Namibian Economics to the Point – January 2017
2017 started with good rains throughout January in several regions of Namibia, bringing hope for the economy, particularly for the agricultural sector. Inflow into storage dams in the central areas around Windhoek has however remained low.
Subdued economic growth
Namibia’s economy had slowed significantly by December 2016, with a severe drought, low commodity prices worldwide and almost no growth for Namibia’s important trading partners South Africa and Angola. Low oil prices negatively affected Angola’s economy, which reduced the export of Namibian products to our northern neighbour. South Africa’s slack economy severely impacted revenue for the Southern African Customs Union (Sacu). The revenue is shared among its five member states Namibia Botswana, Lesotho, Swaziland and South Africa.
Namibia’s government cut the national budget by N$5.5 billion last October and stalled major infrastructure and construction projects. This affected the building sector. Over 1,000 workers employed by construction companies were retrenched by year-end (see our December 2016 edition – Economics to the Point.)
One of the local stock brokerages companies, Simonis Storm Securities (SSS), expects Namibia’s economic growth this year to be 2.8 percent, compared to about 2.5 percent in 2016. Final economic statistics for last year by the Namibia Statistics Agency are expected in February.
“We forecast a gross domestic product (GDP) for 2017 at 2.8 percent with an expectation of a stronger mining sector on the back of stronger commodity prices and higher output across the board,” said SSS research and securities director, Purvance Heuer. Inflation is expected to be around 6.8 percent this year.
Tourism is thriving
Not everything is doom and gloom. Namibia’s tourism sector is still giddy on the success of the 2016 season, which experienced a 5 to 10 percent increase of visitors compared to 2015. “The 2016 season will be difficult to top in the 2017 high season, being mid-July to mid-November,” says Mannfred Goldbeck, Brand and Marketing Director of the tourism company Gondwana Collection. “Nevertheless, all indications are that we can expect a similar increase in 2017, provided there are no shockwaves internally or externally.”
Namibia’s political stability apart for its wildlife and open spaces makes it a popular destination for visitors.
A quick assessment based on pre-bookings for 2017 from car-rental and hospitality establishments reinforces expectations of the upward trend. “Increased activity by new airlines to Namibia, along with a weaker Namibian Dollar and South African Rand had a dramatic impact on the number of visitors to Namibia,” according to Goldbeck. “It remains to be seen however, how these airlines reflect on their activities in Namibia as a worthy investment over the longer term.”
The unprecedented increase in visitors in 2016 put pressure on accommodation facilities, especially during the high season. This caused accommodation further away from main tourist attractions to catch the overflow of visitors. As a result some tourists experienced sub-standard facilities – not ideal, but “certainly an incentive for greater investments in accommodation facilities,” Goldbeck says.
President Hage Geingob noted in January that “the tough economic outlook will require us to draw on the experiences and lessons learned during 2016 and to engage in difficult debates over limited resources and competing priorities.”
In a televised message, the Head of State announced several government initiatives for the economy: Government started to provide subsidised ploughing services, fertilisers and seeds to communal farmers in rural areas. Currently 700,000 inhabitants – a third of Namibia’s population - depend on the government drought relief programme.
Government will establish a multi-disciplinary youth training centre in the Kavango East Region this year and construct a new Vocational Training Centre (VTC) at Nkurenkuru in the Kavango West Region this year. These centres will train young people in vocational and technical skills.
Geingob further announced that the new Procurement Act, which regulates government tenders with the private sector, will come into force in February. The Act gives preference to Namibian companies and companies with Namibian majority shareholding for procurement and service deliveries. For capital projects like construction and infrastructure, foreign companies are encouraged to form joint ventures to qualify for government tenders.
Government will service 6,000 urban land plots and deliver 5,000 affordable housing units for low income earners this year.
Mining and energy
The Ministry of Mines and Energy however announced an increase for petrol and diesel in early January, which will have a dampening effect on the economy. Unleaded petrol increased by 20 cents per litre to N$10.68 at Walvis Bay, the entry port. Diesel (500 ppm) jumped by 30 cents to N$10.58 and 50ppm diesel now costs N$10.63 per litre at Walvis Bay. The fuel prices are higher in other towns’ further inland and vary. Fuel prices remain unchanged in February.
In another development the Ministry of Mines and Energy lifted the moratorium on prospecting and mining nuclear fuels, like uranium this month. New applications for prospecting and exploration licences were stopped in 2007, due to a rush for such licences in Namibia when uranium prices had increased considerably.
“The Ministry has withdrawn reservation of any area in Namibia from any prospecting operations and mining operations in respect of nuclear fuel minerals in, on or under such area”, MME Minister Obeth Kandjoze announced. To date Namibia has two operational uranium mines, Rössing Uranium and Langer Heinrich Uranium. A third mine, Swakop Uranium (Husab) - owned 90 percent by a Chinese government company - started operations end of 2016 with its first yellow cake produced on 30 December 2016. Husab plans to be in full production later this year. According to local mining experts, Husab will add five percent to Namibia’s Gross Domestic Product (GDP) once in full production with estimated 6,800 tons of uranium annually.
Finance Minister optimistic
After a challenging 2016, Finance Minister Calle Schlettwein is cautiously optimistic that 2017 will be better. “This year, commodity prices show signs of recovery and that is good for mining and our economy,” the Finance Minister said. The national budget deficit of 6.3 percent was fully financed.
Namibia dropped one rank in the 2016 corruption perception index, which was published this month. The Berlin-based non-profit organisation Transparency placed Namibia on rank 53 out of 176 countries scrutinised. In 2015, Namibia held rank 52.
In a related development two Chinese nationals and one Namibian businessman, who were arrested at the end of 2016 for apparently defrauding the Fiscus of N$3.5 billion since 2010, were granted bail of N$1.5 million each by the magistrate court. They apparently under-declared imports and exports through false invoices.
Several Chinese nationals and locals were arrested last year and also in the new year for illegal possession of rhino horns and elephants tusks. Poaching has seriously increased in Namibia recently.
22 Farms for resettlement
The Ministry of Land Reform hat acquired 22 commercial farms in the last ten months for the total cost of N$187,9 million. The 22 farms measure 140,064 hectares in total. “This was an exceptional performance”, Land Reform Minister Utoni Nujoma said during his annual address to his officials this month. Negotiations for three more farms totalling 10,376 hectares at the cost of altogether N$17,3 million were at a final stage, the Minister added. During this financial year (April 2016-March 2017) 78 beneficiaries, being previously disadvantaged Namibians were resettled on farms bought by the government.