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Namibia’s fiscal policy at a crossroads

The Namibian economy is at a difficult juncture when it comes to its fiscal policy since the country’s independence in 1990, which has seen government debt and deficit levels rise significantly over the years reaching critical levels of 50% of the gross domestic product (GDP) exacerbated by weak economic recovery.

Economic experts have been pressuring the government to re‐evaluate its fiscal position, spending levels and core strategies to strike a balance between adopting massive fiscal adjustments to reduce debt but also calling for additional fiscal stimulus to grow the economy and alleviate poverty.

The recently published report entitled ‘Namibia’s Fiscal Policy Analysis’ by First Capital Treasury Solutions has described Namibia’s fiscal policy as being at a crossroads because of the total government debts accumulated over the past 29 years, inelastic, non-progressive and volatile government tax revenue and narrow tax base; rise in default risk by local authorities, private sector, state-owned enterprises (SOEs) and households that may need bailouts.

The report analysed current and past fiscal positions since 1990, breaking it down to the three presidencies of President Sam Nujoma (1990 to 2005), President Hifikepunye Pohamba (2005 to 2015) and President Hage Geingob (2015 to 2019).

First Capital pronounced national savings levels as very low to support government while chances of foreign borrowings were diminishing.

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy and corresponding strategy to the monetary policy through which a central bank influences a nation’s money supply.

It would appear that during the review period of President Pohamba (2005 to 2015), fiscal policy practice was at its best as Namibia enjoyed a surplus economy from 2006-2009, where government revenue rose substantially and expenditure was contained, while high government spending resulted in higher GDP growth.

According to First Capital, this fiscal stimulus was also influenced by the last five years of President Nujoma’s government, which saw Pohamba’s government inherited an economy growing at a peak of 12.3% in 2004.

“It can be concluded that under President Pohamba, fiscal policy in Namibia was expansionary with the aim of spurring economic growth and providing major infrastructure especially housing and road network,” read the report.

The report states that under Pohamba, higher average GDP growth of 5.6% compared to 4.1 during Nujoma’s presidency was achieved through high government spending, however, debt to GDP increased after reaching a low of 15% in 2009/10 to 24% at the end of his term in 2014/15.

Under Nujoma’s rule (1990 to 2005), the fiscal policy also showed some successes where GDP growth increased from an average of 1.1% (during the period 1981 to 1989) to an average growth of 4.1%, inflation and interest rate (repo rate) came down significantly (from 11 and 16) to 5 and 9%, respectively for the period 1990 to 2005.

While government expenditure rose, Nujoma’s government saw deficit as a percentage of GDP remains relatively low at an average of 3% of GDP, as per the report.

However, unemployment, poverty and income inequality remained stubbornly high due to the unchanged structure of the economy and limited and appropriate complementary policies.

In spite of that, his era is said to have achieved both macroeconomic stability objective, reduced the infrastructure backlog significantly especially in education and health through additional schools, clinics and hospitals built.

During the review of President Geingob (2015-2019), the incumbent president seems to have had the most hurdles to jump over as he inherited an economy slumping down as commodity prices declined, the mining sector contracted, agricultural sector slowed down and the economy was not generating enough revenue.

Geingob took over the economy in fiscal deficit at 6%, deficit to GDP rose significantly, government expenditure and revenue declined significantly and the economy entered recession in 2017/18.

“Unlike his predecessor who took over a booming economy and a government budget entering into a surplus, president Hage Geingob took over an economy with fiscal deficit at 6% while debt to GDP was at around 24%,” read the report.

Government revenue and expenditure increased from R1.6 and R2.2 billion respectively in 1990/91 to R56.7 and R65.0 billion respectively in 2018/19.

During Geingob’s rule, the fiscal policy stance moved from expansionary to contractionary mode and government expenditure re-prioritisation.

Both deficits to GDP and debt to GDP rose significantly under president Geingob with debt to GDP reaching 43% in 2018 and the only way to ensure the government continues to deliver services to the population was to borrow.

Since 2016/17, capital expenditure allocation has declined from 16% of total expenditure in 2015/16 to 11 and 8 % in 2016/17 and 2017/18 respectively.

