When the rand sneezes, the N$ catches a cold

It has become a tedious topic to discuss the effects of South Africa’s actions on the Namibian economy, and it’s also safe to say that Namibia being chained to South Africa through the pegging of the Namibian dollar to the South African rand will have this country dragged through mud and dung before it can break free.

Yes, when South Africa sneezes, Namibia will most likely catch a cold. The South African rand has felt a hard hit since last year when it started plummeting due to various economic and political factors, stirred by events last year.

The rand spiralled out of control when it recorded an all-time high at R14 against the USD, and this happened shortly after the Asian markets (China) started experiencing a drop in their currencies.

South African media also reported that the firing of the Finance Minister by President Jacob Zuma last year send panic through the business community locally and internationally, after which the rand also suffered a decrease by 9%, while the benchmark All Share stock index lost R170b.

Just last week, the rand traded at R17.9 in Asian markets before it returned to R16. Local banks have only placed themselves on a fence about the plummeting rand by saying that South Africa’s troubles do not necessarily affect Namibia, and that Namibia is doing just fine.

But this is all just a matter of time, we can all agree. Early this year, some local banks made statements that can only be justified by saying that they were trying to avoid panic.

However, it is a little delusional for a bank to say that Namibia will not or is not affected by the rand now trading at R16.45 against the USD. The effects might not be felt because the prices of bread have not suddenly increased by N$10 and the prices of petrol are not skyrocketing, but local companies who trade internationally will be hit the hardest.

Namibians would now automatically pay more for merchandise from other countries who trade with the USD, may it be in retail or manufacturing. Importing a vehicle will cost you a leg and an arm, or simply importing clothing to stock up your shop. It is minor things which eat away at Namibians’ spending power when the Namibian dollar plummets with the rand.

A mother from Koes in the South supporting a child studying in Russia or the Ukraine now has to send more money because of the effects of the falling Namibian Dollar. N$400 today does not mean the same as it did in 2013 if you are supporting a family member beyond the borders because Western Union and Money Gram both trade with the USD.

So, maybe if you can already afford a 10-bedroom house from your millions of rent money you receive from your condominiums, you will not feel the effects. But if you can barely break even and still have to send your child who is studying in a foreign country money, even your pockets will start to whisper to themselves when you try to reach inside.

Locally when the dollar weakens, this can causes domestic prices to rise, and this was even noted by Namib Mills its prices have increased not only because of the drought but also because the Namibian dollar has weakened.

These are factors that are crushing right into us here at home. The question everyone wants answered is, till when can we expect live in the shadow of the Rand’s ups and downs.