Economy limps into 2019

AUGETTO GRAIG

The minister of finance, Calle Schlettwein, says 2019 is a year for continued stabilisation of the local economy in order to achieve positive growth.

“We have to be careful and focused on quality growth; inclusive of jobs and opportunities for the youth and with funds not exported but retained in the economy.

“We need a stable macro economy with debt brought down and kept stable within sustainable limits,” says the finance minister.

Before the New Year he posted on Facebook: “The sun is setting on 2018, a tough year during which the Namibian economy had to be adjusted to become sustainable and stable. It took courage and political will to successfully implement deliberate and meaningful consolidation.

“We have now the opportunity to bring about shared economic recovery with quality (inclusive) growth, quality spending (no over-pricing, no corruption, reasonable wage bill) and quality investment (stimulating the domestic market). I am happy to be a Namibian; Namibia is great!”

Hope

This cautious optimism is shared by economist Robert McGregor of Cirrus Capital.

“Overall, we expect the economy to return to growth in 2019, provided that domestic policies are not introduced to further disincentivise investment. However, this will be low growth (less than 1%) and is mostly as a result of basic effects such as a low base from which to grow, rather than organic growth,” he says.

McGregor says the mining industry is expected to continue its strong contribution to the economy, driven by gold, diamonds and uranium.

Low growth in construction is anticipated as the sector bottoms out and returns to normal levels.

Global oil prices are anticipated to remain low in 2019, and should the rand remain stable, fuel prices should remain bearable for motorists, says McGregor.

However, three of the four factors comprising the standard GDP calculation are under pressure, he says.

“Government finds itself walking a fiscal tightrope and cannot stimulate the economy by spending. Households are under pressure with high debt levels and rampant unemployment preventing them from either spending significantly or accumulating large savings.

“Relatively low inflation was recorded in 2018, but this is expected to accelerate in 2019 and add pressure to already-strained household incomes.

“Our exports are mostly priced externally while we continue to import significantly more and these imports are higher value-added products, meaning we will continue to run a trade deficit.”

Tough times ahead

ISG Risk Services economist Eben de Klerk paints a bleaker picture.

“Despite the government's and Bank of Namibia's forecasts to the contrary, Namibia's 30-month depression will continue into 2019. This is because the government has not even reached the point of acknowledging its hand in creating this depression, let alone taking any steps to improve investment and economic growth,” he says.

While the government blames “external factors beyond its control” for the economic downturn, the global economy and the national economies of Sub-Saharan Africa (with the exception of South Africa) have seen growth of over 3% over the past years, says De Klerk.

“Like South Africa, Namibia has made itself increasingly unpopular to investors. Namibia's tax revenue to GDP (34.6% in 2017) is amongst the top five highest in the world, yet the government is mooting an increase in taxes.

“Despite a drastic decline in foreign investment, Namibia increased its protectionist policies by promulgating the Investment Promotion Act, substantially increasing bureaucracy and the potential for corruption.

“The Act expressly states that the government may expropriate investors' property when it sees fit. It also limits transferability of profits,” he says.

He warns that NEEEF will return in 2019 after causing a major scare when first introduced in February 2016, just before Namibia went into a depression.

“This document expressed just how little regard the government shows for property rights. Although the president stated that the 25% ownership requirement would be removed, nothing was said of the council to be established with unlimited powers to set economic transformation standards, non-compliance with which would result in criminal prosecution,” De Klerk says.

“Despite Namibian consumers and taxpayers paying hundreds of millions each year towards the Anti-Corruption Commission and in compliance with the Financial Intelligence Act, Namibia is losing the fight against corruption and keeps slipping on international corruption indices.

“Despite already surpassing the debt thresholds as per our national planning policies, our government keeps on borrowing, mainly to fund one of the most costly public sectors in the world - when comparing the public-sector wage bill as percentage of total tax revenue,” he adds.

“Nothing meaningful is done to reverse or rectify the above factors that have greatly contributed to our current depression and ‘junk’ investment status. There is therefore very little chance that 2019 will see anything else but a deeper economic depression,” De Klerk warns.