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Inflation – one size does not fit all

Sir,
Most employers and trade unions look at the Consumer Price Index as the measure of year on year inflation as defined by the NSA (Namibia Statistics Agency).
“A CPI measures the changes in the cost of a fixed and representative basket of goods and services. This involves weighting together aggregated prices for different categories of goods and services so that each takes an appropriate share to reflect the budgets of the households covered by the index. The inflation figures from the CPI represent a weighted average of price changes.”
The problem with this approach in a country with our economic demographics, is rather obvious. The basket of goods for a low income household (assume income between N$2,000 and N$5,000 per month) will be very different from the basket of a middle or upper income household. The CPI does not allow for such differentiation as it averages the so called “representative” basket.
For example, one can assume that the basket of a low income household will have a significantly higher share of food expenditure, alcohol expenditure and transport expenditure than a middle or higher income household. In other words the inflation faced by the lower income family will be much closer to the food, alcohol and transport inflation rather than the averaged CPI.

The argument states that the various income categories are actually facing different inflation as for example food inflation is well above the average CPI measured inflation. NSA reported that the Food inflation for April 2013-2014 was 8.9% and Transport was 9.4% while the CPI for April 2013-2014 was 5.9%. Therefore it can be expected that the inflation facing a low income family will be significantly higher than the CPI and the inflation that faces the middle or higher income categories [will be less.]
The fact that our society has such an acute income disparity should make the difference in inflation between categories even higher as the spending patterns of the various categories differ greatly unlike in developed world economies.
Many companies already differentiate their annual increases among the various pay scales. Low income labourers often receive higher percentage increases than the higher paid admin or management staff. However, it is important to note that the rationale behind such differentiation is not the differentiation of inflation between categories, but rather the employer’s effort towards narrowing the gap. Unfortunately this is often eroded by the inflation difference that is facing the particular household category.
As a solution one can recommend that the NSA formulate such household categories and publish regular measurements of inflation for these categories when the CPI is published. This will allow employers to better structure and differentiate their annual inflationary increases and hopefully assist in addressing the existing income disparity.
Alex Kirov
Walvis Bay

About The Author

Following reverse listing, public can now acquire shareholding in Paratus Namibia

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20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.