Sir, what is an average?

Sir, what is an Average?

This year I had one of my life’s truly shocking experiences at UNAM in my second week of class this year. I teach a moderately technical but compulsory course in Basic Microeconomics which covers 950 first year students enrolled in the faculty. At the end of the second class a young lady, fresh out of school asked me after the lecture, ‘Sir, what is an average’. This question was, to say the least, unexpected. My first reaction was disbelief that a high school graduate was asking such a question. Later camethe experience of shock, which I recognize so clearly from the experiences of my youth during the war in Indochina.When you suffer shock it is common that your visionnarrowsand all I could see was this young girl. I answered her question and then, as is so common with trauma, I simply put it to the back of my mind. It was only at 3 AM, the devil’s hour, that I woke up in a sweat and told my poor wife about the experience.She was not in the slightest amused about being woken up by a vexed teacher mumbling about a student who clearly understood almost no mathematics.

It is relatively easy to dismiss this as simply as one experience with one student at UNAM but unfortunately this was just one case and is symptomatic of a much bigger problem with the education system in Namibia. On the first day I arrived from Botswana to Namibia on a very cold day in June of last year I was put in freezing office with no heating- UNAM’s equivalent of ‘trial by refrigeration’. On my desk was a test from the previous occupant for a course called Business Mathematics which is a course taught to all first year students in the Faculty of Economic and Management Sciences. The test, like the young lady enquiring as to the meaning of an average, was a revelation. It contained questions like what is ½ +2/5? It was about the level of grade 7-9 arithmetic taught in many schools throughout the world. I went to the then Head of Department of Economics and asked what was a question paper like that doing at a university? He smiled at me and said ‘That’s not half the problem, some 80% of the students failed the course and they are up in arms about it’. I asked around about the course and found that it had been taught by three separate departments at UNAM, Mathematics, Management and now Economics. None had brilliant results and it had been, in the words of one of the teachers, ‘dumbed down’ to grade 9 level as the quality of students coming out of the school system worsened over the years.

The fact that 80% of the 800 odd students sitting such a course at this level  failed it was a clear indication of just how weak the nation’s secondary school system has become and how clearly it is failing the children of the nation and by extension, Namibia’s economy. Students who complete high school and do not know such basic arithmetic are almost certainly bound to end up unemployed or in low paid employment.

UNAM cannot be held responsible for this mess though the finger is frequently pointed in that direction. It is paid by government to educate the nation’s youth and can only take what the school system delivers to its doors. The fault as well as the solution clearly lies with the education system and thegovernment needs to recognize that the nation is suffering an education crisis. How does one deal with this? The first is to begin by recognizing that we are there is a math education crisis and that desperate times call for desperate measures. The Minister of Education has devoted considerable resource to in-service training of the many teachers who are not qualified to teach and therein lies much of the problem.

When I discussed this matter at UNAM I was told that these outcomes were a result of apartheid. As someone who saw apartheid at its ugliest and fought against it there is no doubt that it has left an indelible scar that will take a very long time to heal. But the struggle was fought for many reasons- principally for the dignity and equality of all men and women irrespective of race or color. However,there were also subsidiary objectives, one of which was to assure that Namibian (and South African) students got a first class and not an institutionalized third class education and,with the end of apartheid that Namibians would be able to determine and write their own history. Arguing that apartheid, which ended nearly a generation ago, is still responsible for all that we now see seems to be a denial of these two subsidiary objectives- giving Namibian children the right to a first class education and writing the nation’s history by a free citizenry, not by people who see themselves asthe eternal victims of a brutal history.

Once the denial of this problem ends providing schools with much more resources as well as temporary math teachers from abroad may well alleviate the problem of math education in Namibia. In time as more and more UNAM graduates will find it difficult to find well-paying jobs, as is happening throughout the region, teaching math will come to be seen as one of the few good employment opportunities and these foreign teachers will not be needed permanently. If we fail to address this issue of the quality of High School education now we will condemn an entire generation of young Namibian high school graduates to being unemployable. The school system is in effect, handing out permanent poverty and unemployment vouchers to the nation’s children and reform is essential.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM, where he is employed.

Why we should tear up the EPA.... Eventually

 

Why we should tear up the EPA…… eventually

The Economic Partnership Agreement, a free trade agreement between the European Union and six SADC countries has finally been signed last Friday by in Kasane in Botswana. Six similar EPAs are being negotiated or have been singed amongst many of 76 members of the African Caribbean and Pacific group of nations. That is both the good and the bad news. It is good news for our farmers who export their beef and grapes and the fishers who export fish to the EU. It will mean that they will be able to sell duty free into Europe’s 26 members.It is also good news for everyone else who exports goods like steel and automobiles to the European Union because after ten years of tough negotiations Namibian exporters are able to export whatever they want to Europe without paying any duty. Unfortunately we have no steel and automobile industries but South Africa does and South Africa is by far the biggest beneficiary of a trade agreement that originally it was not even supposed to sign.

