-level, education, gender ,etc.)

• Distribution of income among household groups• Balance of trade• Impact of new industries, such as textiles, on ‘upstream’ and

‘downstream’ industries

How Can the SAM Contribute to Vision 2030?

Many goals and strategies are described in qualitative terms, not quantitative terms, so the impact on GDP and income cannot be assessed– Will growth of leading sectors identified in Vision 2030 be

sufficient to achieve high income growth?

– Are there unanticipated constraints, conflicts among sectors that might prevent implementation of all strategies?

– What skills will the labour force need, and what education do we need to provide today in order to ensure that Namibian workers with the right skills are available in the future?

– How sensitive is the development strategy to external events like exchange rates, energy prices, trade regulations, etc.

Purpose of NEPRU’s Preliminary Analysis of Vision 2030

• Initiate dialogue about feasible economic objectives and concrete actions to achieve them

• Revise and refine sectoral strategies in light of their economy-wide impact move from sectoral planning to integrated

planning

• Begin to identify the actions that need to be taken in the next NDP period, and subsequent 5-year periods, that are consistent with long-term objectives of Vision 2030.

Part 2. The Namibian SAM

• Overall structure

• Data sources and assumptions

• Relationship to the National Accounts

• Extending the SAM for Labour Force Analysis

Structure of the SAM

SAM is a square table

Row sums = income, sales

Column sums = purchases, payments

Accounting Identity:

Income = Expenditure

Structure of the Namibian SAM

Empahsises importance of agriculture to the Namibian economy

• 41 Products/industries: 15 farming activities, 4 food processing industries, 22 others

• 5 Factor inputs: – skilled, unskilled labour– Mixed income from commercial and traditional agriculture, – Operating Surplus from enterprises

• 9 Institutions:Enterprises, Government, Rest of World (for imports, exports)6 Households: urban & rural based on main source of income

• Wages & salaries• Own-business including commercial farming• Subsistence farming, pensions, gifts, other

