Finance minister Calle Schlettwein is adamant that the economy is still sailing on a recovery path although signs on the ground seem to be pointing the other way.
Latest stringent cost cutting measures, high-unemployment, high debt levels and declining credit extension have convinced experts that the way out would be to leverage on the country’s N$90 billion worth of state assets.
However, the finance minister has said the priority now is fiscal consolidation and while leveraging on state assets is not yet off the table, there are still many grey areas to be dealt with.
“First of all we agreed that we must continue with our consolidation path to which we reduce debt ratios. We must also look at the income side. Leveraging on our assets is part of the review on state enterprises and how we manage our assets is a long and complicated process.”
“So the principal potential is there but we have not as yet found a formula how to do it. I think that is up for discussion in the review program under SOEs but also how do we use our asset base,” he said.
Pressed on whether there is indeed appetite from the private sector to buy some of these assets, the minister did not show any doubt.
“We believe there are interests to purchase some but we must make sure that is in the national interest,” he said.
Unam based economist Omu Kakuhaja-Matundu demystifies the process of shedding off these assets.
“The first step is that you have to have a comprehensive asset register. That is, you have to know all your assets and their valuations. Which our government for most of the assets have no clue. Mind you, government cannot just sell assets left and right and get all the money it needs. It should be a combo of borrowing, selling assets and cost cutting measures to try and bring the debt levels down to set targets,” he explains.
Namibia Stock Exchange (NSX) chief executive officer, Tiaan Bazuin, said the process must not be rushed and must be done in a transparent manner.
“Government has come a long way in realising the potential of some of the assets, however the process in terms of how that is done needs to managed because there are lots of example where government went and disposed of a lot of its asserts only for a couple of years later having to buy them back,” he said.
Meanwhile, despite visible signs of a cash-strapped government, high unemployment, shrinking private sector, high public debt levels, falling credit extension, Schlettwein is convinced the economy is still on a recovery path.
“Indications are indeed that the economy is adjusting, that in the next year we will see some growth in place of contraction. That growth is in the primary sector but also in the tertiary sector,” says the minister.
According to the World Bank, while iron ore prices are predicted to tumble by 10% this year, tight supply may likely push up prices for base metals like lead, zinc and nickel.
The bank predicts an easing in gold prices and an edging up of agricultural products.
Commodity prices have already risen across the board beginning of the year with prices for raw materials going up by 2.8 percent.
The rise in prices, Bloomberg notes, has been pushed by a weakening greenback.
Schlettwein is hopeful that Namibia will see a normalization of the situation in the private sector credit extension space which has been on a weakening trend.
“I think what we found over the past couple of years is that credit extension became unsustainable, the ratios were wrong and the risks increased significantly. So the interventions that we have made are such that the ratios are improving,” he says.
Meanwhile, 2016 statistics indicate that Namibia registered subnormal growth of 1.1% spurred by a contraction in the secondary and tertiary industries.
Debt is already way above government expectations of 35%, the Economic Association of Namibia’s Lauren Davidson is convinced that government has already exhausted its financial pools and debt will likely shoot out of the roof this year.
“It’s a gloomy outlook and government has a limited gap to continue to fund state enterprises,” she says.