22 Juli 2020 | Wirtschaft

Economy’s glass not half full, totally empty

Data trickling in shows the economic damage caused by the Covid-19 pandemic and emphasises the importance of government policy certainty to attract investment to revive the economy. Trying to lure investors back without friendly policy is like trying to catch lighting in a bottle.

Nothing seems to tell it as clearly as naked facts. – Gitta Paetzold, CEO: HAN

Jo-Maré Duddy – Barely one out of every 20 hospitality rooms sold in the second quarter of 2020, an annual drop of 69% in beverage production in April and May when liquor sales were banned, an annual tumble of nearly 62% in the value of buildings completed in Windhoek, Swakopmund, Walvis Bay and Ongwediva: These are the symptoms of an economy infected by Covid-19.

Add to this exports which in total plummeted by 30% or nearly N$5.5 billion in April and May compared to the same two months in 2019, and one gets a faint idea of just how deadly the virus is to the economy. A detailed report on Namibia’s exports and imports is illustrated on page 4 in today’s Business7.

Official data on the impact of the global pandemic and the lockdown on Namibia is starting to trickle through, adding impetus to the private sector’s continuous plea for government to settle policy uncertainty as the only remedy for an economy already ailed by recession.

No walk in the park

Figures released by the Namibia Statistics Agency (NSA) recently show indices for room occupancy rates, bed occupancy rates, as well as regional and international arrivals and departures at the lowest since the publication of the sectoral reports for tourism on the NSA’s website in 2014.

In April the indices for room occupancy rates, bed occupancy rates, as well as region and international arrivals hit a record low of 3.9, 4.8 and 0.4 respectively.

This means that room occupancy rates were 96.1% lower than in 2015, the current basis year for the index. Bed occupancy rates fell by 95.2%, while regional and international arrivals were down 99.6%.

The index for regional and international departures stood at 2.8 in April, 97.2% lower compared to 2015.

In May, room occupancy was 10.2%, while bed occupancy was 13.4. Regional and international arrivals were 0.9% and departures dropped to a record low of 0.6.

Prior to March this year, the lowest any of these indices occasionally recorded was 70+. January 2018 was the exception, when room occupancy rates came in at 57.3.

‘Doom’

The latest statistics released by the Hospitality Association of Namibia (HAN) show the country had a room occupancy rate of 4.86% in the second quarter of 2020. This means only 12 251 rooms out of an available 252 191 rooms in data captured in HAN latest quarterly survey were sold.

The respondents in the HAN survey had 500 791 beds in total available, of which only 22 248 were sold. Bed occupancy therefore stood at 4.44%.

In the same quarter in 2019 the rate for rooms was 53.98% and for beds 44.08%.

“Occupancy levels of below 10%, and as low as less than 5% occupancy in the second quarter of 2020, spell doom for our sector,” the chief executive officer of HAN, Gitta Paetzold, says.

For the hospitality industry to break even, occupancy should be 43%, Paetzold says.

Room occupancy in the second quarter in central Namibia was the highest at 6.52%, followed by 6.04% at the coast. In the North the rate was 3.98% and in the South 2.58%.

Of the 22 248 beds sold in the past quarter, 17 259 (77.58%) were for leisure, 4 699 (21.1%) for business and 289 (1.3%) for conference-goers. Beds sold for leisure in the second quarter of 2019 comprised 82.6% of total beds sold, while the figure for business was 14% and 3.4% for conferences.

‘Open the borders’

Paetzold pointed out that the leisure figure in the past quarter consists mainly of tourists stuck in Namibia due to travel bans, as well as people in quarantine as government struck accommodation deals with certain hospitality providers.

“While there is much talk and hype about the catastrophic impact that the global lockdown and travel ban measures have had on the tourism sector since the onset of Covid-19, nothing seems to tell it as clearly as naked facts,” she says.