Social Accounting Matrix

2. Activities Make of products

by

Total domestic productio

7. Capital Account

CFC Household Saving

Enterprise Saving

Government Saving

Capital Account

BoP

Total savings

7. Capital Account

8. Rest of World

2. Activities

1. Products 3. Factor Payments

4. Households

9. Total Incomes

1. Products Intermediate Use

Marketing margins

Household Consumptio

Govt Consumptio

5. Enter-prises

6. Govt

FI from Abroad

Factor incomes

Investment

Exports Total use of

4. House-holds

3. Factor Income

Value Added

Comp. of Employees

Inter-household transfers

Distributed profits

Transfers to Households

Remittances from Abroad

Household incomes

5. Enterprises Transfers to Enterprises

Enterprise Income

6. Govt Taxes, subsidies

Taxes, subsidies

on products

Tax on Household

income

Corporate taxes

ForEx outlays

SACU, other

transfers

Govt revenue

8. Rest of World

Imports Factor payments

abroad

Remittances abroad

Transfers abroad

9. Total Expenditures

Total cost of

production

Govt payments to

ROW

Total product supply

Factor outlay, NDP at Factor

Cost

Household expenditure

Enterprise Expenditur

e

Net operation surplus

Government expenditure

Investment

ForEx earnings

Enterprise transfers

from abroad

Major SAM Data Sources: National Accounts & 1993/94 HIES

2. Activities Prod. Supply by industry

Total domestic productio

7. Capital Account

CFC Household Saving

Enterprise Saving

Government Saving

Capital Account

BoP

Total savings

Enterprise transfers

from abroad

Total product supply

Factor outlay, NDP at Factor

Cost

Household expenditure

Enterprise Expendi-

ture

Government expenditure

Invest-ment

ForEx earnings

ForEx outlays

9. Total Expenditures

Total produc-tion cost

Govt payments to

ROW

SACU, other

transfers

Govt revenue

8. Rest of World

Imports Factor payments

abroad

Remittances abroad

Transfers abroad

Enterprise Income

6. Govt Taxes, subsidies

Product taxes&sub

sidies

Tax on Household

income

Corporate taxes

Net operation surplus

Remittances from Abroad

Household incomes

5. Enterprises Transfers to Enterprises

Comp. of Employees

Inter-household transfers

Distributed profits

Transfers to Households

4. House-holds

3. Factor Income

Value Added

FI from Abroad

Factor incomes

Invest-ment

Exports Total use of

9. Total Incomes

1. Products Intermediate Use

Marketing margins

Household Consumptio

Govt Consumptio

5. Enter-prises

6. Govt 7. Capital Account

8. Rest of World

2. Activities

1. Products 3. Factor Payments

4. Households

Data from NAData from 1993/94 HIES

23 24 25 26 27 28

Products AgrCerealsAgrCropsAgrLivstkTradAgr-FoodForOwnConFishingMiningMeat processingFish processingGrain millingBeverages and other food processingTextilesPetroleum productsMANUUtilitiesConstrTrade; repairsSERVOwnacct REGovtDirect purch. abroad by resDomestic purchases by non-residentsTTMCereals OtherCrops Livestock TradAgr Fishing Mining

1 AgrCereals 2.6 2.1 - 0.6 - -

2 AgrCrops - 10.6 4.8 - - -

3 AgrLivstk - - 14.1 10.0 - -

4 TradAgr-FoodForOwnCon - - - - - - 5 Fishing - - - - - - 6 Mining - - - - - 881.2 7 Meat processing - - - 0.8 - - 8 Fish processing - - - - - - 9 Grain milling - - - 0.8 - -

10 Beverages and other food processing - - 113.5 1.3 - - 11 Textiles 0.3 2.4 - 0.4 - 1.9 12 Petroleum products 4.4 2.4 43.0 3.8 296.4 331.5 13 MANUF 8.6 26.0 72.6 28.8 524.0 838.0 14 Utilities 1.6 6.6 23.7 4.1 - 105.7 15 Construction - - - - - - 16 Trade; repairs (margins +) - - - 0.4 - 36.6 17 Services 2.2 39.9 97.3 1.5 198.7 552.8 18 Ownacct RE - - - - - - 19 Govt - - - - - 31.9 20 Direct purch. abroad by res - - - - 17.8 57.6 42 Skilled labour 0.6 7.0 24.8 - 351.6 433.0 43 Unskilled labour 3.2 36.3 129.3 5.5 371.1 457.1 44 Mixed income, commercial Agr 40.0 170.2 1,022.4 45 Mixed income, Trad Agr 339.8 46 GOS 722.8 3,582.3 47 U-Wage&salary48 U-Animal&BusinessAct49 U-Other50 R-Wage&salary51 R-ComAgr+Bus52 R-Other53 NPISH54 Enterprises55 Govt - - 3.6 - 151.9 12.4 56 Saving, Gross - - 57 Imports

TOTAL 63 303 1,549 398 2,634 7,322

Example of Industry Production Structure: Intermediate Use

Major Data Sources for Indsutry Inputs

Surveys and other

data

South African

SUT

SA SUT combined with major inputs from by NA

Agriculture x

Fishing x

Mining xMeat processing, Fish processing, Dairy x

Grain milling x

Other manufacturing x

Utilties, electricity and Water  part x

Services x

For most industries, value-added was based on the National Accounts

This Model Allows us to Answer: What industry has the highest impact on

GDP?Direct impact of $100 increase in industry output

= value-added from that industry (labour + operating surplus + taxes-subsidies on production)

Total impact on GDP = VA from that industry + VA from all the production generated by industries supplying that industry (material inputs, electricity, services, transport services, etc.) + VA from industries suppling goods and services purchased by households employed in all the industries affected

Direct inputs to N$100 of output

-

20

40

60

80

100

120

N$ o

f in

dsu

try o

utp

ut

Other inputs to prod.

GOS+ Agr Mixed Inc.