The 2018/19 expenditure allocations also show that only 8% was allocated for capital expenditure, a trend to be maintained during the medium-term expenditure framework period ending 2020/21.

Over the past five years, nearly half (48%) of the budget was allocated for social expenditure, which includes education, health and welfare services, which shows that Namibia could be considered a welfare nation with high public spending, especially on education, health and transfer grants.

In spite of continuing economic uncertainties, there are signs that the Namibian economy will regain growth momentum and recover over the coming years, with a positive fiscal outlook projected for both deficit and debt to GDP projected to decline to below targeted levels, reads the report.

Local economic analyst, Klaus Schade said we would need other approaches to reduce the high wage bill, including a comprehensive review of the public sector, including offices, ministries, agencies and public enterprises.

“This would support First Capital’s call in the conclusions for increased efficiency and for maintaining current expenditure levels rather than increasing expenditure when revenue is starting to pick up again,” he added.

Budget delay raises suspicions

Delays in tabling the 2019/20 national budget have raised suspicions amongst economists, who strongly suspect that the economy might be in turmoil than widely thought.
Executive Assistant to the Finance Minister, Esau Mbako, confirmed on Thursday that the tabling of the 2019/20 fiscal year budget has been postponed to the 27th of March, the second time in as many weeks.
The tabling of the budget was initially scheduled for the 13th of this month, but was postponed to Tuesday 19 March, which has now been cancelled.
Mbako told the Windhoek Observer upon enquiry that the budget had been delayed due to scheduling conflicts in the National Assembly. He said the Speaker of the National Assembly, Professor Peter Katjavivi, had asked them to move the date of the tabling of the much-anticipated budget to the 27th of March.
Finance Minister, Calle Schlettwein, told a local daily that the tabling of the 2019/20 national budget had been moved purely for logistical reasons.
“There is nothing sinister about it,” Schlettwein is quoted as having said.
The minister added that the 27th was the “final” date.
But an economist who spoke to the Windhoek Observer on condition of anonymity said the delay in tabling the 2019/20 Budget Appropriation Bill was suspicious, adding that it does not make sense.
“What could be more important that they need to debate in the National Assembly?” the economist queried.
He said while delays in tabling the national budget were nothing new, it was rather strange that the finance ministry had delayed the upcoming budget twice for almost a month.
“If there is a very important bill that Parliament is currently seized with then the postponement makes sense, but if not then the national budget should be a priority,” the economist said.
Research Associate at the Economic Association of Namibia, Klaus Schade, told the Windhoek Observer that the postponement suggests that tough choices have to be made and that balancing the different demands and interests remains challenging.
Schade said coming up with a budget during an election year will certainly make it more challenging to introduce necessary, but painful reforms.
“However, reforms are necessary to put the country on a stronger growth trajectory in the future and regain fiscal space,” he said.
Schade said the government might wish to increase some taxes, apart from the annual increase in excise duties, or introduce new taxes in order to reduce the budget deficit.
“However, tax proposals contained in last year’s budget statements have not yet been gazetted,” he said.
He added that tax relief for low income earners would increase their disposable income and consequently their spending power, but warned that any additional taxes in the current economic climate would, unless targeting specific rent seeking behaviour, not be supportive of stronger economic growth.
Schade said due to low economic growth and lower inflation, revenue is not expected to increase significantly although Namibia could benefit from some additional SACU transfers, since transfers to the BLNS (Botswana, Lesotho, Namibia and Swaziland) countries in the latest South African budget were increased by about N$4 billion compared to the estimate a year ago.
“On the expenditure side, we do not expect major shifts although the current fiscal situation requires a clear prioritisation of growth-supportive sectors including education and health, but also on infrastructure that have a high potential to improve the country’s competitiveness and hence attract private sector investment.
“The wage bill needs to be addressed in a systematic and structured way, but it will take time to reduce the wage bill significantly. Employment in and salary levels of Public Enterprises need to be reviewed and subsidies cut significantly,” Schade further said.
Namibia’s new fiscal year starts on 1 April.

Consumption to economic growth dips

THE contribution of household consumption to economic growth declined to -4% in 2017, from a positive growth of 6% in 2016, according to statistics provided by the Namibia Statistics Agency.

