Is the African Development Bank Helping African Development?

Is the African Development Bank Helping African Development?

In October the Namibian Minister of Finance Mr Calle Schlettwein was reported to have asked the Minister of Works, Mr John Mutorwa to suspend two major AfDB funded projects, one on the development of the railway from Walvis Bay to Kanzberg and the second the long expected freeway to the airport from Windhoek. These are part of the  $10 billion AfDB loan to Namibia for the construction of infrastructure projects. The reason that the minister asked for the deferral is that the pre-conditions required by the AfDB for companies bidding in effect excluded Namibian firms because they required the firms to have capital, track record and assets that were such an order of magnitude that they could meet the minimum tender requirements.

The Deputy Minister of Works Mr Sankwasa was quoted as saying that the threshold requirements for participating in the tender are too high and in effect block Namibian construction firms from the tenders. According to the report firms are required to have a 5 year balance sheet which shows the applicant has long term profitability and has a cash flow of $N 130 million ( US$10 million). The report also states that the tender documents expect the applicant to have a minimum average annual construction turnover of $800,000 within the last ten years.

This raises first the issue of whether companies that are so small should be involved in major international tenders. What commonly happens in construction contracts is that local ‘tenderpreneurs’ will take a contract that they cannot implement and then sub-contract to a much larger international firm where this is permitted.  All over Africa this allows party apparchnicks to get a share of the action on tenders who have no capacity to implement. The question is whether government wants the project properly implemented by large firms or does it want someone who is connected just to make money. One of the important and legitimate objectives of government is to develop a national entrepreneurial elite and this very ugly business of handing out tenders is an integral part of that process.

Mr Sankwasa is quoted as saying ‘If Namibians are the ones who will pay back this loan, why put threshold they know Namibians wont meet? The ADB is African. Is what they are doing being African? What does it benefit Africa then? You are simply saying Namibians should not participate.’

There are always two reasons for every commercial action- the good reason and the real reason. The good reason for this AfDB threshold is to assure that the project is implemented by companies that have the wherewithal to finance and implement the project. Giving a major project to too small and inexperienced an African firm will simply mean they are doomed to fail. The real reason is that Mr Sankwasahas a romanticized vision of what the AfDB does.It is first and foremost a bank and those who provide its capital expect to be repaid just like any other bank. But the AfDB is a very political animal. China, the USA the UK, France Germany  and whole host of other ‘generous donors’  sit on its governing board as non-regional members and whose firms tender for these projects. The AfDB may be run by well dressed and well groomed Africans who speak immaculate French and English but whose interests these people serve is entirely another matter.

The AfDB has good reason to impose minimum financial thresholds to assure that illegitimate politically connect tenderpreneurs do not get projects that they cannot possibly implement  but whom  it benefits are the non-regional members who want to see the money they loan for ‘African development’ boomerang back to them in the form of construction contracts for their large construction firms.

The AfDB has many instruments that can in theory help African firms. According to the AfDB procurement rules, countries ‘may’ provide preferences for local firms in tenders which amounts to 15% over non-local bidders for manufactured goods and related services and 10% for construction works.  This amounts to nothing more than an empty  best endeavor provision. There is no ‘shall’ in the language and the country must get the agreement of the AfDB first. Using the word ‘shall’ would mean that countries would have more debt to the borrowers AfDB because they wish to help local firms. As long as this someone is connected this may not be an issue but it should.  This does not help Mr Schletwein or Mr Sanakwasa because Namibian firms are too small to even get in the door. If Mr Snakawasa really wants to be  a developmental minister he should do what the Koreans and Japanese did when they found that their firms could not compete with the Europeans and Americans- they helped them form cartels or ‘chaebols’ in Korean. He must work to force small Namibian firms to work together to become big enough to compete.

