There is not a day goes by when the torrent of bad news about Namibia’s economy does not depress even the most pessimistic of economic analysts. With Jet closing down a number of its stores, government guarantees ballooning by N$12.5 billion, and with layoffs in most sectors there is little cheer. In February, Fitch revised Namibia’s rating outlook to “negative”, primarily off the back of weaker than expected growth, resulting in “adverse implications for the government's ability to stabilize the public debt trajectory”. 2019 is an election year and already we see signs of increased spending, coupled with public sector efforts to increase revenue through further tax on a shrinking economy and the fact that SACU receipts appear set to fall this year. The New Era has recently said ‘This month alone, employees at the Roads Authority, Air Namibia and Namibia Institute of Mining and Technology (Nimt) have told their employees to expect delays in salaries. Some of the companies have told their employees that the delay was due to ‘technical glitches’, while others were frank in stating that they simply had no cash to fulfil their salary obligations.’
Passenger vehicle sales which are usually a good early indicator of the state of the economy and they are now at their lowest levels for a decade with monthly sales down to a little over 300 in January 2019 from a high of over 900 per month in 2014.
Namibia is in the midst of a depression, not an extended recession. The Minister of Finance and the rest of the cabinet along the President and the Governor of the Bank of Namibia are still trying to put a brave face on a dreadful situation and are talking about ‘green shoots’ and modest economic recovery in 2019. One can only pray that this is the case but right now prayer seems all that is left as an economic policy initiative. If you speak to the lawyers, bankers and accountants they will tell you clearly that Namibia, is in the middle of what they call, with their deadpan humor, a ‘receiver and default’ lead economic recovery. Meaning that business is booming for those repossessing houses, cars and dealing with commercial bankruptcies.
It would indeed be funny if there were not thousands of people losing their jobs, their homes and the education of their children. The depression has its roots in our over-spending but if you listen to the Ministry of Finance the roots of the current depression are to be found everywhere but in Namibia and especially not the government. There is some truth in this argument as the decline has in part resulted in South African imports flat-lining since 2013 which in turn has resulted in a relative decline in SACU revenues, one of namibia's main source of revenue. This has badly affected the four BLNS states (Botswana, Lesothoto, Namibia and Swaziland).
This external situation has been compounded by what has been done internally. The government tried to deal with poverty by creating ever more ministries and building ever more infrastructure projects ( NATIS, police, home affairs, the Walvis bay port expansion and longer freeways) and then it was soon realized that, like everyone else on planet earth, those governing Namibia have unlimited wants and limited means to achieve them. Once all that investment slowed down the economy went into a long technical depression.
Namibia faces a situation that resembles in many ways the on-going crisis that has confronted Greece for the last decade. Greece too has been in a depression largely because it has refused to decouple from the Euro and reintroduce a devalued Greek drachma. Greece has also has introduced very slowly the painful reforms demanded of it by its ‘European partners’ ie Germany. Many economists believe that Greece’s depression would have eneded much earlier if the country had decoupled from the Euro early on and devalued by returning to the local currency. The IMF has demanded painful changes to policy and the endless bail-outs of the country’s state owned enterprises. Few believe that this will happen in an election ear and that a major crisis awaits Namibia next year.
According to normally well informed sources there have been on-going discussions between the Bank and Namibia and the Ministry of Finance for over a year on the question of the currency peg of the Namibian dollar to the rand. Those who plainly oppose decoupling look at the situation in Zimbabwe where the new for the local currency has been given the new ‘sexy’ name of RTGS or realtime gross settlement dollar. This new currency is widely expected to rapidly lose much of its market value against the US dollar which was the nation’s currency from 2009 until a few days ago. For a decade the Zimbabwean economy was disciplined by the fact the currency was the US dollar like Greece with the Euro and Namibia with the rand. But it is precisely that fiscal and monetary discipline and the subsequent absence of liquidity for big spending governments that has caused the introduction of the new currency.
Namibia stands on the edge of the precipice. If the government fails to introduce the very politically unpopular reforms required by the IMF which includes discipline on the state owned enterprises whose debts and overspending are strangling the economy then we will fall over the edge next year and we will only be caught by the IMF. The pain that the IMF will inflict to assure that we repay our loans will be much harder than what if we would have the political courage to do it ourselves. Given the pattern of events 2020 will be considerably worse than what we are currently experiencing. 2020 is set to be an event better year for the receivers.
These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.
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