WINDHOEK – While economic growth in Namibia last year did not meet expectations, prospects are brighter for 2014, says the Economy Watch for February issued by the Institute of Public Policy Research.
This year’s prospects are good because of anticipation that global economic activities would have a positive impact on the demand for commodities, and their prices, which is good news for Namibia, which produces and exports raw materials. Construction, boosted by the anticipation of thousands of affordable houses under the government’s mass housing scheme, is also set to drive up economic growth this year. Also expected to boost the construction industry is the development of Husab Uranium mine, Otjikoto Gold mine, Tschudi Copper mine, all which are in construction phases to come on stream in the coming year. There is also the expansion of the Walvis Bay harbour, the construction of the Neckartal Dam, and the construction of new shopping malls.
The optimism remains even though the weakening of the Namibian currency against major world currencies hit the uranium mining sector, and as a result mining companies had to reduce losses by shedding labour and other cost cutting measures. This is because gold and uranium had been taking a knock, before they started regaining some ground in January, and prices of the other commodities continued weakening slightly. In the long run though there are expectations of a stronger global economic recovery that would stabilise and perhaps push up demand and prices. “Since construction is a labour-intensive activity, it will have a positive impact on the labour market and eventually on the wholesale and retail trade sector through increased purchasing power,” according to the IPPR’s Economy Watch. Like other export-oriented sectors, tourism could benefit from the weak Namibian dollar that increases the purchasing power of overseas tourists and makes Namibia a more attractive tourist destination. Uncertainties, however, remain concerning the agricultural sector after the worst drought in three decades resulted in a substantial de-stocking of the livestock herd. Since it will take some time to rebuild herds it is expected that livestock marketing and hence meat processing will take a dip. Namibia received about 37 percent of its total revenue from the Southern African Customs Union (SACU) Common Revenue Pool (CRP) during the current fiscal year.
Contrary to commodity prices crop prices (white maize and wheat) gained during 2013. White maize prices performed strongly adding 38 percent, while wheat prices increased by 4 percent. Crop prices moved upward by 18 percent and 7 percent respectively during January mainly on account of the cold spell in the USA that is expected to have a negative impact on the harvest of winter crops, in particular wheat, since the USA is the largest wheat exporter. Wheat prices for deliveries in the middle of 2014 rose recently to close to N$3 900 per tonne on the South African Futures Exchange (Safex) from N$3 785. Maize prices were supported in the USA by expectations of increasing demand for livestock fodder. However, white maize for delivery in July 2014 kept on trading below N$2 500 per tonne on Safex, lower than the current price of N$3 240. “The South African rand and therefore the Namibian dollar weakened substantially against major currencies such as the US dollar, British pound and Euro during 2013. While the losses were strongest against the Euro, exceeding 30 percent in 2013, the currency depreciated the most with 6.7 percent against the US dollar during January, indicating the strengthening of the US dollar. The depreciation is caused by domestic political uncertainties [with upcoming] elections, ongoing strikes, and global factors of cutbacks on quantitative easing in the US and could persist during 2014. This will result in inflationary pressure and lead to higher interest rates,” Economy Watch posits.
By Desie Heita