By Tio Nakasole
Based on the World Bank Statistics, indicated that Namibia’s GDP per capita is at 4 168.3 US dollar. Relatively, Namibia is therefore classified as an upper-middle-income country, favourably with most countries in Sub-Saharan African.
Down to the dichotomy of classification, that does not mean that the majority are able to put bread on their table everyday. This should, however, not obscure existing domestic developmental challenge to curtail inflation.
The fact remains, many still live from hand to mouth, therefore inflation pressure is not only inexcusable but intolerant. From a giraffe point of view, it is high time to understand that, not all governments are certainly solutions, in certain part of the world has made the problems worse, by importing those problems as they perform below their weight given sufficient resources not to written off the Labor force that the country has.
As it goes without saying, three things cannot be long hidden: the sun, the moon and the truth. With respect to Namibia, three traps cannot be long ignored which cage our inflation rate so high since as compared to 2.3 percent and 2.2 percent in 2020.
Those traps are the natural resources trap, the trap of being a not a landlocked but with heavy reliance on SA for import of basic goods – leading to an import driven inflation.
Recently, OpenAI made an estimation on Namibia’s annual inflation rate, which made a takeaway on a decline from 5.4 per cent in January 2024 to 3.2 per cent in January 2025. It is believed that this downward trend was driven by lower price increases in essential categories such as food, transport, housing, and utilities. In contrary, fuel prices are anticipated to rise by cents per litre on Wednesday, March 5, 2025.
However, in spite of the fluctuations, the fragmentation of inflationary pressures persists in certain subcategories, which demand microscopic monitoring. After all these extrapolations, this begs the question around the interconnectedness between the drivers of inflation in Namibia.
This paper seeks to take stock of the root causes of inflation in Namibia in relation to imports but also took an oblique photo shoot on other root causes of inflation in general, which may be in close proximity to that of Namibia. Despite the bearing controversies around it, in simple terms, inflation is a persistent increase in the level of the consumer prices.
Alternatively, inflation may also be defined as a persistent decline in the purchasing power of money due to an increase in available currency and credit beyond the proportion of available goods and services.
However, this draft is not designed to deal with the symptoms of inflation but is mainly concentrated on unpacking the root cause and the funnel upon which the price fluctuation disseminates into the Namibian market.
Firstly, it is quite essential to delve into the different causes of inflation which might be part of the sandwich which makes up the Namibian inflation. Demand-pull inflation originates from the buyers’ side of the market.
This often happens in a situation when there is “too much money chasing too few goods”. This may be attributed to an increase in household consumption or an increase in government spending.
However, that is not the only cause; cost-push inflation operates through the supply side of the economy by the general increase in the unit cost of production. This form of inflation is often inextricably interwoven with the input to the mix, in other words, with the raw material or manpower needed in the production.
Then this also gives us an igniting light that, as a country, you may close the tap of inflation flow once you are in possession of the means of production and, in tandem, have the expertise to produce goods and services from start to finish.
Apart from the abovementioned monetary and fiscal-based root causes, this does mean to keep at bay what the school of thought has to offer. One of them are the “monetarist”.
The monetarists are of the same views that inflation is always engineered by the monetary factors. It means that an increase in the money supply has a prerogative role to play in terms of spending through transactional mechanisms, and that would invariably create a room where aggregate demand for goods and service exceeds aggregate supply.
One may argue that then the Bank of Namibia’s reshuffle of the repo rate down to 6.75 percent last month could potentially have some of form of ramifications effect on the general prices level. Another play maker in contributing to inflation is believed to be from the schools Kynesians’s view who disagree with the Monetarists’s view.
As for them, they strongly believe that interest rates movement and not money supply as the monetarists believed. Lastly, structuralists are of the view that not everything has to do with money supply but interest rates, but because of structural changes in the economy.
What one can diagnose from the above pedagogy of the root cause of inflation is that all may deduce or accept that all may have a direct or indirect effect on the inflation. However, as with Namibia, the Namibia Statistics Agency released that Namibia’s imports were 35.4 per cent from South Africa, which automatically has more bite on the pie of Namibia’s inflation of goods and services.
The only way to retrogress the level of high imports is by starting to produce goods and services, which later increases the export capacity. However, in the process, goods such as minerals, such as diamonds, gold, uranium, zinc, and copper, as well as fish, must be exported as processed in order to contribute to the diversification into an employment vacuum.
Namibia needs to create an institution to complement the Namibia Standard Institution (NSI) that is in place and only earmarked for value addition and processing of finished products from both domestic and foreign investors, in order for the above to be realised.
After all the aforementioned root causes, are not designed to put us in the circus or to leave us in a dilemma of an “egg and a chicken” question. The bottom line is each economies has it own main driver of inflation.
As an economist, an advisors or policy makers ought to advise independently, avoid paternalism and make recommendation even if from an uncomfortable position given the fact on the ground. Personally, I am an ardent supporter of wealth creation, and not wealth redistribution, this is because reinventing the wheel of redistribution strategy such as it is partially synonymous as to say decisions has to be made after you have realised that a certain class is ahead, in return you preserve the same gap between the rich and the poor.
Redistribution does not create jobs which generate income to afford goods at an exorbitant price but may diminish the gap to a certain extend but continuing to maintain a parallel relationship of living in the long run.
Inasmuch, maintaining low inflation without hurting economic growth is therefore sine qua non. It should be a reinforcing macroeconomic policy objective in Namibia and any other developing country.
Otherwise, without realising that, Namibia’s imports price index will forever remain proxied by those of South Consumer Price Index, which eventually will hurting the consumers.
*Tio Nakasole is an Economics Honors degree holder, MBA final student, and a Research Analyst at MONASA Advisory and Associates. theoerastus@gmail.com
