A Year Of Trade

Originally published in the Informanté newspaper on Thursday, 29 March, 2018.

Over the last century, a web of trade has developed between countries, and it is largely responsible for the economic development we’ve seen globally since the mid twentieth century, due to the economic theory of comparative advantage. In short, it postulates that certain economic actors can produce certain goods or services at a lower opportunity cost than others. To maximize economic output, then, it makes sense to produce that which a certain country can produce at lower cost than anyone else and export it, and then import those goods which can be produced by other countries at a lower cost.

To maximize economic benefit, then, every nations imports some goods and services and exports others. These two do not always match, however, and this mismatch is called the balance of trade. The balance of trade is a large part of a country’s current account – which not only includes trade, but also capital flows in and out of an economy. Usually, countries produce a trade surplus during economic boom times, and then records a deficit during tougher times. 

Namibia is no exception, with government’s trade policy aimed at developing, promoting and diversifying the country’s exports while reducing our reliance on imports. It is therefore quite important that we monitor our trade to see if government is, in fact, successful in its stated endeavours. Let’s then examine the Annual Trade Statistics Bulletin compiled by Statistician General Alex Shimuafeni’s Namibia Statistics Agency to see what trade occurred during 2017. 

During 2017, Namibia’s exported N$ 63.5 billion worth of goods, while importing N$ 87.9 billion, leaving us with a total trade deficit during the year of N$ 24.4 billion. As such, we’ve effectively exports locally created wealth abroad. While we saw an improvement in the trade deficit from 2016 of 18%, it remains a fact that Namibia now consistently has a trade deficit, instead of a trade surplus, every year since 2008. 

Let’s take a look at exports and imports individually. Namibia’s largest export market, as usual, is the Southern African Customs Union, with N$ 23.4 billion exported to that group of countries, or 39% of our exports. In second place is the European Union, with N$ 14 billion in exports (24%), then the European Free Trade Area (basically Norway, Iceland, Switzerland and Liechtenstein) with N$ 8.6 billion in exports (14%), followed by non-SACU SADC with N$ 5.4 billion (9%) in exports, and finally, the Common Market for Eastern and Southern Africa (COMESA) contributing 7% in exports and BRIC (Brazil, Russia, India, China) contributing 6% .

When we take a look at the individual countries we export to, South Africa comes out top with N$ 15 billion exported to, or 24% of our exports, with Botswana at N$ 8.4 billion (13%), Switzerland another N$ 6.5 billion (10%), China with N$ 3.3 billion (5%) and Belgium with N$ 3.2 billion (5%). Together, these 5 account for 58% of our exports. 

For Botswana, unsurprisingly, our exports are mainly diamonds, and while South Africa also receives diamond exports (38% of our exports to them), we also export live animals (16%), fish (9%) and beverages and spirits (5%) amongst others. For Switzerland, we can see that 90% of our exports are copper ores and copper blisters. This seems to be the result of the Louis-Dreyfus Group, based there, that via its subsidiary, Dundee Precious Metals, acquired the Tsumeb Smelter, and seems to be importing copper to Namibia for smelting before re-exporting. We mainly export ores as well to China (54%) but in addition, China also receive a lots of our exports of zinc (30%). Belgium mainly receives exports of diamonds (49%) and copper blisters (19%) from Namibia, in addition to a sizable amount of zinc (17%).

In terms of imports, the SACU is by far the largest source of imports, with N$ 54.8 billion imported, or 66% of our imports. The EU is second with N$ 11.4 billion (14%) imported, then the BRIC countries with N$ 7.1 billion (9%) imported, and COMESA with N$ 4.7 billion imported (6%). Taking a look at the individual countries we import from, South Africa stands at N$ 49 billion, accounting for 56% of our imports, with Bulgaria at N$ 5.8 billion (7%), Botswana at N$ 5.4 billion (6%), China at N$ 4.5 billion (5%), Zambia at N$ 4.2 billion (5%)

From South Africa, we source vehicles, electrical and mechanical appliances and equipment as well as most of our manufactured products and pharmaceuticals, as can be expected. This remains the main reason the Namibian dollar cannot delink from the Rand. Botswana’s imports are 94% diamonds – most likely re-imported after processing there. From Bulgaria and Zambia we imported copper ore and copper blisters – for smelting, as mentioned above. From China we get electrical and mechanical appliances and equipment as well as other articles of iron and steel, which can be expected, seeing as their products remain quite popular here in Namibia.

The data has now been turned into information, and the picture it paints is not positive when we consider the government’s trade policy. Our exports are still primary resources. Our imports are manufactured products. With a country that is struggling economically, why are we not encouraging the development of local manufacturing ability? Why can we not process these primary resources we’re exporting first, and export manufactured product to try and reduce our trade deficit? We need to start developing our own manufacturing industries, so we can export more to cover our imports. Until we do, we’ll simply keep exporting our natural wealth – and when that runs out, we’ll be up a creek without a paddle.

