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Namibian Economy Expected to Improve in 2019

TJIPENANDJAMBI KUHANGA

AFTER experiencing negative growth over the last 10 quarters, the Namibian economy is expected to rebound in 2019, going forward.

The Bank of Namibia (BoN) said in their economic outlook report for December 2018 that despite economic challenges, they are expecting the economy to recover to a positive growth rate of 1,5% in 2019 from a contraction of 0,2% in 2018.

The central bank observed that the main risks to domestic growth include a weak recovery in the country’s trading partners, and a slow recovery in international commodity prices, particularly for uranium.

According to the BoN, if Namibia was to encounter a slow demand for minerals from their trading partners such as China or France, then the country’s projected growth will be at risk, especially for the primary industry.

Based on the BoN’s predictions, the growth for the primary industry is expected to massively decline from 8,3% in 2018 to 0,7% in 2019.

However, overall growth in the secondary industry is expected to slightly improve to 2,2% in 2019 from 0,3% in 2018.

The tertiary industry has incurred negative growth of 1,4% in 2017 and 1,5% in 2018. However, the bank predicts that in 2019, the industry will incur a positive growth rate of 1,8%.

The slower growth in the primary industry is a result of the closure of one mine in the diamond sector. Growth for uranium is also expected to slow to 3,6% in 2019.

“Growth for the agricultural sector is expected to stabilise around 4% in 2019 and 2020,” the BoN stated.

Although the fishing industry was estimated to contract by 4,7% towards the fourth quarter of 2018, the central bank is expecting it to grow moderately by 1,4% in 2019.

Growth forecasts for the secondary industry are expected to expand by 2,2% in 2019 from 0,3% in 2018, from severe contractions of 6,7% in 2017 and 6,4% in 2016, respectively.

“The projected recovery in the secondary industries is expected to originate from an improved growth in manufacturing and lesser contractions in the construction sector,” the bank said.

Furthermore, the manufacturing sector is expected to expand further by 2,3% from growth rates of 1,7% and 1,3% in 2018 and 2017, respectively.

This expansion in 2019 would be supported mainly by grain mill products and beverages.

The electricity and water sector, on the other hand, is expected to decline slightly in 2019. However, construction is projected to gradually improve to a positive growth rate of 1,6% in 2019 from a contraction of 5,2% in 2018.

Even though the bank predicted the tertiary industry to incur positive growth of 0,3% in the economic outlook report of July 2018, the outcome is that the industry was projected to have contracted by 1,5% by the last quarter of 2018.

“The downward revision was mainly based on weak outcomes in sectors such as wholesale and retail trade, real estate and business services, transport and communication as well as the public sector,” the Bank of Namibia said.

Simonis Storm Securities said in their economic outlook for 2019 that although these sectors have experienced slower growth in 2018, they are expected to improve in 2019.

They added that despite adverse global developments which occurred in 2018, the local mining sector outlook for growth remains strong, with the real gross domestic product to grow by 1,1% in 2019.

A research associate at the Economic Association of Namibia, Klaus Schade told The Namibian that high production levels at the Husab mine would also benefit the mining sector to some degree in 2019.

Another economist, Mally Likukela, observed that 2019 will be less hard than 2018 as economic agents have found ways to survive and keep afloat.

He added that positive growth in Namibia’s trading partners would boost the local economy, and the usual economic activities that spring to life in the election build-up will spur the economy to some extent.

“Getting out of the woods will take longer, mainly because the balance sheets of most corporations and individuals were shattered severely, and the deeper-than-expected impact of the fiscal consolidation will further slow down the recovery process,” Likukela said.

He added that the growth rate would most probably remain flat, and inflation would hover around 5%.

Recovery in the international prices of commodities could help the mining sector, but the looming drought will work against it, he noted.

The Namibian Economy: RMB View

Namibia: The Namibian economy sank even deeper into recession after 3Q18 GDP came in at -0.8%, marking the tenth consecutive quarter of negative economic growth. With fishing, construction, manufacturing, trade, hospitality, health and government sectors all contracting, the road to economic recovery is becoming increasingly daunting, at a stage where electricity and water is the only sector growing above its long-term average. The electricity performance was supported by strong inflows into the Ruacana hydro power plant increased electricity output, resulting in fewer electricity imports.

The AfDB funded economic stimulus package, which will deploy N$1bn in the current fiscal year and N$1.4bn in the following fiscal years, is expected to contribute to lifting the economy out of recession. However, based on the magnitude of the contraction, the stimulus package is way too small to turn an N$190bn economy. Furthermore, throwing even more money at the economy and resuscitating loss-making state-owned enterprises is tantamount to flogging a dead horse. We therefore maintain our core forecast to an optimistic 0.2% in 2018 and 1.4% for 2019, with a weak medium-term outlook.

