Namibia Logistics Association

2021/06 Coronavirus and the World Economy

Coronavirus and the World Economy

The coronavirus has arrived in the most remote place of the World and 213 countries and territories are affected. Namibia has currently 42 203 cases and 492 deaths. South Africa have currently 1 536 801 cases. The latest cases and deaths are the following:

Table 1: Coronavirus cases – 03 January to 21 March 2021

Region/CountryCases03 JanCases2 FebCases16 FebCases01 MarCases21 Mar
China87 11788 59489 78889 91290 099
Europe19 867 28625 123 46426 570 30328 066 75031 112 327
Africa2 777 5963 571 2073 664 6433 747 8524 035 460
North America21 505 51827 709 33329 144 62730 119 37331 412 643
Rest of the World40 864 89147 626 51750 206 99952 742 25356 799 511
Total85 102 408104 120 115109 676 360114 766 140123 450 040


There is an increasing trend in the number of cases since the 12th of February. The US remains on top of the list with reported 30.48 million cases and 554 871 deaths. Only 3.2% of the reported cases and 4.0% of the deaths are on the African continent. The number of newly reported deaths shows an increasing trend since 27 February, with a lag of three weeks after the increase in cases.  

Table 2: Coronavirus deaths – 03 January to 21 March 2021

Region/CountryDeaths03 JanDeaths02 FebDeaths16 FebDeaths01 MarDeaths21 Mar
China4 6344 6364 6364 6364 636
Europe472 906612 444658 961699 603744 263
Africa66 48191 90998 613101 873110 097
North America[1]374 458474 898519 514547 774577 514
Rest of the World927 2811 070 0801 136 6441 190 7511 285 792
Total1 845 7602 253 9672 418 768 2 544 6372 722 302


[1] North America is Canada and the US

The African continent reported 4 035 460 cases and 110 097 deaths. There are only 1 941 044 cases reported in the SADC region and 60 174 deaths. South Africa is dominating SADC with 79.2% of the cases and 86.6% of the number of deaths. South Africa also dominates the African continent with 38.1% of the cases and 47.3% of the deaths. Many African countries are underreporting and some countries are not reporting any new cases and deaths, like Tanzania since May last year.

 Table 3: Coronavirus cases and deaths in the SADC region – 03 January- 21 March 2021

SADC countryCases03 JanCases01 MarCases21 MarDeaths03 JanDeaths01 MarDeaths21 March
South Africa1 088 8891 513 3931 536 80129 17549 99352 082
Zambia21 58279 00286 2733941 0981 178
Mozambique18 96859 35066 064168641743
Namibia25 116 38 84542 203215424492
Zimbabwe14 49136 08936 6623771 4631 510
Botswana14 80528 37135 49342310458
Malawi6 71231 94533 2161921 0441 093
DRC17 99825 91327 468595707726
Madagascar17 76719 83122 275262297345
Angola17 60820 80721 696407508526
Eswatini9 71117 01417 283227652665
Lesotho3 20610 49110 53565292309
Seychelles2972 6183 7701116
Total1 258 1871 884 7881 941 04432 15057 47160 174


Czechia replaced Belgium on top of the list with the number of deaths per population and Andorra has the most cases. 

Table 4: Worst affected countries according to deaths and cases

CountryDeaths/1M pop.Total cases/1M pop.
Czechia2 288 
Belgium1 948 
Slovenia1 908 
Hungary1 874 
UK1 851 
Italy1 733 
Andorra1 461148 422
Montenegro 138 161
Czechia 136 097
Slovenia 98 843
Luxembourg 93 502
USA 91 705
Germany89531 662
South Africa87025 680
Namibia19116 398

Source: Compiled from Worldometers data

The trend in the Namibian reported number of cases of Covid-19 experienced an increasing trend from the beginning of February with a sideways movement since 20 February. This is visible from the 3 day moving average (graph below). 

Graph 1: The Namibian Covid-19 cases

With an estimated world population of 7.8 billion in 2020, the total number of 123.5 million cases is 1.58% of the world population and the number of deaths is 0.035%. 

The World economy is improving and the Baltic Dry Index (The Baltic Dry Index provides a benchmark for the price of moving major raw materials by sea) surged 16% in the third week of March and it was the strongest gain since September 2020. The world economy is improving.  

Table 5: % change in USD- selected international commodity prices

Winners for Namibia  
Losers for Namibia  
Energy: Brent oil-1.24%24.38%

 Source: Trading economics. 21 March 2021 

The commodity prices relevant to Namibia declined in the last three weeks, accept the price of lead. Oil prices decreased in the past month by -1.24%. The exchange rate has strengthened and the N$ is currently trading 14.75 to the US Dollar and 17.57 to the Euro. 

