Namibian civil servants recently received pay increases after strikes threatened to cripple the country.
It is in an apparent attempt to ward off a cash-flow crisis – the first time since 1996 it has had to do so.
Earlier this week, Permanent Secretary of Finance Erica Shafuda admitted that the government was scrambling for additional funding to pay pensions and disability grants after the contingency fund was depleted before the end of the current financial year.
Shafuda told the Namibian that a sharp increase in the number of pensioners and disabled people had placed a severe strain on the ministry of labour and social welfare's budget.
Cabinet was approached for permission to make up the shortfall from the emergency fund, but this still left the government with a R100-million shortfall to pay the next two months' grants to 144 244 pensioners and 26 277 disabled people. Namibia's population is 2.1-million.
Other senior government officials, however, painted this as a relatively minor problem, pointing to international rating agency Moody's recent rating of Namibia's creditworthiness as Baa3, in line with an assessment by Fitch as BBB- last year.
Moody's took a generally upbeat view of Namibia's debt management, assigning an A3 rating to the country's sovereign debt and opining that, although the government had intended to raise debt to about 30% of gross domestic product, it was unlikely to do so because of inadequate spending capacity.
The rating reflected the country's track record of "responsible budget management and maintenance of low public debts as well as investor- friendly policy framework balanced against structural legacy challenges posed by wide income disparities, high unemployment and dependence upon the mining sector for foreign exchange earnings", Moody's said.
As a result, Namibia successfully secured a R850-million, 10-year bond on the Johannesburg Stock Exchange in November last year as part of plans to raise R3-billion in the South African capital markets.
Wildcat strike
Both the ratings and the bond issuance, however, came before the Namibian government found itself embroiled in a wildcat strike by teachers at the end of last year. They were demanding higher pay after negotiations lasting more than two years had failed to produce an agreement.
One radical faction had demanded that teachers' pay be upped by as much as 40%, failing which they would call for a general strike.
The government responded initially by declaring several services as essential, and so outlawing any strikes by nurses, teachers, police and soldiers, among others.
This in turn was followed by a recommendation by a panel set up to review remuneration for Namibia's political office bearers. The panel said their pay should be raised by 31%.
Faced with the prospect of the entire civil service becoming involved in the strike, the Namibian government then approved an 8% across-the-board increase for all civil servants.
Political office bearers were then given a 15% increase that, though half of what was recommended by Judge President Petrus Damaseb, still amounted to double the increase given to the general civil service.
Bailouts and subsidies
The financial woes, however, did not end there. It emerged that Air Namibia, which has swallowed about R3.6-billion in bailouts and subsidies since 1990, would need another major bailout if it was to continue operating.
The ever-struggling airline has had to resort to refuelling in Luanda – at three times the local cost – after Engen refused to supply more fuel unless an outstanding bill of R70-million was settled.
Namibia Broadcasting Corporation, the state broadcaster, late last year also reported that it could not pay December salaries, but appears to have been once again thrown a lifeline by the government.
The most recent available figures suggested that almost every one of Namibia's 55-odd parastatals was struggling financially, with only the Bank of Namibia and port operator Namport regularly showing a profit.
It therefore remains to be seen whether the ratings by Fitch and Moody's will hold true.
As happened in 1995, key industries such as fishing, mining, tourism and agriculture have slumped as a result of negative international market conditions, and a disappointing rainy season so far suggests that a drought is on the way.