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.