She continues: “Namibian tourism and the economy in general need the influx of foreign exchange earnings and the numbers of travellers to help us reach occupancy levels to above 50% again to help the tourism industry break even. This can never be achieved through local and regional travel, not in good times, and never in the very hard financial times we in Namibia currently find ourselves in - where it has become a challenge for most to pay school fees and other expenses, let alone to spend on leisure and luxury.”

The Bank of Namibia (BoN) expects hotels and restaurants – used as a proxy for the performance of the tourism sector – to grow by about -58% this year compared to 2019. According to the central bank’s latest updated economic outlook, released in April, the sector will remain in recession next year too.

At current prices, the BoN estimates that hotels and restaurants will contribute nearly N$1.7 billion to the economy in 2020 compared to about N$3.89 billion last year.

“We need the resumption of leisure travel and the re-opening of borders,” Paetzold emphasises.

Drop in the ocean

According to the NSA, Namibia produced 205 570 hectolitres of beverages in total in April and May - a plunge of 466 626 hectolitres or 69% compared to the same two months in 2019.

Of the 65 months the NSA has tracked since January 2015, its sub-sector index for alcoholic beverages only fell below 100 on 14 occasions.

Two of those were April and May this year. Alcohol sales were banned during lockdown, as well as Stages 1 and 2 of the State of Emergency and big manufacturers like Namibia Breweries seized production.

The NSA’s sub-sector index for alcoholic beverages registered 8.6 and 16.9 in April and May respectively. In the same two months in 2019, the index was 124.8 and 126.3 respectively.

The lowest the index fell prior to April and May, was 77.1 in February 2015.

Beverage production last year pumped nearly N$2.9 billion at current prices into the economy, according to the NSA. As such, it share of manufacturing’s total contribution to the gross domestic product (GDP) was 13.7%.

NamBrew, the biggest company on the Local Index of the Namibian Stock Exchange (NSX) in terms of market capitalisation by total shares in issue, is a major player in local beverage manufacturing.

To illustrate its contribution to the economy: The group employed 801 people permanently in its 2019 financial year, of which 98.4% was Namibians. For the 12 months to 30 June 2019, NamBrew paid nearly N$402.6 million in salaries, wages and other employment costs.

More than N$2 billion was paid to suppliers of materials and services, of which 35% was local procurement spend. In total, NamBrew contributed more than N$1 billion to state coffers in the form of taxes, rates and duties.

Investors’ anticipated impact of Covid-19 on NamBrew’s financial performance has had a sobering effect on the group’s share price.

The heavyweight on the Local Index ended March on N$40 per share. At the end of April its share price was N$38.99. In May it went down to N$38.40. NamBrew ended Monday (20 July) at N$35.00 per share.

It has lost more than N$1 billion in market capitalisation since the end of March.

Brick wall

According to the NSA’s sectoral reports, buildings to the value of N$126.2 million were completed in Windhoek, Swakopmund, Walvis Bay and Ongwediva in April and May.

Compared to the same two months in 2019, this is a drop of about N$205.4 million or 62%.

In April, buildings to the value of N$1.7 million were completed, compared to N$88.4 million in the same month in 2019. May’s total of N$124.5 million was N$118.7 million lower than a year ago.

Commenting on construction in Windhoek in May, IJG Securities said it was the first time since July 2018 that there were no approvals for commercial and industrial building plans in the capital, excluding the lockdown in April.

“As building plan approvals are a leading indicator it points to diminishing construction activity going forward,” IJG said.

“The lack of approvals in May is somewhat unsurprising given that businesses were severely hit by the lockdown with few financially able to invest in capital investment projects.

“Consumers and businesses have both been adversely affected by the lockdown with few still financially able to invest in capital expansion projects,” the analysts said.

Construction has been in recession since 2016 and the BoN expects the sector to remain in the red in 2020 and 2021. For this year, the central bank’s latest growth forecast is -16.3%. For next year, the BoN expects a contraction of -1.5%.

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