Trial And Error

Originally published in the Informanté newspaper on Thursday, 16 November, 2017.

Over the last few weeks, we’ve talked quite a bit about the values each of us should possess if we want to build a Namibian House. One “where everyone feels a sense of belonging, where everyone is presented with a fair opportunity to prosper in an inclusive manner and by so doing, ensure that no one feels left out.” We, as a people, need to be honest, loyal, kind, jovial and generous, whilst uniting in the bonds of friendship. But what does our government need to do? For a start, it needs to lift all Namibians into prosperity based on an inclusive Namibian House, united in its cause. 

There are, of course, several policies one can implement to alleviate poverty, but none of them work without economic growth. It is often said that economic growth will alleviate poverty, but this is not strictly true for economic growth alone – it will only alleviate poverty if the lowest wages rise faster than the average wage, and if benefits and pensions are kept in line with average wage increases. Economic growth, however, creates new job opportunities, and that is how poverty gets alleviated. It is quite well known that the biggest cause of poverty is in fact unemployment! 

Government has had some success in this, but it appears to have followed the time tested method of trial and error – repeated, varied attempts which are continued until you find success. Unfortunately, it appears government is only measuring the end result to see what is effective – and as a result, may be missing the intermediary measures one can examine to see if policies may not be able to improve those. 

This seems like a job for our Statistician-General, but until such time, we can also look to international studies – such as the Doing Business Report of the World Bank Group. In its 2018 report, however, the results did not look good. Out of 190 countries, Namibia came 106^st on its ease of doing business, dropping 5 places in two years.

In particular, there are several sub-sections where Namibia should mightily improve if we want to build an inclusive Namibian House. In terms of tackling unemployment, perhaps the most important of these would be the ease with which one can start a new business. Namibia ranked 172^nd out of 190 countries – we’ve dropped 8 places in just two years.

To start a new business, there are 10 procedures that need to be followed, which takes 66 days. Compare that to New Zealand, the best, where there is only a single procedure that needs to be followed, and it takes but half a day to register a business. Would it not be better for Namibia’s unemployment if this wall were not in front of every entrepreneur that wished to enter the economy? To simply pay a company’s taxes requires 27 payments a year, and requires 302 hours of work to complete. While this only makes us 79^th in the world, that still means a new entrepreneur needs to work almost two months of a year just on his taxes. This is time not spent building his business!

Registering a property takes 8 procedures, and 52 days – placing us 175^th out of 190 countries. It also on average costs 13.8% of the property’s value. With the world leaders having only a single property procedure taking a single day, and with it costing zero in Saudi Arabia, is it any wonder we’re complaining about land provision when it takes this long and costs so much simply to register it? Perhaps the problem with land is the cost of acquisition…

For trading across borders, I came across an even more startling statistic, which could explain why the Bank of Namibia is constantly warning our citizens that our imports exceed our exports. In order to export from Namibia, it requires 15 working days to ensure border compliance, or two working weeks. It requires an additional 11 working days to ensure the documentation is completed for that export, with the costs to ensure compliance amounting to almost US$1100. Now compare that to the 6 hours required to ensure goods are compliant to import, with only 3 hours required for import documentation, costing less than US$210. 

And to enforce a contract here in Namibia, it takes 460 days to be heard by the court (only 120 days in Singapore), while it would cost 35.8% of the claim (0.1% in Bhutan), although our court system did get credit for the reform process case management and information communication technology systems. There are several more statistics that relate to the ease of doing business that increase our score compared to these, like Getting Credit (68^th), Getting Electricity (68^th), Dealing with construction permits (107^th) and Protecting Minority Investors (89^th). 

If we as a nation wish to alleviate poverty and unemployment, it seems clear where we should start. I know that we as a nation want to do all that we can. We want to make a contribution – we want to be a part of the plan. Our destiny seems uncertain, and that can be hard to take, but our path will become much clearer with every new choice we make. Patience is never easy; we can all understand wanting more. But we also know how hard it is to wait, as a nation, to spread out our wings and soar.

But we are here for a reason – as a nation, we are gifted, and we are strong. We know we belong here, and we’ll solve our problems. Our time is coming soon – as the sun rises, so does the moon, and as love finds a place in every heart, we are a nation. We’ll play our part.

Looking Abroad

Originally published in the Informanté newspaper on Thursday, 2 November, 2017.

