As tricky a topic as it may be, I enjoy reading national comparisons from an economic perspective. It’s a rather arcane and geeky topic, I would admit. But it’s also enormously instructive. National comparisons may be inexact, but they provide the only real way to compare policy choices.
Consider, for example, the split between the two sides of Germany and the two sides of Korea. In a sense, this is like twin studies in psychology. If you think about it, it almost creepily resembles a preconstructed scientific study: let’s take two countries on opposite sides of the world, divide one east-west, the other north-south, institute different economic policies in each half, and see what happens.
What happened was so obvious that only the ANC and a few other political parties around the world have failed to notice: capitalism works, socialism doesn’t. In the broadest terms, it’s as simple as that.
Still, this is just a broad-stroke example. What about something more complicated? The best local example is the comparison between Namibia and SA. The comparison immediately runs into trouble because the population size and the size of the economy are so different.
But the economies do have many startling similarities, which derive from a history of high integration following SA’s mandate to administer the then German South West Africa after World War 1. The effect of the mandate was that SA’s benighted racial policies were exported to Namibia, and the economy developed along a similar tracks.
Hence, when Namibia gained independence in 1990 and SA became a democracy in 1994, the two economies were similar in structure, if not size. The links between the two countries continued, with Namibia opting to remain part of the Southern African Customs Union and the rand monetary area, albeit with a new name for its currency, the Namibian dollar. Furthermore, the legal systems, structure of the economy, unemployment rate and a host of other similarities were then evident, as many are still today.
But if you track the two economies since then just on a GDP growth basis, the numbers tell an interesting story. Like SA, Namibian economic growth was sluggish in the early years as the new democratic government found its feet. Namibian growth was more volatile, as you would expect with a small economy, but generally growth was moderate. Then, like SA, growth took off during the commodity boom of the early 2000s, even more so than SA. The country was regularly getting growth rates in the 10% per annum range, with the result that it made enormous gains in per-capita economic wellbeing. SA’s per capita GDP has increased about 60% since 1990; Namibia’s has almost doubled over the same period off a lower base. The result is that on average Namibians and South Africans are now equally wealthy.
For South Africans, the pertinent comparison is the term of former president Jacob Zuma, which is when things started going wrong economically. During the 2009-2016 period, Namibian growth remained enormously strong, averaging around 5%. In SA, as we know, growth started to be sluggish and went downhill.
But in 2016, an odd thing happened in Namibia; growth just dried up. Namibia has now had 11 quarters of negative growth. Even SA’s miserable growth has been higher. Hallelujah.
The big problem for Namibia has been mining, and particularly uranium as globally nuclear power is on the wane. But equally interesting is the policy response. Namibia was intending to bring in black economic empowerment (BEE) legislation similar to that of SA. In April 2018, President Hage Geingob announced that a clause in a bill that proposed all businesses be at least a quarter owned by “racially disadvantaged people” would be scrapped. “The 25% equity stake will not translate into broad-based empowerment and is done away with,” he told parliament.
But it goes further. Namibian finance minister Calle Schlettwein acknowledged in December that his country was considering breaking away from the currency peg with the rand, partly in an effort to curb currency volatility, as Botswana did years ago. More than that, Schlettwein raised the possibility of re-evaluating the basket of goods that comprise the customs union agreement.
Neither change would be imminent, but collectively they reflect a frustration with SA’s economic policy direction. Asked by Bloomberg in New York about land expropriation without compensation, Schlettwein said Namibia won’t be following that approach. “We favour expropriation with just compensation,” he said tartly.
Clearly, Namibia is under pressure from two directions: poor growth over the past two years and high expectations from the exceptional growth before that. The result is that the country is seeking a divergence from SA and is positioning itself as a safer, more stable alternative. They just don’t trust the South Africans any more, and really, who can blame them?
Cohen is Business Day senior editor.
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