 But the nice men and women who work for the AfDB are supposed to be helping Africa develop are not there for that. These benevolent bureaucrats are  just a figment of the imagination of African ministers. The AfDB officials are there to do their board’s bidding. They are not there to line pockets of tenderpreneurs. If they wish to help in the transformation of Africa they should create a preference that is pan-African in nature. In the coming decades Africa will be electrified, thousand of kilometres of railways and roads will cross the continent and this will be loaned to African countries  through the World Bank, the AfDB and the BRICS bank. In Europe and America and China these major infrastructure projects were the catalysts to transforming their countries when the investment was made because there were backward linkages to iron steel coal, aluminum and copper, zinc industries. This sparked real development and economic transformation but it will not in Africa because the backward linkages will be to Chinese American and European manufacturers. And if we are honest then it will be China, with its highly subsized base metal sector that will benefit the most.

If  Mr Schlettwein and the other African ministers who attend the lovely annual meetings of the AfDB  and World Bank were actually serious about doing something that will develop all of Africa they would force the board to implement a new preference provision which would give a neutral preference to Africa, not the tenderpreneurs. It is time the President of the AfDB Mr Akinwumi Adesin to show real leadership and create a truly pan-African rule of origin. The pan-African preference should read. ‘No African member country shall accept a tender from any company for an AfDB (or World Bank) project by 2025 which does not use 30-50% African content’. This would force Chinese, American  and European firms to invest in backward linkages in Africa.  This will transform Africa much more than helping line the pockets of some small well connected tenderpreneur whose first expenditure is so commonly a new Mercedez Benz . But the great powers who really control the AfDB and the World Bank will never allow such a thing unless they forced by real African leaders determined to transform the continent. Real transformational development will await the day that African leaders demand it and refuse to accept the continent’s centuries old position of ‘hewer of wood and drawer of water’.     

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

Recipes for failure - Tertiary Education in Namibia

Recipes for failure - Tertiary Education in Namibia

Last week the executive director of the Ministry of Higher Education, Dr Alfred van Kent told a SADC meeting of ministers responsible for education, training ,science and technology in Windhoek that ‘we spend 20-25% of  our national budget in education but the quality of the outcomes of education systems remain a challenge’. By implication I and several thousand other people  teaching at UNAM, NUST and IUM are producing the very graduates that are of such questionable quality. By virtue of his position Dr van Kent has every right to point the finger at those who are paid to educate

There is however an ancient truism that when you point a finger at someone else there are invariably three fingers pointed back at you. So Dr van  Kent let us look at the first finger.  Imagine that you are running a business and you are asked to define whether you are a ‘success’. The normal response would be that your success would depend upon whether you are making a profit. Only if you are a bad businessperson  would you define success as the number of goods you made. Earlier this year Mr Schlettwein brought down his budget and one of the documents that was presented to the national Assembly was the ‘Government’s Accountability Report 2017/18 . In the report on page 179 the Ministry of Higher Education under the definition of ‘success’ said ‘the progression and repetition rates determine the internal efficiency of an education system. In 2017, 83.5% of the students were either in their first year or had progressed to the next level while 16.5% were repeating a year. So Dr van Kent if I passed all of students irrespective of whether they studied or not I would be defined as a very efficient teacher? Perhaps the very reason that you complained to the SADC ministers is because of the very criteria that your ministry sets for success. This criteria for what your department calls ‘success’ is not, in my opinion,  success by any reasonable measure but the standard which creates the very outcomes of which you complained.  

Staff at the nation’s universities know perfectly well that if they fail large numbers of students that are not up to standard or because they do not work then they will be the ones blamed and not the students. At UNAM I am forced to give up to four exams for each course in the event that a student fails – normal, supplementary, winter/summer term, and promotional exam. That is directly a result of your ministry’s definition of success. As long as the criteria for evaluating the nation’s universities and its academics is the pass rate and not academic excellence and students being employable both domestically and internationally,  then we are wasting the nation’s money and the students’ time.

But that is only one finger, Dr van Kent. The second finger which explains why we spend N$3 billion per year on tertiary education and get what you know are poor outcomes is that despite having a National Human Resources Plan (2010 – 2025) which tells us precisely what type of students we need and was prepared by the National Planning Commission we make no reference to it in our planning. Few education planners even know it exists and even in 2010 the plan stated that we do not need most of the university graduates we are producing. We now have nurses and doctors demonstrating because there are no jobs available. The reason is simple enough- bad planning or a complete absence of it. By 2015 Mr Schlettwein had told the nation that he no longer has the resources to keep hiring staff for the public service. So if we are looking for a year, then 2015 is the end of Namibia’s post-colonial era when everyone graduating from our universities went straight to government. But at the heart of the problem is that if we have a student who has the grades to enter accounting or economics, irrespective of market demand we will allow them in rather than basing admission on what Namibia needs as per the nation’s HR plan. This is the greatest weakness of out tertiary education system as we simply continue to bring in more students even though we know there are no jobs.

