Namibia QER Q3 2019 - IPPR

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Namibia QER Q3 2019Namibia Quarterly Economic ReviewQuarterSummaryNewsHighlights1July-September 1012Quarter SummaryMacro Situation – forecasts for 2019 revised downThis year’s economic developments have been overshadowed by the poor macroeconomicperformance Namibia has suffered from since Q2 2016. The Bank of Namibia revised its GDPforecast for 2019 from modest positive growth of 0.3% to a contraction of 1.7%. This waslent support when the Namibia Statistics Agency released Q2 growth figures in Septemberwhich estimated that the economy had contracted by a further 2.6% between April andJune while the contraction between January and March was revised to 2.9%. These aresevere contractions by historical standards. The IMF forecasts that the economy will shrinkby 0.2% in 2019 after which it will start to expand by 1.6% in 2020 and a steady 3.0%thereafter. With the global economy weakening, lacklustre performance in Namibia’sprincipal neighbours South Africa and Angola, non-mining private investment lacking andpublic finances in a parlous state, it is hard to see which elements of aggregate demand aregoing to pull Namibia’s economy out of its current depressed state.Public Enterprises – will action finally be taken?The current Cabinet has dithered over poorly performing public enterprises arguing that thePublic Enterprises Governance Act needed to be put in place before action could be taken.The Act is now in place and key public enterprises and SOEs are reaching the point wherecontinued bailouts can no longer be contemplated, if for no other reason than lack offinance. The most serious of these is arguably Air Namibia where Government finally seemsto be reaching out to major international players to strike up partnerships which could helpAir Namibia maintain its international route. Further Board changes have taken place ashave discussions with US-based aircraft leasing company Castlelake while the appointmentof a new permanent CEO has also been put on ice. It is hard to believe that major decisions1The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

will be taken in advance of elections in November but the situation is becoming ever morecritical.Investment News – talking the talk and walking the walkA key event during the quarter was Government’s two-day investment summit held at theend of July under the theme “Economic Revival for Inclusive Growth: Strengthening theNamibian House” and which the newly appointed High Level Panel (HLP) was instrumentalin organising. Although the summit had been hastily put together, it did provide a focus forimportant announcements on outstanding policy issues such as the New EquitableEconomic Empowerment Framework (NEEEF), the Namibia Investment Promotion Act(NIPA), the Central Procurement Board of Namibia, mining taxation and visa regulations.HLP Chair Johannes Gawaxab announced that pledges made at the conference had vastlyexceeded the USD1bn target it had been set. On the face of it, these developments are tobe welcomed but questions remain about the quality of the projects and pledges made aswell as Government’s ability to turn them into real investments. In the aftermath of thesummit, Nico Smit of the opposition Popular Democratic Movement (PDM) released adetailed and cogently argued piece critical of the whole event. It is hard not to be scepticalgiven the limited results of the previous summit in November 2016.Events started coming to a head on the issue of marine phosphate mining with a largedemonstration by workers in the fishing industry in Walvis Bay and clarifications by theMinistry of Environment and Tourism on where Government stands on the decision to issuean environmental clearance certificate. The issue pits an established industry that employsmany thousands of people and a range of environmentalists against a significant newinvestor with influential shareholders and friends. The case is proving a test of Namibia’slegal system as well as Government’s ability to find a compromise in the face of what seemsto be a stark trade-off.News HighlightsDateHighlight25 SeptemberNamibia launches visa onarrival for 27 countries(New Era)21 SeptemberConservation tourists tobe considered tourists(Xinhua)19 SeptemberMinistry of Agriculturecancels moratorium ontimber harvesting andtransport (Xinhua)CommentaryThe Ministry of Home Affairs and Immigration launcheda visa on arrival for 47 countries, including 27 Africancountries, for tourism purposes which also includesvisiting friends and relatives and medical trips.The Ministry of Home Affairs and Immigrationannounced that conservation tourists would no longerhave to apply for work visas but would be allowed in onnormal tourist visas.The Ministry of Agriculture, Water and Forestryannounced that it had cancelled the moratorium ontimber harvesting and transport following consultationwith stakeholders. The moratorium which took effect inApril was triggered by illegal harvesting in the East andWest Kavango and Zambezi regions.2The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

