Nam, Bots most stable SADC economies

By Magreth Nunuhe

Windhoek – Namibia and Botswana seem to be the most stable economies in the southern African region as other countries appear to be constrained by political tensions, uncertainties, leadership vacuum and worries in the transition of power.   

Klaus Schade, a Namibian economic analyst and director of the Economic Association of Namibia (EAN) made this remark during his presentation titled Namibia’s Economy and Future Prospects on Tuesday.

He is of the view that South Africa, which is the largest and most diversified economy in Africa is not playing the role it could play, as there is a political vacuum in that country.

Angola is facing transfer of power uncertainty.  Although its just ended presidential elections “were relatively well and peaceful and accepted”. The conclusion of peaceful elections has created more stability in that country with the transition to a new President.

Angola installed João Lourenço as its third president in August 2017, after President Jose Eduardo dos Santos’ reign of 38 years.

Schade also expressed his worries about the situation in Zambia, Zimbabwe and Mozambique where political tensions appear to be flaring up. He also shared his concerns about political uncertainties on the global level in countries such as North Korea, tensions in the Middle East and near East, and the oil supply region.

But on the home front, Schade predicts Namibia’s agriculture sector to grow by more than 10 percent, while mining is expected to perform better this year and next year, with diamond mining in particular expected to increase with new commissioned exploration vessel, the SS Nujoma.

“We have also seen a reversal of prices for zinc and copper, which increased by 15% since beginning of this year compared to last year during the same period,” he added.

However, he was more cautious about zinc and copper production, saying that this could result in return to production of mothballed mines elsewhere.

He was also not as optimistic about uranium production, because of low uranium prices, but as from 2018, there are expectations that the world-class Husab Mine near Swakopmund in the western part of Namibia will reach full capacity, which could however have impact on other domestic uranium mines’ production, such as Langer Heinrich and Rossing, as well as on global prices.

In the secondary sector, Schade predicts that meat processing will be negatively affected by restocking of livestock. He said that restocking of livestock could reduce livestock numbers sold to abattoirs and there has been a tremendous record of exports of live animals in the second quarter of 2017 than through all previous quarters when we experienced the droughts.

This is reflected in price increase of meat of about 6-8 percent, indicating supply constraints.

Beverage production which was mainly outsourced to South Africa because of a constraint in water supply here, could see and increase due to improved water supply in Namibia this year.

Namibia suffered from severe drought for three consecutive seasons for the past four years, which has had an effect on the whole production in the agricultural sector.

When it comes to construction, in particular manufacturing activity related to construction such as metal fabrication and cement, he sees that industry remaining under pressure this year.

Schade also sees further contraction in  the construction industry, because of budget cuts, while two major industrial projects; the expansion of Walvis Bay harbour and Neckartal Dam are expected to be completed by mid or end of 2018 are hopefully to bring relief to the industry.

“We are aware of the construction boom that recorded at least 25 up to more than 40% of the growth in 2014, mainly due to development of the new three mines, other major infrastructure developments, new shopping malls, residential areas, mass housing scheme which was then suspended, construction sector – these growth rates are not sustainable in the medium and long term,” he opined.

Schade said that unfortunately, the finalisation of the development of the new mines happened more or less at the same time when the Namibian government also announced severe budget cuts that affected capital projects in 2016. Consequently, the construction sector saw a decline of 30 percent last year.

“This year, if we look at some selected quarters – it was mainly driven by the mining and the construction sectors,” he said.

According to Schade, Namibia has also seen an inventory increase in the past three years with the balance stood at close to N$2,3 billion, and unless demand is up and inventories are reduced, it might have effect on future production.

He said that most of the inventories were related to mineral production.

Tourism is expected to perform well despite currency appreciation over past 18 months and despite drop in shopping tourists from Angola, according to Schade.When it comes to the labour market, there has been an increase in the unemployment rate in Namibia in 2016 from 27.5 percent to 34%.

Namibia lost 74,000 jobs in the agricultural sector, 30,000 jobs in wholesale/retail trade, while employment in private households were down by 8%.

“There is a median shift in unemployment in rural areas. Urban areas remain fairly stable,” said Schade, adding that women in particular were affected by more than 50 percent unemployment.

Schade said that external trade was a little bit worrying, “I am not aware we ever had a positive balance, a surplus of exports or imports, but the magnitude is not sustainable,” he pointed out.

With the development of new mines, he said that one would expect increase in imports while exports hopefully pick up later, especially when they reach full production.

“However, that is something we haven’t really seen yet,” he said. As an example, he mentioned the B2Gold mine that started production in 2015 and increased contribution of the sector by more than 60 percent to GDP, but “we don’t see any reflection in the trade statistics.”

September 2017
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