By Desie Heita
The continuous difference in stance on monetary policy by Tom Alweendo and Tito Mboweni, the two governors of the respective reserve banks in Namibia and South Africa, have come to indicate that, perhaps, Namibia could be doing well, albeit relatively, compared to the big brother.
Somehow, this is evident in their last take on the two economies as indicated in the two Monetary Policy statements, where South Africa decided to push up the bank rate by 50 basis points to 12 percent, a cumulative increase of 450 basis points since June 2006. Namibia, on the other hand, decided to leave the bank rate unchanged at 10.5 percent, a third time this year.
Mboweni is battling with “a sizeable current account deficit on its balance of payments” – at 7,3 percent of GDP for 2007 – while Alweendo reports that he is recording “continuous strong surpluses”.
As reserve banks the two are fighting a similar battle, only for South Africa the fight seems to be more intense than for Namibia. South Africa’s year-on-year consumer price index inflation shot up to 10,4 percent in April this year and Mboweni says it “is expected to persist above the inflation target of 3-6 percent, and is not expected to return to within the range before the end of 2009”.
For Alweendo inflation is at 9.7 percent, up from 8.4 percent in March, which although higher, he says “is not unique to Namibia as inflationary pressure has become a worldwide phenomenon driven largely by external factors”.
On the contrary, analysts such as Lazarus Shigwedha of Investec Asset Management Namibia, are tense on inflation which they say “would remain a concern as long as oil prices remain at the current levels of around US$130 and could even worsen should oil prices rise higher”.
Some analysts, such as Johannes !Gawaxab of Old Mutual Group, did expect the policy taken by Bank of Namibia, although he was worried that such a neutral stand might affect liquidity in the local banking system and that there might be a higher increase in the capital outflow for a better yield in South Africa.
“Both money supply and credit extension data show that consumer demand has slowed and remains significantly lower than in South Africa,” !Gawaxab said.
The Bank of Namibia say there has been no adverse movements of capital flows between Namibia and South Africa since the last two decisions to leave the bank rate unchanged, and lower than that of South Africa.
“In fact, since then there was a further strengthening in the country’s overall reserve position, suggesting that inflows have been higher than outflows,” said Paul Hartmann, the Deputy Governor of BoN.