An Independent Budget

Originally published in the Informanté newspaper on Thursday, 22 March, 2018.

This week we celebrate Independence Day here in Namibia, but as we celebrate, it might behove us to take a long, hard look at our country, and how it’s being managed. Minister Schlettwein presented his budget to parliament just a few weeks ago, and the documentation has been made available on the Ministry’s website, so let us pore through the documents, and take a look at what’s ahead. 

Namibians should not be surprised to hear that the economy is expected to have contracted by 0.4% during 2017. Namibia is expected to recover somewhat economically during 2018, with growth expected at 1.2% for the year before increasing further to 2.1% in 2019. With recovering commodity prices, government expected the mining sector to be at the forefront of this recovery. So how did government structure its budget?

Let’s start at the top, with government revenues. In total, the government expects to receive about N$ 56.7 billion from various sources, a 1.3% decline from last year, reflecting Namibia’s difficult situation. N$ 53.2 billion will be from taxes, with N$ 22.2 billion from income taxes – as paid by us every year, and paid by the various companies operating in Namibia. Another N$ 34.5 billion is collected via indirect taxes, like VAT, that you pay when purchasing products or importing products, and transfer duties and property taxes. Then an additional N$ 3.4 billion is raised from other sources, such as dividends and profit shares from government investments and interest of loans and investments, royalties on minerals mined, and fines and administration fees. 

So far, so good. It seems quite prudent, given the state of the economy, and it seems the government has learned not to make the mistake of over-estimating its revenues, having learned hard lessons from two years ago. So, let us take a look at the expenditure now. Minister Schlettwein’s budget indicates that the government intends to spend N$ 65 billion this year, also a decline of 2.3% from the previous year. How is this allocated?

As usual, the biggest expense is the N$ 13.5 billion is budgeted for Basic Education. It has been noted that education is the greatest equaliser, and the Namibian government is certainly striving toward it, as government spending on education dwarfs other spending by a significant amount. In fact, Namibia is one of only three countries in the world where education is the top spending priority for government. Namibia spends about N$ 18 700 per learner per year, but with our high failure rate, the ministry has to urgently improve the quality of outcomes. An additional N$ 3.2 billion is budgeted for Higher Education, Training and Innovation. In total, 28.9% of expenditure goes to education, or about 9% of GDP.

Health and Social Services receive N$ 6.5 billion in the budget, and N$ 3.4 billion goes to the Ministry of Poverty Eradication and Social Welfare.  The budget increases the old age pension grant to N$ 1 250 per month, allowing our oldest and most vulnerable of citizens to be placed above the national poverty line. In total, the Social ministries above receive 49.2% of the budget. 

The Ministry of Transport is allocated N$ 3.5 billion, and has to complete several phases of ongoing road construction projects, as well as invest in industrialization and logistics hubs over the coming years. The Ministry of Agriculture, Water and Forestry will receive 2.1 billion, and PSEMAS N$ 2.5 Billion. The Ministry of Finance will be receiving about N$ 4 billion, and is tasked with establishing a Revenue Agency to improve the efficiency of tax collection and ensure government revenue targets are met. In total, these economic and infrastructure ministries above receive 21.7% of the budget.

The Ministry of Defense and the Ministry of Safety and Security receive N$ 6 billion and N$ 5.2 billion respectively. The Ministry of Home Affairs and Immigration will be receiving N$ 609 million and the judiciary N$ 366 million. These Public Safety Ministries are kept funded at significant levels as we don’t want to compromise the safety of the nation, and in addition, President Geingob’s zero-tolerance stance on corruption will keep these ministries quite busy. These ministries have the second largest share of the budget, with a total of 21.7% of the budget, with the remaining 7.8% of the budget allocated to administrative ministries, such as Urban and Rural development and International Relations and Co-operation, amongst others. 

As you may have noticed, our government expenditures exceed our revenue – this is what is called our budget deficit. This year, however, it only amounts to 4.5% of GDP, in contrast to the 5.4% of last year. This is due to the fiscal consolidation stance taken by the Ministry of Finance to maintain our macroeconomic stability and sovereign credit rating of our bonds. As a result of the prudent budgeting, only N$ 8.3 billion worth of debt funding will have to be raised by government this year. 

This budget, at least, should give some reassurance that the government is keeping its eye on the ball, and positioning itself against adverse conditions, while simultaneously attempting to put the country on the right footing for rapid growth should the opportunity present itself. Still, this quick summary is no replacement for your own – every citizen should avail themselves of the documents as presented on the Ministry of Finance website, and make their own assessment. With the independence celebrations on our mind, we should remain cognizant of the fact that it remains our duty to keep the government accountable and transparent. A strong and independent Namibia is only as accountable as its citizens.

