Local businesses must not allow the pandemic to wipe out gains achieved in recent years, such as economic growth and reduction in poverty levels. In addition, the services industry needs to grow and rebound to re-employ some of the thousands of Namibians who lost their jobs to create and retain stable employment.
These were some of the sentiments expressed by Nedbank Namibia’s Executive for Retail and Business Banking Richard Meeks, at last week’s annual Economic Association of Namibia (EAN) conference, which was presented in partnership with the Hanns Seidel Stiftung.
“The theme ‘Leveraging the Services Industry for Economic Growth,’ is a timely one in this economic and social environment severely disrupted by the global health pandemic. No industry in Namibia has been spared from the impact of Covid-19 and the economic recession,” said Meeks.
At the conference, the Nedbank executive pointed out that the 2020 National Accounts revealed the financial and insurance services sector recorded a decline in real value added of 12.6% compared to a strong growth of 12.5% registered in 2019. The poor performance was attributed to insurance service activities that contracted by 20.2% in 2020, in contrast to a strong growth of 23.8% recorded in 2019.
Said Meeks: “The demand for long-term insurance reduced as cancellation of policies increased due to reduced disposable income. Short-term insurance also declined during the period. Retrenchments and business closure experienced in 2020, negatively impacted on the contributions to medical aid funds.”
Moreover, Meeks emphasised that financial services activities dropped by 4.3% in real value-added in 2020 compared to a growth of 2.5% registered in 2019, with the reduction in demand for loans and household deposits contributing to this decline. Furthermore, the contraction in the performance of the financial services sector was exacerbated by declines in investment incomes brought about by the Covid-19 economic crisis.
Meeks also noted that the banking sector’s performance deteriorated because of the pandemic but remained stable. However, banking profitability has been the lowest in recent years as indicated by the Bank of Namibia’s 2020 annual report.
“We may recall that the central bank introduced various macro prudential policy relief measures for the banking sector. These relief measures included loan payment moratoriums, the release of the capital conservation buffer and the relaxation of the determination on liquidity risk management, as well as postponement of the effective date for the single borrower limit. These are tough times including those of us from the banking sector, who are said to make huge profits all the time,” Meeks stated. He continued that the wholesale and retail trade sector was estimated to have recorded a decline of 11.6% in real value-added during 2020, compared to a decline of 7.9% registered in the preceding year. This poor performance, he noted, was reflected in the retail for clothing, furniture and vehicle sales that declined due to weak demand given reduced disposable income and further compounded by Covid-19 measures put in place to curb the spread of the pandemic. Real turnover in the wholesale and retail trade sector however increased due to base effects, following the Covid-19 related lockdown measures instituted during the second quarter of 2020.
Meeks further pointed out that the tourism sector, although remaining weak, regained some of the ground lost in 2020 owing to developments in tourist arrivals and the vaccine rollout globally.
“The positive from the pandemic is that we’ve seen developments to grow the local tourism industry. Last month, the Namibia Tourism Board (NTB) launched the ‘Domestic Tourism Campaign’ in Swakopmund with the objective for locals to visit the country’s various tourist sites. This campaign runs until March next year and we as locals must take advantage of these efforts to see our beautiful country,” Meeks commented.
He added that as per the EAN’s theme of ‘Leveraging the Services Industry for Economic Growth’ it will not be a walk in the park as key sectors of the domestic economy, such as manufacturing, diamond mining, agriculture, forestry and fishing, and beverage production, have contracted.
“Economic growth and recovery are in our hands, but we must adapt to the new reality. Those who refuse to adapt, and change will be left behind and may risk business foreclosures.
“The demise of Nokia as a mobile phone company is largely attributed to failure to change with the times. There is a need for all of us to accept the new reality and deal with the challenges brought about by both economic recession and the pandemic,” Meeks concluded.