Labour

$61 $76 $12 $55

GDP:

Direct vs Total Impact on GDP:increase sectoral output by N$100

Why are the impacts so different? Upstream linkages, value-adding

-

20

40

60

80

100

120

140

Mining Livestock Meatprocessing

Fishprocessing

N$

imp

act

on

GD

P

Direct impact

Total impact

Differences between SAM and Published National Accounts

Published NA SAM

SAM minus NA Explanation:

Agriculture 1,507 1,783 276Grapes, horticulture, Marketed cattle in NCA

Fishing 1,597 1,597 0

Mining 3,945 4,485 540 DeBeers Marine Namib

Manufacturing 4,444 4,342 -102Textiles added, Other food processing reduced

Services 15,791 16,424 633Transport, Business services

Taxes - subsidies on products 2,816 2,816 0

GDP at Market prices 30,101 31,447 1,346 4.5%

Extending the SAM for Employment

Job creation is a major objective of Vision 2030, so the SAM was extended to include employment by industry and by skill level

Labour inputs were calculated from the Labour Force Survey 2000– Industry– Occupation– Gender– Educational attainment

Does not distinguish: – Formal from informal employment (subsistence agr)– Hours worked, full-time vs part-time

Part 3. Analysing Vision 2030 with the SAM

• Overview of Objectives of Vision 2030

• Scenarios develeoped to represent Vision 2030 with the SAM

• Results

Objectives and Strategies of Vision 2030

High GDP growth 7% annuallyHigh employment growth 3.5% annuallyModerate Population growth 2% annually

Agriculture

Modern, market-oriented agriculture substitutes for subsistence farming, expansion of irrigation of high-value crops; domestic production of horticultural crops

Fishing & Fish processing Increase value-adding of fish processing

Manufacturing

Promote food processing and export-oriented manufacturing to diversify economy

Services Increase services, notably tourism

MAJOR ECONOMIC TARGETS

BROAD SECTOR STRATEGIES

What Drives Economic Growth?How can 7% annual growth be achieved?

Sources of economic growth:• Increase in demand using underutilised resources, like land• Increases in productivity, for example, crop yields

Final Demand in the Namibian Economy:

Government 26% of GDP

Investment 18% of GDP

Private consumption 54% of GDP

Exports 51% of GDP

Imports 49% of GDP

Major Exports & Imports

Major Exports 80%Mining 44%Fish + Fish Processing 21%Tourism 15%

Major Imports 81%Machinery and equipment 40%Light manufacturing 21%Petroleum products 10%

Sources of Demand

EXOGENOUS SECTORS—we set the values:Government expenditure:

Purchase of Goods & services grows at target rate of 7% Transfers to households grow at population growth rateTransfers to enterprises increase 50%

Investment: assumed to grow roughly 10% faster than target GDP growth rate annually

Exports - Imports: the role of exports and imports will be very important

ENDOGENOUS SECTOR—determined by model:Household consumption determined by economic

growth, income received, consumption patternsConsumption patterns: less purchase of food & food for own consumption, greater purchase of other goods and services

Scenario Approach 3 scenarios were analysed:

S1: ‘Business as usual’ at current rates of GDP growth (3%)

• 3% growth for government, • 3.5% investment growth• slower export growth • Slow implementation of changes in agriculture, imports

S2: Medium GDP growth (roughly 5%)• 5% growth for government, • 5.4% investment growth• export growth faster than S1 but slower than S3• Partial implementation of changes in agriculture, imports

S3: attempt to reach the objectives of Vision 2030,• 7% growth for government • 7.4% investment growth• Fastest export growth and full implementation of changes in agriculture, imports

Agriculture: Green Scheme, Grapes & Speciality Crops,

LivestockGreen Scheme:• Increase area under irrigation to 45,000 ha• Mainly for self-sufficiency in cereals + some hort. Crops, also some industrial crops

like cotton. • Import shares of cereal & horticultural products drops to 10%, 15%• Avg. yields increase: 6 tons/ha for maize, 4 tons/ha for wheat and cotton• Productivity gains in yields may be offset by increased costs of irrigated farming

Grapes and Specialty Crops:• Production increases 7% annually, mostly for export

Livestock:• Export of processed meat replaces most export of live animals• Farmers in communal areas increasingly producing for export market• Estimated supply constraint: cannot increase more than 4-fold, avg annual growth

of 5%

Manufacturing

Meat processing: exports increase subject to supply constraints

Grain milling: no export market, but relies increasingly on domesitc production, reducing imports