The annual national accounts’ report by the Namibia Statistics Agency (NSA) showed that in 2017, private households’ consumption amounted to approximately N$121 million each for 2016 and 2017. Government consumption amounted to about N$43 million in 2017, and N$40 million in 2016.

Looking at the figures, predictions are that the figures will continue to drop if the current economic conditions remain unchanged. During 2017, private household consumption amounted to 69%, compared to 73% recorded in 2016.

Statistics also indicate that in 2017, final consumption, including that of the government, amounted to approximately N$164 million, compared to N$161 million recorded in 2016.

Titus Kamatuka, a senior statistician at the NSA, explained that the statistics show that private household consumption declined because households spent less on consumables.

Analysts who spoke to The Namibian said the high unemployment rate has to some extent affected consumption levels across the country because of reduced disposable income. Apart from the high rate of unemployment, the increase in the demand for imported goods compared to local goods has also worsened the decline.

PSG Namibia’s head of research, Eloise du Plessis, said for consumption to be stimulated, the average income of Namibians should be raised.

She added that reducing the rate of unemployment should be a priority because more jobs means more disposable income in the economy, thus increasing consumption levels.

Du Plessis noted that high consumption supports businesses as people buy consumables, hence leading to business expansion and more jobs being created.

“Stronger businesses and more jobs lead to a broader tax base for the government, and this strengthens government finances to provide supportive infrastructure,” she added.

The analyst observed that when there are more business-friendly government policies, more jobs will be created to stimulate higher consumption.

The consumption component is currently the primary driver of growth, but unfortunately due to unfriendly government policies, jobs are being lost and capital flows out of Namibia, thus reducing consumption levels, Du Plessis continued.

An economist from the Economic Association of Namibia, Klaus Schade, said the impact of private consumption on economic growth depends on whether it comes in the form of demand for locally produced goods and services, or imported goods and services.

The demand for locally produced goods and services will increase domestic production, job creation, tax payments, and could result in more investments.

The increased demand for imported goods or services results in an outflow of funds, except for the dealer margin and some other expenses, Schade said.

He added that consumption has dropped as reflected in negative growth rates for the wholesale and retail sector because of increased unemployment and economic uncertainties that result in a decline of consumer spending.

“Shop closures are another sign of the drop in spending, and the drop in demand impacts negatively on the economy since employment and profits decline,” the economist said.

Schade said consumption will increase with rising employment and salary increases.

However, if increased consumption results in rising demand for imported products, it will lead to an outflow of foreign exchange reserves.

Namibia needs to build sufficient foreign exchange reserves in order to maintain the peg of the dollar to the rand, and to meet the international benchmark of three months import cover.

Furthermore, promoting consumption over savings will leave households vulnerable to economically challenging times.

Hence, households should strive for a healthy balance between consumption and savings, which will further reduce their exposure to debts.

IJG Securities, for their part, said household consumption is heavily dependent on consumer demand and confidence.

The company added that consumer confidence is currently depressed as many Namibian businesses are retrenching employees due to the prolonged recession, which forces consumers to cut back on consumption.

“When the level of consumer spending is high, businesses will increase their output to keep up with the demand for goods and services. As a result of higher demand, businesses may expand operations, and in turn hire more employees. Higher consumption and 1emand for goods and services will subsequently drive prices up,” IJG Securities said.

The company noted that currently, household consumption is contracting, thus contributing to the recession.

No Fuel Hikes for March

MINES and energy minister Tom Alweendo last Friday announced that fuel prices will remain. The prices at Walvis Bay will be N$12,05 per litre for petrol and N$13,13 per litre for diesel for the month of March.

This is the third consecutive month that the ministry has kept fuel prices unchanged, with the minister saying in a statement the National Energy Fund will absorb the minimal over-recoveries.

Alweendo, however, said net importers of oil, including Namibia, are always at the receiving end of the global oil market, and therefore remain natural price-takers of whatever prices oil exporters set.

“That makes their respective local markets vulnerable to adverse fluctuations and shocks in the global oil market. Namibia is one of the net importers of refined oil, and although minimal, it could not fend herself off from the effects of increasing oil prices in February 2019, caused by the manifestation of oil supply politics by major oil producers under the Organisation of Petroleum Exporting Countries,” the minister said.

