Namibia’s N$100 billion economy produces its first N$40 billion budget

15 February – 15 March 2012

Namibia has a strong track record of attracting foreign investment and many well-known international companies play an active role in a wide variety of sectors, including agriculture, fishing, mining, manufacturing, construction, tourism, telecoms and financial services. The Namibian Constitution promotes foreign investment and protects private property. Every month Flamingo brings you a round-up of the most important business and economics news from Namibia put together by Robin Sherbourne of local economic consulting company Namibian Economics. To receive regular updates on the Namibian economy, email robin@namibianeconomics.com

The Ministry of Environment and Tourism has launched the Environmental Investment Fund, which could generate N$300m annually. The fund will enable Namibia to raise financial resources for direct investment in environmental protection and natural resource management. According to the Minister, Netumbo Nandi-Ndaitwah, N$37.7m has been allocated to capitalise the fund. Possible types of environmental levies include carbon tax and waste management levies.

Civil servants earning up to N$20 000 per month will soon be able to buy houses through a non-bank financing scheme backed by their pension fund. The GIPF has already appointed a local company, First Capital Real Estate, to disburse the money in what is set to be a watershed funding model for the country. The scheme comes just after newly collated figures indicate that less than 14% of Namibians have an income that qualified them to obtain an average mortgage of about N$406 000.

The West Africa Cable System (WACS) will be ready for commercial data traffic by April 2012. Telecom Namibia has already completed its own cable and landing station in Swakopmund, linking the country directly to WACS. WACS is an undersea communicates cable linking South Africa to the UK. Telecom and MTC have invested US$90m in the project.

The N$750m project for the construction of a fourth turbine at the Ruacana hydropower station is well on track and is expected to be operational by April. The completion of the fourth turbine will come at a time when Namibia drastically needs to find an answer to its energy shortfall. The Minister of Mines and Energy Isak Katali says that Namibia will be facing a shortage of approximately 80MW of electricity this winter.

Only about 67 000 households earn a monthly income sufficient to afford buying an average priced house, according to the monthly housing price index for December 2011. The upside, however, is that 2012 is set to see a relative decrease in house prices, due to new houses just developed by the National Housing Enterprise and a substantial increase in the land delivery rate across the country, according to New Era.

Implementation of the three-year, N$15.2bn (US$2bn) job-creation programme – the Targeted Intervention Programme for Employment and Economic Growth (TIPEEG) – has gathered some momentum, with N$1.7bn spent and 7 000 new jobs created in Namibia as of last November.

Namibia will face an electricity shortage this winter, despite the efforts of

NamPower to develop a culture of energy saving. Mines and Energy Minister Isak Katali announced that Namibia will face an electricity shortfall of about 80MW this winter and expects the electricity deficit to increase to 300MW by 2015. Namibia’s daily electricity consumption currently stands at 440MW.

Namibia Poultry Industries (NPI) is gearing itself to supply the entire Namibian market by the end of May 2012. The abattoir is set to be fully operational in April and the first birds for slaughter are expected on 18 April. Production should peak towards the middle of May 2012. The industry expects to receive infant industry protection as from the beginning of June.

Chairperson of De Beers, Nicky Oppenheimer, has given the assurance that the future of the diamond sector is bright while expansion plans to extend Namdeb’s lifespan to 2025 would not be changed by Anglo American’s acquisition of De Beers.

Trade and Industry Minister Hage Geingob gave the controversial merger between Wal-Mart and Massmart his blessing on 5 March 2012, provided the US retail giant meets certain conditions. Wal-Mart is welcome to do business in Namibia, as long as its merger with Massmart doesn’t result in any retrenchments for two years after the transaction becomes effective, Geingob stated.

HRT Participacoes em Petroleo SA expects to identify partners in the second quarter to help develop assets in Namibia, Chief Executive Officer Marcio Mello advised on a conference call. HRT will open a data room in the beginning of the second quarter to market its assets, Mello stated.

Namibia does not need the export markets of its traditional trading partners in the European Union (EU), as it has found a market that is over twice the size of the EU market, namely China, according to Trade and Industry Deputy Minister Tjekero Tweya.

Plans are underway to extend the Lüderitz port this year to enable it to handle larger export and import volumes. The managing director at LL Namibia Phosphates (LLNP), Kombadayedu Kapwanga, advised that the existing port, which is run by the Namibia Ports Authority, is too small for his company’s vessels.

Mobile operator MTC reported results for the year ended 30 September 2011. Net profit was down 14.2% to N$319m from N$372m previously reported. The decrease was attributed to ‘increases in costs of maintaining the network, as well as costs related to personnel’, according to MTC managing director Miguel Geraldes.

Meatco’s biggest challenge for the 2011/12 financial year was the low number of cattle slaughtered for export to EU markets. Meatco’s chief executive office, Kobus du Plessis, blamed the implementation of the Namibia Livestock Identification and Traceability for the sharp drop in cattle slaughtered at Meatco’s EU-export abattoirs.

Meat industry representatives from Sweden and Norway arrived in Namibia to discuss meat exports to the Scandinavian countries. It will be Sweden’s first discussions with Namibia about meat exports, while Namibia already exports to Norway. Namibia has a quota to export 1 350t of meat to Norway.

The trade volume between Namibia and Australia was worth almost N$122m in 2011 and Australia’s High Commissioner to Namibia, Ann Harrap, stated that bilateral trade between the two countries is expected to grow even further. There are currently 26 Australian companies operating in the Namibian resources sector.

February inflation reached 7.4%, its highest level in two and a half years, while month on month inflation rose 0.8%, according to the Central Bureau of Statistics.

Namibian Budget

Finance Minister Saara Kuugongelwa-Amadhila tabled her ninth national budget in Parliament on 28 February. The Minister forecast steady growth and inflation over the coming three years, which would take Namibia’s GDP to N$102 billion in 2012/13. Revenue in the coming financial year would reach N$35.4 billion while expenditure totalling N$40.1 billion was planned, yielding a manageable budget deficit of 4.4% of GDP, which reassured bond markets. With the exception of excise duties on alcohol and tobacco, the Minister did not announce any new tax changes, putting the emphasis instead on making sure tax measures announced last year would be seen through. The Minister’s theme for the budget was ‘doing more with less’. Nonetheless, Government will continue to spend heavily on infrastructure along the lines of its Targetted Intervention Programme for Employment and Economic Growth (TIPEEG) announced in last year’s budget. Development spending is budgeted at N$6.7 billion, with spending targetted heavily on the focus areas of sanitation, transport, tourism and agriculture. Pensioners will receive a N$50 a month increase in the social pension, taking it to N$550 a month.

This article appeared in the April 2012 edition of FLAMINGO Magazine.