This is deep ÔÇÿishÔÇÖ
Budget cut in October
Operational budget cut
Development budget cut
Revenue to decrease
40% of GDP above the budgeted 36,7% of GDP in the 2015/16 fiscal year exceeding the set debt threshold of 35% of GDP. Estimated to rise to 42,4% of GDP by the end of March
By all accounts and indications, 2017 will be a tough year considering that 2016 closed off at a bad note.
President Hage Geingob called the economic problems of 2016 some headwind that confused many as to whether the Harambee Prosperity Plan would yield results or die just like many other such schemes before it.
This, however, appears not to be just a headwind but some tornado that is likely to evolve into a hurricane this year.
With 50 projects in the bin and a reduced budget that is being gnawed at by deficit as well as debt, there are no chances of any soft landing this year.
Award-winning economist Joseph Stiglitz, who visited Namibia in May last year, said one of the challenges the country faces is increasing employment and diversifying the economy.
Namibia, at the moment, appears to be heading the opposite way. Jobs have been lost and more jobs are most likely to be lost this year.
The construction industry, according to the National Union of Namibian Workers, lost about 10 000 jobs last year.
According to the union’s secretary general Job Muniaro, these jobs were lost when the Aminuis-Gobabis in Omaheke region and the Isize-Luhonono road in the Zambezi region were suspended.
Even the Construction Industry Federation of Namibia said many of their members are likely to close shop this year if the government does not pay them or if the projects stay suspended.
The confederation’s general manager Barbel Kirchner said 30 construction companies could cease to operate by March this year if the government that owes them billions does not pay.
Between 1 September and 30 November 2016, Kirchner said, 115 companies retrenched more than 1 000 workers, and an additional 600 were expected to lose their jobs by the end of December.
The government paid off part of the debt late December but it is yet to be seen whether the other part will be paid on time to save jobs.
It is particularly tough considering that Namibia is in a technical recession following the contraction of the domestic economy by 1% in the third quarter of 2016 unlike the 5% of 2015.
In the second quarter of 2016, the economy declined by 1,2%, while in the same quarter in 2015, there was a 7% growth.
Presidential economic advisor John Steytler admitted last year that Namibia is a technical recession.
“From an economic perspective, it is a technical recession because we have two consecutive quarterly declines. But we have not yet entered a recession. We hope to observe growth in 2017 and hopefully escape a recession,” he said.
It is not clear how such growth will come about if there is nothing going on the ground in terms of development.
The government cannot spend much after the budget cuts that saw finance minister Calle Schlettwein reducing the budget by N$4,5 billion and setting almost every ministerial functions on freeze mode.
The question, maybe, is what happened? How did we get here?
Indeed, there have been a number of capital projects that saw the government making a lot of noise and mobilising the people to be hopeful.
As way back as the early 90s, the government launched the Build Together Programme. This was supposed to provide houses and create jobs.
Until today, nobody knows exactly what happened either to the houses or the money set aside for the programme.
For example, in Omaheke alone, according to the regional governor Festus Ueitele, N$4,6 million allocated for the Build Together programme during the 2010/11 financial year was lying unused five years later.
The Targeted Intervention Programme for Employment and Economic Growth was launched in 2011. It cost the government N$14 billion just to create about 100 000 jobs.
The economic planning minister Tom Alweendo said Tipeeg created 83 000 jobs in the construction sector mainly. Of these jobs, 67 000 were temporary and 16 000 permanent.
Alweendo also said more jobs came from the Green Scheme Programmes, although Geingob in November last year said the schemes were not producing enough food and jobs despite the government putting in money.
“Let me refer to the paper on food security in Namibia. My key observation from the paper is that Government has put a lot of money into the Green Scheme. However, the results presented in the paper suggest huge leakages both in terms of production as well as job creation,” Geingob said when he opened the second Swapo national policy conference.
Geingob said the party must assess whether the government was getting value for money from the Green Scheme and whether food security could be improved by involving the private sector through smart reforms, instead of letting government shoulder the burden alone.
As if the Build Together programme was not enough, former President Hifikepunye Pohamba thought up another money-chewing housing programme that has not yet yielded any results apart from increasing debt and overburdening the country.
Pohamba’s mass housing programme that was meant to provide 9 000 houses by February 2015 at a cost of N$2,7 billion did not hit the target.
The mass housing programme funds were looted and today most of the houses are either incomplete or unoccupied. Of course, a few houses that barely number 1 500 have already been allocated.
And then Geingob introduced his own housing scheme under the Harambee Prosperity Plan for building 20 000 houses within the next four years from April 2015; and servicing 26 000 plots.
What happened and what will happen to the mass housing programme after so much money has already been spent?
Namibia has not been collecting much in form of taxes. To afford capital infrastructure development, Namibia borrowed heavily.
In October 2015, the government secured a US$750 million Eurobond, which finance minister Calle Schlettwein said would increase the country’s international reserves and boost industrialisation activities.
The Economist Intelligence Unit noted last year that although Namibia has been one of the best-rated economies in sub-Saharan Africa, its rating score deteriorated from 45 in September 2015 to 49.
The unit also noted that much of the borrowing was domestic although external debt was sought to ease the liquidity pressure on the local financial market.
The issuance of the US$750 million Eurobond in October 2015 increased Namibia’s debt stock thereby exposing the country to considerable exchange-rate risk.
Ironically, the 10-year bond was quoted by Fitch Rating agency as one factor that drove Namibia’s debt from 23,2% in 2014 to 38,2% in 2015. Fitch also forecasted that government debt would end at 39% by last year.
Government debt was one of the reasons Fitch revised Namibia’s economic outlook from stable to negative in September 2015.
The poor revenue collection and the high debt created a budget deficit that stood at N$8,64 billion, while for the 2014/15 financial year, the deficit was N$7,7 billion.
Documents show that the deficit widened from 0,1% in 2012 to 8,3% in 2015/16. In 2013, it was at 3,4%, before jumping to 6,4% in 2014.
This widening of the budget deficit can be traced to the mass housing programme that was launched end of 2013 and was at its peak two years ago.
The rating agencies have revised Namibia’s economic outlook and sovereign credit ratings from stable to negative.
Fitch has a credit rating of BBB- with negative outlook, which has an impact on Namibia’s borrowing, while Moody’s also revised Namibia’s sovereign credit rating from stable to negative.
As of now, hopes are on the rains and the mining sector especially uranium. But this will not be automatic as in reversing the state of the economy tomorrow. Economist Rowland Brown told the media last year that recovery in 2017 depends will be determined by the uranium industry, rainfall, the external environment and commodity prices. Brown said a growth of anything between 1,9% and 3,4% should be expected.