The oil tsunami (Part 2)

SALOM SHILONGO WRITES:

We are being told that the oil discovery is going to double our economy.

But if the economy is big, then the service provision must also match the size of the economy. The demand must match the supply. The money in the country must match service provision. Because if there is more money circulating in the community but there is a supply shortage, then it will definitely trigger inflation. And if it is true that oil is going to double our economy, then we must be prepared for power blackouts as well. Because a big economy would need a lot of power and electricity. I hope the green hydrogen or renewable energy will save us from power blackouts.

The oil tsunami could trigger economic chaos or the worst economic crisis in Namibia since independence. The oil tsunami could also weaken our currency, so our currency might just become another kwanza. We must also avoid reckless borrowing in anticipation of oil revenue. I propose that we must rather use oil to borrow oil. Meaning that we have to borrow some oil from the oil-producing countries and give back their oil once we start with oil production.

There are a lot of advantages to borrowing oil instead of money. For example, we will be able to sell the borrowed oil at an affordable price. Which could reduce the living cost and boost the economy. It is cheaper and safer to borrow oil than to borrow money. For example, if we borrow US$1 billion, then we have to pay back with interest. And if our currency becomes weaker against the American currency, then we will end up paying more.

OIL MARKET

But if we borrow ten billion barrels of oil, then we will only pay back the agreed amount of oil.

We need to remember that the days of the oil bonanza are over. So, we can’t really bank on oil. The future of the oil market is uncertain.

Oil is facing tough competition from electric cars as well as green/renewable energy. I am afraid that oil is going to become very cheap in the near future. Because if the price of oil remains high, then many people would just go for electric cars and renewable energy.

So, oil is probably going to become cheaper than “otombo drink” in the near future. We must also remember that oil prices are unpredictable. Sometimes it is good but sometimes it is bad. Then we are being told that the oil discovery is going to double our economy by 2043. But if you take a look at our GDP at independence and compare it to where it is today, you will see that it has increased significantly. But how many people are suffering in Namibia today? So, just because the economy will double by 2043 doesn’t necessarily mean that life will improve for the masses.

ECONOMY

By 2043, the population, unemployment, inflation, and the living cost would also increase.

Thousands of school leavers are joining the job market every year, remember. In 1990, had someone predicted that the economy would more than double by 2023, people would have been over the moon, thinking that by 2023, Namibia would be a paradise. But what now? Another thing is the currency depreciation. Which means that the value of N$1 billion/million dollars today will not be the same in 2043.

Today N$70 billion might look like a lot of money, but in 2043 it would be worth very little due to the living cost as well as the high population. Just like the value of N$1 billion/million dollars in 1990 is not the same today. In 1990, one could build more than 50 houses with N$1 million in Windhoek. And at independence, a person earning less than N$2 000 was able to buy a house in Windhoek.

NATIONAL BUDGET

Remember that in the first 15 years after independence, the national budget was much smaller.

But we did more with less. Now our national budget is much bigger, but there is little development taking place and there are more people suffering.

So, just because the budget is going to increase because of the oil revenue, it doesn’t necessarily mean that the masses are going to benefit. High public debt could also dent the oil revenue. Because even if one is earning a lot of money, if you owe other people a lot of money, it will not really make a difference because you still have to settle your debt. So some of the money from oil revenue would be used to settle our public debt.

In the end, there would be little money left for development or to provide services to the people. We must also remember that the oil industry doesn’t create enough direct employment. But be prepared for the oil tsunami.

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