By Fikameni Mathias
Namibia’s chances of getting out of the recession will depend very much on the lessons learned during the recession and how it manages the pre- and post-election costs, Economist Mally Likukela says.
Towards the end of 2018, the general consensus on the ground was that a recovery of the economy remained gloomy should the leadership continue with the same script.
With elections due in the country and the region, Namibians are now concerned -more than ever – with bread and butter issues.
As the 2019 election campaigns approach and gain momentum, the temptation to use economic policy for political gain will become irresistible.
As is tradition in political circles, the winning formula is simply depended on the ability to please the electorate now and worry about the costs later.
This phenomenon (although it will provide a temporary stimulus to the economy [if not managed properly and with the costs associated with it]) can be calamitous for a country that remains locked in a prolonged recession.
According to Likukela, this stimulus phenomenon is worrying in many aspects.
“Firstly, the economy will be subjected to an opportunistic political business cycle whereby incumbent politicians may cause temporary economic expansion before the elections.
These politicians will maneuver budgetary spending and other policy instruments to try and win over the electorate, but these measures will not lead to a real change in outcomes such as GDP, unemployment and poverty reduction.”
He says the second worry is mainly for businesses and investors. Whoever will be in power eventually affects the economy.
This is usually experience in one of two ways: first, the winner of the election determines the laws which shape the economy and secondly, the winner also determines how the taxes and credits could either slow or build new businesses.
Likukela advises that the country must avoid the general tendency observable in many developing country that have fallen into recession.
This is the tendency of muddling through the recession and hoping that growth will eventually return.
Instead he says Namibia should as a starting point, endeavor to purposefully address the underlying causes of the crisis and create an economic and financial system that will be more resilient when bad times return – because they are definitely sure to return.
Stability through reforms
Although Namibia’s GDP per capita is amongst the highest amongst its peers, historical lower inflation and a healthy banking system, the past 10 quarters has seen negative GDP growth never seen before.
Inflation remains elevated, unemployment rose while government spending and debts soared.
“The only path to stability and growth will be by inventing courageous reforms and sticking to them.
Government should be seen to be serious and committed to these reforms,” he said.
The economist also called for a balanced budget saying the previous 10 quarters are characterised by high levels of public debt and a widening budget deficit and expanding government spending. “To turn this around, the Government will need to reinvent its economic governance with a series of innovative regulations. As a departure point, Government should seek political consensus in supporting reforms around budget measures.
These are public spending ceilings, accountability and transparency in the tendering process, and seek to stay committed to these measures” (sic) he said.
Likukela says a total commitment to such measures will help prevent the accumulation of debt, and ensure that national debt is kept in check and prevent the rampant resource wastage in the public sector.
“The biggest lessons that should have been learnt by our Government from the prolonged recession is to keep your financial house in order when times are good, so you will have more room to maneuver when things are bad.”
Fiscal Policy Council
President Hage Geingob has declared 2019 as the year of accountability after the year that was of reckoning.
Likukela proposes for the establishment of a legitimate and independent Fiscal Policy Council which will consist of a committee of experts of finance and economics.
According to the economist, this council will audit government’s policy decisions regarding public finance and ensure that they remain consistent with the goals of growth, employment and long-term financial sustainability.
“This council will go a long way in addressing the SOEs resource mismanagement that continue to milk the state coffers.
This council can also oversee and identify weaknesses in some of the state’s institutions such as Procurement, M&E and planning.”
He says the prolonged recession left the country at the lower end of the global competitive ranking. As such, Namibia’s poor performance in the global competitiveness index is not a secret anymore.
Downside risks such as droughts are an inevitable as there is no sight of hope. Southern Africa and Namibia in particular is in the grip of an impending drought, thus Namibia’s only option is to increase investment in water conservation options.
“This is the only option that can provided the cheapest, quickest and most effective solution to managing demand during the drought.
Think of Neckartal Dam, Kavango River pipelines, Zambezi Irrigation initiatives,” he highlighted.