Sunday 16 May 2021
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-1.7% GDP decline: A failing government

By Megameno Shikwambi

The shocking economic prediction of a deep contraction in the economy in this financial year is a clear indication of government failure in implementing its turn-around strategy, economist Mally Likukela has stated.
The Bank of Namibia this week dropped a bombshell, predicting that the already beleaguered economy will likely recover by 0% next year before bottoming out in 2021 with growth projections not breaking 3%.
This spells doom for jobs prospects and investor sentiment, economists say. “I am not surprised. And the reason why I am not surprised is because government is not committed to turning around the situation. They talk something and do something otherwise. If they had taken advice from the IMF, the advice from the analysts; this situation would have turned around for the better.
Now government totally ignored the free advice given. The advice is simple, do something about the huge wage bill. It is the wage bill that has eaten up all the money. And government did not do anything.Number two, do something about the (business) environment so that we can attract investors. Nothing! Curb expenditure. Nothing! These are simple things that government should have done,” said Likukela.
The economist said there was no reason to be diplomatic about the situation as all this was a reflection of failure at government level.
Virtually all the sectors have been hit by adverse economic forces and buckled into contraction mode.
Inflation continues to be well within manageable levels of 4.5% while interest rates have been cut.
But there are no quick fixes, analysts at Cirrus Securities warned a few weeks ago.  The informal sector which should have been leveraged for growth has been left in the cold, Likukela said.
Government’s rescue package has proven to be a failure, he added.
“They have failed to come up with a credible rescue package to rescue the economy and there is nothing to be diplomatic about that. Leave the economic summit out, because it has nothing to do with these things.
People will continue to be retrenched. There are very limited opportunities for people to create jobs for themselves. The role of the private sector has also been compromised, the economist said, because it can only operate “when government allows it to operate”.
The sector is heavily reliant on government money and the fiscal consolidation route has thrown a number of companies off the rails.
“Look, the economy is 75% controlled by government. There is no way the private sector can come in. He who owns 75% of the economy controls the economy. If government wants the private sector to come in and save the situation, they must get out from the driver’s seat. Let private sector do its thing. Simple!” he remarked. PDM’s Nico Smit echoed the same sentiments. He said the crisis, though not a surprise, had come a long way and was man-made.
“The collapse started in 2016. I have said it many times and I am saying it again, this is man-made. The mismanagement by Swapo of our finances, our economy. And also one of the biggest thing is that they made the government the biggest spender in this country.
So when things go wrong with government, it affects the whole financial sector, the whole economy and the private sector who is supposed to be the biggest spender. They should drive the economy. Government must come with incentives to make it better for the private sector to expand, to create jobs.
But Swapo with its socialist policy, because they come from that background, they thought of controlling the economy and by doing that create a lot of parastatals. We are sitting with 50 parastatals and all of them, with the exception of two or three, Nampower and Namwater, that’s about all, but the rest of them are bottomless wells,” said Smit. Government has been pumping money in some of these parastatals and getting nothing back, he continued.
A case in point is that of Air Namibia which has never made a profit ever since its inception, and Smit said government has to do away with it.
Public Enterprises minister Leon Jooste has been in the U.S recently to try and get a better deal for the beleaguered enterprise, by trying to unhook it from its financially crippling lease agreements.
But what is more aching is that these loss making entities are competing with private sector, Smit said.
“That is killing the private sector. The private sector has to survive in its own but the parastatals are getting money from government. They squander the money, they mismanage the money but they keep on getting it. So this economic situation is purely man-made,” he said.
Smit said the decline could be as deep as 2% next year although the Bank of Namibia expects a rebound.
Economic Association of Namibia’s Klaus Schade has that if the -1.7% decline is to pan out, agricultural jobs may be wiped out.
“If the forecast materializes, then of course we can expect a reduction in employment particularly in the agricultural sector and in the subsistence agricultural sector because they are affected by the drought. The other sector that is not doing well is diamond production because of the maintenance of vessels. They may redeploy workers from mining activities,” he said.

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