Since October 2018, oil prices started ticking up, making a big turn from a decreasing trend. This saw oil prices moving averages of US$58 and US$69 per barrel of refined petrol and diesel, respectively. January 2019 prices moved to averages of US$64 and US77 per barrel of refined petrol and diesel into February 2019.

The mines minister added that the exchange rate between the Namibia dollar and the US dollar strengthened during the period under review, but it was not enough to mitigate the adverse effects of increasing oil prices.

“The exchange rate moved from an average of N$14 in January to N$13,70 in February 2019. Filtered through the local market, gains recorded in January 2019 fell significantly by a margin of over 35c/l on petrol and over 60c/l on diesel. Over-recoveries per product on the basic fuel price import parity landed at Walvis Bay as at 25 February 2019 indicated a 25,953 c/l for petrol and 7,736 c/l for diesel,” Alweendo noted.

In terms of the strengthening rand, to which the Namibia dollar is pegged on a 1:1 basis, analysts The Namibian spoke to in February said it remains one of the most volatile currencies in the world, despite strengthening by a little over 7% during January 2019.

Research associate at the Economic Association of Namibia, Klaus Schade said the rand is recovering some ground lost during 2018. However, the current global climate is characterised by a number of uncertainties (trade wars, geopolitical factors, Brexit), which can lead to fluctuations in exchange rates.

“Unchanged fuel prices for February are one of the results of the strengthening of the Namibia dollar. In contrast, revenue for exports charged in US dollars and so forth will decline since exporters received only N$13,30 per US dollar on average in January, compared to N$13,87 per US dollar in December,” Schade explained.

Shelly Arnold, PSG Namibia’s research analyst said the rand is the most volatile currency on the world market, and a lot of its valuation depends on emerging market sentiments, not SA-specific factors, “which means a ‘perfect’ scenario is not really attainable.

Budget needs to address civil service and budget deficit

With the date of the tabling of the national budget confirmed for Wednesday, 13 March, 2019, economists have pointed out the bloated wage bill, under-performing public enterprises, including a review of the public sector, and the budget deficit as some of the most crucial aspects that Finance Minister, Calle Schlettwein, needs to address.

“Natural attrition does not address the real issue of a bloated civil service; trade unions demand salary increments for public sector employees and economic growth projections for 2019 do not indicate a reduction in the number of public servants. State of public enterprises and fiscal risks concerning their ability to repay debts (even public enterprises that are currently regarded as doing well could come under financial pressure); how to finance major infrastructure projects such as the expansion of the Hosea Kutako International Airport; how to reduce the budget deficit and public debts; what is being done to ensure that Namibia can repay the first Eurobond in two years,” economist Klaus Schade said these are some of the major aspects of the budget that Schlettwein needs to address.

However, Schade cautioned that reducing the wage bill cannot be done in the short-term but needs a medium-term, coherent strategy. In addition, he suggests that the privatisation or partial privatisation of public enterprises could be considered.

Schade, a research associate at the Economic Association of Namibia, further note that if domestic liquidity allows, borrowing locally should be prioritised as it excludes any exchange rate risk and it provides income locally in the form of interest payments. “Government could issue longer-term government bonds rather than short-term Treasury Bills to improve public debt management,” Schade, recommended.

Commenting on the budget deficit, Schade noted that there might not be sufficient liquidity in the local market which would force government to borrow abroad, if the budget deficit cannot be reduced.

This borrowing in turn could increase the country’s budget deficit which would most likely result in Namibia being downgraded by sovereign rating agencies, which would increase the cost of borrowing and hence statutory expenditure. A downgrade, Schade cautioned, could prevent some foreign investors from investing in the country.

“In the current economic climate, it is certainly not advisable to increase taxes, except for the annual increase in excise duties which is decided at the Sacu level. Hence, government needs to focus on controlling expenditure including subsidies to public enterprises,” said Schade.

He continued that Income Tax and Value Added Tax could come under pressure due to increased unemployment and hence reduced income and spending power.

“Revenue from diamond royalties and income tax from diamond mining companies could come under pressure due to expected subdued demand for diamonds in the two major markets – China and USA.  Likewise, Sacu transfers could come under pressure because of sluggish economic growth in South Africa compounded by recent load shedding,” Schade concluded.