19 SeptemberNSA estimates that theeconomy contracted by2.6% in Q2 2019 (NSA)18 SeptemberFlyWestair announces firstinternational route (CGTNAfrica)18 SeptemberMinistry of Environmentissues clarify overphosphate mining (MET)13 SeptemberAir Namibia suspendssearch for new CEO(Windhoek Observer)13 SeptemberIMF sees growth of 1.6% in2020 (Bloomberg)Namdeb sells ElizabethBay to Lewcor (Reuters)12 September9 SeptemberFisheries workers protestagainst phosphate mining(The Namibian)8 SeptemberSWAPO concludes itselectoral list (TheNamibian)7 SeptemberChair and Vice-Chair of AirNamibia board resign (TheNamibian and New Era)4 SeptemberCapricorn acquires 30%stake in Paratus(ITWebAfrica)The Namibia Statistics Agency (NSA) released itspreliminary national accounts for Q2 20019 whichshowed the economy contracted by 2.6%. Thecontraction in Q1 was revised from 2.0% to 2.9%.Namibia’s economy has not experienced consecutivecontractions of such magnitude before.FlyWestair, Westair Aviation’s new scheduled passengerairline in Namibia, announced a new route betweenEros Airport in Windhoek and Cape Town, South Africa,four days per week.The Ministry of Environment and Tourism issued a pressstatement documenting the various steps that have sofar taken place in the process of granting a licence forphosphate mining and clarifying that approval has notyet been granted.Air Namibia has suspended its search for a new CEO dueto uncertainty over the future of the airline. The AirNamibia board was due to appoint Dutch national Larsde Brabander to take over from acting CEO XavierKasule who was appointed in March.The IMF has forecast growth of 1.6% for Namibia in2020 after an expected contraction of 0.2% this year.Government and De Beers-owned Namdeb announcedit had sold Elizabeth Bay mine to Lewcor, a 100%Namibian-owned family consortium in a transactionworth N 120m, after the mine was put up for sale inFebruary.Over 1,000 people, mostly workers in the fishingindustry, demonstrated in Walvis Bay against marinephosphate mining and urged Government not to grantprospective miners and environment clearancecertificate.SWAPO concluded elections for its list of 96 candidateswho will stand for the party at national elections laterthis year based on a 50/50 gender split. Most currentSWAPO MPs maintained their position on the list.President Geingob will nominate an additional tencandidates at a later stage.Air Namibia announced that Advocate Deidre SaulsDeckenbrock and Nangula Kauluma would resign on 5September because “they are no longer in a position toavail the time commitment required for the discharge oftheir fiduciary duties to the company.” Both had beenappointed on 1 January 2019. Legal practitioner andGIPF governance advisor Escher Luanda was appointedchair from 9 September.Capricorn Investment Group, owner of Bank Windhoek,announced that it had acquired a 30% stake in panAfrican telecoms group Paratus Africa Group forUS 17m (N 252m).3The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