The third finger Dr van Kent is the NSFAF. Roughly half of the students that come to university in Namibia are subsidized by the state. A student coming to UNAM gets N$23,000 in living allowance for the year. This is not a great deal of money but a student will very quickly figure out that after finishing high school you are confronted with two choices. You can be unemployed now which is a certainty for a very large proportion of Namibia’s high school graduates or take an NSFAF ‘loan’ and go to university. That means, given the current labour market that you are likely, but perhaps less likely, to be unemployed in four years’ time. Given that this is a ‘loan’ that many do not pay back then the choice is pretty obvious. As a result, a significant number of the students are not motivated to do anything but just pass their exams for four years with a minimum of work so they can continue to get government allowances.

But Dr van Kent, the thumb points aggressively downwards when you point at us. We have fallen for the ideas sold to us by IMF and World Bank that we just need more and better education and all will be well. Transform our mineral capital into human capital and the economy will prosper. The ‘elephant in the room’ is the fact that the supply of students does not create its own demand. In even large Africa countries like Nigeria and South Africa there are massively high unemployment rates even amongst technically trained graduates. Why? Because of Africa’s place in the global production system- we make little more than holes in the ground to extract natural resources and this activity is on the edge of full automation. No amount of tweaking the tertiary education system will change the outcomes until African countries start producing products for the local and export market. Until we generate dynamic local economies where investment is welcome then no changes in the education system will give our youth better outcomes. Namibia’s children will remain unemployed, even the very bright ones.

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

Mining Taxes in Namibia – losers, fools and thieves!

Mining Taxes in Namibia – losers, fools and thieves!

In late April the investigative team at The Namibian stirred the hornets’ nest which is their function and started a very important public debate on whether the country’s mining companies are paying their fair share of taxes. If you look at the company taxes paid by Namibia’s non-diamond mining, their contribution in 2017/18 was a mere N$256 million of approximately $17 billion in non-diamond exports in 2017. In other words Namibian non-diamond mining firms i.e. outside of Namdeb paid roughly 1.5% of revenue to the state in the form of company taxes. One can understand why Minister Schlettwein considers such a contribution as utterly inadequate and thinks there needs to be a review.

The question is why the non-diamond mining firms pay this negligible amount of company tax. Namdeb and Debmarine of course pay much more. Is this figure of 1.5% of exports so low because the mining firms make no profits or because we are fools in the way we administer our mining tax regime or is it because the mining companies are criminals and evade taxes? These are three lines of argument that have been heard in the discussion of Namibia’s mining taxes.

First, mining is a peculiar business and few people understand it well. In fact if you are a mining company what you do when you invest in a mine is you take an almost religious act of faith in the distant future. You put a great deal of money today to discover the ore body and then even more to develop it in the first years and  you will not make a penny because you are paying off the massive injection for capital but then you will make money once this is paid off. The most ‘legitimate’ explanation for the very low tax take of the mining companies is that three of the biggest mines are new Husab uranium mine, the B2 gold mine, Otjikoto Gold Mine in Otavi and the Tschudi Copper Mine near Tsumeb and may not be earning a profit yet.

But there is a second explanation and that is we have been very foolish in the way we have given out tax concessions to some firms including Scorpion Zinc, Trekopje Uranium Mine (currently under care and maintenance) and Weatherly copper smelter. They were all given tax holidays by government. This means that they pay no company tax because that was government policy. Much of these tax breaks  have now been eliminated but it is too late. The tax take is in effect the price the people of Namibia receive for allowing mining companies to take away our minerals.

