Seeking green shoots

Jo-Maré Duddy – Following the deepest contraction in Namibia’s history, the economy is set to rebound this year, but analysts warn that growth will be merely a statistical phenomenon.“The lingering impact of 2020 leaves the average Namibian worse off than they were five years ago,” according to Cirrus Securities. In terms of real gross domestic product (GDP), the economy has regressed nearly a decade while the population has grown in the intervening years.In the four years pre-Covid, Namibia ranked amongst the lowest growing countries in Sub-Saharan Africa. In 2019, it was the 16th slowest growing economy in the world, according to Cirrus. “While external conditions have been relatively favourable, local conditions have caused a material drag on growth,” the analysts say.They add: “Off the back of several years of weak economic performance, slow divestment of capital and material budget deficits, the country entered this [Covid-19] shock with little in the way of reserves, and thus will take longer than many others to recover to pre-pandemic levels.”“A full recovery to where Namibia was at her peak will take several years, at best,” Cirrus says.“2020 will almost definitely be viewed as the global economy’s annus horribilis, Namibia included,” IJG Securities say, adding: “The negative economic impact [of Covid-19] will likely linger for another few years.”‘LESS UNCERTAINTY’The consensus estimate of last year’s contraction is around 8%, while economic growth for 2021 is estimated at some 3% plus.IJG believes that 2021 will be better than last year “as more and more of the surviving businesses are finding ways to adapt to the new normal”.“There is also less uncertainty surrounding the lockdown measures that Namibia could implement to contain the spread of the virus as we now have a much clearer plan of action from health officials should the number of cases start to increase again suddenly,” IJG says.Cirrus comments: “Given that we now have a better understanding of the virus, countermeasures, and vaccines have been developed, a recovery from this absolute low base is inevitable – and simply returning to somewhat more normalised activity is not a triumph that should be lauded over.”“We should be careful to heed those who lionise the economic recovery this year,” Cirrus warns.VACCINESAccording to Simonis Storm (SS), two major factors will shape Namibia’s economy in 2021: the timeline and effectiveness of a vaccine roll-out, and the ability of government to enact structural reforms. “These are critical if an economic growth recovery is to be sustained from 2022 onwards,” SS says.On vaccines, SS says the focus will be on government’s procurement of supply and roll-out logistics. “The key risk is an inefficient start and implementation of vaccinations. Some other risks could be the myriad of ideologies and beliefs and the credibility of science.”Covid-19 will continue to be a factor for the foreseeable future, IJG says. “There will be instances of a resurgence of the virus, especially considering some of the mutations we have seen which have increased transmission rates.”His biggest fear is not further waves, but the new variants that could render the vaccines less effective, says Dr Omu Kakujaha-Matundu, a senior lecturer in economics at the University of Namibia (UNAM).“Should say the Pfizer vaccine not be able to effectively stop the virus, will Namibia be in a position to buy another batch of vaccines? That could be an added burden to fiscus, and could be the biggest economic catastrophe,” Kakujaha-Matundu says.‘RAY OF HOPE’Vaccines will play an extremely important role, according to IJG, safeguarding the most vulnerable, then achieving some form of group immunity as more and more people are vaccinated over time. The analysts say health officials have been “extremely proactive in ensuring that Namibia will receive enough vaccines, which we hope will be rolled out in the first half of this year”.This will further reduce the need for shutdowns of certain parts of the economy, IJG says. “Namibia simply cannot afford anymore hard lockdowns. We are optimistic that we will not return to overly draconian measures like some of the restrictions put in place last year, which essentially brought the entire economy to a standstill.”PSG Namibia describes vaccines as “a ray of hope”, but adds: “Namibia’s economic comeback depends as much on our own roll-out of vaccines as that of South Africa, Europe and the world’s.”“The response to the virus has had major effects all around the world and even if Namibia does everything ‘right’ to eliminate the virus, our destiny is tied to what happens in all other countries,” PSG adds.REFORMSCirrus maintains that necessary reforms could speed up economic recovery, “not just introduced as policy but also implemented with the requisite haste and diligence”. “The former appears unlikely, at least not within the timeframe needed; the latter seems improbable given the perpetual uncertainty created around tabled policies like NIPA [Namibia Investment Promotion Act] and NEEEF [Namibia Equitable Economic Empowerment Framework],” Cirrus believes.Government policy is crucial to attracting foreign direct investment (FDI), IJG says. Gross fixed capital formation (GFCF) or net investment has been plummeting since 2014 and 2015 when it peaked at more