Prolonged civil tensions lead Namibia to earn negative rating
• By Josef Kefas Sheehama
Aprolonged period of civil tensions would likely negatively affect economic growth, indirectly affecting government finance and investors’ confidence.
The S&P upgraded South Africa’s sovereign outlook to positive on May 21 2022. What’s good for South Africa is good for Namibia. The Namibian economy is closely linked to South Africa, with the Namibian dollar pegged one-to-one to the South African Rand. Pegs can overshoot as well as undershoot and either can be economically disruptive.
It is common knowledge that political instability retards the development and progress of a country. In order for a country to develop and move forward there should be a stable political atmosphere.
The Affirmative Repositioning (AR) has urged all members to strictly adhere to democratic good governance principles and best practices of civilised nations. This is a good move to maintain unity, harmony and inclusiveness among the citizens for progress, growth and development of the country.
It is useful to understand the different channels through which civil tensions impacts the economy to better prioritise what can be done before, during, and after unrest to minimise economic losses. Global rating agency Moody’s upgrades Namibia’s outlook to stable from negative to stable while long-term issuer and senior unsecured ratings to B1 from Ba3 on April 9 2022.
We cannot afford a downgraded. We can avert this civil tensions. We should avoid to politicking matters, but let work in the best interest of all. As always, investors’ reaction to such events is more important than the events themselves. The first, really important, thing to do is to encourage solutions and make decisions based on the current market events. We are all Namibians. As individuals it’s important to be active citizens.
If we get downgraded to junk status can take anything from 2-12 years to get back to investment grade. To a large extent the path ahead of us as a country now is really one of our own making. If we choose to ignore the message that is being provided by the economists that our financial position needs attention and our growth prospects look poor, then we risk slipping further into bad grade. If we choose to treat this message as a wake-up call that and we work together as a nation to restore our economy to a sound footing, introduce pro-growth policies, restore political certainty and fiscal discipline, stop corruption, reduce inequality and generate solid, inclusive economic growth, then our sojourn into negative grade will be short-lived and we can bounce back a stronger, united Namibia.
The image of counterfeiting as a harmless activity must be challenged. The challenges and complexities posed by NAMRA underline the need for a thorough consultative process with all stakeholders in order to manage expectations about what can be achieved. It better to consult with affected parties before you make decisions.
In our highly connected society today, few persons are rarely expert in enough to make decisions without having to consult those who will be affected. Remember, deciding not to decide until more information is available is also a decision.
Before such sweeping changes are brought about through, there has to be an understanding of the purpose for such changes and whether these are indeed in the interest of affected parties and country. It has to go through a lot of discussion and dialogue.
The reason given for the objection to the counterfeit goods was as usual, lack of consultation. This seemingly indecisive posture of the NAMRA makes people think that is not serious in their governance.
More seriously, it portrays NAMRA as living in the past. Living in the past in the sense that they still believe that they are operating under the old composition where because they are governing body, they didn’t need the public consultation and other stakeholders when they want to come out with a reform.
A serious governing body will study the impact of the country economy as well as possible effects to the people. If we want to continue with our lack of consultation and engagement, the flip flop will become the order of the day and nothing can get done.
To ensure that the market has adequate time to adapt to and comply with the requirements, the regulations and rules that will give substance to the mandate of NAMRA will become fully operational following a transitional period. Take note, not all our people are law oriented. To make anti-counterfeit laws and measures more efficient, they should be harmonised as far as possible throughout the country.
Furthermore, NAMRA should improve communication with consumers, alerting them to the risks posed by counterfeit goods and ways of identifying such goods. Therefore, NAMRA should enhance information sharing on counterfeiting related problems and to strengthen practical measures against counterfeiting, including consumer hotlines and improved data management systems.
Moreover, persistent civil disruptions pose risks going forward. The downgrade is likely to dampen already depressed business and consumer confidence. To avoid being downgraded, policymakers must do everything in their power to promote a more inclusive recovery, one that benefits all of society prioritising the crisis of poverty, inequality and unemployment of young people.
Namibian economic recovery and the new normal will never happen overnight, we need to make huge compromises to prioritise the common purpose, political and economic instability can be changed. Namibia can recover faster when we all unite and improve in governance and accountability principles.
To this end, a downgrade means that when Namibia needs to borrow more money, as it inevitably will, investors in the new bonds will demand a higher interest rate because of the lower creditworthiness of the country.
This will translate into higher interest costs which leave less money to be spent on running and developing the country. The economy is expected to weaken as uncertainty holds back investment, not just by local businesses but especially by foreign investors who place emphasis on ratings and the outlook for a country when making investment decisions.
Therefore, any effective economic policy must build on the strengths of core stakeholders and bringing benefits to the majority of our people. That means social dialogue is critical for any economic strategy to succeed over time.
A policy that simply ignores the need to bring stakeholders on board will end up as a source of growing conflict and instability in the long run, even if it achieves its aims in the short term.
*Josef Kefas Sheehama is a banking industry professional with 19 years of experience. He writes in his personal capacity.