From the discussions during the recent 2020 Investment Summit, hosted by Nedbank Namibia and Simonis Storm, it is evident that deglobalisation is a structural transformation of the world economy and the risks thereof have not diminished. Experts at last week’s Summit agreed that remedial action to curb the effects of deglobalisation will require not only an internal coming together of the private and public sector, but a candid and results-driven discourse with Namibia’s major trading partners.
The recent Summit, which took place in Windhoek, explored deglobalisation and its effect on economic growth in Namibia, the subcontinent as well as the rest of the world.
Certain schools of thought argue that competition from far and wide encouraged business creativity, which leads to more competitive prices and improved services for the consumer. However, the latest cycle of globalisation (the last 20 to 30 years) seems to be slowing down as leaders with a less sympathetic approach to globalisation have secured a foothold in some of the world’s strongest economies, most notably the United States of America.
The consideration of Donald Trump’s America First, Britain’s recent divorce from the European Union (EU) and the ascent to power of various anti-immigrant, inward-looking parties and leaders have poured fuel on anti-globalisation fires across the planet.
Also, the World Economic Forum (WEF) at its annual gathering in January this year said, “global growth weakened considerably in 2019 as trade wars and weakening growth in China negatively impacted growth. In many parts of the world, manufacturing sectors were either in a recession or close to recession territory. The decade-long deceleration is the result of both structural and cyclical factors: an ageing population and a sharp drop-off in productivity growth mean that potential growth in China is lower now than a decade ago and is set to fall further.”
As the wheels seemingly come off the globalisation bus, political and economic experts are pondering; what happens next?
Speaking at the summit, Nedbank Group Chief Economist, Dennis Dykes, comprehensively unpacked the concept of deglobalisation by providing a global and regional perspective, as well as outlining how the global trend impacts economic growth in Namibia.
Dykes’ presentation highlighted concerns about the protectionist sentiment, especially in the United States of America, which could certainly derail benefits that have derived from increased globalisation. He further explained that if deglobalisation unfolds, consequences for the region would be negative, predicting lower global growth resulting in lower commodity prices and less available capital.
“An additional complication is Africa’s increased debt burden,” he said. “Policy missteps and rising debt have not helped the continent. External and government debt will be back at concerning levels if it is not backed up by improved growth potential.”
According to the Brookings Institution, a nonprofit public policy organisation, African debt is on the rise, with the median debt ratio as a percentage of gross domestic product (GDP) increasing from 31 percent in 2012 to 53 percent in 2017.
Dykes, who also served on the Nedlac Public Finance and Monetary Policy Chamber, believe that deglobalisation is a threat because the benefits of globalisation have been unevenly distributed. “Deglobalisation could also see a decline of trade and demand, diminishing interdependence and integration between nations and multinational organisations,’ he said.
Adding to the discussion, Simonis Storm Economist, Indileni Nanghonga, provided an overview of the Namibian economy, presented a breakdown of the current state of affairs, and also contemplated a way forward. Nanghonga stated that a worst-case scenario for Namibia would be a global recession which will lead to medium-term depressed commodity prices, which will, in turn, negatively affect new exploration or the start of tin and lead mines.
Whilst addressing the audience, made up of leading Namibian business and investment industry players, the influential economist further listed “currency volatility, reduced investment, reduced skill and technology migration and higher trading cost” as possible disadvantages of deglobalisation.
She recommended that Namibia should manage its debt level better, and in addition, advance and create certainty in the policy space, improve the efficiency and productivity of the Central Procurement Board of Namibia (CPBN), reform unproductive state-owned enterprises (SOEs), promote effective work ethic in government and curb corruption. She further warned that with all factors considering, the rising youth unemployment, reported at just below 50% by the Namibia Statistics Agency (NSA), is a problem for Namibia.
Furthermore, well-known political and economic analyst, Dr Hoze Riruako, provided insight from a micro perspective, by looking at the factors such as tribal politics and demographic issues, which came to the fore in the 2019 Namibian elections.
Riruako said the emergence of populism in the world’s political system has an enormous impact on such systems that are still following the traditional political route. This, he said, results into, “erosion of democratic practices, unusual politics, mob politics and strongman politics.”
The former adjunct professor of International Political Economy at the City University of New York said that the political environment was greatly influenced by the emergence of youth, regional and tribal issues which played a decisive role in the outcome of the most recent elections.