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Sunday 21 April 2019
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Is Namibia looking east?

A number of high profile visits from leaders hailing from the east across the world has raised questions whether Namibia is pursuing a future with its eastern allies who are mainly socialist and communist-inclined at the expense of traditional western allies.
Namibia’s recent interactions with its eastern friends has done nothing to end the country’s profound economic and social crisis.
Countries such as Venezuela, North Korea, China, Russia, Cuba and China have all had official engagements with Namibia on economic and political matters during the past year.
Unemployment and poverty is spiralling out of control, oil prices are skyrocketing, foreign direct investment has dwindled, there are serious shortages of medicine, businesses are closing, and the incumbent government of Dr. Hage Geingob has gone on a borrowing spree to fund government operations and development.
The natural question in a country that boasts one of the world’s largest proven uranium reserves is, how did it come to this? Many have latched on to a simple answer: socialism.
The underlying causes of Namibia’s hydra-headed crisis are economic, relating especially to failure to maximise revenue from its natural resources and the foreign currency that it brings into the country.
The proximate cause of the recent turmoil is undoubtedly the fall of global commodity prices a few years back, but the same problems that got exacerbated at that point were already in evidence when experts cautioned government that its over-dependence on minerals and failure to diversify the economy could spell trouble going forward.
Grave shortages are due largely to weak local production combined with a lack of foreign currency for imports, both of which relate to mismanagement of the financial resources, especially through the country’s flawed and easily-manipulated procurement system.
Essentially, in an attempt to prevent capital flight and currency collapse while also protecting local producers and enforcing labour law, government has also been urged to introduce controls on access to foreign currency.
Protection of infant industries have also been mooted to protect local firms.
Beyond undermining local businesses, these policies also created opportunities and incentives for corruption, which grew in attractiveness in step with economic distortions, creating a vicious cycle.
In the short term, Geingob’s government – unlike Pohamba’s- prevented this problem from spiralling out of control by instituting stiff austerity measures.
Geingob, who ascended to power with the promise to deliver prosperity to Namibia’s impoverished groups, has been forced to watch helplessly as his economic blueprint – Harambee Prosperity Plan – is cast aside because the plan cannot be fully implemented due to a lack of funds.
Over the years, government premised Namibia’s transformation on the power of a social economy that would use alternative forms of organisation, such as cooperatives and diversifying the distribution of resources to boost local production and provoke an empowering cultural shift towards active social engagement and solidarity.
The multi-layered social protection system has been eating away a large chunk of the budget. Several social safety nets such as the old-age pension grant, orphans and vulnerable children grant, food banks, monthly grants for war veterans as well as a once-off N$200 000 lump sum, free access to healthcare and education and disability grants have proven too costly for government to sustain, especially considering the meagre income the country reaps from its natural resources.
Multiple social safety nets have been listed by global economists as one of the lead causes of South American giant Brazil’s economic collapse a few years back.
First, it is important to realise that Geingob chose to call his transformative plan the blueprint to prosperity, but Namibia’s economy remained market-based and private-sector dominated throughout his time in office so far.
Not even the creation of a Ministry of Public Enterprises unlocked the true economic potential of state owned entities because that ministry has been operating without legislative powers since its inception in 2015. The law to give the ministry such powers was only tabled in the National Assembly a few weeks back.
Though the social economy and the public sector were heavily promoted – including through nationalisation – the private sector was expected to remain dominant, and it did. A centrally planned socialist economy like Cuba’s was neither the aim nor the reality.
Second, part of the problem was always that the mineral-rich, hyper-consumerist Namibia was the last place you would expect socialism to blossom – and these characteristics caused grave problems for the government.
The crucial role of uranium in the international capitalist system makes uranium-price volatility a central player in Namibia’s development.
With China gradually taking full control of Namibia’s uranium, with a pending acquisition of Rossing’s Rio Tinto mine, Namibia has itself to blame for the price drops.
China, the sole shareholder of Swakop Uranium’s Husab mine, can now afford to mine uranium in Namibia and ship it to China without having to buy on the international market anymore.
With Langer Heinrich having closed shop, China’s dominance when it comes to uranium can be sealed if the Rossing deal is sanctioned by all involved parties.
But more importantly, the sheer value of minerals such as diamonds, copper and uranium provokes the “resource curse” in undiversified economies like Namibia’s.
With boom-time windfalls favouring exchange-rate shifts that make other exports uncompetitive, past favourable conditions that have now culminated in the current economic downturn led to posh public spending, while distorted incentives undermined ethics, entrepreneurship, and efficiency throughout the public sector.
The worldwide economic downturn, and in particular the decrease in the growth rate of China’s economy, has put tremendous strain on manufacturing enterprises, especially now that China has pulled back on its manufacturing capacity. This has pushed down commodity prices and has made many mining enterprises marginal or non-profitable.
Certain statist economic policies associated with Vision 2030 indicate that socialism is indeed implicated in many of the economic distortions and damaging incentives ravaging the Namibian economy.
But they were also implemented in a highly divided, distrustful, and conflictual society in which the mineral-rich state is seen as a means of securing personal wealth.
Government’s response to implacable opposition and widespread corruption was to turn to the global economy he trusted in the military and to the promise of social transformation through socialisation of the economy. But his faith in neither was repaid. The lesson is perhaps that there are no clean, textbook models. The real issue is whether a given political economy is producing desirable results for its citizens. Where once that was the case in Venezuela, clearly it is no longer.




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