Diamonds and Drought
Windhoek – Namibia’s diamond output is likely to decline to 1.64 million carats in 2013 from the 1.67 million produced in 2012, mirroring the overall slowdown in the country’s mining sector, the latest statistics from the Bank of Namibia (BoN) show.
Mining is Namibia’s economic mainstay, and depressed output in that sector, coupled with the worst drought in these parts in 30 years, has hit the country hard.
The mining sector’s total output will contract by 0.9 percent in 2013 from a growth rate of 12 percent registered in 2012 “owing to developments in diamond and uranium production”.
The output of diamonds, estimated at 1.64 million carats in 2013, will – however – expand by 2.5 percent in 2014 with marine mining activities boosting production, BoN said in its most recent economic outlook.
“The diamond industry continues to operate at near capacity, as onshore production continues to wind-down, reducing production over the medium term.
“Offshore production is, thus, expected to continue to be the main source in total diamond extraction,” the central bank said.
Namibia is the world’s biggest miner of offshore diamonds and the fourth-largest producer of uranium.
“Some uncertainties in diamond and uranium production are expected to exert a drag on mining sector growth,” Deputy BoN Governor Ebson Uanguta told journalists.
He went on: “The low uranium prices and the subsequent uranium output are expected to contribute to the slowdown in other mining activities.”
In 2014, the mining sector is projected to register growth of 4.4 percent.
Overall, Namibia’s economic growth will likely moderate to 4.7 percent in 2013 from five percent in 2012, according to Uanguta.
“The growth outlook is overshadowed by declines in key commodity prices, particularly uranium and copper, high food and energy prices, and the negative impact of the current drought,” Uanguta said.
The central bank said that production of uranium would most likely remain depressed in the short to medium-term due to low prices which are being attributed to lacklustre growth in emerging economies.
As if that is not bad enough, the drought that has affected large swathes of the country is the worst in three decades.
Due to the effects of the drought, growth in agriculture is expected to slow down to 5.5 percent in 2013 from around 10.2 percent growth registered in the prior year.
A rebound is expected in 2014 with growth in the sector projected to be 6.1 percent in 2014, should the country’s rainfall situation improve, the central bank said.
Crop production will decline by 9.3 percent in 2013, though a recovery is forecast for 2014.
“Estimates indicate that most cereal crop farmers are expecting below average harvest in 2013, due to poor rainfall and swarms of worms negatively affecting production.
“The effects of drought, which we believe to be the worst experienced i9n 14 years, is not only limited to the agriculture sector on the food security, but it will have negative spill over to other sectors, such as power generation from the Ruacana hydro power station,” BoN said.
The domestic challenges facing the Namibian economy are exacerbated by the fragile state of the global economy. Namibia’s growth challenges also mirror macro-economic conditions across the globe.
“Prolonged near-stagnation in the euro area and a further slowdown in emerging markets, especially the BRICS, pose risks to export demand and a decline in commodity prices, adversely affecting the domestic exports and growth,” BoN said.
“Drought conditions experienced in the country could also impair longer-lasting depressed conditions than assumed under the baseline projections and moderate growth.”
The central bank last week left its benchmark interest rate unchanged at 5.5 percent citing the need to boost growth. Namibia’s inflation fell to 5.8 percent in July from 6.2 percent a month earlier, creating room for bon to keep borrowing costs unchanged to support the economy, as demand for exports of diamonds and manufactured goods eased.