Briefly Brighter Than 200 Suns

Originally published in the Informanté newspaper on Thursday, 15 March, 2018.

Yesterday, a giant in physics died. Stephen Hawking was the contemporary face of physics, much like Einstein was in his time, and Isaac Newton before him. There are many obituaries that cover his life, detailing how he was diagnosed with motor neurone disease (or ALS) at the age of 21, and was expected to only live anther two years (he lived another 55), or how he was a difficult student at Oxford, and threatened to do his PhD there if they gave him a second class degree, with the understanding he’d move to Cambridge if he got a first. This led to him eventually occupying the Lucasian Chair of Mathematics at Cambridge. But instead of covering all that, let’s rather take a look at a small part of his life’s work – the radiation that’s named for him.

After Eintstein’s publication of the General Theory of Relativity, it became rather well known that light speed was the speed limit of the universe, and that gravity affected light. Karl Schwarzschild took Einstein’s field equations, and found a solution that described the peculiar behaviour that occurred when that gravity of an object was so massive that its escape velocity (or the speed at which an object would have to move to escape its gravitational pull) was so large that it exceeded the speed of light. At this border where this happened, some terms in Einstein’s equations became infinite, resulting in a singular point in space with no properties able to be observed from the outside – a singularity. 

At first, it was thought this was but an aberration, but by 1931, Subrahmanyan Chandrasekhar showed that for stars above a certain size, it was inevitable. By 1939, even Robert Oppenheimer conceded that such objects might occur, but called them ‘frozen stars’ as light at the surface would just stop. By 1958, David Finkelstein identified the Schwarzschild radius, at which no light could escape, an event horizon – a perfect unidirectional membrane from which nothing could escape. As such, these objects were now called ‘black holes’ and became subject to research. By the late 1960’s, Roger Penrose and Stephen Hawking had proved that black holes could, in fact, exist in nature. But then Hawking noticed something else. Something that occurred when he applied quantum field theory to black holes…

Now, to explain this part, we first have to examine the underlying structure of the universe. We need to look at quantum mechanics. In essence, this is the fundamental theory in physics that describes nature at its smallest scales – below atoms, and into subatomic particles. It is so named because it examines the quanta (singular: quantum) or smallest individual pieces of particles of the universe. At this level, everything exists as both small particles and waves – the wave being the frequency dependent on the energy of the particle. 

To wit, this means that at the smallest scales of the universe, particles don’t exist all the time – they instead pop in and out of existence in a ‘probability wave.’ As these waves overlap, we get areas where there is a greater probability that a particle exists, and that’s where we’ll find it most likely. By the time all these subatomic particles have collapsed their wave functions to the atomic level, these larger particles are a lot more predictable, and we get to atomic theory – with protons, neutrons and electrons making up atoms of matter. 

It’s at this point I’d like to note that I’m not a physicist, and I’m simplifying heavily to attempt to make it easier to understand. 

To continue, matter also has its ‘inverse,’ antimatter. Antimatter is indistinguishable from normal matter except for its atomic charge, which is opposite. Hydrogen, for example, is normally composed of a proton (positive charge) and electron (negative charge), whereas antihydrogen has an antiproton (negative charge) and a positron (positive charge). When matter and antimatter particles meet, they annihilate each other and release energy. In fact, in early days of the universe, it was filled with both matter and antimatter, but as they interacted, more than 98% of the matter/antimatter in the universe was annihilated. It’s just due to a statistical chance that a bit more matter was present than antimatter, and all that we’re made of is the residual matter left in the universe. No wonder space is mostly empty, eh?

So what Stephen Hawking noticed is that, due to the quantum nature of subatomic particles, their waveforms in a vacuum will inevitably build up and for a brief moment form particles even when there was none before. Normally, this is not normally noticed, as both a particle and an antiparticle will be created, and they’ll annihilate each other instantly. However, at the edge of a black hole, there exist an event horizon, and if one particle emerges on its outside, while the other passed through the event horizon from which nothing can return, these ‘virtual’ particles are not annihilated – one is left free in the universe, while the other eliminates particles on the other side of the event horizon. The black hole would emit particles and lose mass, in what is now termed ‘Hawking radiation.’

In other words, Stephen Hawking showed that black holes… evaporate! Or they would, if they were small enough. The radiation emitted, he showed, is inversely proportional to the mass of the black hole, and cosmic background radiation would inevitably overpower the small effect of evaporation with larger black holes. For a black hole to evaporate, it would need to have a mass of about the same as the moon. And, like Stephen Hawking’s life, if a black hole had about the mass of a car, it would be only about a yoctometer in size – but after a nanosecond, would evaporate and shine briefly brighter than the light of 200 suns.