Helmke Sartorius von Bach | Jul 1, 2020 | 0
Workers were already in ‘Junk Status’ prior to Moody’s downgrade announcement
By Dr. Michael Akuupa
Director, Labour Resource and Research Institute
If the credit rating of Namibia’s working force could be measured with the same yardstick that Moody’s credit ratings agencies used (i.e. the country’s ability to meet its financial obligations), then more than half of Namibia’s workforce were already in junk status long before the downgrade announcement on 11 August.
Junk status simply means a country has a highest risk of defaulting/ not able to meet its financial obligations every month, so if we take this definition and apply it to the number of Namibia’s workforce which for a long time have and continue to default on their financial obligations, we can safely conclude that majority of workforce have been in a junk status way before the announcement.
Given the above prelude, government’s denial and political spin doctoring of the economic reality (“Junk”) and rejection of Moody’s rating is tantamount to worker’s betrayal of the highest order and a clear sign of insensitivity to the plight of Namibia’s workforce.
While Government embarked on defensive campaign against Moody’s rating, the hardest hit group of the society (the working class) continue to sink deeper into the Junk status. This is besides the fact, of them being the engine and foundation of this economy. It is disheartening to realise that Government did not show any intention or desire to clear the air or have an honest conversation around the newly acquired status and how it plan to address the impact on the economy in general and for the working class in particular.
The working class deserves to be informed of the true picture of the economy including factors that led to a junk status downgrade. Workers are far worse-off now after the downgrade, because they were ill prepared due to conflicting accounts by Government statements with regard the state of the economy. It is unfair for Government to keep painting a picture of a healthy economy while regular job losses are evident with business closing increasingly.
Since there is no good that will come out of a junk status, workers need to be warned of the impending higher borrowing cost, higher rates of debt repayment and its concomitant effect on domestic allocations for social services, infrastructure development, etc.
Truth of the matter is that this downgrade will greatly complicate the prospects for Namibia being able to stage a speedy economic recovery, period! Working class must be informed that this downgrade will hinder a growth recovery, employment growth and revenue collection will stagnate and may even decline. Thus it is likely that the workers living conditions will deteriorate further.
Workers should enjoy and benefit on equal footing with resource owners (i.e. employers) from all economic opportunities that Namibia has to offer. The continual ignorance of workers’ voice and plight by Government in terms of information dissemination does not augur well with the spirit of Harambee and or one Namibia one nation.
The level of wages plays a crucial role in the economy not just as a cost to business, wages and salaries but also give consumers a spending power that is needed to purchase goods and services. With rising cost of living, wages are expected to rise accordingly in order to keep up with the standard of living. In light of current economic development wage negotiations for the near future will be complex. The question that begs for an answer is: Are workers or trade unions well informed or consulted about the economic situation Namibia find itself?
Given the severity of the crisis, the outlook looks deem and should this be the case wage moderation, pay freezes or cuts and loss of pay is expected to be the order of the day. It is also feared that the downgrade will potentially lead to pay impairments across industries and this could lead to wage deceleration, pay freezes and possibly pay cuts. The negotiation complexities will have a negative impact on worker’s motivation and retention will be affected as well.
Workers and trade unions should be concerned about the loss of policy sovereignty as a result of the economic downgrade to Junk status. When the government cannot borrow from capital markets as it is deemed high risk, its only remaining global source to borrow from will be other governments and multinational institutions such as the IMF, World Bank, ADB, etc. Such a situation will lead to a loss of sovereignty over national macroeconomic and sectoral policies.
Experience elsewhere has shown that, such funding comes with unpalatable and, often times, disruptive conditions attached. The notorious structural adjustments imposed by the IMF and the World Bank are cases in point. Namibia cannot afford to lose fiscal control as well, as it already lost monetary independence to the Common Monetary Area.
The Government successfully manage to sell to Namibia’s working class the country’s prosperous ambitions (enshrined in Vision 2030, Harambee Prosperity Plan (HPP) Fifth National Development Plan (NDP5). The loss of policy sovereignty has the potential to derail the gains paid for through sweat and tears of workers class towards achieving these noble causes.
These plans are clearly in serious jeopardy as the country will struggle longer and harder to emerge from junk status. The downgrade stands in contrast to all these plans. Workers are the country’s economic spine, a revenue base, and drivers of hope for prosperous Namibia and Government ought to take them serious.
Let us face it, the crisis is real and no amount of denialism, political spin doctoring or ideological posture is going to change the rating or even avoid a deeper downgrade which will hinder recovery further. Government should take urgent steps to ensure that Namibia does not proceed through a destructive cycle of multiple downgrades (Fitch rating is next). First, Government should ensure that its policies are clear, consistent and growth-oriented and communicate to the nation honestly and openly.
Secondly, rather than considering further borrowing or increasing taxes, the government must cut non-productive spending and restructure non-viable state-owned entities (especially those that rely on bailouts or have become too large to manage). Thirdly, authorities need to ensure that business confidence does not deteriorate further by communicating openly and frank with business, and workers (trade unions).