Reduced UK trade exposure mitigates risk for Namibia

Home Business Reduced UK trade exposure mitigates risk for Namibia


Namibia’s direct exposure to the United Kingdom (UK) from a trade perspective has declined significantly with overall European Union (EU) trade accounting for over 90 percent of both imports and exports, which mitigates the risk of a direct fallout in trade dynamics.

Furthermore, this may provide an opportunity to diversify local export markets and renegotiate trade agreements, through being a member of the Commonwealth with which the UK has indicated it will strengthen relationships.

This is according to an analysis by Namibia Equity Brokers (NEB), which this week published a paper on the Brexit implications for Namibia. The paper was compiled by NEB analysts Ngoni Bopoto and Alfred Kamupingene.

“We surmised that, in the short term, we believe the biggest risk lies in the local currency as capital usually flows to safe havens and markets in the wake of uncertainty. By market close on Monday, 27 June, the rand was weaker at R15.52 to the dollar from R15.24 earlier in the morning, after sliding to R15.68 on the Friday of the Brexit announcement, having suffered its biggest intraday drop since 2008,” noted NEB. The economic analysts also noted that the rand closed at R16.75 against the euro from R17.06 previously‚ and at R20.48 against the pound from R20.44.

NEB’s analysts note that for Namibia the direct impact emanating from trade is not likely to be catastrophic in the short term given the declining role of the UK as a trading partner over the past five years.

Preliminary 2015 trade statistics from the Namibia Statistics Agency (NSA) reflect how trade with the entire EU bloc has changed over the last five years, with exports dropping 38 percent to N$9.5 billion and imports surging 62 percent to N$6.5 billion.

“We note how trade with the UK has plummeted as exports fell 86 percent to N$893 million and imports dropped 75 percent to N$413 million. Over the same period exports to the EU (ex. UK) fell by 6 percent to N$8.6 billion while imports surged 152 percent to N$6.2 billion.”

Furthermore, Econometrix South Africa’s Chief Economist, Dr Azar Jammine, pointed out that South Africa’s economic prospects are slightly more vulnerable should the negative impact on British economic growth be substantial, given that country’s high historical and current dependence on UK trade, investment and financial ties.

“This negative impact on the SA economy is likely to be transmitted into the domestic (Namibian) economy given our strong linkages,” said Jammine. Econometrix is an independent South African economic consultancy. Jammine has over forty years of experience and is one of the most well-known economists in that country.

Meanwhile, NEB’s analysts pointed out that people and countries join organisations which they believe will advance their cause or provide them with the security they need.

“The virtues of international pacts or organisations are in that they strengthen the voices of its member states and thereby through the pact help advance the member states’ cause. The collective objectives of the member states are attained through coordinated bloc voting and strategies. Thus, cooperation is the foundation of any coalition or international organisation,” states the NEB paper.

“Britain’s exit from the EU initiates a period of uncertainty for the UK, Europe and other global partners. The nature and severity of the impact it could have on different countries and industries depend on the political will of the UK and Europe to negotiate new terms on trade arrangements amongst other things. Another concern is that this event may trigger calls in other EU countries to follow the UK’s example, for instance there are semblances of contagion in Slovakia and the Netherlands, while Scotland may opt to leave the UK and retain its EU membership,” reads the NEB analysis.

Some of the issues being mentioned as justifications for Brexit include the fact that the UK, Germany and France are net contributors to the EU bill and the UK’s contribution has been rising. The UK contributed £2.7 billion in 2008 and £11.3 billion in 2013.

Furthermore, critics noted that the EU membership is hampering the UK’s trade ties outside the trading bloc. “The inherent weaknesses of international organisations or coalitions are in their abilities to attend to each member’s needs. Sometimes, owing to the differences in the national priorities of the member states, invariably push-and-pull situations occur. When some of the member states believe that they are more ‘important’ than the other members, hegemony comes to the fore and that imperils the coalition or organisation,” NEB noted.

It went on to say that the stability or lack thereof, of an international organisation, depends on how, even-handedly, and optimally it addresses the national objectives of each member state. Each member state tracks the pay-off it derives from being part of the coalition or organisation.