Textiles and leather products: exports increase 14% annually due to AGOA and increased capacity for processing leather

Other manufacturing: small degree of import substitution

Fishing and Fish Processing

Industries face severe supply constraints

Some expansion of freshwater and marine aquaculture

Some increase in value-adding exports of processed fish increase 4%

annually

Tourism

The value of Tourism exports increases due to a combination of higher-value tourism and increased numbers of tourists

No explicit analysis of commercial and community-based tourism was undertaken

Tourism is assumed to increase more than 7-fold, by 7.4% annually

Mining

Not discussed in Vision 2030 except in terms of environmental impact

New mining ventures compensate for closing of Rossing Uranium and Navachab Gold

Diamond and other mining continue at slightly higher levels than 2002

Kudu Gas is established for export

Mining exports increase by 3% annually

Labour Productivity

Number of workers engaged in Traditional agriculture remains roughly constant

Labour productivity increases in all sectors except Traditional agriculture by 40% under scenario S3, slower productivity growth under S1 and S2

Increase in the share of Skilled Labour by 20% under Scenario S3, 10% under S2 (excluding Govt)

Summary of Assumptions for Major Components of Final Demand

Government and Investment expenditures

Grow by target GDP growth rate, 7%, or slightly higher, transfers slow

Major exports: Mining grows 3% annually Fish & Processed fish grows 4% annually Tourism grows 7.4% annuallyMajor imports: Machinery and Equipment no change in import share

Light manufacturingincrease in domestic supply from 16% to 21%

Petroleum no change in import share

GDP, alternative scenarios

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2002 S1 S2 Vision 2030

N$ m

illi

on

GDP growth rates: S1: 2.5% S2: 4.3% S3: 6.1%

Percapita GDP growth rates: S1: 0.5% S2: 2.2% S3: 3.9%

Employment in 2030, percent of working-age population

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 S1 S2 Vision2030

per

cen

t o

f w

ork

ing

ag

e p

op

ula

tio

n

Traditional Agr.

Formal sector

Distribution of Employment by Skill level

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 S1 S2 Vision2030

Dis

trib

uti

on

of

emp

loym

ent

Unskilled, Trad Agr

Unskilled exc Trad Agr

Skilled

Sectoral Distribution of Employment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 S1 S2 Vision 2030

Dis

trib

uti

on

of

emp

loym

ent

Agr, trad

Agr, formal

Fishing

Mining

Manuf.

Services

Income Growth forUrban & Rural Households Relative to 2002

-

1.00

2.00

3.00

4.00

5.00

6.00

S1 S2 Vision 2030

Ho

use

ho

ld in

com

e re

lati

ve t

o 2

002

Urban

Rural

Income Growth by Household Type Under Vision 2030

-

1.00

2.00

3.00

4.00

5.00

6.00

Ho

use

ho

ld i

nco

me

rela

tive

to

200

2

Change in Balance of Trade Relative to 2002

-

1.00

2.00

3.00

4.00

5.00

6.00

2002 S1 S2 Vision 2030

Ch

ang

e in

tra

de

rela

tive

to

200

2

Exports

Imports

What More Needs to be Done?Financing Vision 2030• Where will taxes come from for Govt budget?

• How will Balance of Payments deficit be financed?

Trade Policy:• How will Namibia be affected by trade liberalisation within SACU?

• What taxes should be raised to replace decliningSACU tariff revenues

Labour & Education• What will be the labour demands in the future by occupation and by gender?

• What education will future workers need?

Land Reform: how will it affect agricultural production and incomes?

Transportation: is infrastructure sufficient for growing frieght and passenger demands?

Tourism sites: is carrying capacity adequate for much higher levels of tourist visits?

Electricity, energy, water demand and supply

HIV/AIDS: impact on labour supply & productivity, household well-being

Main Recommendations for Vision 2030

Data, accurate and timeous, is essential for policy analysis

Vision 2030 needs much more economic input

Foundation for Vision 2030 needs to be laid with NDP3

Need for integrated, economy-wide planning, not just sectoral planning, for Vision 2030 and other economic planning