Loans come with Chinese workers, materials, warns local economist

12 September 2018 | Economics

Economics professor Roman Grynberg has sounded a warning regarding the N$10 billion loan facility being offered by the Chinese government to Namibia.

“When similar levels of infrastructure were developed in America, Europe and Asia, it created demand for metals such as steel, copper nickel, etc. But all of these will be made in China, not in Africa and all the jobs will be for Chinese workers and Chinese construction companies. No backward linkages are the problem for Namibia and all of Africa,” Grynberg said.

“The real issue is whether this and all the other infrastructure development occurring around Africa is intended to aid in China or Africa's development.”

Grynberg said further government has no choice but to upgrade the ­Hosea Kutako International Airport.

“We either upgrade or face a major loss of forex earnings.”

Grynberg was responding to the confirmation of N$10 billion Chinese loan package offered to Namibia at the just-ended Forum on Africa-China Cooperation (FOCAC) summit.

China has put on the table US$60 billion in total, to finance African infrastructure projects under its Belt and Road Initiative.

Independent analyst Klaus Schade said there was a definite need to upgrade Namibia's infrastructure.

“That does not only include transport infrastructure, but also water, electricity, communication, health and education (infrastructure), for instance,” Schade said.

“The loans could have a positive impact on domestic economic growth, if the result is an increase in demand for domestic goods and services and creates additional employment. These are some of the factors that need to be taken into account when deciding whether to make use of the loans: the projects to be financed by the loans and the timing of the loans.”

Finance minister Calle Schlettwein said on Monday at a State House briefing that government is yet to decide whether it would accept the loan package. According to him, the Chinese loan facility is very competitive in comparison to loans from the African Development Bank (AfDB) and the Eurobonds that Namibia has issued.

Rating agency Moody's recently voiced its concern over the rate at which Namibia is accumulating debt.

“Namibia's fiscal strength has weakened in recent years. Although government debt to gross domestic product, at slightly more than 40% in the financial year 2017/18, remains moderate relative to its regional peers, the pace of debt accumulation has been rapid in recent years,” Moody's said.


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