Picture: THINKSTOCK
Picture: THINKSTOCK

London  — Namibia is ruling out dropping its currency peg with the rand “unless something very drastic happens”, given its close trade links with its larger neighbour and its drive to recover from recession.

“We have to consider all the options but, after having considered that, we still think that backing one on one with the rand is the best option,” Namibian President Hage Geingob, 77, said in an interview in Cascais, Portugal, where he attended the Horasis Global Meeting.

The economy of the world's top producer of marine diamonds has been dragged down partly by anaemic growth in SA. Power shortages in SA have spilled into Namibia, which imports electricity. That prompted calls for a review of the currency arrangement and customs agreement.

The rand is one of the most volatile currencies, making planning tough using the pegged Namibian dollar. Most of Namibia’s trade is with SA and its companies, such as banks FirstRand and Nedbank,    are also listed on the Windhoek exchange. Namibia, a country bigger than France by land area but with a population of just 2.6-million people, is part of a currency union with other smaller regional countries Lesotho and Eswatini (formerly known as Swaziland).

The rand lost 14%  against the dollar in 2018 and is 1.4% stronger in 2019.

Prospects for Namibia’s economy are improving after a two-year slump — its first back-to-back annual contractions — despite signs that SA’s acceleration from weak expansion may be delayed.

“We have taken tough actions, painful ones” including cutting back wasteful spending and tackling corruption, Geingob said.

“Although it was painful, I know we are getting out of the woods now. We are going to have a growth rate of maybe 1%” in 2019. “By next year we’ll be OK”.

Namibia will seek private investment in its energy sector, to help provide generation capacity to the state-owned Namibia Power Corp and reduce its reliance on imports from SA’s cash-strapped power utility.

“In the past, we had a monopoly, just NamPower,” said Geingob, who will be seeking a second term as leader in an election in November.

“We hope to address that issue. It’s not easy, but I think we will overcome.”

Geingob said Namibia is satisfied with its “marriage” with Anglo American unit De Beers, the world’s largest diamond company, and has signed a new long-term agreement to extract the stones in a joint venture through Namdeb Holdings.

“So far it is working,” he said.

“We have an open-door policy where we can discuss anything and when it comes to profit-sharing I think we work … so why fix it if it isn’t broken?”


Bloomberg