Also weighing in on the expected budget, economist and Managing Director of Twilight Capital Consulting, Mally Likukela, pointed out that Schlettwein is navigating troubled waters, not of his own making.

“I would rather have him push back the date for a balanced budget than continue to cut his way to one as doing so continues to hurt the economy as it is the case right now. This year, more than ever before, his budget speech, which is expected mostly to focus on debt reduction strategies, will undoubtedly trigger politically polarized debates,” said Likukela.

He emphasised that, currently standing at more than 45 percent, the public debt has become unsustainable and he expects this to soon cause bond yields (higher interest payments) to rise and in the worst case, lead to a loss of confidence in the government, as already hinted by various rating agencies such as Moody’s and Fitch.

Then, to reduce fiscal deficits, Likukela suggests using a combination of policies at its disposal, but said a key factor is the timing of deficit reduction strategies.

“If the country is already in recession, as is the case for Namibia, it is much more difficult to reduce the deficit because fiscal consolidation can simply worsen the economic situation leading to lower tax revenues. Continuing with fiscal consolidation right now will be self-defeating. The best way to reduce the budget deficit is to aim for positive economic growth, but in the long-term evaluate government spending commitments and reduce spending to sustainable levels,” said Likukela.


Inflation pushes up food prices: EAN

WINDHOEK, 17 FEB (NAMPA) – Consumers have been paying more for food and non-alcoholic beverages as prices continued the upward trend, owing largely to the high inflation rate in January compared to December 2018.
This observation was made by the Economic Association of Namibia (EAN) in its review of the latest Consumer Price Index (CPI) released by the Namibia Statistics Agency.
The month-to-month inflation rate rose to 5.7 per cent in January 2019, up from 5.2 per cent in December 2018, while food prices increased by 6.1 per cent in January compared to 5.4 per cent in December.
Overall, the annual inflation rate dropped further to 4.7 per cent in January from 5.1 per cent in December and 5.6 per cent in November 2018.
It is, however, 120 basis points higher than in January 2018 (3.6 per cent).
In a media statement released on Sunday, the EAN said this marks the highest inflation rate in almost two years.
The main drivers of the high inflation are price increases for bread and cereals of 8.3 per cent in January after 7.9 per cent in December, and meat prices which rose slightly faster in January (3.6 per cent) than in December (3.5 per cent).
These two categories contribute almost 57 per cent to the total food price inflation.
Food and non-alcoholic beverages bear the second highest weight (16.5 per cent) in the consumption basket, as both alcohol and tobacco products contributed to the increase in the inflation rate from 5.9 per cent to 6.4 per cent for the category ‘alcohol and tobacco’.
The inflation rate for housing, water, electricity, and other services however continued to decline, reaching the lowest level since December 2015.
Prices for such services increased by 2.9 per cent in January compared to 3.1 per cent in December 2018 and to 2.7 per cent in December 2015.
Rental payments, according to the EAN, contributed 23.3 per cent to the total inflation rate and 82.1 per cent to the inflation rate for the category ‘housing etc.’
“Prices for rental payments increased by just 2.3 per cent, while prices for the maintenance of dwellings rose by 3.3 per cent in January 2019 up from 2.5 per cent in December,” the EAN statement said.
The EAN further warned that prices for basic food commodities will come under pressure in the coming months, as the current economic dry spell continue.
In addition, further price increases for alcoholic beverages and tobacco products can be expected this month with the annual increase in excise duties, the EAN noted.
The EAN further said despite upward price pressure in some categories, inflation is however, expected to remain well within the 3 per cent to 6 per cent band targeted by the South African Reserve Bank.
According to the statement, lower global oil prices contributed further to the lower inflation rate, which could positively impact some sectors.
(NAMPA)
CT/AS/HP

Fuel price decrease should not result in complacency

THE Economic Association of Namibia has cautioned consumers, oil producers and policymakers not to become complacent because oil prices are decreasing. Instead, they should continue embarking on more fuel-efficient transport, production equipment, and further move to electrical vehicles and equipment.

