Reflections on Namibia and its neighbours
As a small country, Namibia needs a strategy to position itself relative to South Africa, and others in Africa.
Glenn Silverman - Namibia has a large land mass, some 66% of that of South Africa, and far larger than that of either Germany or the UK – countries with which it shares some historic linkages. Yet for all its size, is has the lowest population density of any sovereign country in the world, outside of Mongolia. Its population of 2.5 million is roughly double that of Mauritius (1.3m) - a country less than 1% of its size. And whilst Namibia borders each of South Africa, Zambia, Angola and Botswana, it is with “Big Brother” South Africa that it shares much more of its history.
From 1884, Namibia was a German colony - German South West Africa. After the First World War, the League of Nations mandated South Africa to administer the territory. This set of events ensured that South Africa’s influence, and its own particular history, would play a significant role in that of Namibia’s. It also ensured that Namibia would share its part of South Africa’s “national scar”, namely that of Apartheid.
One would have thought that that linkage would have ended in 1990, with Namibia’s independence from South Africa - an independence only gained after years of armed struggle by Swapo, the then liberation party, against its far larger southern neighbour. Swapo has dominated Namibian politics, and governed the country ever since, a precedent fairly typical of Africa. Yet even post-independence South Africa’s influence over Namibia looms large.
Big brother across the Orange
Both are part of the 15-country SADC (Southern African Development Community) bloc, their exchange rates (rand and Namibian dollar) are linked 1:1, and 66% of all Namibian imports originate from South Africa. Escaping the reach and influence of its big brother has proved a challenge for Namibia in the past, and remains true to this day.
And with South Africa, Namibia shares some other far less virtuous macro-statistics – extremely high unemployment rates, amongst the highest Gini (inequality) measures globally, significant education challenges, and more. The South African economy at some US$313 billion is more than 30 times larger than that of Namibia’s approximate US$10 billion. That places Namibia, again, as a not too dissimilar level to that of Mauritius (US$12 billion), making for an interesting three-way comparison, when far larger South Africa is thrown into the mix, as captured in the table below.
INSERT: TABLE MACRO STATISTICS
The dominance of South Africa from a size perspective, versus both the above peers, is quite clear, whether that be in terms of population size, gross domestic product (GDP) or the market capitalisation of their respective stock exchanges.
The JSE is far larger than both others for a number of reasons. One being that it opened its doors in 1887, giving it a proud 130 plus year history, versus the mere 25 to 30 years of its two peers. Similarly, Namibia’s far higher market cap than Mauritius, stems from a similar source i.e. the number of SA dual-listed companies on the Namibian Stock Exchange (NSX). This provides a key challenge to the smaller countries when attempting to compete with South Africa, for investment flows, skills and talent.
Because of its huge size advantage, one would rationally surmise that South Africa would similarly dominate the other two in most other key global rankings, for example the 2016 World Economic Forum’s Global Competitiveness Survey, and others of the ilk. Yet, that is not the case, with Mauritius in the ascendancy in virtually every key ranking, but with Namibia ranked even worse than South Africa.
Mauritius
In every key stat below, Mauritius scores ahead of its two peers, often significantly so. And more tellingly is that this ascendancy was achieved within a decade or so. Until that time, South Africa had a higher ranking than that of Mauritius in many of these key areas.
INSERT TABLE KEY RANKINGS
What explains Mauritius’s far higher rankings than those of South Africa, and Namibia? Firstly, South Africa’s rankings have been falling for some time, arguably since 2008 and the associated leadership changes flowing from the ANC elective conference in Polokwane that year. At the same time, Mauritius’s have been improving – a consequence of its more enlightened leadership, and resultant economic and fiscal policy decisions, emanating from that country. The differences in approach, and the resultant consequences, have been stark.
Mauritius embraced the free market, and opened itself up for business, arguably becoming the financial gateway for, and into Africa, notwithstanding South Africa’s far larger and deeper financial markets and world-class institutions. South Africa has, instead, mired itself in red-tape, over-regulation, high taxation, and other forms of what is termed “financial repression”. The results are clear. And where South Africa goes, Namibia has tended to follow.
Namibia would do well to rather exhibit real leadership by following the example of small, but more successful Mauritius, when it comes to economic and related policies.
Large countries will attract investors simply due to their size, but smaller countries have to provide something appealing for investors to do so. A haven from financial repression would be one area of competitive advantage, eg. lower taxes and less burdensome regulation. Those would provide a magnet for skills and talent too.
Namibia should also look to use its geography, natural resources and innovative incentives to attract both capital and skills. Out-the-box thinking is required, including how best to use its huge land mass.
