Not all doom and gloom

We live in a great country, and you and I are at a perfect moment in the history of Namibia. It is not all doom and gloom, and the good news is that there is light at the end of the tunnel.

As Namibia approaches the general elections in 2024, there is immense pressure on political leaders to tackle these economic challenges and implement policies that will deliver an inclusive and competitive economy.

On 22 February 2023, Minister of Finance and Public Enterprises Iipumbu Shiimi tabled an N$84.6 billion budget outlining his vision to build on the work the government has done to make a real difference in people’s lives, investing in Namibia, lowering costs for families, protecting them, reducing the deficit, and more.

However, Namibia expects economic growth of 3.2% in 2023, down from 3.4%, as drivers of income streams remain uncertain. Despite the gradual economic recovery in 2022, the socio- economic situation did not improve significantly. Unemployment is estimated to remain high. Poverty rates are estimated to be high. Namibia has a choice to implement critical macro-economic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per capita incomes, sustainably reduce poverty, and deliver better life outcomes for many Namibians.

Furthermore, it involves boosting private sector development and competitiveness by eliminating structural constraints that hinder productivity and expanding social protection to protect the poor and most vulnerable.

Moreover, the CEO of the Namibia Investment Promotion and Development Board, Nangula Uaandja, said Namibia secured investments worth N$161 billion in potential investments from abroad. This is a good move for Namibia, as it is expected to create 122 000 jobs. It was held that an amount worth N$2.8 billion is in operation where capital has started to flow valued at N$24.1 billion, and investments have started in the country. However, foreign direct investments have been received with mixed feelings. The presence of highly competitive international players on weak domestic markets often leads to market abuse fallowed by reluctant political pressures. Large investors more often than not persuade concessions from host the country to maximise tax obligations, hence encouraging volatile balance of payment flows. The negative results can be caused when a market is distorted and foreign direct investment externalities that influence supply chains of domestic companies, tightening productivity gains and profit levels, which is translated in loss of competitive a dvantage to domestic enterprises.

To leverage the full potential of these investors, the government will need to design and implement national skills programmes aimed at upskilling young Namibians to ensure many more embrace skills and capabilities.

Furthermore, with the high unemployment rate in Namibia, FDI will not change the status quo. Hence, foreign companies might not create as many jobs as the domestic private sector, but they often create better-paying jobs that require higher skills.

In the case of high unemployment in Namibia, domestic investment can be a driver and an engine of economic growth. The re-launched SME Economic Recovery Loan Scheme, in the amount of N$500 million, is one good example to create liquidity within the domestic markets.

It is necessary to sustain growth, create employment, and lay the foundation for poverty reduction. Our domestic markets have not grown fast enough to tackle unemployment. As a result, there is a wide and growing gap between Namibia’s investment requirements and domestic resource availability.

It is not economically ideal to wait in anticipation to use FDI as part of achieving a development objective. Therefore, we have to think of policies towards attracting and encouraging linkages between foreign multinationals and local companies. We should not forget Ramatex Textiles Namibia’s (RTN) environmental concerns. The reality is that we need these people, but we should not allow them to exploit our people. The FDI should not be a curse on our dignity. It must always remain a win-win. It should, therefore, not be at the expense of the dignity of our people, or the sovereignty of our nation. Hence, we expect to see more action from the Ministry of Labour, Industrial Relations and Employment Creation in legally correcting any prevailing situation with the deserved urgency.

Therefore, economically, we are not yet out of the woods, but we are beginning to see signs of stabilisation. Laterally, with the domestic issues, Namibia also faces the same inflationary pressures that have plagued economies around the world. Annual inflation rose to 7.2% in February 2023, defying the Bank of Namibia’s expectations for price pressures to ease. This prompted the bank’s Monetary Policy Committee to hike interest rates by 0.25 basis points on 15 February 2023, taking the benchmark repo rate to 7%. The Bank of Namibia is expected to raise interest rates by 0.50 basis points on 19 April 2023 to curtail ravaging inflation and a fast-depreciating Namibia dollar. We are expecting the Bank of Namibia to continue raising interest rates over the medium-term.

The expectations are that inflation and interest rates will remain undesirably high for some time. The Bank of Namibia will play a major role in striking the balance needed to bring down the cost of living without stalling the economy. Furthermore, the Namibian economy is closely linked to South Africa, with the Namibia dollar pegged one-to-one to the South African rand.

This means that Namibia will increase repo rate to strike a balance. South Africa’s Repo Rate stands at 7.75%, compared to Namibia’s Repo Rate at 7.00%. This resulted in difference of 0.75%. It should be noted that although much of this inflationary pressure is supply side-based, there is merit in increasing interest rates as a tool to try to slow down inflation. The fundamental debates about inflation are really concerned with whether the central bank is an inflation- creator or an inflation-fighter. The responsibility of monetary policymakers is to adequately respond to inflation. To that end, youth unemployment is one of Namibia’s most intractable challenges. Given this evidence and the fact that Namibia is facing moderate growth for some time, it is crucial that FDI, domestic institutional investors, policymakers and those working on youth employment interventions evaluate and invest in programmes on the basis of their ability to keep young people positively oriented towards the labour market.

Therefore, the programmes should help improve their employability, even if the young participant is not yet able to find an actual job.