Long road to recovery

With annual real growth of 2.4%, Namibia technically clawed its way out of the recession doldrums last year. However, boom figures like the 6.1% of 2014 are a distant memory.

The hard facts remain dismaying: Annual real growth since 2016 now stands at -1.05%, according to the latest preliminary data released by the Namibia Statistics Agency (NSA) recently. During this period, the country could only muster positive economic growth in two years, including the 1.1% in 2018.

Last year, Namibia’s gross domestic product (GDP) in real terms was about N$136.6 billion, a far cry from the N$146-billion levels of 2015 and 2016, and the second lowest on the NSA’s rebased records stretching back to 2013.

Investment, or gross fixed capital formation (GFCF), last year recovered to some N$26 billion from about N$23.4 billion in 2020. This figure has been declining from its peak of nearly N$47.4 billion in 2014.

Analysts have consistently been blaming this alarming trend on policy uncertainty and ­business-unfriendly regimes tainting the investment landscape. This include proposed empower­ment legislation, the contro­versial New Equitable Economic Empower­ment Bill (NEEEB), as well as the Namibia Investment Promotion and Facilitation Bill (Nipa).

DOWNWARD SPIRAL

Namibia’s real gross national income (GNI) per capita in 2021 contracted for the second consecutive year. At N$54 841 for 2021, it was 2.4% lower than the N$56 164 of the previous year – the lowest on the NSA’s rebased records and way below the peak of nearly N$64 000 of 2015.

Namibia real GNI per capita has contracted by 2.5% on average since 2016.

In nominal terms, total compensation of employees fell from nearly N$80.4 billion in the pandemic-hit 2020 to about N$80.3 billion last year. Employee compensation is now back at 2018 levels.

The figure for Namibia’s net savings in 2021 was around N$10.7 billion, compared to nearly N$7.6 billion the year before. Central government’s net saving for 2021 stood at -N$12.7 billion (2020: -N$14.3 billion), while the net saving of all other sectors ­totalled N$1.97 billion (2020: N$21.9 billion).

Consumption of fixed capital – the depreciation of fixed assets – last year reached -N$22.6 billion compared to -N$20.9 billion in 2020 and the biggest on the time series of the NSA.

OUTLOOK

The Bank of Namibia (BoN) in February said it expected the domestic economy to grow by 3.4% this year, slightly below the average of 3.7% forecast for Sub-Saharan Africa by the International Monetary Fund (IMF). Next year, the central bank expects growth of 3.7% in Namibia.

The IMF anticipates the global economy to grow by 4.4% this year, advanced economies by 3.9% and emerging market and developing economies by 4.8%.

The BoN forecast growth of 9.6% for primary industries in Namibia in 2022, followed by 8.3% the next year. In 2021, the sector grew by 8.0%.

Secondary industries are forecast to grow by 2.2% and 2.9% respectively in 2022 and 2023, following -6.6% in 2021.

Growth of 2.0% and 2.5% is anticipated for Namibia’s tertiary sector in 2022 and 2023 respectively. The sector grew by 1.9% last year.

“Risks to domestic growth remain dominated by the impact of the Covid-19 pandemic, but also include swings in rainfall pattern as well as high prices for energy products such fuel and gas and supply disruptions around the world,” the BoN said.

The central bank elaborated: “Risks to domestic growth are dominated by possible new waves of coronavirus infections, vaccine hesitancy, supply chain disruptions and the slow pace of vaccinations in Namibia. The first sub-variant of Omicron (BA.1) has led to tighter travel restrictions at the end of 2021, especially affecting the Southern African countries.”

By the end of March this year, only about 26% of the target population in Namibia was fully vaccinated, according to the ministry of health and social services.

PRIMARY INDUSTRIES

The BoN expects primary industries to grow by 9.6% and 8.3% in 2022 and 2023 respectively, following the rate 8.0% last year.

“The projected improvement is expected to come from the mining industry, with diamond mining anticipated to expand by 26.2% in 2022 and by 16.5% in 2023,” the central bank said.

Debmarine Namibia recently added the US$240-million Benguela Gem, the world’s most technologically advanced and sophisticated diamond recovery ship, to its fleet. This will increase Debmarine Namibia’s annual production by 45%.

The BoN expects uranium mining to expand despite risks from low prices and water supply issues – by 3.9% this year and 6.6% in 2023.

“In the medium term, impending risks from low prices for uranium and water supply challenges remain. In the short-term, however, these risks appear to have eased somewhat, as the spot price for uranium increased to over US$44.00 per pound during January 2022,” it said.

The agriculture, forestry and fishing sector is also expected to record a positive growth, by 3.1% and 3.8% in 2022 and 2023, respectively. Last year, the sector grew by 2.0%.

SECONDARY INDUSTRIES

The BoN forecast growth 2.2% and 2.9% respectively for 2022 and 2023, following a contraction of 6.6% in 2021.

“Except for construction, all other subsectors under the secondary industries are expected to register improved growth rates in 2022,” the central bank said.

The manufacturing sector is projected to grow by 2.4% and 2.8% in 2022 and 2023, respectively. Construction is forecast to remain in contraction this year before recovering to growth in 2023. The construction sector is expected to contract by 2.0% in 2022 before expanding by 2.5% in 2023.

TERTIARY INDUSTRIES

The tertiary industries are projected to grow by 2.0% in 2022 and by 2.5% in 2023, an improvement on the 1.9% last year.

Growth in wholesale and retail trade sector is expected to reach 2.0% this year and 3.6% in 2023.

Hotels and restaurants sector, a proxy for tourism, is projected to expand by 4.8% and 6.3% respectively in 2022 and 2023.

Growth for financial and insurance service activities is projected to improve in 2022 before slowing in 2023 - by 4.2% this year, followed by 2.0% next year.

“The profitability of financial institutions has been negatively affected as banks are faced with high non-performing loans and had to forgo some potential interest income by giving ­repayment breaks to clients who were negatively affected by Covid-19. This is in addition to operating in a low interest environment,” the BoN said.