Covid-scarred economy riddled by risks

Jo-Maré Duddy – Namibians entered 2022 tossing and turning about bleak prospects for jobs and a decent living: As the country enters its third year in the clutches of the Covid-19 pandemic, the World Economic Forum (WEF) has identified the employment and livelihood crises as the biggest risk Namibia will face in the immediate future.

In its Global Risks Report 2022, the WEF defines the crises as the “structural deterioration of work prospects and/or standards for the working-age population: unemployment, underemployment, lower wages, fragile contracts, erosion of worker rights etc.”

The WEF surveyed 124 countries and more than 12 000 country leaders in its latest report. The livelihood crisis is the second most immediate threat to the world, the WEF says. “It is the most immediate national threat in 97 countries, including 16 of the G20 economies,” it adds.

The crisis is also the top one at the country level in the Executive Opinion Survey (EOS) in the WEF’s risk report.

“It will take the global economy at least until 2023 to create the jobs lost to Covid-19, but many of these jobs are expected to be of low productivity and poor quality, according to the International Labour Organisation,” says the WEF.

EMPLOYMENT

No official data yet reflects actual jobs losses in Namibia caused by the impact of Covid-19 and the ongoing recession. The Namibia Statistics Agency’s (NSA) last labour force survey in 2018 pegged the unemployment rate at around 33.4%.

Local analysts now agree that at least 40% of Namibia’s workforce currently is unemployed. Trading Economics, a leading internation website, states its global macro models and analysts expectations estimate that Namibia’s unemployment rate reached 36.8% in 2021. According to theglobaleconomy.com the average unemployment rate of 181 countries in 2020 was 8.15%.

Namibian economist Rowland Brown of Cirrus Capital in a recent tweet said four years ago, Namibia needed to create about 300 000 jobs to reach full employment. For full formal sector employment, which doesn’t count non-cash earning workers like subsistence farmers and informal traders, around 700 000 had to created.

“After Covid, and population growth, it’s probably now closer to one million,” Brown said.

DIGITAL INEQUALITY

According to the WEF, digital inequality is Namibia’s second biggest risk in the near future.

This they define as “fractured and/or unequal access to critical digital networks and technology, between and within countries, as a result of unequal investment capabilities, lack of necessary skills in the workforce, insufficient purchase power, government restrictions and/or cultural differences”.

Namibia was ranked 102nd out of 120 globally on the Inclusive Internet Index 2021. The index, compiled by the Intelligence Unit of The Economist, is based on availability, affordability, relevance and readiness categories.

In the availability and affordability categories, Namibia was ranked 100th. The country was placed 106th on the relevance pillar and 92nd on the one for readiness.

In the WEF’s latest Global Competitiveness Report, released in 2019, Namibia was ranked 91st out of 141 countries for ICT adoption.

The WEF in its risk report says Covid-19 spurred a leap in digitalisation, but to varying extents across countries.

“While moving towards hyperconnectivity has made some countries more competitive, others could remain stuck in a pre-pandemic analogue economy,” it adds.

The WEF continues: “In the EOS, ‘digital inequality’ is a top short-term risk in Latin America and Sub-Saharan Africa— the two regions expected to grow the least in 2022.

“The need for rapid digitalisation to avoid a widening digital divide remains pressing. Governments, businesses and individuals in developing economies will be seeking to digitalise rapidly but may have limited technical and financial resources to enhance cyber defences against critical infrastructure breaches or cyber regulations to safeguard data and privacy.”

ECONOMIC STAGNATION

The WEF regards prolonged economic stagnation as Namibia’s third biggest risk. It regards stagnation as “near-zero or slow global growth lasting for many years”.

The economy last recorded meaningful annual growth in in 2015, penning in 4.3%. Subsequent growth was meagre or negative: zero percent in 2016, followed by -1% (2017), 1.1% (2018), -0.9 (2019) and the historic low of -8.5% in 2020.

Real gross domestic product (GDP) tumbled from about N$146 billion in 2015 to N$132.5 billion in 2020.

Recording two consecutive quarters of positive growth, Namibia techically exited its ongoing recession in the thrird quarter of 2021, according to NSA data. However, the economy was still nearly N$5 billion poorer than it was at its peak in 2015.

In its updated economic outlook released in December, the Bank of Namibia (BoN) forecast annual growth of 1.5% for 2021, followed by 3.3% this year and and 4% in 2023.

The International Monetary Fund (IMF) in October forecast growth of 5.9% for the world economy in 2021, followed by 4.9% this year. The forecast for Sub-Saharan Africa was 3.7% and 3.8% respectively.

Only 16% of respondents in the WEF risk report feel positive and optimistic about the outlook for the world, and just 11% believe the global recovery will accelerate.

“Most respondents instead expect the next three years to be characterised by either consistent volatility and multiple surprises or fractured trajectories that will separate relative winners and losers,” the WEF says.

CLIMATE CHANGE

Extreme weather is Namibia’s fourth biggest risk, according to the WEF.

This could result in loss of human life, damage to ecosystems, destruction of property and/or financial loss as a result of extreme weather events: cold fronts, fires, floods, heat waves, windstorms etc, the Forum says.

Over the past decade, severe drought caused government to declare national emergencies in 2013, 2016 and the 2019 – the latter was the worst drought in 90 years.

According to the United Nations Office for Disaster Risk Reduction (UNDRR), on average one million people in Namibia are potentially affected by droughts every year.

“The affected livestock under current climate conditions is about 883 000 units, while under future climate conditions, considering current livestock units, the projection is likely to increase to 1.8 million units,” the UNDRR said in 2019.

According to the WEF’s risk report: “‘Extreme weather’ and ‘climate action failure’ are among the top five short-term risks to the world, but the five most menacing long-term threats are all environmental. ‘Climate action failure’, ‘extreme weather’ and ‘biodiversity loss’ also rank as the three most potentially severe risks for the next decade.”

DEBT CRISIS

The fifth biggest crisis facing Namibia is debt, the WEF says.

The WEF defines this risk as “corporate and/or public finances overwhelmed by debt accumulation and/or debt servicing in large economies, resulting in mass bankruptcies, defaults, insolvency, liquidity crises or sovereign debt crises.”

Cirrus Capital says Namibia’s sovereign debt has increased at a rate mcuh faster than revenue and GDP since 2015/16.

According to finance minister Iipumbu Shiimi’s Mid-Year Budget Review tabled October, debt is expected to increase to more than N$144 billion or 73.6% of GDP in 2022/23, while interest payments will quaff about 17% of revenue.

By 2024/25, debt is forecast to reach about N$160 billion or 72.9% of GDP, with interest payments gobbling up 16.6% of revenue.

Namibia’s sovereign debt has a junk credit rating at both Fitch Ratings and Moody’s.

The WEF summarises the global risk profile: “Economic challenges flowing from the pandemic persist. The outlook remains weak: at the time of writing, the global economy was expected to be 2.3% smaller by 2024 than it would have been without the pandemic.

“Rising commodity prices, inflation and debt are emerging risks. Moreover, with another spike in Covid-19 cases towards the end of 2021, the pandemic continues to stifle countries’ ability to facilitate a sustained recovery.”

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