Here in Namibia, we’ve grown used to examining the reports released out by Statistician General Alex Shimuafeni and the Namibia Statistics Agency to gauge our economic health. Unfortunately, our own health does not paint a complete picture – the country, after all, does not exist in isolation, but is part of the global economy. Where then would we look to find out how the rest of the world is doing? Well, the World Economic Studies Division of the Research Department at the International Monetary Fund in Washington DC can help us on that front. Every 6 months, they release a World Economic Outlook to inform us as to how the world is doing, economically. 

So what does the October 2017 report reveal? Well, after struggling through most of 2016 at a paltry 3.2% growth, it appears the world economy is picking up steam again, with 2017 growth expected to be 3.6%. Central Banks across the world have begun tightening monetary policy again (raising interest rates) as growth slowly returns, but it’s not all good news. It remains problematic that not all countries are participating in the recovery, and while growth is increasing, inflation – and specifically, wage inflation – remains low. This means that the new growth is not being funnelled to the ordinary people, and economic inequality is on the increase.

So let’s dig a bit deeper into the details, starting with the so-termed ‘Advanced Economies.’ In the United States, growth for 2017 is expected to increase to 2.2%, less than expected, as President Trump’s election promised of fiscal policy expansion has yet to come to pass. Further hampering the US’s growth is its lack of productivity growth and aging workforce. In the Euro area, growth is expected to rise to 2.1% on the back of a growth in exports and smaller political risk. However, similar to the US, weak productivity growth and an aging workforce will stymie growth, alongside the problem of excessive debt still faced by some countries in the Euro area. 

In the United Kingdom, growth is expected to drop to 1.7% going forward, with the pounding taken by the Pound Sterling depressing consumption. With Brexit details not yet confirmed, future growth is also likely to be muted until the extent of the country’s relationship with the euro area is finalised. Japan is similarly on a downward path, with expected growth of 1.5%, but going forward, the country’s shrinking labour force will curtail growth. In other advanced economies, growth accelerates, however, with Norway (1.4%), Canada (3%), Australia (2.2%), Korea (3%) and Singapore (2.5%) benefitting from the recovery in global trade.

Now let’s have a look at the Emerging Market Economies. First amongst these is of course China, with growth projected to be 6.8%, well on their way to their target of doubling GDP between 2010 and 2020. However, much of this growth has been funded by debt, which has ballooned, so risks increase there as well. In the rest of Asia, the economies are doing quite well too, with India being a standout, despite still experiencing disruptions associated with their currency exchange initiative, and they’re expected to grow by 6.7% this year. 

In Latin America and the Caribbean, GDP growth is returning to 1.2% in 2017 after contracting by 1% in 2016.  Mexico leads the way in this region, even though a renegotiation of the NAFTA agreement is on the cards, and Brazil is once again experiencing economic growth as well. The biggest issue in the region is the continuing political uncertainty in Venezuela, whose economy is expected to contract by 10% in 2017. In the Commonwealth of Independent States (or Russia and the former USSR countries) conditions continue to improve, with growth in the region expected to be 2.1%. This coincides with Russia finally struggling out of its two-year recession, with expected growth of 1.8%. 

In developing Europe, growth is expected to be 4.5%, driven by a recovery in exports, and lead by Turkey (5.1%) and Poland (3.8%). In the Middle-East and North African region, however, growth is slowing to 2.6% from 5% in 2016, mainly due to a renormalization of Iran’s growth after it sped up significantly in 2016 after sanctions ended. Pakistan is expected to lead in growth, with 5.3% expected in 2017 due to investment in the Pakistan-China Economic Corridor.

Finally, our own neck of the woods – sub-Saharan Africa. By now we have good comparisons with the rest of the world to show just how we’re doing. Well, the region as a whole is expected to grow by 2.6% this year, but we have sizable differences between countries, and the big outliers are Nigeria, which is only now starting to recover from the oil price shocks of 2016, with growth for 2017 projected at 0.8%. South Africa, the other large economy, is also facing growth of just 0.7% despite recoveries in the commodities markets and agricultural exports on the rise due to good rains. However, the political uncertainty continues to sap not only consumer confidence, but growth as well. Angola, on the other hand, will grow by about 1.5% this year, off the back of a rebound in oil production, and for the rest of the region, an average growth of 3.9% is expected this year.

So what does this mean for us? When we take a step back to see the whole world economy at a glance, we can see that no one economy is without its challenges. But we can also see that every recession has a solution, with quite a few countries pulling themselves up by their bootstraps. We’ve been blessed with quite a few years of exceptional growth, and now seem stuck in a recession. But the proof is out there. If we Harambee, we too can return to solid growth.

