IN his State of the Nation Address recently, President Hage Geingob affirmed that the proverbial ‘bull’ that is poverty, is being taken by the ‘horns’, and Namibia’s Fitch credit ratings upgrade this week could, therefore, not have come at a better time.
Authenticating the progress made by Geingob’s administration, the ratings agency for the first time, since independence, rated Namibia separately from South Africa, with the upgrade expected to persuade investors to also draw that clear distinction.
Without a doubt, the upgrade on the South African scale to ‘AAA(zaf)’ from ‘AA+(zaf)’ shows that the Namibian government, through fiscal prudence and consolidation, has improved the economic architecture, contained government debt and managed a good domestic versus foreign debt mix.
What is notable is that the upgrade follows the downgrade of South Africa’s long-term local-currency IDR to ‘BB+’ from ‘BBB-’ on 7 April, a scenario that would have also dragged Namibia into the mud, had Geingob’s astute leadership not convinced the ratings agency that Namibia is a completely different political landscape.
How advantaged we are that we have largely avoided the political imprudence and other upheavals facing our neighbours!
In the short-term a downgrade would have meant that Namibia would have paid higher interest rates on money borrowed, leading to more money going to meet debt repayments, and less to spend on priorities, such as education, healthcare and housing.
Going forward, it is important to highlight that although Geingob’s administration has done exceptionally well, the battle for prosperity still has a long way to go, and treasury must continue to reprioritise and realign spending to national developmental priorities.
In order for Namibia to remain an attractive investment destination, and comply with Fitch rating standards, we must continue to do away with wasteful expenditure on non-priority projects, such as overinflated building complexes, including the mooted N$4 billion parliament offices, the N$7 billion new Hosea Kutako International Airport and the N$1 billion new offices of the Prime Minister. There is also a wanton desire amongst some parastatal heads, to build extravagant office structures that exceed their office space needs, at the expense of taxpayers.
Fiscal credibility will depend on effectively controlling spending and implementing current consolidation plans. Namibia needs bold structural reforms, to boost the economy, remove bottlenecks to production capacities (electricity and skill shortages), and increase market competition in network sectors.
These reforms are fundamental for growth, job creation and the reduction of the high unemployment rate, and would allow for reform of social safety net policies, in a way which stimulates economic activity and labour force participation.
This year, the economy will be lucky to squeeze out more than one percent growth, but next year’s outlook needs to better. Weak commodity prices and a sluggish world economy are all contributors to slow growth, but even so, many of the barriers to faster economic growth are within the government’s ambit to change.
The one hope we do have is that our government will do enough in the next few months to further boost the country’s credit rating, and ensure that the downgrades do not occur and hurt our pockets.
Credit must also go to Finance Minister Calle Schlettwein, who was with his African counterparts in the United States this past week, meeting with the World Bank, the International Monetary Fund and ratings agencies.
These meetings provided an opportunity for the Namibian delegation to highlight government’s economic policies and strategies, as well as investment opportunities.
Confidente. Lifting the Lid. Copyright © 2015