By Emma Kakololo
WINDHOEK
The year 2007 that is drawing to a close has been characterized by moderately slow economic growth for Namibia.
“Economic growth is going downward adjusted to about 4.2 percent,” said Dr Klaus Schade of the Namibian Economic Policy Research Unit (NEPRU).
Recent estimates show that slow growth has been evident since 2005 when it stood at 4.7 percent. Growth slowed from a revised 4.8 percent in 2005 to 4.1percent in 2006, owing to a significant decline in the manufacturing sector, especially fish processing on shore.
Numerous factors lie behind this year’s slowdown – perhaps most important, the inflation rates that continue to be high, even causing pessimism about the preliminary growth of 4.2 percent for 2007.
According to local economist Martin Mwinga, who is the Chief Executive Officer of RMB Asset Management, the country can expect a combination of slowing global growth and higher domestic interest rates to slow growth in Namibia to 3.8 percent this year as household spending responds to the higher interest rate environment.
“Personal disposable income is likely to remain under pressure in 2008, as the average rate of inflation remains high. The economy is only expected to grow by 3.5 percent in 2008.”
Despite the month-on-month inflation in Namibia remaining flat at 0.5 percent for the last two months and the year-on-year number declining slightly, said director of research at Investec Asset Management Namibia Dr Alfred Kamupingene, the direction of food inflation is threatening to spoil the party.
“In particular, the property market and eventually the construction sector also feel the pinch due to interest rate hikes,” said Dr Schade.
A relief for citizens for the festive season is that despite the recent rise in interest rates in South Africa, the Bank of Namibia (BoN) has decided not to adjust rates accordingly.
“The Bank has taken a policy decision that its rate could deviate from the South African Repo rate to some extent, without disrupting capital flows in the context of the CMA arrangement.
“In light of these developments, the Bank of Namibia decided to leave the Bank rate unchanged at 10.5 percent per annum, for now,” said BoN Governor Tom Alweendo.
“However, I certainly expect commercial banks not to increase their prime lending rates and to reduce the already unwarranted high spread between the Namibian and South African prime lending rates.”
Despite this somewhat gloomy backdrop, analysts argue that the mining sector that continues to benefit from strong world-market prices remains one of the main drivers of the Namibian economy.
“Overall growth is expected to be positive for 2007, especially with the uranium mine, Langer Heinrich, adding to mining production,” said Mwinga.
Schade however warned that despite the development of new mining sites; extension of lifespan of existing mines; exploitation of lower grade deposits; and an increase in copper and zinc production, uranium production is not at full capacity, while diamond production is lower than expected.
“This is due to on-shore deposits depleting.”
Vision 2030 Unlikely Due to HIV
Namibia’s Vision 2030 appears to be a far-fetched dream with the Human Development Index (HDI) deteriorating.
Contrary to the vision of Vision 2030, life expectancy has worsened over the years and it might take the country more than three decades (by 2045) to reach the levels before 1991 when life expectancy was 61 years, according to a recent study by the United Nations Development Programme (UNDP).
“You are not going to reach the same number like in 1991 until 2045,” said the author of the report, Sebastian Levine.
Life expectancy stands at 49, while 69 is the desired age set to be achieved through Vision 2030.
According to Levine, this “long-term decline” in life expectancy is pulling down HDI despite improvements in household income and educational attainment, the other two dimensions of human development.
In addition, he said, despite the fact that income poverty appeared to be decreasing, human poverty was increasing over time.
“Life expectancy is falling because the HIV pandemic is so strong that it more than offsets the positive effects of improvements in the other dimensions of human development.”
Levine stressed the need for effective implementation of programmes to treat those with HIV as well as prevent new HIV infections for the expansion of human capabilities.
He also called for reallocations in the development budget, as regions with greater need are under-prioritised in the current budgets.