With the next ANC elective conference in South Africa taking place this December, followed by a general election in 2019, it is likely that many local and foreign investors will place South Africa “on hold”, awaiting the outcome. Good leadership choices will be rewarded, poor ones likely punished.
Taking the gap
This may provide South Africa’s neighbours with an opportunity to take the gap. Yet South Africa can ill afford the delay, with the alarmingly high levels of unemployment (27%, with Namibia at 34%) and the percentage of the population below the poverty line (36%, with Namibia at 27%).
South Africa has been a proud member of the Brics since 2010. Where South Africa is the “Big S” in Sub Saharan Africa, it is a mere briquette when compared to the other Bric countries – Brazil, Russia, India and China - on almost all measures. Yet, South Africa (and Namibia’s) numbers stand out strikingly versus those other emerging countries, with the Bric countries unemployment levels ranging between 4% and 13%, and poverty levels between 5% and 14% - the latter excluding India, at a far higher 22%, but still well below the levels of South Africa and Namibia. These effectively form the new national scars of both countries, and need to be treated like the national emergency that they are.
In conclusion, the key messages that flow from the above are:
Unemployment and its related cousin poverty are two areas that must be given the highest priority by the governments of South Africa and Namibia. All other priorities should be subservient to these, with creative measures from all sources sought to deal with both.
“Talk is cheap”, but action is now needed. A collaborative, well-thought out, inclusive and well-communicated strategy is required. Unfortunately, that does not appear to be the case at present in either country, with more focus seemingly being placed on the past than on the future.
Size matters. As a small country, Namibia needs a strategy to position itself relative to South Africa, and others in Africa.
The lessons of tiny Mauritius provide some useful lessons and guidance. Competitive advantage can be created in the ease of investment and doing business, in lower taxes, in less complex and more supportive legislation, along with a supportive and consistent policy environment. Utilising a country’s geography to best advantage is sensible too.
Arguably, far larger South Africa is relatively small when contrasted with the other Bric countries, and so it too would benefit from a similar approach, and line of thinking. There are big brothers – South Africa relative to Namibia for one, and then REALLY big brothers - for example, when comparing South Africa relative to the Asian giants of India and China.
Kassie:
Glenn Silverman is based in Johannesburg and has been involved in the investment industry for the past 25 years. He is a chartered accountant and a CFA charter-holder. He was formerly the chief investment officer of Investment Solutions (now Alexander Forbes Investments), the largest multi-manager in South Africa, for some 17 years until the end of 2015. Silverman is the co-author of a book on the Brics, entitled “Half Way There”, published in 2014. He is now an independent consultant and analyst. Silverman wrote this article after a recent trip to Namibia.
From 1884, Namibia was a German colony - German South West Africa. After the First World War, the League of Nations mandated South Africa to administer the territory. This set of events ensured that South Africa’s influence, and its own particular history, would play a significant role in that of Namibia’s. It also ensured that Namibia would share its part of South Africa’s “national scar”, namely that of Apartheid.
One would have thought that that linkage would have ended in 1990, with Namibia’s independence from South Africa - an independence only gained after years of armed struggle by Swapo, the then liberation party, against its far larger southern neighbour. Swapo has dominated Namibian politics, and governed the country ever since, a precedent fairly typical of Africa. Yet even post-independence South Africa’s influence over Namibia looms large.
Big brother across the Orange
Both are part of the 15-country SADC (Southern African Development Community) bloc, their exchange rates (rand and Namibian dollar) are linked 1:1, and 66% of all Namibian imports originate from South Africa. Escaping the reach and influence of its big brother has proved a challenge for Namibia in the past, and remains true to this day.
And with South Africa, Namibia shares some other far less virtuous macro-statistics – extremely high unemployment rates, amongst the highest Gini (inequality) measures globally, significant education challenges, and more. The South African economy at some US$313 billion is more than 30 times larger than that of Namibia’s approximate US$10 billion. That places Namibia, again, as a not too dissimilar level to that of Mauritius (US$12 billion), making for an interesting three-way comparison, when far larger South Africa is thrown into the mix, as captured in the table below.
INSERT: TABLE MACRO STATISTICS
The dominance of South Africa from a size perspective, versus both the above peers, is quite clear, whether that be in terms of population size, gross domestic product (GDP) or the market capitalisation of their respective stock exchanges.
The JSE is far larger than both others for a number of reasons. One being that it opened its doors in 1887, giving it a proud 130 plus year history, versus the mere 25 to 30 years of its two peers. Similarly, Namibia’s far higher market cap than Mauritius, stems from a similar source i.e. the number of SA dual-listed companies on the Namibian Stock Exchange (NSX). This provides a key challenge to the smaller countries when attempting to compete with South Africa, for investment flows, skills and talent.
