Eye of the Storm paints gloomy picture for Nam


Magreth Nunuhe

Windhoek – A local financial institution has warned that if Namibia does not monitor its debt closely, it is in for a prolonged sub-investment grade sovereign rating, stagnant economic growth and can also be forced to de-link from the peg with the South Africa rand.

Simonis Storm has cautioned that even though Namibia’s debt as a percentage of GDP is lower than Brazil, India, South Africa and China, a 45% debt-to-GDP “for a significantly less productive and a less diversified economy is aggressively high”.

“Escalating debt levels for a small open economy with little revenue generation capacity is a recipe for disaster,” said the firm in its Namibian Economic Outlook 2019: “In the Eye of the Storm” report.

The Ministry of Finance has estimated Namibia’s public debt-to-GDP to increase to 44% in 2018/19 compared to an initial 40% expectation recorded in the annual budget, but Simonis Storm is still convinced that Namibia’s public debt-to-GDP could hover over 47.7% in the current financial period.

The Namibia Dollar is linked one-on-one to the South Africa rand and also shares a monetary union through the Common Monetary Area (CMA), which also links currencies of the Kingdom of eSwatini lilangeni and Lesotho loti.

The South African rand is legal tender in the other states, but the other member states issue their own currencies.

Simonis Storm expects Namibia’s public sector debt to increase to R107 billion and debt to GDP to 51.9% by the end of 2020/21.

Namibia has had its longest contraction ever, recording another slippage of 0.2% during the second quarter of 2018, which was driven by dragging construction, agriculture and manufacturing sectors affected by the drought, government consolidation and declining consumer demand.

“The economic slowdown has affected businesses and households, slashing borrowing appetite to record lows. Taxes on products also contracted as spending subsided. We expect a further contraction in GDP of 0.8% in 2018 (previously 0.6% growth) before it picks up to 0.7% in 2019,” reads the Simonis Storm report.

The firm expects improvement to be driven by the mining sector and a rebound in the construction sector.

According to the financial institution, if the government follows through on their budgeted spending in construction and sufficient rainfall is received, a projected GDP increase of 1.5% can be expected in 2019 in the best case scenario.

The best scenario will also include improving strategic service infrastructure; rapid SOE reforms, improving capital allocations, attracting talent and skills, removal of policy uncertainties to try and win back investors and investor confidence.

But in the worst case scenario where there is a lack of clarity on policies that can put strain on investments, lack of consumer and business confidence to maintain growth, lack of debt discipline and capital flight, a projected GDP increase of 0.1% can be expected, while government debt to GDP can go up to 47.7%.

In a fair case scenario where rain falls moderately to support GDP and keep food inflation toned-down; commodity prices remain subdued but at sustainable levels; slight increase in government spending on capital projects and tax policy is enacted, GDP is expected to rise to 0.7% but government debt to GDP will still go up to 47.7%.

Further to that, Simonis Storm expects employment to remain relatively stable, Namibia to attract lower foreign direct investment and central property prices to continue on a downward trajectory, while there will be no need for a bail out.

The SACU revenue is projected to decline by R2.2 billion in 2018/19 and a further decline of R1.2bn in 2019/20.

Revenue is expected to be undershot by 4.2% to R54.3 billion in in 2018/19, by 8.2% (R52.9 billion) in 2019/20 and 12.6% or R53.6 billion in 2020/21.

“Our lower projections are underpinned by expected sluggish VAT collection as spending subsides, and declining income taxes on individuals and companies,” reports Simonis Storm.


Agriculture contracted in the second quarter of 2018 as a result of a 6.9% contraction in the livestock subsector, driven by good rains that saw farmers restocking rather than marketing their livestock.


Despite some negative developments in 2018, the outlook for growth in mining and exploration in Namibia remains strong in 2019. Five potential new mines are to be developed in 2020, which has the potential to recover prices of uranium, while seven potential new mines are to be developed and two new mines being are to be redeveloped in 2019.


The manufacturing sector recorded a decline of 12.5% in the second quarter of 2018 compared to strong growth of 9.8% recorded in the previous year. The manufacturing sector is expected to further contract by 9.2% in 2018 before lifting to a moderate pace of - 0.1% in 2019.


Simonis Storm is of the view that further efforts should be implemented to manage fish stock so that catches are maintained at sustainable levels in line with the three-year moratorium, which was imposed on pilchard fishing in 2017 to facilitate stock recovery. The fishing sector’s contribution to GDP has declined from a peak of 5.6% in 2000 to 2.7% in 2017, the sector is expected to remain under pressure.


The tourism sector is expected to contract by -11.6% in 2018. The sector has contributed to GDP on average 2% over the past three years.




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