Namibian Economics to the Point - February 2017
While a few dark clouds over Namibia’s economic downturn still prevail, there are silver linings as some mining companies and the tourism industry perform well. The Finance Ministry applied fiscal brakes on spending and demands that State-owned companies make profits. Welcome rains during February helped fill several dams and farmers are cautiously optimistic about beef and crop productions. Western parts of Namibia only received scattered rainfalls. Some nervousness prevails in the economy.
Good news first
Namibia’s second gold mine, B2Gold produced 14 percent more gold in 2016 than the previous year. Production came to 166 285 ounces of gold. The Canadian-owned Otjikoto mine near Otavi recently expanded operations. The Chamber of Mines is optimistic that commodity prices will improve. “Namibia is the only African country where new mines opened recently like the Tschudi copper mine of Weatherly International, B2Gold and Swakop Uranium’s mine at Husab,” Chamber of Mines boss Veston Malango says. Mining in Namibia employs 9,000 people and contributes 12.5 percent to GDP.
Things didn’t go so well for Vedanta’s Skorpion Zinc mine, where 278 workers face retrenchment. “We don’t have the heavy equipment to deepen and broaden an existing pit to extend the mining life to 2020 – we have to outsource the job,” explained the mine’s spokesperson Nora Ndopu to local media. She was however hopeful that the contractor might absorb the 278 workers.
The State bank kept its repo rate at 7 percent this month, despite recommendations from independent economists to raise it. The Namibia Statistics Agency this month published the inflation for January, which jumped to 8.2%, 0.9% higher than December 2016. It is the highest inflation rate since 2009. Food prices, fuel and energy costs have pushed up inflation.
In contrast new vehicle sales dropped by 14,6% in January (910 vehicles sold) compared to December 2016. Apart from the usual spending jitters consumers have after Christmas, the re-introduction of a 10 percent deposit by government for new car purchases also throttled car sales.
Tightening the screws
Finance Minister Calle Schlettwein, is preparing the national budget he will table in Parliament in early March. While talking about silver linings behind the clouds on the economic horizon, when addressing to CEO’s of State owned companies, Schlettwein also predicted a low 1,3 percent economic growth for Namibia this year. During that meeting Schlettwein spoke frankly and revealed that many public enterprises relied on government bailouts instead of making profits. “That scenario cannot continue,” Schlettwein said.
The private sector feels the crunch after the government halted large infrastructure projects and delayed paying Value Added Tax (VAT) returns as well as paying construction companies and service providers on time. At least 1,000 construction workers were laid off by private sector companies. “It is difficult for us smaller companies to keep afloat, having to wait longer for government payment,” owners of small service providers say.
Best year for tourism ever
Good news came this month from the tourism industry. According to the Hospitality Association of Namibia (HAN), 2016 will go down in history as “the most successful and positive tourism year” for the country. Accommodation facilities recorded nearly 60 percent occupancy throughout 2016. At the coast, occupancy rates soared to over 62 percent, said Gitta Paetzold, CEO of HAN. Better news still is that January 2017 showed an average occupancy rate of 45 percent, despite this being the low season.
In another development, Air Namibia and Turkish Airlines signed a code share agreement. From 1 March, the code share applies to flights Windhoek-Johannesburg, Windhoek-Frankfurt and Istanbul to Johannesburg as well as Istanbul to Frankfurt.
Tourists will be pleased that Namibia wants to introduce higher fines against elephant and rhino poaching. The Minister of Environment and Tourism asked Parliament to adopt fines up to N$25 million for poaching these endangered animals.
News from the energy sector
Construction for Namibia’s largest solar power plant will start soon. The power utility NamPower allocated the tender to a Spanish company for a 37-mega watt (MW) solar plant near Mariental. Three smaller Namibian companies are partnering with Alten Energy.
Namibia’s offshore gas field might be developed in due course for electricity generation. BW Offshore, company based in Singapore, will buy a 56 percent stake into the project, through its subsidiary BW Kudu. BW Offshore is also listed in Oslo, Norway. Namibia’s state-owned petroleum company NamCor will retain 44 percent. The Kudu gas field has reserves of 1.33 trillion cubic feet.
Mixed outlook for agriculture
Good rains in February also brought pests in the form of alien caterpillars descending on mainly maize millet and sweet potato crops. While the ‘African armyworm’ type is no stranger, though detested by farmers, the fall armyworm appears to have come from Latin America. According to the Food & Agricultural Organisation (FAO), the various caterpillar types have destroyed some 50,000 hectares of crop fields in northern Namibia. Chemical spraying brought little results. These caterpillars, eventually transform into moths. These pests recently invaded six countries in Southern Africa within 8 weeks.
The three-year long drought in Namibia, which has not yet been overcome, also affects the ability of communal and commercial farmers to repay loans. The Agricultural Bank of Namibia (AgriBank) announced in February that farmers owed it N$500 million, nearly 20 percent of the N$2.4 billion loan book. AgriBank will outsource debt collection to a company which will retrieve repayments from defaulters. AgriBank belongs to the government.
On the legal front
In its fight against corruption, the government wants to protect witnesses and whistleblowers. The National Assembly is currently debating the two bills.
Government will soon set limits for residential and commercial rents in the country. A rent control bill is to be tabled in Parliament this year, Information and Communications Technology Minister Tjekero Tweya announced this month. The aim is to curb exploitation of lessees. Rentals and property prices in Namibia are very high.
Arrests after illegal activities
Corruption does not pay. Namibia’s Anti-Corruption Commission (ACC) arrested the former mayor of Rehoboth, the town’s current Chief Executive Officer and a municipal employee on corruption charges this month. They were allegedly in cahoots with a building contractor who received a tender circumventing the prescribed tender procedures. The builder was also arrested as he allegedly only submitted a tender document a month after he was given the work for N$2,76 million. The job allegedly cost only N$1,16 million. The ACC investigated the matter for nearly 7 years. All 4 suspects are out on bail after paying N$20,000 each. The court case continues in June.