Namibian Economics to the Point – December 2016
A difficult year for the Namibian economy has come to an end with low commodity prices worldwide and close to no-growth for Namibia’s important trading partners South Africa and Angola. Local economists and Finance Minister Calle Schlettwein are however optimistic that the worst is over.
“We are optimistic that the current difficulties are manageable and that they are transitional,” says the Finance Minister.
The international rating agency Moody kept Namibia’s investment rating unchanged at ‘Baa’ in early December. Moody however changed Namibia’s economic outlook from stable to negative due to the economic constraints Namibia is experiencing. In September the Fitch Credit Ratings agency reaffirmed Namibia’s credit rating at BBB-, but similarly revised the outlook from ‘stable’ to ‘negative’.
Oil and Gas
The Institute for Public Policy Research (IPPR) in Namibia introduced a website with information on oil and gas companies active in Namibia, including petroleum exploration licence holders. IPPR Director Graham Hopwood noted the purpose was to make such information more accessible to the public and to increase transparency in this sector. The website can be accessed at www.namibia.transparentoil.org. To date the only commercially viable gas reserve found is the offshore Kudu gas field, Namibia wants to exploit. In 2013 oil was found off the Namibian coast, but not in commercial volumes.
Germany’s Lufthansa subsidiary Eurowings announced this month it would add Namibia to its destination for long haul flights. Flights from Cologne to Windhoek will commence twice a week in July 2017. In October Dutch airline KLM added Windhoek to its international destinations, while Ethiopian Airlines and Qatar Airways are additional newcomers. These developments are benefitting Namibia’s tourism sector, which experienced 2016 as a bumper year.
Investments in Botswana and Zambia
Namibia’s Capricorn Investment Group announced in December it would acquire the controlling issued share capital of Capricorn Investment Holdings Botswana (CIHB) and Cavmont Capital Holdings Zambia (CCHZ). Capricorn will acquire 65 percent of the issued share capital of Capricorn Investment Holdings Botswana, which owns 100 percent of the share capital of Bank Gaborone; Capricorn will buy 97.9 percent of Cavmont Capital Holdings Zambia, which owns 100 percent of the share capital of Cavmont Bank.
The acquisition of shares is seen as a key enabler towards achieving the Capricorn Group’s aim to “diversify the business interests of the group and expand its footprint outside Namibia”, the Group announced. Capricorn owns Bank Windhoek in Namibia.
Progress with Harambee Prosperity Plan
During the first 8 months of implementing Government’s Harambee Prosperity Plan (HPP), some 1,681 houses for low income earners were built, while another 1,500 houses are under construction. Presidential Economic Advisor Dr John Steytler informed reporters during a press conference at State House on 13 December. So far, 2,240 residential plots for Government’s low-cost housing project have been serviced by municipalities. According to Steytler, the State’s electricity utility NamPower advertised tenders for the construction of a 200 mega watt (MW) renewable energy plant to boost the national electricity supply. ”The bids are currently evaluated,” Steytler said.
President Hage Geingob made the HPP public in April. It complements Government’s development plans. The HPP is outlined for 4 years until March 2020. It is based on 5 pillars: effective governance, economic advancement, social progression, infrastructure development and international relations with emphasis on economic diplomacy.
Namibia technically in a recession
Data released by the Namibia Statistics Agency (NSA) in mid-December revealed that Namibia’s economy contracted by one percent during the third quarter this year. During the second quarter the economy contracted by 1.2 percent, having shown slight growth in the first quarter. Economic contraction during two consecutive terms means a country is in a technical recession. Mining and the construction sector showed considerable decline in the third quarter. Data for the fourth quarter will be released by the NSA in January 2017.
The construction sector called on Government to pay outstanding dues of some N$1 billion owed to construction companies for work done. Reportedly several hundred workers in the construction sector were dismissed this year due to fewer construction tenders as Government is reducing its infrastructure projects until the economic situation improves.
Finance Minister Calle Schlettwein reacted and announced that government had crafted a strategy “for funding the outstanding invoices” and payments would be honoured.
Bank of Namibia
The national bank, the Bank of Namibia kept its repo rate unchanged at 7 percent in December. The next monetary policy announcement will be made in mid-February 2017.
The Bank of Namibia further announced that from March 2017 prospective property buyers will have pay higher deposits if they buy more houses. First time buyers need not pay any deposit if they buy a house. Home owners, who want to buy a second house, must pay a 20 percent deposit on the new property. For a third house, a deposit of 30 percent of the purchase prices is required, for a fourth house 40 percent deposit and for a fifth house the deposit must be 50 percent of the purchase price.
Visit from Germany
The leader of the Social-Democratic Party (SPD) in Germany’s Bundestag (= Parliament) Thomas Oppermann visited Namibia from 19 to 21 December. His visit also had an economic dimension: The politician popped in at the Aviation Centre, which is located at the Eros Airport in Windhoek. The Namibian company Aviation Centre Pty Ltd was bought in 2013 by Germany’s Rheinland Air Service (RAS) GmbH, which has its headquarters at the Düsseldorf-Mönchengladbach airport in Germany. RAS offers aircraft maintenance, repair, and overhaul (MRO) services at various locations in Germany. Namibia is its first major investment in Africa. Oppermann also visited the port of Walvis Bay, where a new container terminal is currently constructed as part of a huge harbour expansion exercise.
The German Embassy informed about Oppermann’s only after he had left. The local media had thus no opportunity to meet the German politician.