What Namibia got was a continuation of the status quo in terms of the access of our exports to Europe. We can continue to export everything we make duty free. But we had that before the EPA, you say so what extra did we get? The answer is almost nothing. The Europeans know it and those who signed on Namibia’s behalf almost certainly know it. They will trot out the benefits in improvement in rules but everyone knows that almost nothing was gained and it is unlikely that our limited range of exports will not increase one dollar as a result of the EPA agreement.

The bad news is what we had to pay a great deal to get nothing. For years the government of Namibia had quite rightly been one of the strongest opponents of the EPA. The reason was simple. Not only does Namibia now have to eliminate all its tariffs on goods from the EU which would make it even harder to compete with EU exporters it also has to comply  a whole new range of EU  provisions that are anti-developmental. What are these provisions? They include things like limitation on Namibia’s right to introduce new export taxes and the use of infant industry provisions which protect new industries.  The grand daddyof all conditions in the EPA is the so-called ‘most favoured nation’ provisions whereby Namibia and the SADC countries must grant to Europe whatever they might negotiate with large economies like Brazil or India. This is the so-called ‘’we shall never negotiate again provision”’ because it means that the EU can free ride on the back of other negotiations without having negotiate yet another treaty with small African states.

Europe is simply trying to stop Africa from using the very same laws and taxes that they used to develop for almost a hundred years ago. You may ask what sort of people are these to tell a sovereign nation what its laws and export taxes must be? If you listen to the European negotiators it is being done for development according to the European negotiators who say that all these rules that they used in the past are bad for us and we should not have access to them. That is good reason- the real reason is that it is good for Europe because it helps consolidate EU exports and maintain their access to our raw materials and stops us from trying to process them here.

Many think those who negotiated the treaty for Africa to be at very best,fools and some would use stronger words. But in fact the African negotiators have done much better than the Caribbean and Pacific negotiators who signed their own EPA in 2007. They gave up everything,  export taxes MFN and infant industry because they were true believers in the free market in the case of the Caribbean. Unfortunately their heads of government were not and they sacked them all and closed the Caribbean Regional negotiating machinery. In SADC the negotiations resulted in clear limitations on what we can do  but not the sort of outright bans that the Caribbean or the Pacific foolishly agreed to. In future we shall have to ask Brussels for permission to pass new export tax laws and they may not agree.

Fortunately  MinisterSchletwein has been cleverin dealing with the EPA. He recently  mooted export tax laws of 2% of the value of mineral exports  which will be introduced presumablybefore the treaty with the EU has to be ratified in October. The provisions of the EPA limit Namibia’s ability  to introduce new export taxes but they allow us to maintain old export taxes. In the long run the treaty mean that we will give Europe what  will effectively be able to effectively veto over our commercial laws.

So who benefits  from all of this. Swaziland keeps sugar access, Lesotho improves slightly the terms of its garment exports and we, along with Botswana get to keep our beef exports to Europe. But the world is as it always was,  and the big winner is of course the biggest country- South Africa which cleverly used its small neighbours to get better access for its wine and sugar, which is what Pretoria always wanted.

Ironically the biggest loser is not Africa but Europe because it has given Africa yet another reason to despise what they have done on this continent. Before when Europe was more generous during the days of the Lome Convention and the Cotonou Agreement  ie before the EU felt hreatened by the three-headed hydra of Indian service exports, Chinese manufactures and Brazilian agriculture we had generous trade arrangements.

The Chinese are much more clever than Brussels. They come with no repulsive treaty but with what Africa so desperately needs- investment and aid that is commercially oriented. This is precisely what Europe did in the beginning of the post-colonial era under the Lome and CotonouAgreements in the 1970’s but has since given up. The Chinese are now doing it bigger and better.

ThisEPA  is an odioustreaty that we will have to sign and ratify to protect our export sectors but there will come a day when Europe is no longer relevant to Africa’s future and we will be able to tear up this dreadful treaty which aims to determine our economic future as surely as European machine guns did 100 years ago.

These are the views of Professor Roman Grynberg and not necessarily those of his employer. The writer was, much to his subsequent shame and regret,  an EPA negotiator for the Pacific Islands.