3 September27 August24 AugustSouth African GDP growsin Q2 2019 by an annualrate of 3.1% quarter-onquarter (StatsSA)Bank of Namibia cutsgrowth forecast for 2019(Bank of Namibia)Countries vote againstNamibian rhino proposal(National Geographic)24 AugustProsecutor Generalconfirms N 600m lostfrom GIPF (The Namibian)19 AugustRwandan PresidentKagame makes state visit(The New Times)14 AugustOld age pensionsincreased (Xinhua)14 AugustBank of Namibia cuts repoto 6.50% (Bank ofNamibia)12 AugustNamibia charcoal industrybooming (New Era)12 AugustNamibia becomessignatory to OECD taxavoidance initiative (TheNamibian)President Geingob seeksimmediate solution tophosphate mining impasse(The Namibian)Public Enterprises Ministerin US to negotiate end tolease deals (The Namibian)7 August7 AugustFollowing a contraction of 3.1% in the first quarter,South African GDP grew by an annual rate of 3.1%quarter-on-quarter in Q2 2019.The Bank of Namibia reduced its forecast for economicgrowth in 2019 to a contraction of 1.7% from themarginally positive growth of 0.3% earlier in the year.Countries voted against decreasing protections forsouthern white rhinos at the 18th Conference of theParties for CITES, the wildlife trade treaty, in Geneva,Switzerland. Following the vote, Environment andTourism Minister Pohamba Shifeta announced thatNamibia would consult with other countries in southernAfrica and consider withdrawing from CITES.Prosecutor General Martha Imalwa announced thatN 600m from the Government Institutions PensionFund invested in unlisted investments prior to 2004 islost and will not be further investigated due to lostdocuments, forgetful officials and lack of evidence.Rwandan President Paul Kagame made a three-day statevisit to Namibia aimed at deepening bilateral ties.Historically, Namibia has had cool relations with Rwandasince the two countries were on opposing side in theDRC conflict 20 years ago.The Ministry of Poverty Eradication and Social Welfareannounced that the old age pension would be increasedfrom N 1,250 to N 1,350 a month in September.The Bank of Namibia’s Monetary Policy Committee cutthe repo rate from 6.75% to 6.50% following signs ofweaker than expected growth and the South AfricanReserve Bank’s actions in July. This is the first changesince August 2017.At the Biomass Technology Expo in Otjiwa which drew120 exhibitors and 1,400 visitors, Michael Dege of theNamibian Charcoal Association (NCA) said thatNamibia’s charcoal industry is booming and due to growfurther.Namibia became the 134th to join the group enactingthe OECD project on tax base erosion and profit shifting(BEPS) which was started in 2012 to combat harmful taxpractices by multinational companies.President Geingob was reported to be applying pressureon Cabinet colleagues to reach a decision on phosphatemining demanding an “immediate solution” despite theongoing court case.Public Enterprises Minister Leon Jooste travelled to theUS to negotiate an early exit from lease deals for AirNamibia aircraft from lessor Castlelake as a prelude toclosure of the national airline which could cost theGovernment N 2.5bn. This comes two months afterFinance Minister Calle Schlettwein reportedly submitted4The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

6 AugustOtjikoto exceedsproduction target for Q22019 (B2Gold)2 AugustPresident Geingobinaugurates new portterminal ( AugustInvestment summitconcluded (The Namibian)25 JulyRio Tinto officially handsover Rossing uraniummine (FOCAC)24 JulyNamPower announcesrenewable energy plans(Bloomberg)23 JulyNamibia will renegotiatedouble taxationagreements (TheNamibian)Namibian MarinePhosphate takesgovernment to court (TheNamibian)19 July18 JulyNamdeb produces385,000 carats in Q2 (AA)18 JulyNamibia assumes chair ofSACU (The Namibian)a paper to Cabinet Committee on Treasury entitled“Non-Sustainability of Air Namibia” outlining why theairline should be shut down. According to this documentgovernment pumped N 8.3bn into Air Namibia from1999 to 2019.B2Gold reported that its Otjikoto gold mine produced37,421 ounces of gold in Q2 2019, exceeding itsproduction target due to slightly higher throughput andrecoveries.President Hage Geingob inaugurated a new US 400mcontainer port terminal at Walvis Bay built by ChinaHarbour Engineering Company on reclaimed land anddesigned to allow the port to handle 750,000 containersa year and help Namibia become a major logistics hub insouthern Africa.Government’s two-day investment summit held underthe theme “Economic Revival for Inclusive Growth:Strengthening the Namibian House” concluded withN 20bn worth of investments pledged according to HighLevel Panel Chair Johannes Gawaxab.Rio Tinto formally handed over Rossing uranium mine toits new majority shareholder China National NuclearCorporation (CNNC) thus completing the sale that itannounced in November 2018.At the launch of its 2019-23 business plan, NamPowerannounced a 5-year programme to build four renewableenergy power plants costing N 4.7bn (US 338m)involving biomass, solar and wind energy generating220MW.Finance Minister Calle Schlettwein confirmed thatNamibia is planning to renegotiate its existing 11 doubletaxation agreements to tighten up on tax loopholesstarting with Mauritius.Namibian Marine Phosphate (NMP) is suing the Ministerof Environment and other government officials in anattempt to be issued with the Environmental ClearanceCertificate it needs to allow it to start mining. NMP firstmade its application in April 2012 and was granted acertificate in September 2016 by the thenEnvironmental Commissioner. However, this was putaside twice by Environment Minister Pohamba Shifetadespite being overruled by the High Court in May 2018.Anglo American reported that Namdeb Holdingsproduced 385,000 carats of rough diamonds in Q2 2019compared to 483,000 carats in Q1 2019 driven partly byElizabeth Bay transitioning onto care and maintenanceand planned maintenance for the Mafuta crawler vessel.Namibia took over the chair of the Southern AfricanCustoms Union (SACU) from Lesotho.5The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

