South Africa’s economic sneeze likely to give Namibia the same flu

The South African economy is bordering on a recession which will in all likelihood impact Namibia negatively as well. This was said yesterday by Minister of Finance, Calle Schlettwein in Swakopmund during his keynote address while opening the annual conference of the Organisation Of Eastern & Southern African Insurers (OESAI).

While Schlettwein addressed more than 200 delegates from all over the world during the 39th OESAI conference taking place at the Dome in Swakopmund this week, he deviated from the topic of the conference and briefly touched on the financial situation in Southern Africa, especially Namibia.
“Many are estimating that the South African economy is bordering on a recession, and it is an unavoidable reality that a weaker South Africa means weaker government revenue in Namibia,” he said. In this regard he highlighted the revenue Namibia is receiving from the South African Customs Union (SACU), consisting of Bot-swana, Lesotho, Namibia, Swaziland and South Africa. “SACU revenues have long constituted a large part of government revenue – around 30% in recent years. The reality is, what happens in the one (country) has an impact on the other,” he said.
Schlettwein made these remarks in light of the release of Fitch Ratings on 2 September of their latest rating opinion. The ratings agency recognised that the outlook for Namibia’s rating was revised from “stable” to “negative” – something that was dubbed a “downgrade” since. The sovereign credit rating at the investment grade notch was affirmed at BBB-. “In this sense, the word ‘downgrade’ has been misused: this was not a ratings downgrade, as some have implied,” Schlettwein commented.
He explained the change in rating was based on a number of factors and that “it is important to remember that Namibia does not exist in a vacuum – the current challenging global growth outlook, depressed commodity prices, and in particular the weak economic performance of our neighbours in the region have most certainly led to a lower growth in Namibia than was previously envisaged.”
According to Schlettwein one of the major factors in this ratings opinion was the elevated level of public deficit to GDP observed in the 2015/16 financial year. This was chiefly the result of actual government revenue coming in below its target. “I agree with Fitch when they identify ‘a secular decline in SACU revenues’ as one of the key challenges to Namibia’s public finances,” he said.
The Minister of Finance noted that it cannot be expected to see the strong revenue growth of the 2012-2014 period repeated in the coming few years, particularly due to the current challenging environment. Subsequently Government revenue growth has been constrained by persistently low global commodity prices and spill-overs from the slowing Angolan economy. “This curtails consumer demand in Namibia,” he said.

You must be logged in to post a comment Login