The third possible explanation is that sometimes one finds that mining companies never make a profit, at least on any piece of paper our tax authorities ever get to see. When you mine and make almost no profit year in year out then people begin to think that perhaps the great transnational mining companies are not here for their health but are hiding their profits in tax havens through what is known as transfer price manipulation. This means they either inflate their local costs or deflate their apparent revenues by selling to related companies at low prices. If tax inspectors are doing their job then catching and stopping the under-valuation of exports is relatively easy as there is a London price for zinc lead and copper but catching the mining companies blowing out their costs is much more difficult to detect. Some, maybe even many mining companies cheat the tax authorities by shifting their profits to off-shore tax havens. In the last few years many simple minded studies of the value of cheating by mining companies have been done by the UN, and the Economic Commission for Africa and most are at the level of economic rubbish, not worth the paper they are written on.This is not suggest that many companies do not cheat but the so called scholarly work that has been done has generally been very poor.

But company tax is not all that government earns from the mining companies. The government also gets what are called royalties and now since 2017 it is starting to get export tax revenue as well. In other countries where governments own a share of the mines, governments also get dividends. The standard measure of what is the contribution of the mining companies is the company tax, plus royalties plus export tax plus dividends divided by exports. In the case of Namibia the figure was 4% in 2017, up from 3% the year before when there were no export taxes. In South Africa the mining industry contributed 8% of exports to government coffers. In Zambia the contrition of its mines was a huge 17% export earnings in 2016.

The real deal though is in Botswana where the government got 39% of its diamond exports in the form of government revenue in 2017. Why? Because Botswana, owns 50% of Debswana (the local equivalent of Namdeb). What really makes the difference in terms of contribution to revenue is that Botswana not only owns 50% of Debswana, it also owns 15% of the parent company De Beers and the dividends are counted as part of the contribution to revenue. There are only two places on earth where government ownership of the mines has brought a huge dividend to the government and that is Botswana and Chile. In Zambia the nationalization of the copper mines was a complete commercial disaster. Chile and Botswana have owned a very large chunk of their resources and profited handsomely for some 50 years. Why were they a success and yet brought Zambia to its knees? Chile and Botswana have respectively had the biggest resources of copper and diamonds in the world. This is the first condition - having a world class resource. But the Zambian Copperbelt was also a world class resource when Kaunda nationalized the mines in 1973. The second condition for profitability that was not fulfilled in Zambia, which is that the resource must be managed in an otherwise commercial manner, irrespective of who owns it. In Chile and in Botswana business was allowed to get on with making a profit which was not the case in Zambia under KK where the mines became a political football that devastated the nation.

Mr. Schlettwein is right, the evidence suggests strongly, though it does not yet prove, that the people of Namibia are not getting a fair share of their mineral resources. Namibia needs to undertake a formal review of its mining tax regime. However, this must be done delicately and the way it is done is just as important as the outcome. Our politicians love bashing the private sector and foreign mining companies in particular rather than trying to make them genuine development partners and this has harmed the country greatly.  A public inquiry needs to be held and the Chamber of Mines needs to be directly involved and it must be based on the facts. It is the facts and not rhetoric and ideology or the short term interests of the mining houses that should determine an appropriate tax regime for Namibia.

These are the views of Professor Roman Grynberg and Mr. Fwasa Singogo (research fellow) and not necessarily those of UNAM.

In Namibia, being white sucks

In Namibia, being white sucks

As a white foreign academic I know myself to be on the endangered species list. What however makes my situation one of being ‘’critically endangered'" is that I write articles  that are sometimes construed as critical of government policies If you comment on government policy you really cannot expect to be loved unless of course you are a professional praise singer. The fact that I am still here and still alive, for the moment, is one of the very best things about Namibia. In so many of  Namibia’s neighboring countries, even those that are democracies such as Botswana,  if you write with critical policy articles then the River Styx awaits you or at best a one way ticket to another country if you are not a national. Consider it something of a cliché but Namibia remains the home of the free … and yes you still have to be a bit brave!

But (and nothing has meaning before the word ‘but’) I must confess that to be white in Namibia is one of the more difficult parts of my life. Color has never meant much to me personally and I have always taken people for what they are inside their heads and their hearts. Nothing else should ever really matter. Yet as a relative newcomer to Africa after 12 years I have found color to matter in Namibia much more than it ever should, almost 30 years after decolonisation and  independence. Of course anyone who knows Namibia’s tragic history would not be surprised.

