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