The private sector has more ability but the government has more clout
Where will the money come from to drive the ambitious Harambee Prosperity Plan? This vexing question is the starting point of many water-cooler discussions I have witnessed over the past three months.
Given the now obvious constraints on government finances, it is not an invalid question. Many people support the drive for prosperity and the so-called war on poverty but those same people are realistic about such fundamental issues as return on investment.
Only this week, another person asked about the suggested relationship between Regulation 29 and the value of assets that must be funded under the equitable empowerment framework. “It is just a disguised form of nationalisation” was the remark, followed by, “if the people and the government are the same entity politically, then what difference does it make whether shareholding goes to Epangelo or to a previously disadvantaged person? It is sugar coated nationalisation.”
This may be so, depending on your view, or it may be not. That is something we shall only know in several years from now. What can not be disputed though, is that ignoring inequality and poverty, creates some serious future political and security risks. The issue then becomes not why, but how, and this is where I find the biggest difference in opinions.
Another person closely involved with the pension fund industry and with the investment of its assets, asked. “has anybody gone to the trouble to actually calculate the value of the funds that must be repatriated under Regulation 29?” It is vastly inadequate to fund either Harambee or NEEEF.”
“Even if the entire asset base of the whole pension fund industry, is repatriated, then it is still not enough which only leads me to conclude that eventually the private sector will be forced to provide the dough.”
These are strong statements and I am not necessarily in agreement with all the views, but they can not be disregarded as nonsense. The questions are being asked by intelligent, experienced people, and they are asked all the time.
Up comes the new buzzword – private public partnerships. This leads to a flurry of more questions from a growing number of disconcerted prospective participants. Granted, the PPP framework is only in its infancy, but there are several large and small projects where PPP principles are already applied without a specific, regulatory framework to guide the agreements.
From a recent presentation on PPPs by a visiting British expert comes the wonderful insight that the government has more clout to borrow, at substantially lower rates, than the private sector. This is perhaps what will eventually bring our earnest endeavours to put our growth path on a tangent, to produce positive, tangible results. It is not a complicated concept, and it has an already established platform on which to function, the so-called capital market. Much has been said about developing the local capital market but real experts in this realm are few in our small pond. Still, the importance of growing a trading floor for debt, must not be underestimated.
Bottom line is, we need money and lots of it to reach our lofty development goals. Secondly, we need credible and reliable structures to conduct the two-way traffic between raising capital and developing revenue streams. And finally, we also need the entire statutory apparatus to manage and control the financial web.
The question on where all the money will come from for Harambee remains. I believe the answer is not straightforward or simple. It is a complex development riddle which will probably be built one brick at a time.
I am sure adequate funding is available from the nefarious capital market but these loans must all be serviced. This point is underscored by the fact that a large part of the US$750 million Eurobond went to bolster foreign reserves. The massive jump shows up in the statistics, but in the latest Bank of Namibia quarterly bulletin, the reserves are stated again to be under the magical three-month benchmark. How soon before we will need another loan like that, and how soon before our statutory expenses become a drain on economic growth? We have doubled government debt in just over six years, and we are approaching the IMF’s 42% ceiling for middle income countries. What happens after that? What we need to do in the meantime is to manage expectations, and then to plod along on the path to put all the blocks in place. In the meantime, it would do the process no harm, to take a step back and consider again: Where will all the money come from?