Namibia Economist (Windhoek)

Namibia: Its a Subtle Shift, but With Important Implications for Government Paper

editorial

Fitch Ratings released its latest sovereign assessment this week Tuesday drawing attention even in such austere circles as Reuters. The noted news agency, careful not to make another gaffe, chose to run the Fitch statement verbatim. (Reuters infamously misquoted a minister a year ago, indicating that the offshore carbon estimates represented actual oil deposits. But they should not feel bad about the incident, the minister also did not have the foggiest of what he was reciting.)

Trying to locate country-specific statements on the Fitch website is like searching for the proverbial needle in a haystack. But eventually I managed to find the relevant report, although Fitch graciously indicates the region as "South Africa". Nevertheless, finding the report confirmed that Reuters really ran it verbatim.

The content is not a surprise. Very little has changed in the Fitch ratings of Namibia. The report, in its own jargon, only affirms the current ratings, with one notable exception, Fitch has changed the outlook from negative to stable. The report compilers do not make a big spiel of this, for instance, nowhere is it stated the outlook has changed. It simply, matter-of-factly, states the latest outlook. For us, however, there is slightly more at stake in this game of sovereign ratings and having the microscope shift just those few degrees, conveys an important message to institutional investors who may be considering to taste just a little of what the Namibian capital market can offer.

This has recently become even more important since a bevy of South African bonds are now included in the Citigroup World Bond Index, inevitably drawing more attention to the subcontinent's capital market, especially those that do not function. While ours are fully functional and liquid, international scrutiny must be expected, all the more reason for me to notice the change in sentiment from an institution that certainly helps to shape opinion about our domestic market.

All the facts and figures quoted are known and very much in the public domain, so to speak. Fitch even refers to the Medium Term Expenditure Framework in listing their assumptions, gallantly accepting that the finance ministry will stick to the planned trajectory of getting us out of deficits.

Systematically working through the report, the facts and figures seem above board, or at least, quoted at face value as they appear in the macro-economic budgetary and policy documents. In essence, Fitch does not conjure up these figures, they accept them at face value from the submitting government agency. But it is only close to the end of the report, where a number of negative issues are discussed where I picked up the most valuable nugget. There at the end of a line, unabashedly, Fitch says one of our problems is an unemployment rate of 34%! Halloooooo! Where does this come from?

Remember, early this year, the 51% unemployment figure was thrown around in parliament at the highest level, as if it is the most sacred statistical gospel. It does not help that a very very small band of brave warriors said right from the outset the 51% unemployment rate is rubbish, and the survey methodology from whence it originated, stinks, it still became elevated to urban legend status.

Nowhere, on paper, a ratings agency of international repute, says unemployment is 34%. Fitch does not suck their ratings out of their thumbs. It is done following a comprehensive and rigorous methodology (explained on their website if you are interested) and it is done IN CONSULTATION with the sovereign itself.

This means somewhere in government somebody had to tell the Fitch analysts the official unemployment rate is 34% and not 51%. But as I said earlier, Fitch does not explain these anomalies, it accepts the figures in good faith from the sovereign.

I have written at length about the Household Income Survey which is the origin of the 51% phantom. It is not necessary to repeat all of that here. The major issue is a political one: while the top leaders tell an indiscriminate public one thing, where it matters, they, or their appointed officials, tell the analysts of a ratings agency something different. And the compilers of the sovereign ratings report are not in a position to verify these statistics, nor is it their responsibility to do so.

What we must hope for is that the Statistics Agency goes back to the population, and the market, with a defendable methodology and come up with a reliable view of unemployment.

PS. On the Markets page of this edition is a more comprehensive excerpt of the salient points in the Fitch rating statement.

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