The EAN’s analysis comes after the mines and energy ministry on Friday announced that fuel pump prices will decrease by N$1 per litre for petrol and 40 cents per litre for all diesel grades, effective from 5 December 2018. This means fuel prices at Walvis Bay will now be at N$12,95 per litre for petrol; N$14,08 per litre for diesel 500ppm; and N$14,13 per litre for diesel 50ppm. The prices for the rest of the country will be adjusted accordingly.

In the EAN analysis released last Friday, research associate Klaus Schade said once consumers, producers, and policymakers use fuel-efficient transport, it will not only reduce Namibia’s dependency on oil imports, but would also support the country’s ‘Growth at Home’ strategy by harnessing the country’s natural resources such as solar, wind and biomass to generate electricity.

“Policymakers need to take the initiative to design a joint strategy to promote the use (and production) of electrical vehicles, not only in Namibia, but in the southern African region. Namibia and the southern African region at large are rich in lithium and cobalt, the main inputs into the production of lithium-ion batteries that power electrical vehicles. Instead of exporting the minerals as raw materials, policymakers need to design a strategy to add value to the minerals, and produce the batteries in the region,” he urged.

Schade added that the fuel price decrease is good news as it is providing the much-needed relief to Namibian producers and consumers who have to cope with the slow economic recovery and increasing inflation.

“It will ease the burden on the consumer during the upcoming festive and holiday season. The drop in fuel prices is more generous than the previous under-recoveries would have suggested. However, the current drop in oil prices highlights once more the volatility in the global oil market that is influenced not only by the performance of the global economy, but also by geopolitical factors such as the tensions in the Middle East,” the research associate added.

Mines and energy minister Tom Alweendo said fuel consumers in the country had to tighten their belts to cope with exchange rate uncertainties and the oil supply cuts introduced by the Organisation of Petroleum Exporting Countries (Opec) earlier in the year, which took full effect at the beginning of May.

“The ministry, through the National Energy Fund, is continually pulling in the same direction with the fuel consumers by ensuring that the full costs of oil supply are at no point passed on to consumers,” the minister said.

https://www.namibian.com.na/73735/read/Fuel-price-decrease-should-not-result-in-complacency

How do rural people save and invest traditionally?

7 September 2018

From income and expenditure surveys we know quite a lot about what people earn and spend from day to day. The surveys also tell us about sources of incomes. By contrast, less information is collected on what people save or in what they invest. That seems odd. Why should we pay scant attention to assets used for future contingencies? Do we assume that many families don’t have real savings and investments, or that planning for the future is neither a priority nor a practice? Perhaps those are our presumptions about rural people who appear poor and seem to lead day-to-day subsistence lives.

Those assumptions are mistaken, but how wrong is hard to say. I am not aware of any study to have targeted directly the question of how rural families save and invest traditionally in Namibia, but here are some observations that indicate that they do much more to prepare for the future than we think.

First and most obviously, crop-growing households save food stocks, often going to great lengths to make sure that the reserves last as long as possible. Not surprisingly, stored foods are those that remain edible over long periods. Magnificent omashisha or iigandhi storage baskets were developed to help people overcome famines, some of which devastated populations in the North in the first half of the early 20th Century and before.

Second, livestock are largely used as savings and investments. This may be the case throughout Africa, especially among agro-pastoralists (see the essay on the purpose of livestock in the edition of Market Watch on the 13th of July 2018). An interesting report on financial inclusion released recently by the Namibia Statistics Agency contains useful information on the uses of livestock (the report can be downloaded from https://nsa.org.na/microdata1/index.php/catalog/32/related_materials ). However, not everyone has livestock, especially pigs, goats, sheep or cattle that have considerably greater savings value than chickens. And among those who do keep animals, the majority have few livestock. As with other kinds of wealth, livestock ownership is highly skewed in rural households. Cattle serve as long-term investments over years, smaller goats and sheep as savings over shorter periods of months, while chickens are ‘cashed-in’ to meet more frequent needs for cash.

Third, considerable security comes from social networks formed in and around extended families. Membership of a network offers degrees of access to land, livestock and help from a package of assets, capital or savings. Substantial insurance value can come from being able to draw on that package when needs arise. Families also supply land and livestock – as start-up capital – to young men when they mature, marry and start their own more nuclear families. As with food stocks and livestock, family assets vary in value, and some members have greater access to the assets than others.

