Namibia has weighed the possibility of delinking its currency from the South African rand, President Hage Geingob revealed on Wednesday, saying that his administration had commissioned a study to look at the possibility.
Without going into details, Geingob, who was speaking during an end of year media briefing, said an alternative had been looked into, but the huge dependency of the country on South African imports remains a key influencing factor.
“We are buying 80-90 percent of our imports from South Africa and imagine the impact if we had our own currency,” he said.
“Zuma and I talk about these things when we meet, but we also have to be considerate of regional integration, where the region should have a single currency. I am a pan-Africanist myself.”
Geingob, however, warned that should things go drastically wrong in South Africa and with the rand, then his administration would be forced to weigh its options.
“We may look at an alternative should something drastically go wrong, which I doubt will happen. So far we are better off linking,” he said.
“So far things are not that bad. The long-term plan is about pan-Africanism. If things go wrong, we will act.”
Economic Association of Namibia (EAN) Executive Director, Klaus Schade, said although he was not aware of the Government’s alternatives, it would more likely be a basket of currencies.
Schade, however, cautioned that any planned delink has to be strategic.
“I’m not sure what Government alludes to, but an alternative to the one-to-one link to the ZAR could be basing the NAD on a basket of currencies, which would make it less vulnerable to one currency,” he said.
“A delinking of the NAD should not be based on a single event. It has to be a strategic decision that is informed by our social and economic goals and strategies.”
He said although business had factored in the impact of the Moodys and the Fitch downgrade in August and November respectively, the outcome of the African National Congress’ elective congress, could also be a factor.
“We haven’t really seen a major impact of the recent downgrade, most likely because financial institutions and other businesses have factored the downgrade already in. The response from the private sector will also depend on the outcome of the upcoming ANC Congress,” the EAN Executive Director said.
Ngoni Bopoto, a Research Analyst with Namibia Equity Brokers, said any consideration of delinking would not be possible because of the country’s net import status from South Africa.
“We believe that it is premature to discuss the possibility of delinking from the rand before attaining considerably less dependency on imports, particularly from SA or having meaningfully grown the value of sustainable exports. Given current trade dynamics, a freely floating Namibian Dollar is likely to be oversold in the forex markets resulting in rapid depreciation of the local currency,” he said.
“The structure of our trade flows implies that we would most likely require more rand than any other currency, therefore, it would be the rand that will depreciate most rapidly against.”
The revelation by Geingob comes as Namibia’s economy has been negatively affected by political and economic situation in the neighbouring country, where the country’s President, Jacob Zuma, remains scandal-prone, impacting on confidence in the country.
Next year, Namibia faces uncertainty with Moody’s expected to downgrade South Africa’s rand-denominated debt in February next year, amid concern it could see that currency nosedive.
The Bank of Namibia has previously warned of the impact of South Africa’s economy on the domestic economy.
Meanwhile, the president was non-committal on a timeline of lifestyle audits when he was asked when his administration planned to introduce them as per his previous pronouncement while on a visit to the United States.
“Lifestyle audits will be done, it can be done, just give us time. It will not be done by politicians, but by experts,” Geingob said without giving details.
The president also defended the size of the country’s 110,000-strong civil service, amid calls for it to be streamlined in line with Government cost-containment measures.
“It had to be big because we had to bring in the black people that had been left out before independence,” he said.
Speaking at the same press briefing, Prime Minister Saara Kuugongelwa-Amadhila, said an investigation had been conducted to look at the cost drivers of the Government’s wage bill, which currently costs 48 percent of public revenue.
“We had an investigation to identify the cost drivers such as medical aid, overtime, S&T and to check if there are any ghost workers. The investigation also included the reduction of the retirement age from 65 to 50 years. This will be early retirement, which is voluntary and has a cost factor. We have to also look at pensions,” she said.
“We will look at bonuses to ensure they are linked to performance, to ensure sustainability.”
Quizzed on how many Namibians had lost jobs during the course of 2017, Kuugongelwa-Amadhila said Government still need to verify the figures.
“We can’t just announce figures without verifying them first,” she said.