than N$45 billion per year. Data released by the Namibia Statistics Agency (NSA) shows GFCF in 2019 amounted to about N$30.5 billion – the lowest since 2012.Having some sense of policy certainty creates a conducive investment environment, IJG says. “At the risk of sounding repetitive, NEEEF and NIPA are the main culprits here and without clarity on the exact implementation of these policies, we will likely see foreign direct investment suffer as a consequence.”POLICY CERTAINTYSorting out policy uncertainty is crucial, SS says. “The fickle nature of money is just that, if the environment is not lucrative/hospitable, then it will leave. The facts are known for years, publicised/boosted on many platforms. The economic agents within the economy must understand the rules of the game and be certain that those rules will be uphold – repatriation of profits, protection of intellectual property rights, the rule of law, etc. If uncertainty remains, investments will be withheld,” SS says.Cirrus points out that the quantum of money pumped into the global financial system over the past year and with more on the way, as well as historic low or negative yields in developed economies suggest that driving such investment into Namibia should prove “simple, particularly where attractive real yields can be found”. They add: “However, this requires a far more hospitable business environment, certainty on policy and property rights, and a guarantee that capital (whether foreign or domestic) is not only welcome within Namibia, but also to leave again. Until we can see these changes, Namibia will remain her own worst enemy on the road to sustained long-term development.”Namibia’s ease of doing business could be greatly improved, says IJG. “Many entrepreneurs still find it way too cumbersome to register their businesses, while bureaucracy makes registrations and licensing extremely difficult. The red tape needs to be removed to allow Namibian businesses to operate.”PSG says Namibia cannot afford to continue on the path of increasing red tape and bureaucracy for people to do business. “It is this red tape that breeds corruption. Phrases in legislation that give ‘The Minister’ power over business’ destiny is what causes bribes to be paid.”POLITICSThe manner in which the Covid-19 pandemic develops during 2021 may influence the political situation in Namibia, SS says.“It will influence the public view about government in general, determine its impact on the economic dynamics and the impact on confidence in the short term. Successes or failures in this respect will be translated into political optimism/pessimism and levels of economic confidence,” the analysts elaborate.The results of both the most recent national and regional elections have made it clear that voters are getting tired of growing corruption, governance failures and abuses of office, IJG says.Cirrus attributes Swapo’s loss of support in the national and regional elections to economic stagnation, worsening living conditions, deteriorating unemployment and high-level corruption allegations. This loss happened “much quicker than could have been anticipated just five years ago”, the analysts say.According to SS, the change of the political landscape and the renewed public interest in social and political issues, as displayed by recent demonstrations, can lead to an “increased sense of accountability, transparency and urgency of service delivery”.“This may create a platform for genuine, intentional public-private sector dialogues on a regular basis and in a structured manner with the aim to agree on a workplan and clear responsibilities,” SS says.Kakujaha-Matundu the impact of the changing political landscape “could go either way”. “The so-called progressive elements could stave off the plunder of the people's resources by introducing transparency, mostly at local level and deliver greater level of public services. However, the pressure to live by their promises could bring about greater pressure on the meagre local government resources. That could maybe lead to the ‘summer of discontent’ with more service delivery demonstration and claims on municipal land,” he says.PRIORITIESWasting taxpayers’ money on non-essentials in the budget is the one thing Namibia simply cannot afford to do in 2021, IJG and Kakujaha-Matundu say. So is corruption.SS says government can’t allow the further deterioration and procrastination of structural reforms of the business and investment environment.“There is no better time than now, we simply need to act and act swiftly,” the analysts say. “The speed of decision-making and action have become more critical to prevent us from falling further into the abyss. Now, more than ever, we require someone to unite and galvanise the nation.”“Never let a good crisis go to waste,” says IJG. “The pandemic has been a huge shock to the Namibian economy. However, the country was not on a sustainable economic trajectory in the years leading up to the pandemic. This is the ideal time to reprioritise and refocus on areas that matter to promote long-term, sustainable and inclusive economic growth,” according to IJG.

Seeking green shoots

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Republikein 2025-12-18

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Seeking green shoots

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