….as Old Mutual launches new Fund
2018 will be a tough year for businesses that depend mostly on government to do business, with IJG predicting that government will not be the driver of the economy that it has been in the past.
IJG’s head of sales and research Eric Van Zyl said the recession in 2017 was not particularly deep but the increase in unemployment remains – thus while GDP figures may not show it, the country has moved backwards.
Van Zyl was speaking at the launch of Old Mutual Investment Group’s Stable Growth Fund last week which is targeted at people who need to grow their investment in real terms while preserving capital.
Described as an actively-managed and conservative multi asset class fund, the fund is compliant with the Namibian Regulation 28 (Retirement Fund).
It may also invest up to 25% in listed property; invest up to 40% in listed equity and invest up to 35% in offshore assets.
With commodity prices expected to rise in 2018, Van Zyl highlighted that such increases are resulting in a renewed push into exploration of commodities such as Lithium, Manganese, Iron Ore which may drive some marginal growth.
Uranium remains a concern however, especially the fact that uranium supply is decreasing.
“The Largest mine in Canada is being shut down temporarily and Kazakhstan’s supply is decreased. China will continue to push nuclear, thus prices are expected to rise in 2020 and beyond,” he said, adding that Namibian mines will stay under pressure, if not go into care and maintenance.
He also added that Husab Mine’s contribution to GDP growth could be intangible.
“We should see decent growth production in 2018 land based operations contributing more over next few years.”
Van Zyl said ocean based operations remain resilient and that there is a decent initial demand shown in the US and Chinese markets.
And despite prices remaining depressed, Van Zyl predicts that the mining sector will post decent growth in 2018.
The construction sector has been dealt the biggest blow since the country’s economy took a dive a few years back. Van Zyl says “construction created such a low base that some growth should be expected but it is not going to return to its former glory in the near term.”
“Thus tertiary sectors and secondary sectors that benefitted from construction activity are likely to continue to struggle. Projects like the port expansion and Neckartal Dam will shed jobs when they come to an end,” said Van Zyl while also pointing out that construction activity may remain muted for some time.
The ever-performing tourism industry is expected to record another year of growth.
“The demand is high and waiting lists are long.
Brand Namibia is alive and well in our traditional markets, but some challenges include poor roads and an uptick in crime,” he said, adding that policy remains a challenge.
“While we may not see another recession in 2018, growth of above 3% will be very challenging to achieve.
Unpredictable factors such as rainfall and uranium prices could have positive or negative impacts on the economy.
With the currency strength being witnessed at the moment, foreign direct investment flows will be crucial in order to mitigate the impact of an expanding trade deficit.
Part of the solution to attracting FDI lies in clarity on policies such as NEEEF and NIPA because uncertainty kills the majority of investment, he said.
In the long term Namibia will have to find ways of becoming more competitive in the global context in order to achieve optimal growth, Van Zyl opined.
FNB cautions shareholders
Commercial banks are also feeling the pinch brought about by the country’s teetering economy. The country’s largest commercial bank, FNB Namibia, this week cautioned that “the group’s unaudited earnings for the six months ended 31 December 2017 are expected to be materially lower than the comparative period by between 10% to 15%.
Shareholders are advised that the financial information on which this trading statement is based has not been reviewed and reported on by the group’s external auditors.”
According to a stock analyst, nett profit for the group is still expected to be well above N$1 billion.
The group’s financial results wil be released on 15 February 2018.