14/04/20

COVID-19 Considerations for Namibia

In association with Nedbank.

The COVID-19 pandemic has dominated headlines both internationally and domestically, as governments the world over have scrambled to contain the spread of the virus. The resultant measures have seen international travel and trade slow dramatically. The subsequent measures introduced by various governments have seen major revisions to world GDP this year, as at first the impact of the measures was simply expected to result in a significant slowdown. Now, most are anticipating large contractions in major economies including the US and European Union.

Namibia, similarly, reacted to curtail the spread by declaring a State of Emergency and thereafter a ‘lockdown’ in two key regions. This has since been extended and expanded to the entire country. The debates around the balance between health and economic implications have, generally, been oversimplified. Many would pit it as a binary trade-off between either the healthcare outcomes or the economy, but the reality of the matter is that this is a topic that requires a far more nuanced approach.

Namibia’s health measures have undoubtedly played a vital role in containing the transmission of the virus, but have also forced a significant reduction in business activity – both formal and informal. In recognition of the impact this has on households and businesses, Government introduced the first phase of its Economic Stimulus and Relief Package, including the Emergency Income Grant, wage subsidies for the worst hit sectors, loan guarantees for households and businesses, rapid payment of outstanding VAT refunds and invoices, and more. While a promising start, this will not be enough to stem the blow in the event that there would be continued lockdowns and restrictions, especially for industries reliant on external demand – such as tourism.

A rough, arguably conservative, illustration would be to assume that lockdowns and restrictions result in typical output being halved (i.e. a 50% reduction) over that period, as many activities are considered ‘non-essential’. This would translate into an approximate GDP reduction of 1% or (N$1.8 billion) for every week of such restrictions. Thus a 3-week lockdown would result in about a 3% contraction (rough estimate), and 5 weeks in a 5% contraction. However, the longer or more frequent there are lockdowns, the more likely we are to see an upswing in retrenchments and business closures, meaning we will not return to that former 100% productivity and thereby compounding the GDP impact.

Source: NSA

The difficulty in the balance between health outcomes and the economic fallout often comes about because of misunderstanding. Generally speaking, the measures to contain the spread are not targeted to entirely prevent people from contracting the disease – the goal is to slow the spread so as to not overwhelm the healthcare system and buy additional time to prepare. There will be no real end to the virus until a more workable solution is found, such as a vaccine, which would take months. The danger here is that, while it is important to ensure we can manage the healthcare effects, we must also bear in mind the economic consequences.

After four extremely difficult years for the Namibian economy, most businesses in Namibia are in a fragile state and do not have the reserves to survive extended or frequent lockdowns. Continued distress to business will result in either layoffs or business closure (which also results in layoffs). Unemployment is already high, while the quality of employment has deteriorated (there are more informal than formal workers) and household indebtedness is extremely high (approaching 100%). Any impact on incomes or jobs (whether formal or informal) would place additional burdens on households, many of which have already been struggling for several years now.

Source: NSA

The concern around blanket containment measures (rather than a more targeted approach) is that it is particularly the most vulnerable in society who are affected, including those in low-wage formal jobs or in the informal sector, who are unable to work from home. In addition to this, these are also the same individuals most likely to live from hand to mouth, without savings to support them through such periods. Given the trade-off between potentially becoming ill, or not being able to afford food and/or shelter, the obvious decision for most in these circumstances would be to risk illness to secure the latter.

Additionally, there are a host of other consequences. For instance, the psychological impact of lockdowns and job losses, which may lead to mental health problems including depression, and may force many into desperation.

Source: NSA

Approximately 26.6% of Namibian households live in improvised housing (i.e. shacks); meaning that one in every four families is confined to a small, restricted space, which poses its own problems such as poor access to sanitation. There are many other social issues, which may also result from measures like forced confinement, such as increases in reported cases of gender-based violence.

These considerations do not mean that nothing should be done, or that we should ‘favour’ economic considerations over public health considerations. This creates a false binary, whereas the favourable alternative would be to find a middle ground. This would include, for instance, more targeted containment measures (like lockdowns) which would allow a staggered return to normal activity; focus on isolating those most susceptible/at risk to the virus; maintaining social distancing and hygiene protocols; and assisting informal workers (like traders and markets) in adhering to policy while being operational. Government cannot come to everyone’s rescue through an excessive stimulus, it is simply unaffordable, but at the same time, we must balance the priority of public health with the need for people to maintain a livelihood.