WINDHOEK, May 12 (Xinhua) -- The Namibian economy, which is closely linked to South Africa, with the Namibia dollar pegged one-to-one to the South African rand, is set to feel the ripple effects of geopolitical tensions, a Namibia expert told Xinhua Friday.
Namibian economic analyst and researcher Josef Sheehama highlighted this following the South African rand recently weakening past 19 rands per U.S. dollar for the first time since COVID-19.
"South Africa is Namibia's major import partner of about 66 percent to 80 percent of total imports. It is early to tell if economic sanctions will be imposed against South Africa, should it be true as alleged by Western countries that South Africa aids material support to countries in conflict, the effects of any sanction will affect Namibia's economy and local market, even if we don't have the same problems as South Africa, we are still exposed to all the external factors," he told Xinhua.
Sheehama said with Namibia's current narrow industrial and export base, it is going to be difficult to withstand the external shocks.
"Our economy is reliant on a portion of sectors such as fishing, diamonds, and uranium mining. Therefore, should the variables influencing the pair continue at their current state, the rand/Namibia dollar will find it difficult to regain any momentum," he said.
According to Sheehama, there is a need to understand that a weaker currency could increase the cost of imports, as Namibia uses U.S. dollars to buy oil and other commodities and the negative market sentiments cause capital flight.
Sheehama is of the view that the geopolitical shifts are likely to put incremental pressure on the rand/Namibia dollar over time.
"However, cumulatively, they may start to change investors' minds on the currency. If they do, the rand/Namibia dollar has a long way to fall given relative depreciation. If momentum builds behind a weakening rand/Namibia dollar, it will have significant repercussions across financial markets," he concluded.
According to the Bank of Namibia's economic outlook update report in March, Namibia's economic growth already is expected to weaken over the next two years as global demand declines and consumer spending power reduces.
