… as state revenue and mining expected to underperform
By Kelvin Chiringa
President Hage Geingob’s promises of job creation this year may be a pipe dream as state revenues are anticipated to suffer for the rest of this financial year owing to a weak growth recorded in the first four months of 2019; throwing prospects of job creation into disarray.
This is the gloomy prediction of economic research analysts at Simonis Storm (SS).
Geingob has so far rallied his party to focus on employment creation, inclusive growth and reduction of inequities in order to remain relevant.
At the same time his Harambee economic blue-print envisages establishing 121 Youth-Owned Rural Enterprises each permanently employing a minimum of 5-10 youths by 2020.
But state revenues have become a major concern.
According to SS, the decline in diamond royalties (8.0%) coupled with a contraction in tax on products could have a knock-on effect on government revenue.
Given that Namibia’s SACU revenue projections by the Ministry of Finance (MoF) are based on a better economic growth rate in SA (1Q2019 GDP: -3.2%), we are of the view that continuous economic weakness will derail these projections (SACU revenue is 39% of Namibia’s total revenue),” said Indileni Nanghonga, economist at Simonis Storm.
Geingob recently told Swapo party school graduates that the majority of Namibians are expecting Swapo to bring prosperity to the nation in the same manner in which it delivered independence.
“They want jobs, better housing and good nutrition. In other words if Swapo is going to continue to survive and thrive then we have to transition from being a party primed to face the challenges of Apartheid occupation, and equip ourselves to be a party primed to face the economic and social challenges of the 21st Century,” he said.
The cold out there
Lower than expected revenues however, will likely hit critical government-dependent sectors the hardest further, killing consumer demand and expenditure, which are vital for the wholesale and retail sector.
Wholesale and retail is a major off-taker of a significant number of Namibia’s semi and unskilled youths who make up a large proportion of the national population.
Construction has so far this year alone contracted by 27.8%, marking the 13th consecutive quarter of contraction.
Despite Geingob’s confidence on jobs, so far the ailing sector has shed almost 18,000 jobs between 2016 and 2018.
To bring back the jobs, experts advise that increased capital expenditure by government or increased investment from the private sector/foreign investors will be key.
The Patriot recently reported that as per the central bank announcement, treasury is expected to receive some N$4.7 billion from SACU on a quarterly basis and N$18 billion for the whole of 2019.
With Namibia’s major growth driver, mining, having contracted for the first time since 2016, the outlook has been riddled with uncertainty.
Nanghonga told The Patriot that given the demand and supply challenges in the commodity space, they expect commodity prices to remain relatively volatile (to the downside) and mining to remain under strain.
On top of this, she warned that agriculture which has experienced volatile growth over the years due to a persistent onslaught of droughts will remain weak due to the prevailing drought, hitting hard on crops and livestock.
At the moment, the Swapo manifesto envisages ensuring that Namibia increases its share of the domestic, regional and international markets for agriculture produce.
“We expect the wholesale and retail trade sector to underperform going forward as consumers remain depressed and high unemployment prevails. We revised our GDP figures for 2019 to -1.1% compared to a 0.1% increase stated in the second quarter of 2019,” she said.
These indicators points to the fact that Namibians will be required to this year further tighten their belts by saving more and spending less although inflation is not expected to breach 4.5% for the remainder of the year.
SS has in the meantime revised its GDP figures for 2019 to -1.1% compared to a 0.1% increase stated in the 2Q2019.
“This was mainly influenced by the 1Q2019 mining numbers released by the Chamber of Mines, which signals an 8.0% contraction in diamond production and royalties. Furthermore, due to the prevailing drought, we have revised our agriculture projections downward to -4.9%,” said the firm in its Fixed Income and Economics Report.