Politics of Deeper Integration with South Africa (Part 1)

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By Martin Mwinga If history is a guide, the single most important risk factor that countries and people face in good times is complacency. Deep economic integration between Namibia and South Africa has created a space for Namibians to become complacent and in the process have developed a dependency syndrome to the extent that Namibia tends to copy and paste almost everything that South Africa does, be it policies, products, etc. The aim of this article is to highlight the potential risks posed by Namibia’s deep integration into the South African economy. By identifying potential systematic weaknesses and by calling attention to potential fault lines in the way the economy is managed, the article seeks to play a role in highlighting potential risk areas and suggest preventive measures. At a distance the Namibian economy appears to be standing on solid pillars with a high standard of living relative to other African countries, but at a close range one observes an economy that has no foundation, an economy and institutions run with a remote control from South Africa, an economy whose income is generated from non-renewable resources, and an economy with an unsustainable wage bill. The dependence of the Namibian economy and its institutions on the South African economy poses major risks to the political and macroeconomic stability achieved over the past fifteen years of independence, and unless something is drastically done to steer the economy in the right and sustainable direction, the economy could find it difficult to withstand a small storm. Concentration of risk such as the one experienced by Namibia has been the cause of the dysfunctional nature of most African economies. Because Namibia is not a political province of South Africa, during testing economic crises, South Africa will not be available to bail out Namibia and therefore an economic risk diversification strategy needs to be put in place. The deep integration and the resulting complacency by Namibians and institutions is developing into a culture of laziness, lack of initiatives and innovations to the detriment of the economy. While government created institutions to manage the economy and risks that could pose a threat to the stability of the Namibian economy, these institution, have never been tested before and do not seem to have the capacity to absorb and manage risk that could threaten stability in Namibia. The majority of companies in Namibia are owned and managed by South Africans and as a result decision-making is concentrated in the hands of South African managers based in South Africa. Despite the appointment of Namibians to top management positions in these companies, most decision-making and technical work remains the responsibility of South Africans. Management control and concentration of business decisions in the hands of South Africans leads to poor productivity of Namibians, especially black managers and workers who end up being put in positions to fulfil government affirmative action policies. The impression is always created that Namibians are unproductive and lazy with no appropriate skills and therefore technical work and decision-making must be left in the hands of South African executives, all in the name of integration. The situation is even worse for companies where blacks are appointed to top positions, in which organisational structures are changed to transfer management control and decision-making to South Africans. Almost all companies in South Africa that established operations in Africa outside South Africa run big departments dedicated to service the African operations outside South Africa. These departments are fully staffed with technical staff to support African and Namibian operations, but end up doing the work supposed to be done by Namibians. Such type of institutional arrangement that denies Namibians to participate fully in the running of these institutions has excluded most Namibians from doing technical work and only relegated them to marketing and bringing business on the table and once that is done South Africans are the ones to do the technical work and in the process develop technical skills at the expense of Namibians. South Africans seem to have discovered a formula that keeps them in control of the economy – “put Namibians” in visible positions where they can be noticed by politicians and reserve technical work for South Africans. I have no problem with this arrangement if the support runs for the first few years of the company’s establishment, but for companies that have been in existence for more than fifteen years to claim that there are no Namibians to run these companies is an insult to the intelligence of Namibians. The current institutional arrangements make Namibians, especially black Namibians, look incompetent and lazy. If this trend of allowing South Africans to continue running Namibian companies goes on, the process of skills transfer will not be realised and Namibia will remain an economic slave of South Africa and the benefits of integration will be minimal. The dependency syndrome is not only limited to the private sector but is prevalent in the public sector. Since independence, the Namibian government has been establishing institutions to serve as a pillar for the economy and to manage economic risks as they arise. However, the deeper integration between Namibia and South Africa has made Namibian institutions much weaker. The Bank of Namibia is the custodian of monetary and exchange rate policies in Namibia and is entrusted to have full control over these policies. Due to the increased integration between the two countries, the Bank of Namibia operates like a branch of the South African Reserve Bank, implementing policy decisions decided in South Africa. There are times when economic conditions in Namibia do not justify a change in monetary policy, but the Bank of Namibia will always abandon its position and follow the action of the South African Reserve Bank. While this policy dilemma is not only limited to Namibia alone, but applies to most countries belonging to a monetary union, the drawback is that the Bank of Namibia fails to build capacity and capability to conduct monetary policy and manage exchange rate. The risk Namibia faces by virtue of this dependence on South Africa is that the Bank of Namibia has over the past sixteen years failed to build enough foreign reserves despite the substantial increase in exports. While Namibia’s exports increase exponentially, the country’s foreign reserves have been declining from three months import cover in 1997 to below two months import cover by 2006, contrary to the current Governor’s stated goals of building the country’s foreign reserves when he took office in 1997. The failure by the Bank of Namibia to build foreign reserves over the past ten years shows that integration is in South Africa’s favour, and this has put the Bank of Namibia in a complacent position not to develop mechanisms and skills to capture these foreign reserves that Namibia needs to accumulate during favourable times. While the deeper integration between the two countries may not put pressure on Namibia to build foreign reserves for now, one should not be so complacent to be caught unprepared. Despite its benefits, integration has left Namibia with little foreign reserves, poorly developed skills and unpreparedness to manage monetary and exchange risks or economic crises that may arise. The point I am demonstrating here by using the Bank of Namibia as a case study is that, despite the establishment of institutions, deeper integration between the Namibian economy and South Africa renders these institutions ineffective in carrying out their stated objectives and they end up as white elephants. Part 2 will look at how Namibia can take advantage of its deeper integration into the South African economy by developing specialized knowledge, and how public and private sector clients can use their business to change the current status quo that is depriving Namibians from acquiring the necessary on-the-job skills.