‘African countries must rely on their resources after foreign aid cuts’

African countries, including Namibia, should start building better social safety nets through their domestic economies to mitigate the impact of aid cuts from foreign donors.

This is according to Windhoek economist Salomo Hei, who says aid cannot have an indefinite timeline.

He was responding to reports that United States (US) president Donald Trump says he will cut aid to South Africa because the ANC-led government had passed a law allowing the government to expropriate land.

“They are taking away land, they are confiscating land and actually they are doing things that are perhaps far worse than that,” Trump was quoted as saying in a Fox News interview.

Hei says countries with natural resources need to better utilise them to the benefit of citizens..

“What African countries need to do is to build buffers for social security nets. South Africa is one of the leading producers of platinum. It has stockpiles of coal, gold and other different minerals.

“African countries should start looking at their minerals and other resources to have inward looking initiatives to create buffers around the aid being withdrawn.”

He says as soon as the US withdrew support from the World Health Organisation (WHO), it meant WHO would not be able to meet its obligations towards countries that used to receive aid.

“This will have ripple effects across the continent, including Namibia. There is need to build buffers but there must be efficiency around the production and usage of resources to ensure they filter to the man on the street,” Hei adds.

International media reports suggest the United States provided nearly U$440 million (about N$8.3 billion) in assistance to South Africa in 2023.

Hei says the withdrawal of this aid will affect Namibia, mainly due to the link between the rand and the Namibia dollar.

“As soon as you have the rand falling, the Namibia dollar will also lose value against the US dollar.

“This will push the cost of imports, particularly fuel, up which will in turn drive up, inflation.”

Vetumbuavi Mungunda, the founder of Ombu Capital, says the South African rand is one of the most traded currencies in the world, and is bound to respond to external shocks caused by global geopolitical and trade tensions as being experienced now.

“This is no surprise. Given [that] our Namibia dollar [is pegged] to the rand, we shall experience the same economic shocks being experienced in South Africa … even in situations where we are not involved in these geopolitical and trade tensions.

He says this is unfortunately the “con” of having pegging currencies.

The South African media reported in January that, in a significant development for land reform in South Africa, president Cyril Ramaphosa had signed the expropriation bill into law.

The landmark legislation was signed to address longstanding issues of land inequality and provide a framework for the expropriation of land.

Ramaphosa recently said he was not worried about the country’s relationship with Trump. He said he had spoken to Trump after the latter’s election victory and looked forward to working with his administration.