Namibia's Solidarity Tax

The Namibian Solidarity Tax

Almost every quarter that goes by in Namibia the issue of the country’s income inequality comeshome to haunt the government in one form or another. Whether it is the land issue and Affirmative Repositioning Movement last year, or the ‘Struggle kids’ now, Namibia’s  unfairdistribution of income undermines the peace and stability of the nation and the government wants to address the issue. Namibia has the world’s second worst distribution of income- yes based on the so-called Gini co-efficient which economists use to measure income inequality (zero for complete equality and 1 for complete inequality) we have the amongst highest in the worldwith a Gini co-efficient at 0.6.

In terms of inequality, the country at the very top of the world’s inequality ladder is South Africa,with a Gini co-efficient of 0.69 in 2011. This is of course no coincidence as both countries suffered under apartheid and worse still Namibia, wasa colony of apartheid South Africa. This apartheid/colonialism narrative has been the basis for explaining Namibia’s current situation. In part this is correct but it runs head long into some really uncomfortable facts. The firstfact is that South Africa despite a long period of rapid economic growth and enormous amounts of money spent on social spending over the last twenty years such as income support for the poor, RDPhousing, health and education expenditure has, much to the horror of the ANC government, actually witnessed a worsening of its distribution of income since the end of apartheid. In Namibia the two estimates that have been made of Gini co-efficients show precious little downward movement as well. The reason is straight forward –  despite the very rapid economic growth up to 2009, which is supposed to decrease inequality,  and the very large amounts spent on social programs in South Africa and Namibia the rich have gotten richer as fast as the government has increased subsidies to the poor and sowhile poverty may in part be alleviated income inequality is not effected. Poverty alleviation and income redistribution are not the same thing, they are related but almost invariably confused in public discussion.

The second really uncomfortable fact in terms of Namibia’s colonialism/apartheid narrative is the existence of Botswana. Botswana was never colonized – it was a British Protectorate and was so poor and miserable that the British did not even bother building a capital  choosingrather to administer it form Mafeking in South Africa until just before independence. Botswana had no apartheid, no colonialism and very few white settlersand yet its Gini co-efficient is not that much lower that of Namibia. Now that is a problem if you believe that the only cause of Namibia’s inequality of income is its historic legacy.

The country with one of the worst distributions of income in Asia is Papua New Guinea and what all these four countries have in common is mining. The existence of mining and petroleum puts huge amounts of wealth in the hands of mine owners and the government. The former is not inclined to lose its income and in the case of the latter, most governments are incapable of developing the fine and delicate sort of policies which really alleviate poverty effectively.

Namibia’s Minister of Finance MrCalleSchlettwein, last year suggested the implementation of a new Solidarity Tax. He has said he will raise some $600 million in extra taxes on upper income individuals. Given the personal company and withholding tax revenue of the country was $14 billion in 2013/14 this tax measure constitutes an increase of some 4% of tax burden.  While details are scarce the tax will presumably be implemented through the income tax system though some flat rate taxes on corporations are also expected. This is a good proposal, which I as an economist and one of its intended victims fully support, but the devil will be not in the detail but what the minister actually intends to do with the money.What would make the new tax more convincing to a skeptical public is the creation of a fund that would ring fence this money specifically for poverty alleviation measures. That way the public would know that existing poverty alleviation measures would continue and that this tax would actually be over and above what is already being implemented.

The best means of poverty alleviation is to give money directly to the mothers as the Brazilian ‘bolsafamilia’ fund. In order to receive money women must assure that their children are regularly inoculated against diseases and attend school so they get a monthly lump sum payment. No bureaucrats stand in between the government and the beneficiary. The money goes straight to the bank accounts of the mothers. It is enormously empowering to otherwise impoverished women and children. No system has as yet been so cost effective in alleviating the poverty of so many and redistributing income in a country also known for its inequality. Under former Brazilian President Luiz Inácio Lula da Silva poverty was decreased by approximately 30% in three years from 2003 -2006 in large part because of the program. It is widely acclaimed across the political spectrum as an excellent way of dealing with poverty and variants should be considered here in Namibia.

But in making this proposal for a Solidarity Tax Minister Schlettwein has violated one of the cardinal rules of tax policy. If you are going to hit people with a new taxes the first thing you are supposed to do, even before the tax, is to tell them all the good things you are going to do with their money. This decreases resistance to tax increases. Otherwise the taxpayer may think that, because all money is fungible, the new tax is merely a way of soaking the taxpayer to pay for the widening and unsustainable government budget deficit. Minister Schlettwein knows full well the adage that labor has legs and capital has wings and so he must finely balance tax increases in Namibia against the risk that capital will fly if he pushes tax solution too hard. But he is caught between a global economic system that creates inequality, a middle class that is myopic and hates the proposed tax, and a large and restive poor that will mean continual instability if the issue of inequality is ignored.There are no easy and painless solutions to this, most vexing of Namibia’s long term economic problems.