Namibia is ruling out dropping its currency peg with the rand “unless something very drastic happens”, given the close trade links to its larger neighbour and the drive by the world’s biggest producer of marine diamonds to recover from a two-year 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 said in an interview in Cascais, Portugal, where he attended the Horasis Global Meeting.
Namibia’s economy has partly been dragged down by anaemic growth in South Africa, and power shortages in this country have spilled over 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.
Namibia is part of a currency union with two other smaller regional nations Lesotho and Eswatini (formerly Swaziland).
Prospects for Namibia’s economy are improving after a two-year slump – its first back-to-back annual contractions – despite signs that South Africa’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 1percent” in 2019 and “by next year we’ll be okay”.
Namibia will seek private investment in its energy sector, to help provide generation capacity to the state-owned Namibia Power Corporation and reduce its reliance on imports from South Africa’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 if it is working, so why fixing it if it isn’t broken.”