In my life I have been hated for many things, my politics, my country of birth, my religion but color never rated high in the great sources of hatred until I crossed from Botswana to Namibia. In Botswana I was of course aware of color but it was not like Namibia. In Botswana there was no apartheid and the country was at the time too wretchedly poor a country to even be colonized by the British so racial and ethnic relations were always more comfortable than here.

In Namibia to be a white foreigner is uncomfortable, of course not half as uncomfortable as being black Namibian and having no choice but to live in ‘kambashu’ in Katatura. Oft times the racial tensions which exist in Namibia invades my personal life. Recently I went to a restaurant near UNAM which shall remain nameless to protect the guilty. My Namibian friend who accompanied me hates the place because it is one of those restaurants in Namibia that remains ‘for whites only’ even though the signs are long gone. You will almost never see a black person there, unless they are waiters or unless they are so used the abuse that it no longer matters. Most black Namibians know which places these are and where not to go. But I like the food there and so I insisted. I was really pleased to see a large group on UNAM students sitting there enjoying a substantial  dinner and writing notes of some sort. Maybe there is progress, I naively hoped.

At the end of their dinner the owner/manager of the restaurant came and told the students that they should not be writing notes and said ‘where do you think you are, in a shebeen in Katutura’.  I lost my temper, which rarely happens these days, and got up and started screaming at the top of my voice that these students had done nothing wrong and that this is a free Namibia and that if I heard this sort of racist dribble again I would report the man to the police. He disappeared to the kitchen. I promised the staff that I would never step foot in the restaurant again and left.

I have also been a victim of the discrimination against whites. One petty episode involved a taxi driver at UNAM who last year wanted to charge me $20 for going to the other end of town when I knew that at the time the price was $10. I told him as such and he replied’ You colonized my country’ Being of Polish origin it struck me that the last imperialist ambitions of the 14^th century Polish empire ended at the Ukrainian steppes and those Polish aristocrats probably never even knew where Africa was. Angry at so blatant an attempt an attempt to rob me I turned around to the driver and said ‘I hate you, not because you are black, but because you use your color as an excuse to cheat people’ and then proceeded to hitch-hike to town.

For me personally this racism pervades much of my life in Namibia. I am a physically large man, from a family of large copper miners and textile workers and hence I have the natural physical appearance of a white man that many unfortunately associate with such racist views.  As a result two things happen. Black Namibians immediately assume because of my appearance that I am just another white racist and don’t want to speak to me and some, but not all, white Namibians feel at complete liberty to express racist views. This simply put, in the language of the younger generation, sucks, and leaves me personally isolated as I naturally avoid people with racist views and so I simply have learned to avoid people altogether in Namibia.

Recently I had an experience with a white contractor that is also worth the recalling. He shared my views, and that held by many Namibians, black or white, about the sad mismanagement of the country’s economy. I knew where the conversation was going as he amplified his views about ‘African mismanagement’. I cut him off   and said that ‘I am very old now, which makes me neither smart nor wise, but I have heard what you are about to say,  said many years ago about the Chinese and Indians. They also screwed up their economies for a very long time with really bad policies , just like we are doing now, but over time they have found their own road to prosperity and are winning. It will take time, and I don’t know how long it will take or whether I will live to see it,  but Namibia and Africa more generally will also find their own roads.’The road for Namibia will be shorter when we finally are able to bury the racism that is the ugliest aspects of Namibia’s past and present.

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

On Trade Trump may be right and it may also good for Africa

On Trade Trump may be right and it may also good for Africa

Since coming to office President Trump has done on international trade what few thought was possible. He first tore up the Trans-Pacific trade agreement on coming into the White House a move which Hilary Clinton had supported. He has torn up NAFTA and has picked a major trade war with the Chinese which is likely to continue because the disagreement runs to very heart of the Chinese development model.

