Government is looking at a drop in dividend payments from the central bank after the bank announced in its 2016 annual report that its annual dividends dropped from N$76.5 million in 2015 to N$68.1 million in the 2016 financial year. On top of the 4.4% drop in dividends, another notable drop was recorded in the currency circulation in Namibia which “marginally” decreased from N$4.5 billion in 2015 N$4.4 billion in 2016. The report attributes the drop to the “decline in demand for cash”. During the year under review, BoN achieved notable milestones in terms of having the right staff compliment. By the end of 2016, the central bank had 300 employees on its payroll, 37 fewer than the approved establishment (337).
At present, BoN’s staff is made up of 265 general staff, 33 managers and two executive managers, in line with the Affirmative Action Act of 1998. “In this regard, the Bank ensured that all its policies and practices were aligned to the affirmative action requirements and guidelines,” the report reads. BoN’s compliance has seen the Bank land a certificate of compliance from the Affirmative Action and Employment Equity Commission. Central bank governor Ipumbu Shiimi noted with concern the slow economic activities that mainly characterised 2016, especially when considering the fact that global economic growth slowed down by 3.1% from 3.2% the previous. The economic slowdown has been attributed to among other things the weak investments; slower productivity due to the drought; the drop in oil and other key commodities; UK’s vote to leave the European Union and the US presidential elections. On the local front, Namibia’s economic growth is projected to have dropped significantly from 5.3% in 2015 to 1% during the 2016 financial year.
The sluggish performance is attributed to the decline in the construction industry, metal ores, diamond mining and slower activities in the private sector – which in any case relies heavily on Government. Namibia’s reserves have remained sufficient to sustain the one-to-one currency peg with the South African Rand. The level of international reserves increased by 4.8% to N$24.7 billion at the culminating stages of 2016, from N$23 billion one year earlier. The reserves resulted in an improved import cover of 2.9 months in 2016 from 2.8 months in 2015, marginally lower than the international benchmark of 3 months. In order to remain pegged to the South African Rand and on par with the international benchmark, the international reserves in BoN’s vault should be able to import good to Namibia for three consecutive months. Additionally, the Government’s overall budget deficit is estimated to improve both in nominal terms and as ratio to Gross Domestic product (GDP) during 2016/17.
The improvements projected in Government’s budget deficit has been attributed to its continued consolidation efforts to spend money where it will have the most impact. According to Shiimi, to finance the budget deficit: “Government has introduced two new bonds and a total of N$492 million was successfully issued on top of regular issuance of Treasury Bills and existing bonds (internal registered stock).” Furthermore, the Government tapped its Johannesburg Stock Exchange (JSC)-listed Medium Term Note programme from N$3 billion to N$7.5 billion. “The intention is for the Namibian Government to become a regular issuer on the JSE and in so doing, increase the liquidity of, and demand for Namibian securities on that exchange,” Shiimi explained. At this stage, the total debt of government to GDP has increased to 40.7% which is higher that the Government debt ceiling which stands at 35%. However, Government remains optimistic in reducing its debt to 37.7% over the period of the current Medium-term Expenditure Framework spanning from 2016/17 to 2018/19.
Moreover, the report notes that the general financial system and banking sector in Namibia remained sound despite the volatile economic situation in 2016. According to the report, banking institutions in Namibia have displayed positive aggregate balance sheet growth and high profitability during the reporting year. The Banco Nacional Angola (BNA) continued to honour its repayment obligation with its Namibian counterpart. The repayment emanates from the implementation of the Angola Trade facilitation, commonly known as the Kwanza conversion agreement between the two central banks BoN said it has been monitoring risks relating to the aforementioned agreement which has since resulted in an accelerated repayment plan. Furthermore, the two banks(BoN and BNA) continue to share information on the global economic environment and the impact of low commodity prices on the economies of both countries.