Who is Responsible for Namibia’s Depression?

Who is Responsible for Namibia’s Depression/Recession

 

Three weeks ago the Prime Minister point blank blamed everyone but the government for the country’s mounting economic woes. For three years the country’s real GDP per capita, the standard measure of its income has been in decline. The government does not dare call it what it really is- a great economic depression. Normally these are defined as occurring when GDP/capita has been declining for 10 quarters though unlike a recession there is no agreed definition. With some fancy foot work GDP per capita in Namibian dollars has not declined every quarter and so we can avoid the dirty ‘D’ word and just call it a very long recession.

It was recently reported that the Prime Minister Saara Kuugongelwa-Amadhila told an Outapi Town Hall Meeting that two consecutive years of drought in 2016 and 2017 were to blame for the country’s financial downturn. It is also reported that on the Namibian Presidency Twitter handle, the prime minister said it is not true that the economic downturn was due to a mismanagement of the economy, but was a result of external factors reported to be blaming just about everything other than the poor economic management of the government.

The drought over the last two years may have knocked half a percentage point off Namibia’s growth rate but not much more. Agriculture is just too small for it to be the expalantion.  The government also blames declining commodity prices for Namibia’s economic decline. This is also correct. The collapse of uranium prices has meant that Namibia now has only two significant Chinese owned uranium mines which may  pay taxes as some point.  The decline of Angola caused by low oil prices has also made things worse as we no longer have Angolan officials coming to Namibia in their scores to spend and launder their money through the Namibian real estate market.

 In case you are thinking this an unpaid election advertisement for the government you would be wrong because the PM is about as right on external factors alone being responsible for our problems as I am when I blame my dear departed mother for my size. After World War II in eastern Europe an entire generation that had starved during the war, the Great Depression and the forced collectivization of land by Joseph Stalin in the Ukraine wanted to make sure that their children never knew a hungry day. And so on every occasion that I opened my mouth as a small boy my mother would put food in it. To this day I blame my mother for my size but the response to that lame explanation has to be, so what? Of course this is just an excuse, no better than the PM’s excuse for our declining GDP/capita.

The interesting question is what I can do about my weight and what Namibia can do about its current economic decline. I cannot change my mother and the PM cannot change commodity prices or make it rain. There are of course a host of reasons why we are in the dreadful position we are in and many come from weak economic behavior by the government. The most obvious explanation was the absurd proliferation of what passed for ‘infrastructure’ i.e. new government buildings such as NATIS, Home Affairs, a new super modern Police headquarters, and an ‘absolutely necessary’ new administration building at UNAM that was undertaken without any economic analysis of which of the competing projects would give Namibia the greatest economic benefit.

The second is a collection of state owned enterprises that habitually lose money and are sucking the government finances dry. The third is the decision of the previous administration to hire thousands of public servants straight from university that are of the most questionable productivity and that we can no longer afford. This is entirely in the purview of the government and of course before the November election the government will do nothing to address these issues.

The government has started to make painful decision such as those about Air Namibia. It must make decisions regarding private management of our hotel resources in the tourism sector. The government of Namibia owns the Country Club and gets a dividend cheque every year from the private South African managers but NWR just send the government bills. There are many more state owned enterprises that need professional management or closure. These inevitably involve job losses and the question is whether the government will accept this.

But the really tricky and probably the most important part of reform is stop ‘the economics of 10%’ in the building of absurd infrastructure in Namibia. We will probably never be able to stop some ministers and senior officials from taking kick-backs for construction projects in their sectors of responsibility but it is not impossible to make sure that some of the ridiculous projects that will only enrich some contractors, ministers and officials can be stopped. The normal procedure in most countries is for the Ministry of Planning to evaluate each proposed project through cost-benefit analysis and make recommendations on which give the best return. This is done in many countries but not in Namibia and even if it were done the Ministry of Planning simply cannot be trusted not to sway the results in favor of a particularly vocal or powerful minister.  

There is one institution that the US Congress has created in the 1970’s that is a must for Namibia if we are to save the country from the greed and villainy of some of our ministers and officials. We need to create the equivalent of the US Congressional Budget Office which independently of government reviews the cost and benefit of budget proposals. In the USA it is controlled by the Congress and reports to them directly. The most serious and present risk to Namibia is the proliferation of economically irrational loan funded infrastructure projects with no obvious economic base. A body that evaluates these projects and reports back to the national assembly will increase accountability and strengthen democracy in the country. To continue on the present road leads us to default and loans from the International Monetary Fund. Which road we take Madam Prime Minister is your choice and that of the rest of the government?

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