Rand delinking talks discouraged
Delinking a pipe dream for now
Despite standing on the cusp of major oil discoveries, Namibia has been advised to pause any thoughts of delinking from the South African rand.
Banking experts have poured cold water on suggestions that Namibia delink its currency from the South African rand, saying that while oil and gas discoveries may propel the economy positively, Namibia does not have sufficient metrics in place to have its own currency in place.Speaking at the green industrialisation workshop, RMB Namibia head of oil and gas, Angelique Peake, said foreign direct investment (FDI) flows into Namibia are still reliant on the rand, to which it is pegged on a one-to-one basis.
“We are having many discussions with our economists. We cannot see it necessarily becoming a real part of conversation anywhere closer to the next five or seven years; I do not think we are there yet,” Peake said during a panel discussion.
Namibia is still reliant on the rand to enable FDI flows into the country, according to Peake.
“We are still reliant on some of the main metrics that require FDIs to allow us to go on our own, and we see the examples where it has not worked in Africa,” she said.
Keep the link
Economist Nikol Hearn, who is also the head of investments for Green Hydrogen Namibia, government’s hydrogen business arm, said a delinking of the Namibian dollar has the potential to create currency instability.
“Liquidity is always going to be a factor when you are looking at buying or selling. If there is not a lot of buying or selling, if there is not a lot of demand and supply, there are going to be a lot of price spikes, and that is very dangerous because you do not want a situation where someone wants to sell Namibian dollars, which are not lined up to the rand, but there is not enough demand on the other side of the transaction,” Hearn explained.
The Bank of Namibia (BoN) has continually stressed the importance of keeping the Namibian dollar linked to the rand.
BoN governor Johannes !Gawaxab stressed the importance of building sufficient foreign currency reserves for Namibia to even consider delinking from the rand as a starting point.
“Our reserves are too low to consider delinking from South African currency because the moment we delink, we are dead in the water. To survive, we need to grow the economy as we build on green hydrogen and oil, as well as diversification. Once we have 10 or 15 months of sustainable reserves, then we can talk about that,” !Gawaxab was quoted as saying.