Imagine If TFSAs were a thing in Namibia

Imagine a savings account which behaves like an investment, where your money grows without the taxman ever having to touch it. That is the idea behind the tax-free savings account (TFSA), a facility that has already turned this idea into a reality for many South Africans but remains a dream to Namibians.

Although called ‘savings account’, a TFSA is just a long-term investment facility. Individuals can make monthly, annual or even a lump sum contribution towards the TFSA, and all returns – whether interest, dividends or capital gains – will remain untaxed.

In South Africa, the contributions are capped at R3 833 per month, R46 000 per year and R500 000 over a lifetime. At these limits, it will take 11 years of consistent (monthly or yearly) contribution to max out the facility.

The catch is: any contributions above those limits will trigger a tax penalty, and once withdrawn, the withdrawn contribution can not be replaced. Nonetheless, it remains a powerful way to build tax-free wealth.

By design, a TFSA serves as an incentive to encourage individuals to save or rather invest, allowing wealth to grow faster because returns are never taxed. It extends access to wealth creation for ordinary citizens, with flexible contributions that suit different levels of affordability. Even when the account has been fully maxed out, the facility continues to generate untaxed returns, making it a great tool for long-term wealth.

In Namibia, most households rely on bank accounts, NamPost savings, government bonds, etc. While all these options offer great security, their returns are modest and usually taxed, apart from the limited exemptions that apply. Unlike the TFSA, there’s no facility that shields ordinary savers from taxation. As a result, it discourages many households from building long-term wealth.

TFSAs would change the reality for so many Namibians by steering up the investment culture. With tax-free growth, citizens gain stronger incentives to put money aside. Of course, such a facility would require careful consideration, as government revenue may shrink, yet the long-term benefits could possibly outweigh the short-term costs.

*Lucia Hatutale is a final-year charted accountancy student and founder of the FinYouth Foundation. She is passionate about finance, investment ethics and financial literacy. She writes to inspire youth engagement in shaping Namibia’s financial future.