For those interested in how the poor make a living and their use of credit, read Portfolios of the Poor by Daryl Collins and others. It is an enlightening book, which describes the substantial number and variety of financial instruments that poorer families use to save, as well as to lend. For those of us who are wealthy and presume to be clever, the book provides sobering perspectives on the astuteness of the poor.

There is still much to ask and learn about how Namibians save and invest. If livestock, family land and social networks clustered literally and figuratively around the ‘village’ are important investments in rural areas, how might people retain or transfer those assets when they move away to urban societies? How are new social networks created? And how do urban people re-establish access to secure assets if they move back to the village?

By John Mendelsohn

7 September 2018

Is food security more important than cash security?

A recent search in Google for the exact phrase ‘food security’ came back with a whopping 24,500,000 finds, while ‘income security’ produced a list of 1,820,000 ‘hits’. ‘Cash security’ trailed way behind with only about 284,000 items.

Very different numbers. The content of the pages at the top of the search lists was also starkly different. Sites and references concerned with food security typically focus on poor people and poor countries having enough nutrition, whereas pages on income largely deal with the certainty of having an income in the long-term. Pages on cash security, by contrast, mainly talk about thieves, safes and protecting your money. This was surprising since food, income and cash security are so related. But Google and others (Namibians included) see them worlds apart: cash security troubles those who have much cash; food security is a concern for the poor who have little food; and income security is about long-term needs for an income, such as a pension.

And so it is with so many perspectives, policies and development programmes in Namibia. Much focus is on food security. That is what the poor need, and that is what they will get: in food packages, seeds, fertilisers, implements, farming training, baskets and pots. Come what may, self-sufficient food security is the goal. Rural people are even persuaded that food security can be achieved in places where it is impossible to grow food economically or sustainably. Much of this perpetuates and promotes poverty.

Even customary land rights – if people are lucky enough to have them in communal areas – forbid the use of land for commercial purposes. Instead, land held for customary occupation may only be used for residential and domestic food production purposes. To be fair, it is possible for rural residents in communal areas to have leasehold rights which could be used for commercial purposes. But then again, these are never offered as an option because the Ministry of Land Reform assumes that residents don’t need commercial rights. This has been the attitude and practice for 16 years since the introduction of the Communal Land Reform Act in 2002. Again, how much of this perpetuates, if not promotes, poverty?

We are also reminded that there is no point in giving the poor cash because we believe they don’t really need to buy much. ‘The poor are simple, ignorant people who need food and little else. Besides, any money they get is spent on alcohol. They don’t know any better.’ It is on the basis of these sorts of attitudes that the Namibian government dismissed proposals for a Basic Income Grant (BIG) years ago, and now has food packages handed out by the Ministry of Poverty Alleviation & Social Welfare in an attempt to reduce poverty. Sincerely, however, Namibia does a great job in providing social grants to the elderly, orphans and disabled. In that, there is much to rejoice.

In another blast of prejudice, we believe that rural residents in communal areas don’t need to use land as investments. They live in 38% of Namibia’s homes. How often do we hear the nuanced comment that such simple people really live day-to-day? They don’t need to, or can’t plan ahead we are told! For that reason, communal land need not be traded and therefore has no investment value. The same is true for the quarter (26%) of Namibian families who live, but can’t own land in informal settlements. But recall that livestock have long served the need for investments, capital and savings by people in Africa. That continues today in the keeping of millions of cattle, goats, sheep and poultry by non-farmers living in Windhoek and other towns.

What evidence do we have that the poor are stupid, irresponsible and with no need for long-term capital? On what evidence do we assume that day-to-day nutrition is their most pressing need? Why can’t people have the options that cash provides: to buy food, or medicine, or blankets, or taxi fares to a hospital, or cell phone credit to telephone for a job or advice from an uncle? Most modern necessities are as important to the poor as they are to the rich, especially in being able to get ahead: find a job, be mobile, look presentable, find a spouse, have children and to communicate with family and friends who provide social capital or support.

Namibian society is moving rapidly from a rural, subsistence environment to one based on incomes and consumerism in urban environments. Nutrition is needed, but so are cash incomes, and more so in towns. Unlike food security, cash security provides options for both: to buy food and other necessities of life. Options available to different groups during apartheid were not equal because it was then believed that some people were better than others. That was bad! But the same belief has guided many perspectives, policies and programmes in the same vein for the last 28 years.