Our National Trade

Originally published in the Informanté newspaper on Thursday, 19 October, 2017.

No man is an island, they say, but this is perhaps even more true for countries. We do not stand alone from our neighbours. 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, however, managed to record trade deficits ever since quarter 3 of 2012, peaking at a trade deficit per quarter of almost N$ 12 billion in the second quarter of 2015. Clearly when a country consistently imports more than it exports, it effectively exports locally created wealth abroad. It should therefore be of great concern to us when the Statistician General Alex Shimuafeni releases trade statistics via the Namibia Statistics Agency and reveals that over the last few years ( 10 quarters ) the Namibian trade deficit has grown by 49.9% Let’s take a look at the Quarterly Trade Statistics Bulletin for the second quarter of 2017, then. 

In the second quarter of this year, our trade deficit was N$ 6.2 billion, showing a deterioration of 26.8% from the first quarter.  This is the result of N$ 20.1 billion in imports, versus N$ 13.9 billion in exports, with the drop in exports since the first quarter the leading reason for this change. Over the last 5 years, the trade deficit averaged N$ 6.7 billion per quarter, mostly due to Namibia’s demand for high-valued manufactured commodities and machinery, while all we were exporting was primary goods. 

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$ 4.8 billion exported to that group of countries, or 38.1% of our exports. In second place is the European Union, with N$ 3.3 billion in exports (26.1%), then the European Free Trade Area (basically Norway, Iceland, Switzerland and Liechtenstein) with N$ 2 billion in exports (15.8%), followed by non-SACU SADC with N$ 1.1 billion (8.8%) in exports, and finally, the Common Market for Eastern and Southern Africa (COMESA) with N$ 984 million (7.2%) in exports.

When we take a look at the individual countries we export to, South Africa comes out top with N$ 3.1 billion exported to, or 22.7% of our exports, with Switzerland another N$ 2 billion (14.5%), Botswana at N$ 1.7 billion (10.1%), Spain with N$ 886 million (6.4%) and Belgium with N$ 758 million (5.4%). Together, these 5 account for 61.4% of our exports. Strangely, “Belgium” is the rudest word in the universe, which is "completely banned in all parts of the Galaxy, except in one part, where they could not possibly know what it means,” according to the Hitchhiker’s Guide of the Galaxy, but I digress. 

For Switzerland, we can see that 81.8% of our exports are copper ores and copper cathodes. 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 from Zambia to Namibia for smelting before re-exporting. The rest of our exports to Switzerland are, unsurprisingly, diamonds. Belgium (my apologies to sensitive intergalactic readers), mainly receives exports of Diamonds (59.8%) and Zinc (38.8%) from Namibia, while Spain is mainly a recipient of Namibian Fish, which amounted to N$ 778 million in this quarter, compared to N$ 993 million in the first quarter.

In terms of imports, the SACU is by far the largest source of imports, with N$ 13.6 billion imported, or 71% of our imports. The EU is second with N$ 2.1 billion (11.2%) imported, then the BRIC countries with N$ 1.4 billion (7.4%) imported, COMESA with N$ 1 billion imported (5.2%), and Non-SACU SADC at N$ 974 million (5.1%) imported. Taking a look at the individual countries we import from, South Africa stands at N$ 12.1 billion, accounting for 60.4% of our imports, with Botswana at N$ 1.3 billion (6.9%), Bulgaria at N$ 897 million (4.4%), Zambia at N$ 872 million (4.3%), and China at N$ 752 million (4.7%).

From South Africa, we source vehicles, boilers and most of our manufactured products as well as pharmaceuticals, as can be expected. This remains the main reason the Namibian dollar cannot delink from the Rand. Botswana’s imports are 94.5% diamonds – most likely re-imported after processing there. Bulgaria provided us with N$ 872 million worth of products from animal origin, while from Zambia we imported copper ore – for smelting, as mentioned above. China, of course, also provides vehicles and boilers and manufactured products, as can be expected, seeing as their products remain quite popular here in Namibia.

The data does not paint a pretty picture, does it? Namibia is still quite dependent on exporting raw materials to fund our economy, but our growing populace wants more manufactured products than we can afford, and so our wealth is exported to the world. We still do not have adequate capacity to process our own diamonds, given the diamond trade with Botswana. And we remain quite dependent on South Africa for our supply of manufactured goods. We need to start developing our own manufacturing industries, so we can export more to cover our imports. But I guess there’s one bright spot – at least our country is not called Belgium.