Keeping our heads above the junk line

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As South Africans absorb the decision by Standard &Poor’s (S&P) to downgrade their country’s credit rating to junk status, Namibia needs to move fast and put in place measures to help mitigate the spill over effects.

There is, of course, a sense that S&P were overzealous in their hasty decision to downgrade Africa’s largest economy – but swallowing those sentiments hook, line and sinker we would do at our own peril.

The undeniable and irrefutable truth is that there are some unpleasant vibes, political and otherwise, emanating from South Africa. But while we pray for our neighbours to overcome what evidently seems to be a manageable situation, we must at the same time prepare for all eventualities.

Already, Namibia knows the storm coming its way as a result of that downgrade. We know that the rand, to which our currency is pegged, has done badly in the past couple of days against major currencies – leaving us in exactly the same predicament.
A weaker Namibian dollar means importing goods and services becomes more expensive while borrowing, especially by government, becomes more costly as loans owed would have to be settled in foreign currency, thus in higher amounts than would have been if the currency remained strong.

So, as far as the impact of the situation in South Africa is concerned, there is no escape route for Namibia.

It is with this in mind that key ministries and government agencies need to urgently convene and sketch various scenarios that could emanate from South Africa’s downgraded status and to develop mitigation propositions to each of those scenarios.

The intertwined nature of the two countries’ economies is such that we shine together in good times and fall simultaneously when economic gravity strikes. Namibia is already having her fair share of economic headwinds and cannot afford to slide an inch downwards, hence the need for a proactive plan to withstand the storm from the south.

The National Planning Commission, Ministry of Finance, Bank of Namibia and other government offices of strategic nature, must plan – together or separately – their responses.

In truth, Namibia is not an island and will always be prone to global market forces and seismic economic events – even those not of our own doing. The midnight cabinet reshuffle in South Africa mothered the storm we are feeling, but in our view, as a sovereign state our neighbours have every right to deploy and redeploy the ministerial workforce as they see it fit.

Even with the S&P rating, South Africa remains an attractive investment destination. But if Namibia does not plan wisely and slides down the rating order, to junk status, it is hard to see how a small economy like ours would be able to continue to lure investors here.

Rating agencies have been hovering over African economies for years, waiting to pounce at the slightest provocation. We are therefore not entirely surprised by the lowly status bestowed upon South Africa’s investment prospects.

There were talks this week that part of the decision to downgrade that country was because of the choice of words used by new Finance Minister Malusi Gigaba, who spoke of ‘radical’ economic reforms.

South Africa, just like Namibia and other former colonies of Europe in Africa, has not reformed the economy sufficiently to address the gaps, mismatches and other painful legacies of colonialism, that include the concentration of wealth in a few white hands.

To rectify this, Africa needs to radically transform its economy. And that is what S&P and others do not want to hear.

Yet, failing to bring about radical transformation means keeping the black majority trapped in abject poverty and hopelessness. To punish South Africa for the radical tone, therefore, suggests the rating agencies are happy with the status quo of black suffering.
We reject and condemn such efforts with the contempt they deserve.

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