By: Josef Kefas Sheehama
A continuation along the current path of economic stagnation and slow deterioration of Namibia’s prolonged financial crisis remains the most likely outlook.
The Electricity Control Board approved a 7.30 per cent tariff increase effective 1 July 2022 to ensure a sustainable electricity industry at affordable tariffs. The Namibia Power Corporation (Nampower) imports about 67 per cent of power from neighbouring countries to meet the country’s electricity demand. The higher costs come when the rising bank’s interest rate rises, increasing fuel and food prices.
The Bank of Namibia raised its key interest rate as policymakers combat inflation fueled by high energy prices, Russia’s war in Ukraine and lingering concerns about Covid-19. The energy supply crisis is one of the main factors pushing up household bills. Due to a spike in demand and lack of delivery drivers, the supply chain shortage also pushes up prices for goods.
The cost of living crisis will deepen inequality in Namibia. Yet, no political party is talking seriously about addressing the enormity of this challenge by fixing our broken social safety net. Furthermore, I am afraid that the City of Windhoek might increase the water bill, and people will be disconnected from their water supplies if they don’t pay the bill. I am talking here about people in genuine distress who don’t have the money to pay their bills because, I think, human beings, as well as having a right to water, have a right to light and warmth. It is unclear how long the cost of living crisis will last.
Furthermore, it helps to be aware of all the upcoming changes and how much they will cost you, so you can take steps to budget and protect your finances. There’s no way to avoid the increase, but it pays to be aware of upcoming changes. This has the largest effect on poorer families because they tend to spend a more significant proportion of their income on essentials. The rise in energy prices has a massive impact on discretionary spending power after households have paid their rent or mortgages, food bills and utilities such as water. This rise in prices is considerably higher than the increase in average earnings.
Inflation is clearly something that bites people’s household income. I’m sure they’re already feeling that in terms of prices going up. Employers are unlikely to compensate their staff for this extra and might well limit pay rises.
Moreover, what you should do? One option is to fix your mortgage now, so you lock in current rates and avoid any future interest rate rises. Consider your heating and electricity use when spending more time at home as this could push up your energy bills, especially for all those cups of tea. Don’t be tempted to leave your TV on standby or your phone and laptop plugged in when they’re fully charged if you’re at home all day. Overall, the signs are favourable for the temporary reduction of levies imposed on fuel products despite uncertainty caused by the Ukraine war and inflationary pressures. So, it is crucial to avoid complacency and ensure this windfall opportunity is not missed. There are still many risks to the outlook, including the knock-on effects of a global economic slowdown should rising prices and the conflict persist.
Additionally, as inflation rises, it erodes the spending power of your hard-earned cash. So it’s important to make sure your money is working hard for you. But it’s almost impossible to find a savings account to beat inflation at the moment. Everyone will be hit, and it will feel like a big squeeze for everybody. It will feel like a catastrophe for lower-income households if nothing changes.
The ruling, if left uncontested, will not only disrupt the industry but will further suppress economic recovery, considering the current threat the country’s economy is facing.
It is quite interesting to see that Namibia is importing electricity from neighbouring countries such as South Africa, Zambia, and Zimbabwe, which have similar climate conditions. I strongly believe that electricity prices will rise due to this lack of electricity production and dependence on foreign imports. Furthermore, if electricity production is not supported by alternative renewable sources such as wind, solar, and biomass energy, these problems are inevitable.
Moreover, green hydrogen will be one of the largest economic opportunities. The preferred bidder, Hyphen Hydrogen Energy, is set to start production in 2026. According to James Mnyupe, green hydrogen trains and pipelines are to trade with neighbouring countries. The Zambian and Namibian governments are expected to sign a Memorandum of Understanding to construct a gas and oil pipeline from Windhoek into Lusaka. There are hopes of creating renewable electricity, both for export and as an alternative to imported coal power from South Africa. Namibia believes that by making renewables the cheapest and most attractive option during the bidding, the system creates an incentive to switch to low-carbon technologies, stimulates investments and reduces the need for state subsidies. Therefore, the country’s energy consumption per capita is regarded as an important indicator of economic development. In today’s world, energy is not only considered to be a production input but is also regarded as a strategic commodity that constitutes the basis for international relations and shapes the world economy and politics. Due to the rapid depletion of oil reserves with each passing day, it is thought that this problem can be mitigated in the short term and completely solved in the long term, provided alternative energy sources are mobilised.
To this end, this isn’t only going to be felt by the very poorest. That’s obviously where the political response ought to focus, but very many middle-income people will also struggle with the kind of rise in bills that they’re going to see.
The whole country will feel squeezed throughout 2022, and low-income households will struggle most to deal with that. Also, when inflation gets too hot, the government might shift toward a contractionary fiscal policy.
These measures, such as hiking interest rates and increasing the cost of borrowing, could slow economic activity and depress standard prices.
Therefore, it is clear that renewable energy sources have considerable potential to meet mainstream electricity needs. However, having solved the problems of harnessing them, there is a further challenge of integrating them into the supply system where the most demand is for continuous, reliable supply. Obviously, sun, wind, and waves cannot be controlled to provide either constant dispatchable power to meet base-load demand or peak-load power when needed.