At present China has some US$3 trillion in foreign exchange reserves from past trade surpluses with the US and the rest of the world. With that fat padding China has been able to invest heavily in the development of its own industry and you help local firms subsidize exports. It is these subsidies that Trump wants to see abandoned by China as part of a new bilateral deal. As long as China continues to subsidize industry in the way they have then the Chinese will grow to completely dominate global manufacturing industry. Much of the subsidies come from massive injection by the Chinese state in the wake of the  2009 Great Recession. The Chinese communists, ever fearful of mass unemployment and revolution, poured 4 trillion Yuan ( $600 billion in 2009) into supporting their firms after the onset of the Great Recession post 2009. Many of the loans that were given out to Chinese companies then were written off by the government. It was these and earlier subsidies that have been the main support for Chinese heavy industry. At first the subsidies were poured into various heavy industrial goods such as steel, aluminum copper and nickel. But China has used more pointed subsidies to develop solar power as well as electric cars.

Beijing knows well that it is precisely these targeted subsidies that have been at the very heart of China’s return to the world stage as what will soon make it the world’s largest economy. On a commodity by commodity basis China is already number one in virtually every heavy industrial sector. If Trump could actually succeed in reigning in Chinese subsidies then this would inadvertently help what Trump calls ‘Nambia’ and other ‘s..thole’ countries in Africa establish industry. Africa’s role in the new modern 21^st century Chinese order is to be the ‘diggers of holes’ for Chinese industry ( as opposed to hewers of wood and drawers of water) and we will never be able to beneficiate and progress beyond digging holes so long as China subsidizse the processing of  minerals in the middle of its value chain.

Last week Donald Trump did something that most thought impossible- he surprised the world. He had just agreed to  a revised Nafta trade agreement with Canada and Mexico now called the USMCA ( impolitely dubbed ‘you shmucks’ in the New York vernacular) which was supposed to end the on- going trade war that had erupted at Trump’s instigation  between the USA and  two of its biggest trading partners and neighbors- Mexico and Canada.

Then, after having agreed to a trade deal with Mexico just a few months previously in a tweet last week Trump announced that he would impose a 5% tariff on all imports from Mexico and he would increase it to 25% by October if Mexico did not stop the illegal immigration across the US southern border. Trump would fulfil an election promise that he would get the Mexicans to pay for the wall that he has long wanted to build but the US Congress had blocked funding. The Mexicans will no doubt retaliate with higher tariffs on US goods but in the end their choice is simple- either they help block illegal immigration from their side of the border or face a destruction of their most important trade relationship and one which creates millions of Mexican industrial jobs.  This, seen from the perspective of Trump’s power base which is among America’s white blue collar workers, is a brilliant commercial stroke.

 If you look at illegal immigration not from the perspective of an American elite who want cheap Mexican maids and gardeners but from the perspective of the white American worker it was automation, international trade and lastly migration that has eliminating a large swathe of American industrial jobs post 2000 and kept workers’ wages at such low levels for the past 30 years. American workers will almost certainly applaud Trump’s move but the danger is simple enough. It is now clear that to the world that Trump is so utterly erratic in his decision making that you have to be a real ‘shmuck’, after Mexico, the Iran nuclear deal and the Paris accords on climate change to believe that when America signs an agreement that it means anything as long as Trump is in the White House. That however is a problem for the Washington elite and the world but not for Trump’s working class power base.

Trump may be able to brow-beat the Mexicans into slowing illegal migration but unfortunately for Africa he is unlikely to succeed with China because the subsidies have worked for China and they will not change their economic model until it is in their economic interest to do so. China, after a 150 years of European and Japanese imperialism and 30 years of idiotic Maoist economic policy will soon return to its proper place as the world’s biggest economy and nothing short of World War III will stop them.

Whatever one thinks of Trump as the so-called ‘leader of the free world’ or even as what passes for a human being, his economic policy, viewed from the perspective of his own base has been a remarkable success. His tax cuts which mainly benefited the US rich has created a boom in the US economy. Unemployment has fallen to record low levels of 3.6% unseen since the 1960’s. This is a rate we can only dream of in ‘Nambia’ and the rest of ‘s..thole Africa’. Because of this labour is now scarce and median wages have actually started to rise again in the US over the last few years since came to office. Looked at from the perspective of the American worker Trump has done what he promised and what no previous president over the last thirty years has which is to lift the position of  working people. It will be really hard work for the opposition Democrats to put up someone to stop Trump being re-elected next year under America’s gerrymandered and undemocratic electoral system where Republicans can win with a  minority of the electorate as did Trump in 2016 and Bush junior before him.

