New normal time to innovate and reinvent Namibia’s economy
By Josef Kefas Sheehama.
The new normal will continue and accelerate the move to digital spaces, which, without in-person interaction, are abstract and hard for many to grasp. When we lost our physical nearness, we created emotional bridges that connected us in new and significant ways. It turns out that it took constrained distancing to bring out our most complete and true humankind.
The Namibia Statistics Agency, released national account figures with revisions that pointed to more positive momentum in the economy. GDP increased to N$181.9 billion in 2021 compared to N$174.2 billion in 2020. The official figures show that for the year 2021 the GDP growth rate was estimated at 2.7%. Whether growth picks up beyond a modest cyclical rebound will depend on the government’s ability to deliver against high expectations to reduce policy uncertainty and accelerate structural policies that can raise the growth potential of the Namibian economy more meaningfully.
The gradual relaxation of COVID 19 restrictions aided our economy to rebound and enabled movement of people between countries. The most recent economic update simulates various reform scenarios and their impact on jobs, poverty, and inequality. It holds some potential good news for Namibia. We have also noted an annual growth of 14.3% in Gross Fixed Capital Formation recorded in 2021 compare to 13.4% in 2020.
Furthermore, Namibian Private Consumption accounted for 75.1 % of its GDP in 2021. This includes all purchases made by consumers, such as food, housing, energy among other things. It also includes durable goods such as cars, but not households’ purchases of dwellings, which are counted as household investment. This means, private consumption accounts for the largest part of GDP, it is the key engine that drives economic growth.
Government spending reduced by 0.3% in 2021 compared to expenditure levels of 2020. Government expenditure forms aggregate demand in addition to household consumption, business investment, and net exports. Thus, the changes will affect the economy. When it increases, aggregate demand increases, and we expect the economy to grow higher. Conversely, when the government cuts its spending, aggregate demand declines, and so does the economy. Therefore, in response to the financial slowdown and its impact on the economy, the government plays a key role by increasing its spending to boost economic growth.
Going forward, I believe that only businesses with the agility and adaptability to meet volume spikes, market changes, and business disruptions will thrive in the new normal. At the same time, big players and agile innovators alike will need to balance technology adoption with creative approaches to maintain a sense of community and shared culture. The competitive, technical economic and social environments are all in flux and businesses need to quickly transform their operations to meet the new normal.
This is also the time for business owners and managers to think about the future of their businesses and, where possible, divest non-core or underperforming assets to structure their portfolios in a manner that reflects efficiency and value creation. This is a defining moment, which calls for Namibian companies to innovate and break new ground. The safety of employees should also be put on high priority to help them cope with the already difficult times. This is the time where a business can reinvent to better support customers, optimize for a digital future and become more agile in their operations. Change is always a big challenge, and more so an organisations’ preparedness and readiness to transform.
Additionally, there are several commonalities that present themselves to businesses of all sizes. The question to ask is: what are some of the major opportunities and shifts that will dominate the business landscape, and can organizations rise to take advantage of these evolving market dynamics? Diversification strategy could be a solution to your business. A sudden drop in the economy can potentially kill your business if the business has no contingencies in place for such situations.
Your priority before any diversification should be to make your core business stable in terms of both capital and resources. Your core business is what would fund the diversification for some time. Remember, even a well-established business can suffer if resources are spread too thin. So, management teams must not only have the responsibility but must also be empowered to move things forward.
Moreover, economic control is not merely control of a sector of human life which can be separated from the rest, it is the control of the means for all our ends. Therefore, the National Development Plans are very important in redefining the future of economic recovery and growth plan. Proper implementation of the National Development Plans would restructure the economy and could put the country onto a sustained higher growth path. We now need to look at public policies to ensure that these benefits become permanent. Having been catapulted into the digital future, we must make the most of this opportunity by doubling down on digital transformation. Investing in new digital capacities, infrastructures and technologies will be a key element of a sustained recovery.
We have gone through an accelerated digital learning cycle due to the pandemic. The government, by involving the private sector in the new normal will have a partner that is focused on maximizing profits from operating and maintaining the infrastructure. Furthermore, inflationary pressures are expected to rise in 2022, the Bank of Namibia will continue to tighten monetary policy, further tamping down inflation expectations. The fiscal deficit and public debt levels are expected to remain elevated as the government implements its ambitious economic recovery programme and limits the fiscal space needed for infrastructure and human capital investment.
To that end, in this time of unprecedented change, there is a very real element of societal transformation that we can expect, with a more direct impact on how we live and work. But adapting to this new normal requires a collaborative effort which calls for unity between private and government leaders. The question is: are we ready to be bold and take a long-term view, with the aim of driving progress for a healthy, economic future?
Therefore, the time to reinvent and innovate the Namibian economy is now.