Mining turbo-charges NamibiaÃ¢â‚¬â„¢s economy
In its quarterly bulletin to September 2006, the Bank of Namibia (BoN) said the economy performed relatively well during the second quarter of 2006 strengthened by strong growth in the mining sector, wholesale and retail trade, motor vehicle repair and household goods, hospitality industry, transport and communication, among other sectors.
BoN said growth in the agricultural sector ‘ which is anchored by the number of livestock marketed ‘ however, remained poor. The central bank said farmers are not willing to sell their cattle early, opting to continue growing their herds because of the good grazing.
The central bank could, all the same, not say whether Namibia was on course to meet its growth target of 3.9 percent in 2006.
Value addition to the agricultural sector contracted by 0.6 percent during the second quarter against to a slump of 8.2 percent during the first quarter. In the second quarter of 2005, agriculture declined by 1.1 percent, BoN said.
The number of cattle exported to South Africa also went down by 25.2 percent during the period under review from a 3.4 percent decline early this year.
A rebound in the mining sector’s performance, however, ensured that Namibia maintains its two-year-long economic growth path.
Government has projected that the economy would grow by 3.9 percent in 2006, citing increase in sales of rough diamonds and rising revenue from the Southern African Customs Union.
BoN said the mining sector expanded by a whopping 20.9 percent in the second quarter against a 4.7 percent decline witnessed in the same period in 2005. The mining sector grew by a dismal 1.2 percent in the first quarter.
“The positive performance of this sector is mainly attributed to the increase in diamond, uranium, gold and silver production,” BoN said in the quarterly bulletin.
Namibia has steadily improved its economic credentials during the past couple of years and in December last year became the third country in Sub-Saharan African to receive an investment-grade rating after powerhouse South Africa and Botswana.
Fitch Ratings assigned Namibia an investment grade credit rating of BBB- with a stable outlook, citing the country’s stable policy environment and sound economic fundamentals, which include a low debt burden and current account surpluses.
Diamond output, which anchors the country’s economic growth, increased by a remarkable 26 percent on a year-by-year basis. BoN said the good performance observed in diamond output is underpinned by mining in the areas with good diamond resources and a favourable exchange rate.
During the second quarter, diamond export earnings, however, suffered a slight 1 percent decline on quarter-to-quarter analysis but still raked in N$1.8 billion for the country.
BoN said diamond export value still rose year-on-year by 59 percent from N41.1 billion.
Production of uranium ‘ which is increasingly gaining dominance in Namibia’s economy ‘ grew by 13 percent as investors rush to extract yellowcake from the country.
Namibia currently has two uranium mines whilst two others would be coming on stream in the coming years, government officials say.
Gold, lead and silver production also increased by 12.3 percent, 0.2 percent and 25.3 percent respectively.
Zinc output, however, suffered a 28.1 percent decline and the central bank attributed this to operational disruption caused by the breakdown in equipment at one of the zinc mining companies.
Farming, fishing and diamond mining heavily dominate Namibia’s economy although manufacturing now accounts for over 12 percent of gross domestic product (GDP).
The economy is also hugely reliant on neighbouring South Africa. The Namibian dollar is pegged at a 1 to 1 rate with the South African rand while interest rates are in line with the region’s economic powerhouse.
In 2005, real GDP grew by an estimated 3.2 percent, slowing from 6 percent in 2004. The government projected a 3.9 percent growth in 2006. The pace is expected to quicken to 4 percent in 2007, before slowing to 3.3 percent in 2008.
Economists have, however, slashed these projections to 3 percent, citing the upward rate movement, high crude oil prices and the non-performance of sectors such as agriculture and the fishing industry.