“We activated an active citizenry here in Namibia, something that was missing for a long time, but we should not stop here. We should question why we are doing things. If it’s good we should support it and if it’s bad then we need to stand up and say something. Make our voices heard”
What is freedom in the economic sense and can we in Namibia claim to be a free market while we are pegged to another currency, is what MYD Smart sat down with Suta Kavari to find out. Suta is an Investment Strategist at Capricorn Asset Management, a regular contributor to the public dialogue about the Namibian economy and a leading commentator on the Namibian economy.
99FM’s MYD Smart asked :
What is freedom in the sense of the economy?
“Economic freedom, in the simplistic sense, is the freedom available to members of society to engage in various economic activities aimed at a specific outcome with the assistance of Government, who provides the legal framework and creates the environment conducive to the free movement of trade”
Is the economic system working here in Namibia and around the world?
“You need to strike a balance and create equilibrium in the context of economic freedom. If you have more than 50 percent of your population living in poverty, how then do you reach that equilibrium where you promote a free market system without exploiting of your market?”
“Personally, I think a free market is one that is more of a combination, social-capitalist system. A system where a free market is encouraged but that also looks after the most vulnerable in society. These are the two that you need to marry, so that you don’t have the 1% of the population holding all of the world’s wealth and the rest of the world not having the means to access that wealth. We need a system that doesn’t disadvantage the people at the top as much as it does not disadvantage the people at the bottom. ”
“People talk about equality, but I am a firm believer in equality of opportunity. At the end of the day we can’t really have equality of outcome, because what one person puts in is different from what another person puts in. I believe this is where government comes in to create the system, to develop a level playing field that no matter which school you went to in Namibia, you would have the same opportunity. Then you have equilibrium and through this we create equality of opportunity.”
How far are we from finding the balance here in Namibia?
“Obviously more can always be done. We are headed in the right direction but we are not completely there yet. Finding the balance here will also come from having government policies that stimulate economic activity and encourage economic freedom.”
“You need government and private sector to be on the same page in a free economy. Because at the end of the day they are both working towards the same outcome, bettering the lives of people in this country and promoting economic growth. If you have one arm complaining about the other arm, it creates problems. We need to get those two arms shaking hands and moving in the same direction.”
Can we be completely free if our currency, the Namibian Dollar, is linked to another countries currency, the South African Rand?
“When you look at globalisation and how interconnected the world is, to a greater extent you can’t really go it alone. You do need to market your countries expertise and your countries goods and services. You can do that domestically but you also need to export and with that comes a currency regime that is essentially based on sentiment. If the South Africa Rand depreciates for example it affects Namibia but we need to look at why this happens.”
“A big chunk of what is happening in South Africa is idiosyncratic and coming from a certain Mr. Zuma who seems hell bent on destroying the economy but there are other factors we need to look at considering how interconnected we are globally. We need to look at what influences currency depreciation. The Rand is a commodity currency, meaning it is influenced by changes in the prices of commodities. So if the prices of commodities go up, the currency strengthens. If these prices go down, the currency depreciates.”
“Crazy things are happening in the world right now and this affects sentiment. Currencies are essentially traded by investors who as soon as they start feeling uneasy about something they start pulling away from what they perceive as risk as you start putting your investment into something you see as a safer option.”
“My opinion with our continuing to peg the Namibian Dollar to the South African Rand is that the advantages far outweigh the disadvantages. Take a look for example at what we get out if it; by linking the Namibian Dollar to the South African Rand, we get price stability. We get 70% our food from South Africa at a stable price because of the exchange rate being linked one-to-one. An independent Namibian Dollar means we have no guarantee that we would be stronger or weaker than the South African Rand and price fluctuations disadvantages those living in poverty. ”
“Another thing to look at is that the Namibian economy is quite small in the global context and so big changes in the global market would be felt severely by our market. South Africa is a shock absorber to the Namibian economy. All the shocks in the global economy go through the Rand before they reach the Namibian Dollar. If the Namibian Dollar was a stand-alone currency, a plunge in the South African rand of 5% could easily see a plunge in the Namibian Dollar of over 12%. Like take for example what we have seen with the Zambian Kwacha which has plunged 40% over the last couple of months. By having our currency pegged to another currency we get the benefit of that currency acting as a shock absorber for changes in the global economy and we see a reduction of the unfavourable effects of currency fluctuations that we are seeing now in the global context.”
“By linking the Namibian Dollar to the South African Rand we also gain access to the deeper financial markets that South Africa has and we don’t necessarily have. This is a benefit for investment on pension funds which can see better returns for pensioners and savers at the end of the day.”
“We also import relatively low inflation. Historically we average around 6% inflation, which is good. Zambia for example is on 20% inflation. The benefits mean we get offered protection and especially protections for those living in poverty because they know for the most part, what the price of bread is going to be tomorrow.”
“It is also very difficult to say whether the Namibian Dollar would be stronger than the South African Rand, if anything it would be much weaker than the Rand because we have such a narrow production base and our exports are solely based on minerals. So if the price of commodities goes down the currency then will follow in tandem. The South African Rand is also a commodity currency but it has the shock absorbing feature.”
Do you have any advice for Namibians when it comes to the state of our economy?
“Looking at the geopolitical set up in the world right now and specifically in Southern Africa, we find ourselves in a very fortunate position. For example political risk has increased in South Africa as we are seeing every day at the moment; Angola’s vulnerability has been exposed due to falling oil prices; Zambia is going through a down turn with the price of copper having fallen.”
“In Namibia we tend to take for granted, our stability. We don’t have the violent social unrest that we have been seeing in some of our neighbouring countries; we don’t always have the same levels of adversity. We are doing great. But then we also can’t really rest of our laurels in that we need to be active in the future of our country, we need to be engaged. I think that with the dawn of social media, we have been exposed to so much more information. We now have greater access to information, and we need to use that information to better ourselves. So when government comes up with polices that we feel are not really helpful for the economy or for our wellbeing, we should speak up. When government comes up with polices that are helpful for the advancement of our people, we should support these policies. We should use the information that is at our disposal to make informed decisions and opinions and then also engage government.”
“We activated an active citizenry here in Namibia, something that was missing for a long time, but we should not stop here. We should question why we are doing things. If it’s good we should support it and if it’s bad then we need to stand up and say something. Make our voices heard. We are the generation that can make a difference but we can only make a difference if we have informed opinions and we do have access to the information, we need to read through the information and find out what it means for our future. We need to use our voices. While one person’s voice is not enough, when you have three or four talking about the same thing, engaging in debate, it will make a difference.”
Do you have any message for Namibians?
“Most of the time we live past ourselves, so busy with our lives and our jobs. We lose ourselves and we stop being a human being and essentially become a human doer. We need to start finding the beauty in the subtly and small things in life. Appreciate what we have and just be yourself. Be one with yourself and take time out for yourself and your thoughts. Understanding who you are and appreciate yourself for who you are and not what society’s normative stance on who you are supposed to be is. Once you do that you get a certain level of freedom. You are not influenced by other people’s judgment because you are happy with who you are. You can use that to grow yourself and personal growth is the best growth you can give yourself. But it’s only you, only you can do that for yourself.”