Mixed emotions over tumbling rand

August 31, 2015, 2:01pm

Mixed emotions over tumbling rand

The plummeting value of the South African Rand has evoked mixed emotions from captains of industry in Namibia. Some say it will put pressure on the imports of finished products as the exchange rate is unfavourable to local producers, while others believe exporters will have the best of it.

The South African Rand plummeted to its weakest rate against major trading currencies, including the American Dollar and the British Pound. The Rand, which is pegged at one-to-one with the Namibian Dollar, was trading at a historical low of R14.682 last week Monday. to the US dollar, raising concern over its implications for the Namibian economy.

The Executive Chairman of the Ohlthaver & List (O&L) Group of Companies, Sven Thieme said the weakened rand has both positive and negative repercussions for the Namibian economy. “There is a downside for imports. The weakened rand is very negative because all imports of finished goods will be expensive, which will prove bad for consumers. The rand’s weakening will impact on exports, and is good because we will be receiving a lot more from foreign currency. This way, we can maximise exports,” he said.

Namibia’s exports can gain market share as its goods become cheaper, relative to goods priced in stronger currencies. This way, the country’s goods and services appear more attractive to others. The resulting increase in exports is also beneficial because it can boost economic growth and jobs, as well as increase corporate profits for companies which do business in foreign markets.

However, there is a downside to it, especially because Namibia is mainly an importing country. In 2012, Namibia’s percentage of imports stood roughly at 70%. Thieme said trying to predict whether the downward trend will stop anytime soon is like trying to predict the current tumultuous weather. “At the moment, things are volatile, and will continue that way for a while before it stabilizes. Things will get worse before they get better,” he stressed.

The Chief Executive Officer (CEO) of the Namibia Chamber of Commerce and Industry (NCCI), Tara Shanika, however, felt that exporters would be smiling all the way to the bank as they fetch more money for their products, but the challenges will lie heavily on the importers. “There are mixed implications for Namibia. Number one is that those who are exporting will find it easy for their products to compete on international markets,” he said.

Shaanika added that the weakened currency will also be beneficial for tourism because rates will become cheaper, boosting the number of tourists who visit the country. To some extent, agriculture and the beverage industries might also benefit. Nonetheless, there is a downside for imported products, for example those which are produced using fuel because it would become more expensive.

The same applies for products imported by using the US dollar. “This will have a significantly negative impact on the Namibian economy, especially for consumers, because a lot of goods are imported, and that will drive the prices up,” he stressed.

Shanika said this should serve as a call on Namibians to produce more goods locally so that when exchange rates rise, the country’s economy is not exposed. “We need to heed the government’s call to become more industrialised. When these things happen, they tell us to produce more of what we consume because this is a risk for us (the current situation),” he said passionately.

He pleaded that Namibia must replace as many imports as possible, pointing out that products such as maize need not be imported as there is enough land in the northern and southern regions to produce maize locally. T

he tumbling of the continent’s most-developed economy’s currency mounted fears about the pressure it would put on imports, and the repercussions it would have on inflation rates as the Namibian dollar is still pegged to the South African rand. Wholesalers and their producers will also feel the pinch of the weakened rand because they will have to fork out more money to import their goods.

Shaanika explained that flooding the market with goods would not help because it would still be expensive to import those goods. “It is difficult to predict the future. However, I hope things will not go beyond the point where they are at the moment. We want the rand to strengthen again, but that will not happen fast… We need to prepare for a tough future,” he noted.

by Faith Haushona-Kavamba