• Market Watch

The good, the bad and the ugly

• 4 Months Ago - 2023-12-27 00:00:00

As 2023’s hour glass runs out, Market Watch recaps Namibia’s economic landscape this year. To kick off the series, Cirrus Capital economist Robert McGregor captures the most notable developments.

The good
After the last few years, there have been many more reasons to be positive and optimistic about Namibia’s (economic) trajectory.
Foreign direct investment has hit record levels, owing to the exciting oil and gas developments, Heineken’s purchase of Ohlthaver & List’s interest in Namibia Breweries, and a thriving mining and exploration sector.
Mineral exploration activity is buzzing in Namibia, a promising sign given its importance to the economy.
Our mineral endowment is also favourable at the moment, particularly given the encouraging prices for gold and uranium, offsetting weakness in diamond prices.
The fiscal trajectory has also improved materially, with more conservative forecasting from the finance ministry and improved revenue outturns, owing to better economic growth and efficiency gains and through the establishment of the Namibia Revenue Agency (NamRA).
Tax policy has also taken a positive turn, with commitment to tax cuts for low-income earners and small cuts to corporate income taxes.
While small or overdue changes, the direction of such policies is a welcome one.
And even though it was two years late, the 2023 Population and Housing Census took place.
Next year should bring us some new and interesting numbers to work with, and reduce the risk of making policy in the dark.

The bad
For Namibian households and businesses, high inflation and interest rates made 2023 a difficult year.
This is particularly with inflation being seen in food and fuel prices.
Despite better economic growth, this has not yet reflected in material improvements in employment or household incomes, meaning higher price levels and interest costs (with Namibians typically being highly indebted).
Luckily both seem to have peaked and suggesting less pressure on household incomes in 2024 relative to the past two years – but as we’ve seen, global events can change this quickly.
While the fiscal trajectory is improving, there are still challenges.
These are highlighted when the level of spend in an economy as small as ours (and our small population) with the quality and outcomes of this spend (healthcare and education come to mind).
Even with the improvements in revenue collection, the deficit this year was increased in the mid-term budget review.

The ugly
The more things change, the more some stay the same.
Although there is no official data since 2018, unemployment remains high and a core risk for the country.
There remains a large skills mismatch within the economy, while economic growth has not been high enough to absorb the large number of unemployed persons. This also disproportionately effects the youth, with the labour force growing faster than the private sector is allowed to create jobs.
Water is another longstanding issue, with little done to address the challenges facing the central areas when there is drought or rain does not fall in catchment areas.
Rather than proactive measures, it appears that we wait until the situation is dire before looking to address it (if at all). Frankly, it has become embarrassing.
Lastly, policy has been a major issue.
Whether it’s on water (such as not allowing private actors to build and operate their own desalination plants, because government must be the one to do so), or rehashing bad attempts to over-regulate the economy (such as this year’s fiasco around the Investment Promotion and Facilitation Bill, or talks of introducing free-carry for mining licences).
Policy own-goals seem to be a specialty in recent years, and 2023 was no exception.
Yes, there were some positive developments on the fiscal front, but these are overshadowed by the damaging macroeconomic policies. This is reflected in many of the longstanding issues our economy faces, such as high unemployment and (looming) water shortages.