The 2021/22 Budget

The theme of the budget is “Boosting Resilience and Recovery”, an appropriate topic or theme within the Covid-19 experience. The Minister want to transform the economy by strengthening public finances, reduce inequalities, create jobs and eliminate extreme poverty. The four policy themes are mentioned for the last six years in each budget speech, demonstrating a certain resilience of repetition of policy themes or – from a different perspective – a resilience of policy failures. Total projected revenue for 2021/22 is N$ 52.07 billion and total projected expenditure N$ 67.95 billion with a total budget deficit of N$ 15.9 billion. 

Table 6: Budget analysis:

GDP estimate in million at market prices178 940174 979184 778
Tax revenue54 70552 23948 512
Other3 7203 2183 553
Total revenue58 42555 45752 065
Total expenditure-67 343-72 105-67 950
Total budget deficit-8 918-16 648-15 885
As % of GDP-5.0%-9.5%-8.6%
Public debt100 399109 476130 060
As % of GDP56.1%62.6%70.4%

   Source: MoF

It is projected that total expenditure declines by 5.8% and total revenue also declines by 6.1%, more than expenditure. The estimated budget deficit is N$ 15.9 billion or 8.6% of GDP. The Minister announced also certain tax changes:

  • A reduction in the non-mining corporate tax rate, more detail will be announced in October 2021.
  • The sale of sanitary pads will become zero rated.
  • 15% VAT on fees of asset managers registered under the Stock Exchange Control Act.
  • 10% withholding tax on dividends paid to Namibians whilst ensuring that dividends are not paid more than once.
  • Increase the deductibility on pension, retirement and educational policy contributions from N$ 40 000 to N$ 150 000.
  • Strengthening of the administration of freight tax provisions as prescribed.
  • Improve the tax administration on withholding tax on services.
  • Review the withholding tax on interest from unit trust funds.
  • The increase in excise duties increased sin taxes

Tax changes that were not addressed in the budget are the long awaited changes in the personal income tax brackets, the last time they were changed was in 2013 to an N$ 50 000 threshold and in the meantime inflation over the years has put pressures on low income groups. The accumulated inflation since 2013 was 40.5% and thus a threshold of N$ 70 000 or higher would be more appropriate.

In 2014 it was mentioned by the Minister of Finance that a different tax regime for small business (SME’s) will be investigated, but no announcement was made yet. Many countries introduced successfully lower tax rates for small business to boost entrepreneurship, business growth, innovation and employment. The importance of an appropriate SME policy should not be overlooked given the high unemployment rate in Namibia. Benchmarking Namibia against some progressive countries will demonstrate the current weaknesses of our policies regarding job creation.   

Allianz Research and Euler Hermes[2] did international research on the business climate for SME’s and they found that the main obstacles/challenges for SME growth are administrative and regulatory burdens, access to finance, shortage of skilled staff, rising costs (labour costs, regulations, taxes) and competition. They took six components (tax policy, financing, export opportunities, red tape (ease of doing business), labour market flexibility and competition. The research benchmarked 13 countries according to the six components and concluded that the world’s best business climate for SME’s is in Canada; followed by Hong Kong, United States, Netherlands and Singapore.

Table 7: Benchmarking Namibia’s business climate for SME’s

Tax policy SME9%8.25%19.8%20%17%14.8%32%
Tax rate corporate23%16.5%21.0%25%17%20.5%32%
Red Tape[3]
Doing Business[4]233642215.2104
Labour Flexibility[5]

[2] Alliance Research (2019). Why do we look at the business climate for SME’s?

[3] Heritage Foundation on Economic freedom

[4] Ease of doing business Index by the World Bank, a high score means high economic freedom

[5] World Economic Forum. (2019) Competitiveness Report, a high score means high labour flexibility like Singapore with a score of 79.8  

[6] World Economic Forum

[7] Unemployment rate in %, The Economist, February 2020. 

[8] Reinhart, C. M. and Rogoff, K. S. (2010), “Growth in a Time of Debt”, American Economic Review, Vol. 100. 

[9] Padoan, C. P., Sila, U. and van den Noord, P. (2012), “Avoiding debt traps. Fiscal consolidation, financial backstops and structural reforms.” OECD Journal Economic Studies. Vol. 2012/1.