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

What should have been in Mr Schletwein’s Budget.

What should have been in Mr Schletwein’s Budget.

Minister Schletwein has done his best to try to slow Namibia’s seemingly inevitable slide into the hands of International Monetary Fund which exist to ‘help’ member governments which are unwilling or unable to deal with the fundamental factors that underlie their economic and financial situation. In Namibia three factors underlie our current financial crisis. These are the  wage bill in the public sector which is ballooning, state owned enterprises which need to be brought under strict financial control and privatized or shut and lastly the elephant in the room which is  the most important – the large number of infrastructure projects in Namibia which are said to be undertaken to ‘stimulate economic development’ but are in fact commonly just government buildings and roads, many of which are of the most doubtful benefit to the  long term growth of Namibia.

Minister Schletwein has a most unenviable job of trying to balance the competing desires of the President and his cabinet colleagues with the reality that Namibia cannot continue on the current path where there has been no economic growth for 10 quarters ie a depression and continue a ‘business as usual’ approach to the funding of government. It would appear that very few in cabinet have any real understand of how grave is the financial situation. Despite doing what is widely seen as the best possible job in such a constrained environment it is widely said in business circles that Minister Schletwein will eventually pay with his job for the situation the country faces. The great fear of many in the business community is that a ‘yes man’ will replace him as there are few in cabinet who have the financial ability or understanding of Minister Schletwein.

The problem that underlies the economy is structural and while SACU revenues and our monetary relations with South Africa have made things worse, the current crisis is largely ‘Made in Namibia’. If there were no election this year and only economics and finance mattered then Mr Schletwein would have gotten up before the National Assembly two weeks ago and made a quite different speech.

He might have said ‘Honourable Speaker, we face an unprecedented economic and financial crisis, unparalleled in the history of Namibia. Our debt has doubled in the last few years, SACU revenues are stagnant and we have allowed the wage bill in the public sector to grow unsustainably. Honourable Speaker, we have no new significant mines, fisheries exploitation is at or above maximum sustainable yield for most species and recreational tourism numbers are not growing. These sectors are the three engines of our economy and we have done little to either assure their long term sustainable development or to effectively diversify away from them.

‘Honourable Speaker We now need to balance the budget over the longer term by undertaking even more significant and painful cuts to the government wage bill and eliminate the pointless and unsustainable subsidies to our near bankrupt public enterprises’

‘Honourable Speaker, more importantly than balancing our current budget we need to bring reason and sound economic calculation to our choice of infrastructure projects by establishing, under the direct auspices of this house, and not the National Planning Commission, an independent body that will analyze proposals and advise government and this house on which of the many potential infrastructure projects will bring the greatest long term economic benefit to Namibia. Otherwise we shall continue to build infrastructure on the whims of those who desire for vanity projects. This matter is of the greatest immediate and long term threat to Namibia’s financial viability and must be addressed this year.’

‘Honourable Speaker, while financial and macroeconomic stability are vital and fundamental what we must do is to rebuild relations with our private sector which feels that the government is conducting and implementing policy that is not in their interests. This government considers itself as part of a ‘development state’ and therefore will intervene in the economy in ways that will assure that economic growth benefits society as well as business. Our rankings as a place to invest are plummeting in mining and in other sectors of the economy more generally. While the government does listen to the private sector this needs to be done more openly for not only must government listen it must also be seen to be listening and doing so very publicly. As a result, Mr Speaker we will be calling a series of open consultations with business which will draw up action plans to reassure investors in mining and tourism that Namibia remains open for business’.

This of course was not said because neither Mr Scheltwein nor anyone who may succeed him after the election dare utter such things about our current financial state or what further painful measures need to be implemented. The alternative to Namibians doing it by themselves is to have the International Monetary Fund (IMF)  do the reforms for us. By not reacting appropriately now what will happen is that we will eventually need a loan from the IMF and at least then there will be someone to blame when the people feel the sort of pain an IMF program will inevitably bring.

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