Namibia should ensure that different socio-economic classes have the same options. That would be good!

By John Mendelsohn
31 August 2018

Should tenure systems still govern land uses, or vice versa?

 

The much-awaited 2nd land conference is 6 weeks away. Lots is being alleged, assumed and demanded during dozens of meetings and consultations, often accompanied by considerable hype. Despite all this talk and energy, the debate about land remains narrow, focusing largely on land as a political football. Those who score most goals will fill their political bellies with more free, idle farms. Those who lose will continue to be destitute and forgotten. A few thousand families will be winners, but hundreds of thousands will be losers if the debate continues on its present course.

Redistribution and restitution are extremely important challenges to which solutions must be found. The solutions need to be practical, and much more pragmatism will be achieved if Namibia begins to focus on the uses and values of land, rather than the kind of tenure or ownership applied to land.

Land policy in Namibia has largely been structured so that tenure arrangements are determined first. Land uses come second, thus having to fit in with tenure stipulations. As a result, tenure systems have been established in many areas of the country regardless of what land uses are desirable, or indeed possible. The nature of ownership or occupation of land has become more important than the purpose or use of land.

Much poverty has been caused as a result. The best example – and with the greatest impact – is in communal areas where about 38% of all Namibian homes are found (a percentage based on extrapolations using the 2016 Inter-Censal Demographic Survey and 2011 Population Census). Most of those households have been offered or given customary land rights (but not in Kavango East and Kavango West). The Communal Land Reform Act of 2003 first set a limit of 20 hectares (which was later raised to 50 hectares) for each customary land right parcel. However, in areas where crops can be grown population densities are so high that most residents have only a few hectares, largely of soil with minimal fertility.

The same legal tenure conditions apply in other areas mainly or entirely used for farming livestock. Each resident normally has a tiny plot, large enough for a residence, a kraal and perhaps a small vegetable garden. There is no point in having more land around your house, and also no sense in having 20 or 50 hectares because cattle herds or flocks of goats or sheep require hundreds, if not thousands of hectares of forage.

The Communal Land Reform Act of 2003 allows only two land uses on parcels registered as customary land rights: residential purposes and crop growth. No commercial uses are allowed, and the land may not be sold. Customary land right parcels therefore cannot provide incomes or investment values. These restrictions follow the perverse, pervasive prejudices that food stuffs are the only consumables that rural people need, and that these ‘simple people’ have no need to invest for the future.

Tenure conditions for commonages are left under the control of traditional authorities who are not accountable to local residents who use – or should be able to use – commonage resources. The freedom and authority that the Communal Land Reform Act gives traditional authorities allows them to expropriate or facilitate the appropriation of very large areas of commonage. For example, more than half the communal land in Kavango West and East has been expropriated and allocated to a few hundred influential families, many of them from other regions.

Namibians in other areas are also constrained by inappropriate tenure systems. For example, resettlement farms can’t be owned by their occupants. Onerous requirements for tenure and planning regulations in urban areas prevent more than a quarter of all Namibian families from having small plots on which to build their homes and invest in their futures. These are people now crowded into informal settlements. Their numbers will grow so that shacks become the predominant form of Namibian housing in 2025 if major changes to tenure policy and practice are not made soon.

These are the bizarre tenure arrangements that bedevil the livelihoods of the majority of Namibians, now to poor and polite to complain. Even the State’s honourable intentions for communal land to be used as a safety net for the poor are undermined by the tenure system that facilitates abuse by traditional authorities.

Perhaps it is not too late to ask those who lead the land conference to focus more on the livelihoods of the majority, less on the wealth of the few. Place emphasis on the use of land, not who owns it. Maximize the economic value of Namibian land, rather than using it as a political football to exaggerate differences between the ruling elite and the lower class, leaving the distribution and use of land more broken than ever! In the words of the late Kofi Annan, delegates to the land conference would do well to acknowledge ‘that suffering anywhere concerns people everywhere’. Indeed, Mr Annan’s words would do well as a slogan for Namibia’s 2nd Land Conference.

24 August 2018

By: John Mendelsohn