In benchmarking the business climate for SME’s in Namibia, one can deduct where the problems or obstacles lie. The countries had on average an unemployment rate of 3.8% compared with the unemployment rate of Namibia at 34%, before the Covid-19 economic meltdown. Namibia is not competitive, lacks labour mobility, has not enough economic freedom, red tape and ease of business is a burden and the tax policy is not attractive. Namibia’s economic policies are not business friendly and thus an obstacle for SME’s and Start-Ups – the business climate has to improve if we want to create jobs.

Comparing Namibia’s tax policy regarding our neighbouring countries provides us with an indication of our competitiveness regarding tax policy and especially corporate tax which impacts on the cost of doing business. 

Table 2 below demonstrates that Namibia’s corporate tax rate is not competitive and above the African average and the Global average. The average corporate tax for SME’s in the top 5 countries regarding SME business climate is 14.8% whilst in Namibia it is 32%.A remarkable difference of 17.2%. 

 Table 8: Corporate tax rates – Namibia is not an attractive investment destination

Country or regionCorporate tax
Africa average28.45%
South Africa28%
Global average24.18%
Botswana (Manufacturing)15%
Top 5 countries on SME Business Climate14.8%

 Source: Trading Economics

To restart the Namibian economy and at the same time improve the SME business climate, Namibia should consider reducing its corporate tax rate to 28% and introduce a different tax rate for small and medium enterprises at 18%.

Funding the deficit

The Minister did not provide any detail of how the budget deficit of N$ 15.9 billion will be financed; he only indicated that approximately 70% of the funding will come from the domestic market. In July last year Namibia applied for an N$ 4.13 million from the IMF under the RFI (Rapid Financing Instrument) and the African Development Bank offered N$ 5.0 billion under GERSP (Governance and Economic Support Programme). The economic appraisal reports were submitted to the respective boards last months and the Ministry of Finance is expecting an answer soon. Treasury was also silent on the redemption of the USD 500 million Eurobond at the end of October this year. 

Can Namibia avoid a debt trap?

At the turn of the 21st Century the World Bank and IMF decided (HIPIC Programme) under the Development Committee that billions of debt be written off for countries in Sub-Saharan Africa. This created fiscal space for many countries and economic growth resumed. In the last years the debt to GDP ratio of SADC countries is on the rise again and some countries have to reschedule their debt payments again or are in default. This calls for a reflection of public debt in development and the question arises when a country is facing a debt trap, meaning that higher debt has a negative correlation to economic growth and eventually default like Zimbabwe, Greece or Argentina. 

Reinhart and Rogoff[8] argued in a paper titled “Growth in a Time of Debt” that high debt creates investor uncertainty, deter investment and innovation and have a negative impact on economic growth. Various empirical studies in OECD countries[9] conclude that the debt threshold is close to 85-90% of GDP. This means that debt beyond the 90% level becomes harmful for economic growth and a country is caught in a debt trap. Developing countries have a lower threshold; depending on the bond yield in the respective countries and debt beyond 60-70% of GDP is normally already an indication of a debt trap in making. Comparing the debt/GDP ratio of some selected SADC countries gives an indication of how fiscally vulnerable the region has become:

Table 9: SADC countries Debt/GDP ratio

CountryDateDebt/GDP ratio
South AfricaDec/2081%

Source: Trading Economics

The debt to GDP ratio of Namibia is about 70%, meaning that Namibia is caught in a debt trap already. Another indicator of a debt trap is statutory expenditure as percentage of total revenue. If statutory expenditure exceeds 10% of total revenue a country is in fiscal difficulty.

Graph 2: Statutory expenditure as percentage of total revenue

It is projected that statutory expenditure will be 16.5% of total revenue in 2021/22. The estimated statutory expenditure is N$ 8.5 billion, funds that could have been used to fund necessary capital projects – but unsustainable spending in the past is catching up with us. Past consistent fiscal imbalances (budget deficits) caused our current fiscal misery. The following graph depicts the budget deficits in the last years:

Graph 3: Budget deficits are too high and on average -6.2% of GDP in the last 12 years

The Maastricht criteria are that budget deficits should not be more than 3% of GDP and in Namibia it is more than double. Consistent high budget deficits lead to a rise in public debt as the next graph illustrates:

Graph 4: Rise in public debt since 2010

It is projected that public debt will reach N$ 130 billion in 2021/22 and in 2010 total public debt was N$ 13 billion, a ten times increase. Namibia is clearly on an unsustainable fiscal path and has to reduce the budget deficits even further. Fiscal consolidation and reducing the budget deficit should receive full political support. The focus should be on reducing public spending even further, reform SOE’s and improve investor confidence. Sustainable job creation should be on top of the agenda.

Compiled by: Rainer Ritter                   

21 March 2021