Unemployment, skills shortage remain challenges
Windhoek –In an interview with The Southern Times, Shiimi said that it was therefore a commendable development for our economy, though below a desired higher growth rate necessary for Namibia to achieve Vision 20130.
Southern Times (ST): What advice would you give that can stimulate the economy and narrow the gap between rich and poor for the next five years, given that the economy has been growing at an average of 5.1 percent, despite a desired mark set at 6.1 percent?
Ipumbu Shiimi (IS): What is desired is to promote inclusive growth. In this regard, the NDP4 approach is highly commendable.
This revolves around the identified economic priority sectors (i.e. sectors with high potential to directly and/or indirectly enhance job creation), such as logistics, tourism, manufacturing and agriculture. The NDP4 further suggest strategies to attain the narrowing of the gap between the rich and the poor.
It acknowledges the fact that poverty is a complex, multifaceted challenge that needs to be addressed from various angles. Hence, a number of interventions to reduce extreme poverty and vulnerability should include imparting education and skills to the poor, strengthen and expand social protection systems, increase household food security, promote cooperation with the private sector to identify and remove bottlenecks restricting private sector expansion so as to absorb as many unemployed people as possible, expand and increase social grants or social protection, which Government has for example commendably done with the recent announcement of the increases of pension grants to our senior citizens. These are all noble ideas.
ST: What are BoN’s priorities for the next five years?
IS: As the central bank of the country, the core responsibility of the Bank of Namibia is to safeguard the value of the Namibian currency with the view of promoting and supporting economic growth and development in Namibia within a global environment that is continuously changing. Currently the Bank’s priorities are guided by a five year strategic plan.
The purpose of this Strategic Plan, which is reviewed every year, is to reflect the Bank’s overall Strategic Objectives, Strategies and Outcomes, as well as Special Focus Areas for the planning period extending from 2012 to 2016.
This provides clear specific focus for all business units or departments in the Bank in terms of their respective annual business plan or areas of concentration.
The current strategic plan highlights the following as key corporate priorities: promoting financial inclusion; safeguarding and enhancing financial stability; impacting sustainable economic growth through quality research and sound economic policy advice; ensuring quality of currency; building a knowledge institution by developing, engaging and retaining staff and ensuring business and infrastructure resilience.
ST: What do you think are the biggest challenges facing the economy?
IS: Namibia faces quite a number of challenges. I will only list but a few.
The key challenges facing Namibia at the present are the high unemployment rate and general shortage of technical skills. In recent years, issues such as access to land both for housing and for agricultural production have also gained prominence and a challenge to the economy.
Poverty, particularly in the rural areas, and unemployment remain serious challenges and if not addressed may pose a risk to the development of the country.
The country’s limited production base and high dependence on imports is another challenge due to the fact that this will directly result in the importation of goods from outside Namibia and this in turn, put undue pressure on the country’s external position. Lastly, the looming drought is another challenge.
ST: Government expenditure is most likely to balloon, what is your advice on how government can ensure that expenditure does not outstrip revenue by astronomical amounts?
IS: When expenditure outstrips revenue by a large amount, it implies that the country’s indebtedness will be affected negatively. This may happen because the government will need to borrow to fill the gap between expenditures and revenue.
This will further mean that the government either needs to improve the efficiency of its tax collection or find other means in order to increase revenue.
Alternatively, the government needs to manage its expenditure by for example cutting on its spending.
These measures are important to avoid the estimated widening budget deficit and thus we noted and welcome the envisaged consolidation of Government finances during the Medium Term Expenditure Framework (MTEF). I therefore commend the Minister of Finance for this and further encourage him to stay his course in that regard.
ST: Namibia’s financial stability is heavily dependent on stability in South Africa and other SADC countries. With the recent xenophobic attacks on foreigners in South Africa, how will that affect the Namibian financial situation that is closely linked to South Africa?
IS: The first expected channel through which the xenophobic attacks in SA may affect Namibia is through adverse impact on investors’ confidence.
The decline in investors’ confidence may trigger capital outflow, which will lead to the depreciation of the exchange rate of the South African Rand and the Namibian dollar.
This will cause inflationary pressures to increase, making the importation of machinery and equipment expensive.
The xenophobic attacks could also lead directly to the reduction in tourist arrivals both for Namibia and South Africa, Foreign Direct Investment and portfolio investment flows into Namibia as confidence deteriorates and consequently employment and government revenue may be negatively affected.