Because of its huge size advantage, one would rationally surmise that South Africa would similarly dominate the other two in most other key global rankings, for example the 2016 World Economic Forum’s Global Competitiveness Survey, and others of the ilk. Yet, that is not the case, with Mauritius in the ascendancy in virtually every key ranking, but with Namibia ranked even worse than South Africa.
Mauritius
In every key stat below, Mauritius scores ahead of its two peers, often significantly so. And more tellingly is that this ascendancy was achieved within a decade or so. Until that time, South Africa had a higher ranking than that of Mauritius in many of these key areas.
INSERT TABLE KEY RANKINGS
What explains Mauritius’s far higher rankings than those of South Africa, and Namibia? Firstly, South Africa’s rankings have been falling for some time, arguably since 2008 and the associated leadership changes flowing from the ANC elective conference in Polokwane that year. At the same time, Mauritius’s have been improving – a consequence of its more enlightened leadership, and resultant economic and fiscal policy decisions, emanating from that country. The differences in approach, and the resultant consequences, have been stark.
Mauritius embraced the free market, and opened itself up for business, arguably becoming the financial gateway for, and into Africa, notwithstanding South Africa’s far larger and deeper financial markets and world-class institutions. South Africa has, instead, mired itself in red-tape, over-regulation, high taxation, and other forms of what is termed “financial repression”. The results are clear. And where South Africa goes, Namibia has tended to follow.
Namibia would do well to rather exhibit real leadership by following the example of small, but more successful Mauritius, when it comes to economic and related policies.
Large countries will attract investors simply due to their size, but smaller countries have to provide something appealing for investors to do so. A haven from financial repression would be one area of competitive advantage, eg. lower taxes and less burdensome regulation. Those would provide a magnet for skills and talent too.
Namibia should also look to use its geography, natural resources and innovative incentives to attract both capital and skills. Out-the-box thinking is required, including how best to use its huge land mass.
With the next ANC elective conference in South Africa taking place this December, followed by a general election in 2019, it is likely that many local and foreign investors will place South Africa “on hold”, awaiting the outcome. Good leadership choices will be rewarded, poor ones likely punished.
Taking the gap
This may provide South Africa’s neighbours with an opportunity to take the gap. Yet South Africa can ill afford the delay, with the alarmingly high levels of unemployment (27%, with Namibia at 34%) and the percentage of the population below the poverty line (36%, with Namibia at 27%).
South Africa has been a proud member of the Brics since 2010. Where South Africa is the “Big S” in Sub Saharan Africa, it is a mere briquette when compared to the other Bric countries – Brazil, Russia, India and China - on almost all measures. Yet, South Africa (and Namibia’s) numbers stand out strikingly versus those other emerging countries, with the Bric countries unemployment levels ranging between 4% and 13%, and poverty levels between 5% and 14% - the latter excluding India, at a far higher 22%, but still well below the levels of South Africa and Namibia. These effectively form the new national scars of both countries, and need to be treated like the national emergency that they are.
In conclusion, the key messages that flow from the above are:
Unemployment and its related cousin poverty are two areas that must be given the highest priority by the governments of South Africa and Namibia. All other priorities should be subservient to these, with creative measures from all sources sought to deal with both.
“Talk is cheap”, but action is now needed. A collaborative, well-thought out, inclusive and well-communicated strategy is required. Unfortunately, that does not appear to be the case at present in either country, with more focus seemingly being placed on the past than on the future.
Size matters. As a small country, Namibia needs a strategy to position itself relative to South Africa, and others in Africa.
The lessons of tiny Mauritius provide some useful lessons and guidance. Competitive advantage can be created in the ease of investment and doing business, in lower taxes, in less complex and more supportive legislation, along with a supportive and consistent policy environment. Utilising a country’s geography to best advantage is sensible too.
Arguably, far larger South Africa is relatively small when contrasted with the other Bric countries, and so it too would benefit from a similar approach, and line of thinking. There are big brothers – South Africa relative to Namibia for one, and then REALLY big brothers - for example, when comparing South Africa relative to the Asian giants of India and China.
Kassie:
Glenn Silverman is based in Johannesburg and has been involved in the investment industry for the past 25 years. He is a chartered accountant and a CFA charter-holder. He was formerly the chief investment officer of Investment Solutions (now Alexander Forbes Investments), the largest multi-manager in South Africa, for some 17 years until the end of 2015. Silverman is the co-author of a book on the Brics, entitled “Half Way There”, published in 2014. He is now an independent consultant and analyst. Silverman wrote this article after a recent trip to Namibia.
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