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.

African Economic, Trade and Mining Policies : The Economics of Drugs and Drug Abuse

African Economic, Trade and Mining Policies : The Economics of Drugs and Drug Abuse: The Economics of Drugs and Drug Abuse In 2001 Portugal came to the conclusion that with approximately half its prison population in ja...

The Economics of Drugs and Drug Abuse

The Economics of Drugs and Drug Abuse

In 2001 Portugal came to the conclusion that with approximately half its prison population in jail because of drug related offences that changes in laws were absolutely necessary. In that year the government embarked on what is still to this date the most radical experiment in the management of illicit drugs of any country. Rather than legalize drugs, something that would gotten the very unwanted attention of the US government as well its EU partners Portugal decided to decriminalize all dugs, both hard and soft, and start to treat those who were drug addicts as a public health rather than a criminal issue. Decriminalization means it is still illegal but use is treated as a misdemeanor rather than a felony. After all a crime normally has a victim and in this case, unless the drug addict commits another crime  as a result of their addiction, then there is no victim apart from addict and their family.

Since then the Portuguese experiment has been dissected by virtually every country and despite what one would expect the actual rate of addiction has not increased. In April 2009, the Cato Institute published a White Paper about the decriminalization of drugs in Portugal. Data about the heroin usage rates of 13-16-year-olds from and claims that decriminalization has had no adverse effect on drug usage rates The results of the Portuguese experiment are impressive. The rates of HIV have decreased and so have drug related crimes.  However, Portuguese officials themselves will tell anyone who is willing to listen that decriminalization is not a panacea for drug abuse and that there are many other aspects of the country’s drug abuse problem that were addressed.

In the USA the government maintains a policy that has only changed slightly since President Nixon launched the War on Drugs in 1971. Penalties for the pushing of drugs remain draconian and  a large portion of the prison population in the USA are small time drug pushers and users.  Yet the criminalization along with mandatory prison sentencing has resulted in a massive increase in prison populations in the USA. All drug lords know their economics- the more severe the penalties  for selling,  the higher the price and given a normally price unresponsive demand the greater the profits. You will never find the drug lords advocating either decriminalization or legalization. They know that it is their ‘retailers’ and their mules who go to jail and this is a  minor inconvenience to the drug lords

Last year in the USA it  was estimated that some 50,000 people died of drug overdose. The majority are based on dangerous opioids such as heroin and fentanyl.  This annual death rate is roughly the same as the number of Americans who died during the Vietnam War over a period of nine years. The main substance are opioids which are also used in common pain killers like codeine. One of the main ‘gateways’ for opioid abuse in the USA are not the heroin pushers on the mean streets of American cities but the family doctor who commonly  prescribes opioid based pain killers to help people deal with severe pain. From this people graduate to more deadly opioids.   

Two weeks ago Ms Cheryl Green was arrested in Walvis Bay for growing marijuana for what she claims are medical reasons to help her partner Reiner Kring, who suffers from amyotrophic lateral sclerosis (ALS), which is a progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord. There are several scholarly articles which support the contention that cannabis does appear to have positive effects for ALS sufferers.

Ms Green was reportedly charged under Act 41/1971 Section 2A which relates to the possession and dealing in prohibited dependence producing drugs or a plant from which such drugs can be manufactured. The law under which Ms Green was arrested was a colonial law from the apartheid era which has in effect been struck down by the courtsin South Africa recently. In many states of the USA Ms Green would simply have go to a doctor and get a letter permitting her to grow a certain quantity of marijuana for her partners condition.

Cannabis for medical uses is  legal in many countries including Australia, Canada, Chile, Colombia, Croatia, Cyprus, Finland, Germany, Greece, Israel, Italy, Norway, the Netherlands, New Zealand, Peru, Poland, and Thailand. In the United States, 33 states and the District of Columbia have legalized the medical use of cannabis, but at the federal level its use remains prohibited for any purpose. Cannabis has without reasonable doubt positive medical advantages and to imprison people for using it for medical purposes seems to be a  destructive pandering to a small minority of voters  whose knowledge of and interest in the facts regarding the medical advantages of cannabis in  treating some diseases.

Two countries, Canada and Uruguay have legalized cannabis for recreational purposes, South Africa has, following a Constitutional Court ruling, also legalized the recreational consumption of marijuana and  it is time that Namibia starts a national dialogue on reforms of antiquated colonial laws that does not reflect current best practice and medical knowledge. It is an election year and it is doubtful that President Geingob and the Minister of Health would lose votes by asking the country’s Law Reform Commission to publicly review the law especially as it pertains to medical use of cannabis but also for its recreational use.

There can be no doubt that the consequence of abuse of hard drugs are dreadful and addiction to hard drugs often destroys its victims and breaks up families. Yet the question arises as to whether serious drug abuse ie opioids and coca based substances are best treated as criminal  activities as is currently the case, or should users be treated as individuals having a disease, whether social or psychological. The more humane and cost effective way to deal with this scourge of drug addiction is to treat it as a disease and not to waste the nation’s scarce financial resources incarcerating drug users but giving them the medical care that similarly ill people receive from our medical system.

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

Namibia’s ‘Receiver Led’ Economic Recovery

                                      Namibia’s ‘Receiver Led’ Economic Recovery

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.