Trade data: A silver lining

Third quarter data shows increasing international trade, as exports trumped imports, resulting in a sharp narrowing of the country’s trade deficit. The strong export performance was the result of increased exports of diamonds, copper and metal ores, coupled with a once-off export of a vessel, which boosted export numbers even further. And, despite a weak economic performance, the economy managed to increase imports by 16%, bolstered by imports of intermediate goods (copper cathodes, fuel, vehicles, boilers and other metal ores and concentrates). These are all significant inputs to domestic production processes and, as such, are positive lead indicators. Accordingly, the IJG reported one of the largest improvements in its leading indicator for the Namibian economy earlier this week, continuing its upward trend for the fourth consecutive month and suggesting a silver lining for the domestic economy. This crucial improvement will narrow the balance of payment deficit, given the significant capital inflows as pension funds repatriate funds to comply with the September Regulation 28 deadline. Coupled with the AfDB funding, this will be the game changer for the fourth quarter, breaking the 10-quarter recession streak and return the economy back to positive growth – albeit weak – we will take any growth at this stage!

Inflation: Rising distribution cost push inflation higher

Rising energy costs continued to push domestic inflation higher through November, with the latest print lifting to 5.6%, which is significantly higher than our inflation expectations. After rising distribution costs pushed food inflation upwards last month, we expect to see a continuation of the same trend this month, with the price pressure spilling over to consumer durables. In this regard, beverages, appliances, consumer electronics and furniture inflation have begun to lift in tandem with rising distribution costs – which increased after diesel prices rose by 50c in October and by another 70c in November. The direct impact can be seen in the rapid acceleration of transport inflation to 13.8%.

However, the diesel price has been cut by 40c in December, after similar over-recoveries from the National Energy Fund in November. However, we do not believe the lower fuel costs to be passed on to consumers during December and January, and therefore expect to see transport inflation remaining upwardly sticky. As for next year, we expect a downward revision to rental inflation, which according to our estimates has contracted by 8.2% compared to the current 2.6% increase. This should ultimately lower the housing inflation and, as the biggest component in the inflation basket, reduce the overall inflation profile for next year. So, it is the lower housing inflation that will keep inflation expectations within bounds, despite the stubbornly high transport inflation – which is about the only good news for the struggling consumer at this stage.

Trumpism

Moody’s Investors Service on Friday affirmed several of Namibia’s credit ratings, but also retained a negative outlook.

Those affirmed, Moody’s said, are the Ba1 long-term issuer and senior unsecured ratings.

The decision reflects Namibia’s slowly improving growth prospects, the ratings agency said, as well as “moderate” wealth, both of which are supporting the economy’s shock absorption capability.

Namibia’s institutions have “relative” strength, Moody’s continued, and are sticking to fiscal objectives in a difficult economic and financial climate.

“The decision to maintain the negative outlook reflects Moody’s concern the government will not be able to address the vulnerability to shocks which the structure, level and trajectory of Namibia’s debt burden creates,” said Moody’s.

“Such shocks might include subdued growth in South Africa, lower than expected Southern African Customs Union revenue, a shock to commodity prices, and/or a marked and prolonged tightening in external financing conditions, including renewed depreciation of the South African rand,” it continued.

“While the government has maintained its fiscal consolidation objectives, progress towards these objectives and the related strengthening of the country’s fiscal institutions has been limited so far, leaving Namibia’s credit profile exposed to economic and financial shocks.”

Upside to the ratings could come from “significant” fiscal measures and a strengthening of institutions in Namibia, Moody’s said.

On the downside, the ratings could change if policy does not protect Namibia from higher financing costs or potentially lower revenue.

By George Collard; georgecollard@alliancenews.com

Land and Livelihoods in Namibia

 

The Economic Association of Namibia (EAN) has published a great number of articles on issues
of economic importance in Namibia over a number of years. Many of the articles relate to matters
concerned with land and livelihoods, which are issues that feature heavily in our debate and
discourse. This booklet reproduces those articles in a single volume, for ease of consumption and
reference.
For many years, the Association has espoused the benefits of focusing on policy interventions
that unshackle the potential of the Namibian people, catalysing this potential towards greater
development, building capacity and wealth, and ultimately breaking the chains of poverty and
inequality that continue to hamper far too many Namibians. Key interventions such as improving
access to ownership of urban land (rather than providing houses); increasing land ownership
opportunities in communal areas; enhancing access to savings mechanisms; stimulating
cash-multipliers in rural societies; and strategic, evidence based, intervention and restitution on
communal and commercial land form but a few of the proposals tabled by the EAN.
Many of these proposals are now being given the consideration that they clearly deserve. The
EAN is proud of its contribution in making these and other proposals, as well as its track record
of sparking discourse and debate to improve the lives of Namibians, however challenging these
debates may be.
In this regard, the EAN regularly takes an independent and objective position on critical and
emotional issues, where such views are founded in research and evidence. However, at the same
time, the Association appreciates the human, often emotional, factors at play in decision making
and public opinion.
This booklet on Land and Livelihoods comes at an important time, as the Namibian economy
shows lacklustre performance at best, and as unemployment, inequality and poverty show undesirable
trends. The contents of this booklet provide extensive insight and recommendations on
policy interventions and options that can help lead Namibia out of these challenging times.

