The economic situation for most people in Namibia over the last two or three years of fiscal austerity have been pretty dire. Employment has been in clear decline and unemployment rates in Namibia is estimated to be at 37.3% in 2017 according to recent reports, up from 37% in 2016. These are unemployment rates much higher than those found in the USA at the height of the Great Depression in 1933 which was 24.9%.
Since independence in Namibia in 1990 the growth rate of real GDP in Namibia has been an average of 4.25% which is considered pretty healthy by global standards. These are growth rates that most countries only dream of but they do not reflect the most biting fiscal austerity in the nation’s economic history and the resulting recession that began in 2016.
But what we have had in Namibia over the last few years is not a recession but what more closely approximates what economists refer to as a depression. So what is the difference between the two? The formal and widely accepted definition of a recession is widely accepted as when real GDP has been falling for two consecutive quarters. The definition of a depression is contested but is commonly defined when GDP falls for more than two years and GDP decreases by 10%. From 2016 onwards we have had at least two and a half years of negative growth and this fulfils at least one criteria of a depression even though real GDP in Namibian dollars has only decreased by 5% since 2015. But the economic situation that Namibians faces is actually much worse than these Namibian dollar figures suggest.
Reality can never be easily captured by one single number but economists, the media, politicians and the public like simple numbers. A better way of capturing what has happened to the standard of living of Namibia’s people more accurately is not in terms of rand or Namibian dollar but rather to look at GDP per capita in terms of the world’s main trading currency the US dollar i.e. what Namibians can buy from the world market. Doing this we get a picture of the Namibian economic reality that probably looks far closer to what most of us understand at the end of the month. Based on NSA and Bank of Namibia data in 2011 the Namibian real GDP per capita peaked at US$5,684 and went into a steady decline for six years until 2017 when it reached a low of US$3,437 in 2010 dollars. This is a huge 39.5% decrease in US dollar denominated real GDP/capita for six years amounts to an economic depression by any reasonable definition. As we move to the point where 2018 figures become available there will almost certainly be another very substantial decline in real US dollar GDP per capita because the exchange rate has fallen to 14- 15 rand to the dollar.
We are arguably in Namibia’s worst ever depression when it is measured in US dollars. The recession immediately following independence was minor by comparison. But what has largely caused the US dollar depression is the exchange rate. In May 2009 when President Zuma came to power the rand was about 7-8 rand to the dollar. But by the time he left power in 2018 the value of the rand ie the Namibian dollar had halved in value to 15 to the dollar. There was a temporary recovery in the value of the rand in 2017 when our US$ GDP/capita rose but in 2018 the Rand is once again moving towards new lows against the US dollar. Much of the deterioration can be put down to the worsening perception of the South African economy and its prospects by investors. If the exchange rate between the rand and the US dollar had stayed at 2011 levels there would have been no “Great Depression’ but a modest 11.5% growth rate of Namibia’s real US$ GDP/capita between 2011-2017 rather than the 39.5% decrease.
But why does the US dollar matter at all to Namibia as almost everything that Namibia imports is from South Africa and so the US dollar should simply not count much? Wrong! We may buy most of our imports in rand but South Africa which produces a very large part of what we consume buy its inputs in US dollars and we are also importing more from outside of the SACU block and that means we pay in US dollars. A halving of the value of the rand during the Zuma years meant that South Africans as well as Namibians are poorer and import less and therefore there is less SACU customs revenue to distribute as a result and it also means that the cost of everything that is bought from abroad to produce goods in South Africa is increasing.
But what is perhaps the most interesting issue is the interpretation of this ‘Namibian Great Depression’. The experts have been arguing that the current austerity and the recession are a result of a decline in SACU revenues or a result of slow domestic growth or excessive government debt or a host of other domestic factors. While much of this is true Namibia’s depression is very much an exchange rate phenomenon caused by South Africa and its turbulent politics and has little to directly do with matters in the country.
But simply blaming South Africa perhaps offers too much comfort to those Namibian policy makers who have done nothing to arrest this most remarkable economic decline. We have remained so connected to the South Africa and its rand because it is easy and comfortable for many at the top. What it has done for lives and livelihoods of Namibia’s working people and the masses of unemployed is quite another matter.
It is time for government to seriously rethink economic policy in Namibia before we slide into ever more dire poverty.
These are the views of Professor Roman Grynberg and Mr Fwasa Singogo (research associate) and not necessarily those of UNAM.
No comments:
Post a Comment