Quarterly trade numbers fall but fish and meat exports show promise – Schade

Home National Quarterly trade numbers fall but fish and meat exports show promise – Schade

WINDHOEK – The latest trade statistics for the second quarter of this year, which were released by the Namibia Statistics Agency (NSA) on September 13, show that the country’s quarterly trade deficit dropped to its lowest level for the past couple of years, second only to the first quarter of 2016 when a deficit of N$448 million was recorded. However, a local economist says the trade statistics, which refer to trade in goods only and exclude the trade in services, show good numbers for both fish and meat exports. Namibia usually achieves a surplus in the trade of services.  

“The increase in the value of exported fish and of imported fish that is further processed in Namibia is encouraging. The value of fish exports was the second highest over at least the past five years. Likewise, the increase in the export value of meat, while the value of live animal exports dropped, suggests that more value was added to livestock in Namibia,” noted Klaus Schade, research associate at the Economic Association of Namibia. The value of live animals dropped by 8.1 percent to N$671 million.

The fresh figures from the NSA show that Namibia’s value of exports increased by 19.6 percent from N$19.1 billion in the first quarter of 2018 to N$22.8 billion in the second quarter. Commenting on the figures, Schade noted that the increase was caused by an increase in re-exports from N$8 billion to N$12.4 billion over the same period, most notably the re-export of a vessel to the UK valued at N$5.4 billion. 

Re-exports are goods that were imported into the country and then exported again. Excluding re-exports, Namibia’s exports dropped from N$11 billion (Q1 2018) to N$10.4 billion (Q2 2018). 

Overall, the value of imports dropped by 15.4 percent from N$28.4 billion to N$24.0 billion (Q1 2018) in the second quarter 2018. Schade pointed out that the import figure for the first quarter includes the importation of an oil rig valued at N$3.7 billion for drilling purposes in the Walvis Bay basin, while a vessel worth N$2.2 billion (most likely another oil rig) was imported in the second quarter. 

“This equipment will be re-exported once the drilling is completed. Excluding these two items from the import data, the value of imports dropped by 11.5 percent,” Schade said. 

The statistics also indicate that the trade deficit declined substantially by 86.6 percent from N$9.3 billion to N$1.2 billion in the second quarter of 2018. Excluding the two vessels mentioned earlier from the import and export data, the trade deficit would actually be 20.5 percent lower.

Moreover, except for the vessels that pushed up the value of exports, the export of diamonds increased by 8 percent to N$4.6 billion and the export of fish by 1.2 percent to N$2.5 billion. Furthermore, the exports of beverages rose by 13.8 percent to N$280 million and exports of meat rose by 71.6 percent to N$314 million. 

In contrast, the export value of copper ore declined by 11.9 percent from N$2.2 billion to N$2 billion, the value of copper cathodes from N$5.3 billion to N$4.1 billion and of zinc by 65.2 percent from N$1.2 billion to N$0.4 billion. 

In total, diamonds accounted for 20.3 percent of total exports followed by copper cathodes (17.8 percent), fish (11.0 percent) and copper ore (8.7 percent). The value of re-exports grew by 54.6 percent from N$8.0 billion to N$12.4 billion in the second quarter of 2018 owing to the re-export of the vessel. Otherwise, copper cathodes dominated the list of re-exports with 29.9 percent (N$3.7 billion), followed by diamonds with 11.7 percent (N$1.5 billion). 

Also, the total value of imports declined due to a sharp reduction in the importation of mineral fuel that dropped by 48.1 percent to N$1.7 billion and of ores and concentrates that dropped by 48.3 percent to N$0.7 billion. 

Schade cautioned in his commentary that the figures show some worrying trends because based on monthly data, exports are on a downward trend, which, he says, could be a reflection of declining commodity demand and prices, although the depreciation of the Namibia dollar should result in higher commodity prices in the local currency. 

“Moreover, a large and increasing share of exports consists of re-exports, meaning these are goods that were imported and then exported either during the same or a later quarter. These are not goods produced in Namibia and exported. In fact, the share of goods produced in Namibia over total exports is declining. In the fourth quarter of 2017, re-exports accounted for 32.3 percent of total exports. This share increased to 42.1 percent in the first quarter 2018 and 54.5 percent in the second quarter 2018. It is not only the share that is declining, but also the value of domestically produced exports,” Schade stated. 

In the fourth quarter of 2017, exports excluding re-exports amounted to N$12.4 billion, in the first quarter 2018 to N$11 billion and in the second quarter 2018 to N$10.4 billion. Schade emphasised that only these exports will increase Namibia’s foreign exchange reserves. 

“The strong depreciation of the Namibia dollar in particular at the end of August and beginning of September will increase the value of imports, in particular of mineral fuels, but also the value of exports in the domestic currency. The overall impact on the trade deficit depends on the elasticity of demand, i.e. whether the demand for imports drops faster than the price of imports increases and whether the demand for Namibian exports increases. Rising oil prices supported by looming US sanctions against Iran’s oil exports will put further pressure on the trade balance. The demand for commodity exports is relatively inelastic, since commodities are traded mainly in US dollar. It remains to be seen whether Namibia could gain a competitive advantage for other export products (processed and manufactured goods) due to the more favourable exchange rate,” Schade concluded.