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Home / Reflecting on the year 2017 and looking into the future
Reflecting on the year 2017 and looking into the future
2017-12-20Staff Report 2 Sakaria Nghikembua As the year approaches the end, it is prudent to reflect on economic events and themes through which Agribank [Agricultural Bank of Namibia] operated, while fore-sighting the future. At a macro level, 2017 saw significant challenges such as lower commodity prices, contraction in fiscal expenditure, increasing debt-to-GDP ratio of 43 percent against the national benchmark of 35 percent, and the subsequent downgrade of Namibia’s investment grade to sub-investment grade (or junk status). The Namibian economy registered quarterly growth rates of -2.7 percent, -0.7 percent and -1.9 percent in the first, second and third quarters of 2017, respectively, compared to quarterly growth rates of 4.8 percent, -0.4 percent and -0.3 percent realised during the same periods in 2016. The picture has not been bleak on all fronts, however. The agricultural sector rebounded quite strongly from a two-year-long recession, registering respective growths of 15 percent, 20 percent and 5.3 percent in first, second and third quarters of 2017, respectively, compared to -2.9 percent, 7.2 percent and 14 percent recorded in the same periods of 2016. Agricultural commodity prices and sales volumes across the board have depicted a persistent rising trend throughout the year and maintained high levels compared to the prior year. This is particularly on the back of improved production and high demand in the local and export markets (South Africa), favourable prices and trading conditions. Looking ahead, the economy is expected to register overall annual growth of -0.3 percent from 0.5 percent previously estimated (Simonis Storm Securities) in 2017, before improving further to 2.2 percent and 2.4 percent in 2018 and 2019, respectively, owing to monetary easing, recovery in the agricultural sector, and growth in the mining and tourism sector. The trend in agricultural product prices is projected to improve. Hence, the agricultural sector is anticipated to strongly support growth. Expected growth in the agricultural sector is partly a response to the end of the El Nino drought that plagued the Southern African region for two consecutive periods (2015 and 2016). Despite the promising economic outlook, growing national debt, fiscal consolidation, uncertainty concerning the climate, remain downside risks to the economy. From a business perspective, Agribank operates in a dynamic environment faced with fierce competition in the financial intermediation market, uncertainty in climate change, economic conditions as well as disease and pest outbreaks. This has prompted the bank to strengthen efforts aimed at increasing our market share, diversifying our loan portfolio, improving loan collections, building brand loyalty, while mainstreaming risk management in our business operations. In terms of business prospects, we foresee growth resulting from a second consecutive year of normal rainfall. This is supported by a continued upward trend in producer prices across agricultural products. We therefore look forward to growth in our market share over the next two to three years. Pulling it all together, we see a promising future for the agricultural sector. Heading into 2018, we would continue to play to our competitive advantage, pursue opportunities in the sector and mitigate risks in order to shape a promising future not only for Agribank but also for the agricultural sector and the economy as a whole. *Sakaria Nghikembua is the Chief Executive Officer of the Agricultural Bank of Namibia 2017-12-20Staff Report 2