The overview of the booklet is as below:

URBAN LAND AND MIGRATION 7
Rural-urban migration – a blessing in disguise

Urban migration: The Good, the Bad and the Ugly

Too Poor to Own Land

Namibia’s housing problem is not hard to address

Why do so many Namibians have to live in urban shacks?

Windhoek: A Tale of Two Cities

House prices not just expensive, but unaffordable

Would a Land Value Tax reduce the housing backlog?

Why is Namibia changing rapidly from a rural to an urban society?

Public spaces create business opportunities

How Manhattan solved its housing problem in the 1800s

Housing market moves to buyers’ market

Roads vs Streets: the Economic and Social Cost

 

INCOME AND INEQUALITY 26
The myth of the lazy poor

One small, but big aspect of the Basic Income Grant

The multiplier effect of Basic Income Grants

How about a Basic Nutrition Grant instead?

Is food security more important than cash security?

Perpetuating inequality on a daily basis

Most Namibian families can’t own land!

Not the source, but the level of income matters

How do rural people save and invest traditionally?

What is the purpose of property rights?

The cost of bypasses

Transport services, jobs and motor cycles

 

RURAL LAND AND FARMING 40
Should tenure systems still govern land uses, or vice versa?

Capital or revenue: the use of land by wealthy, urban livestock owners
“We will die communal”

Strip the Emperor’s clothes: the façade of the rural

What is the purpose of livestock in Namibia?

Crop farming on communal land: maximising production or minimising risk?

The Business of Land Grabbing

What is land reform all about, or what could it be?

 

Please download the booklet here:

Download (PDF, Unknown)

Fuel price hikes – The Namibian

CONSUMERS must brace themselves for another tough month as fuel prices were increased for a fourth consecutive month, with analysts predicting that prices will continue on an upward trajectory for the remainder of 2018 (…)
Economic Association of Namibia research associate Klaus Schade added that the continuation of the depreciation of the Namibia dollar against major currencies as well as oil supply-side uncertainties owing to the ban threatened by the United States administration on Iranian oil from November onwards are likely to exert further upward pressure on domestic fuel prices (…)

Read the full article in The Namibian

Financial analysis of social protection programmes

EAN Research Associate, Klaus Schade, gave a presentation on the financial implications of social protection programmes at the Ministry of Poverty Eradication and Social Welfare workshop on Social Protection in Swakopmund. The presentation is based on a report prepared for the ministry with financial assistance by the OECD. OECD is going to release the report by November 2018.

Financial analysis of social protection programmes

A single African currency: What it would mean for global currencies? New Era

WINDHOEK – There has been speculations in recent years as to the real reason behind the removal of Libya’s Muammar Gaddafi with one of the most popular theories being that he was in the process of establishing a single gold-backed currency for Africa called the Gold Dinar. Many conspiracy theorists are of the opinion that Gaddafi’s new plan for Africa would have meant an entirely new banking system for the continent which would have taken economic power away from the current western powerhouses and would have dealt a severe blow to the US Dollar-based monetary system.
However, two local economic analysts seem to have opposing views on the practicality of a single African currency, with one saying such an ambitious plan is not pragmatic while the other feels that a common continental currency has the potential for strong value given the world’s dependency on African commodities.
According to Klaus Schade, a research associate at the Economic Association of Namibia, these conspiracy theories are not credible. To support his view, Schade put the African economy into perspective, noting that the Gross Domestic Product (GDP) of the entire Africa amounted to some US$3.4 trillion in 2016 while the GDP of China, the world’s second largest economy, was more than thrice this figure at US$11.2 trillion…

Read the full New Era article

Upward pressure expected to remain as inflation continues to rise – New Era

WINDHOEK – Continuous upward pressure is expected on inflation, mostly owing to the rising fuel prices, the most recent of which was a 25 cents per litre increase in August, attributed to the adjustment of the fuel tax in August. Although international oil prices have eased slightly, the prevailing sentiment is that the depreciation of the Namibia Dollar will increase the cost of oil in domestic currency which could result in further under-recoveries, meaning the actual costs of fuel are still higher than the pump price.
“If not fully or partly absorbed by the National Energy Fund as in the previous months, under recoveries will lead to fuel price increases. In addition, the municipality has increased bus fares, which will add further pressure on transportation costs,” noted Klaus Schade, Research Associate at the Economic Association of Namibia…

Read the full article in New Era