5 December 2008
editorial
A FEW months ago, southern African monetary principals and bank executives pronounced that the tsunami of recession would not be smashing down the doors of our bank vaults because Namibia and South Africa were fairly "insulated" from the ebb and flow of international finance.
Our banks would not experience the liquidity crisis faced by their counterparts in the US, the Euro zone, the UK, Japan and China, they said.
Foreign bankers and mortgage houses were simply more exposed to the subprime crisis in the US than our institutions.
In addition reckless investments in once-proud American institutions by reputable European and Asian banks meant that they too needed bailouts from their respective governments to ride the crashing waves of bankruptcy occasioned by lack of cash in their vaults, the public was advised.
As recently as September, the Bank of Namibia wrote in its Quarterly Bulletin that the "domestic economy remained resilient amidst a global slowdown".
The US is now officially in recession and its government has made available over US$700 billion in bailout cash and guarantees to banks, its investment firms and its car manufacturers on the false premise that these companies are "simply too big to fail".
Across the Atlantic, Bank of Scotland, one of the most prestigious institutions in the UK, was rescued by a 50-billion-pound package, along with banks.
Back in Namibia, the announcement by Weatherly International to retrench 643 workers at its copper mines in the country has sent a loud message that even foreign direct investment has suffered a fatal blow and that the local economy is at the mercy of market vagaries and the 50 per cent drop in copper prices.
The company claims that it does not have the cash reserves to sustain operations in Namibia.
It is "forced" to cut production costs, and, of course, labour is usually the first to go.
Down south, looming retrenchments at major mines have captured the public imagination and we are likely to see more unemployed on the streets in South Africa as exports take a knock because there is just no cash to buy the goods.
Today, the local chiefs in charge of our money are singing a different tune.
They are recognising that the world of international finance is all-pervasive and that no country is immune from the full-blown twin crises of global banking failures and food security.
Recent comments from Tom Alweendo, Namibia's central bank governor, and Tito Mboweni, the SA Reserve Bank top executive, confirm that the financial and food crises are going to hit southern Africa as early as next year.
Belt tightening, savings and more investment by local companies and fund managers are their solution to parry the fallout of the crisis.
Already a few months ago the Development Bank of Namibia's David Nuyoma, had warned against debt accumulation and greed.
The string of car repossessions that we are experiencing in the country, the failures of people to pay their bank loans, hire-purchase accounts and home loans point to an uncomfortable truth: we are, like the US, heading for an uncontrollable debt-driven society.
If debt is managed, and put to good productive use, as Nuyoma stressed in an interview with The Namibian, then the situation could be contained.
But we are spiralling out of control and this should be of concern to all Namibians.
The scarcity of finances internationally has meant that funds from developing countries, in banks and in stock exchanges, have been withdrawn or hedged in developed countries to shore up a liquidity squeeze.
People and their firms are simply out of cash and what they have invested elsewhere and in our parts of the world has to be withdrawn to sustain their lifestyles in the North.
And with global and local inflationary pressures rising and not behaving according the standard macroeconomic models, Namibia may not be in a position to report growth come next year's second quarter.
If this happens over two consecutive quarters, we also might be in recession, and this is not a pleasant thought to relay to our people.
While the Christmas season is about giving, we should also be discretionary and start saving now, rather than spending cash we don't have.
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