8 July8 July26 poaching incidentsrecorded since January(Xinhua)Minister found guilty ofcorruption (The Namibian)8 JulyCabinet instructs NPTH topurchase RCC head office(The Namibian)4 JulyNAC claims Air Namibiaowes it N 522m in userfees (The Namibian)2 JulyTeraSun Energyannounces US 62.3minvestment in 50MW PVplant (PV Magazine)NUNW condemns sale ofErindi to foreign investor(The Namibian)1 JulyThe Ministry of Environment and Tourism recorded 26incidents of poaching since January, seven elephantsand 19 rhinos.Education, Arts and Culture Minister Katrina HanseHimarwa was found guilty by the High Court ofcorruption and corruptly using her office forgratification. Hanse-Himarwa had put relatives on a listof housing beneficiaries under a government masshousing scheme while Governor of the Hardap Region in2014. This is the first time such a high-rankinggovernment representative has been found guilty ofcorruption since Independence in 1990. She resignedfrom her post as Minister on 9 July and was replaced byMartin Andjaba. She was eventually sentenced to pay aN 50,000 fine.Cabinet has instructed Namibia Post andTelecommunications Holdings (NPTH), the holdingcompany of MTC and Telecom Namibia, to purchase thehead office of the Roads Contractor Company (RCC) foran estimated N 104m to prevent the property beingrepossessed by Bank Windhoek due to non-payment ofthe mortgage.Newly-appointed CEO of the Namibia Airports Company(NAC) Bisey /Uirab told the Parliamentary StandingCommittee on Economics and Public Administration thatAir Namibia owed it N 522m and that this backlog madeit hard for the NAC to maintain infrastructure and raiseloans for new investment.TeraSun Energy has announced it will commencebuilding a new 50MW solar PV plant at Arandis in Q12020 and sign PPAs with private off-takers for termsranging from five to 15 years.Petrus Nevonga, General Secretary of the PublicWorkers Union speaking on behalf of Namibia’s largesttrade union federation, the National Union of NamibianWorkers (NUNW), condemned the sale of the 65,000hectare Erindi private game reserve to Mexicanbillionaire Alberto Baillères and called on government tocancel the sale.6The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

Key Economic VariablesGDP Growth (%)GDP Quarterly Growth (%)Preliminary national accounts suggest thatthe economy contracted by 0.1% in 2018,compared to -0.9% in 2017. Growth in2016 was revised up to 1.1% from theprevious estimate of 0.6%.Quarterly growth crashed in Q2 2016 andhas not recovered since. The latestestimates show GDP contracted by 2.6% inQ2 2019 while the contraction experiencedin the first quarter of the year was revisedfrom -2.0% to -2.9%.Fixed Investment (N bn in 2010 prices)Private Fixed Investment (% of GDP)Fixed Investment (constant N 2012SOEs20132014201520162017GovernmentInvestment, driven by strong privateinvestment, rose significantly after 2011but peaked in 2015 and has since returnedto previous levels. These figures will beupdated once the full national accountsare available for 2018.Strong private investment has been drivenby investment in mining. Both mining andnon-mining private investment as aproportion of GDP have declined since2015. These figures will be updated oncethe full national accounts are available for2018.7The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Researchand is financially supported by the Hanns Seidel Foundation. It is available to download free ofcharge from or

Sectoral Breakdown of GDP in 2018 (%)Agriculture, 4.6%Health, 2.8%Sectoral Growth in 2018 (%)Fishing, 2.6%Other, 6.6%Education, 9.4%Mining, 14.0%Pubic Administration,11.2%CommunityServices, 1.8%Manufacturing, 10.1%Electricity andWater, 2.9%Real Estate,6.8%FinancialIntermediation,8.6%Trade, 10.2%Construction, 2.3%Hotels, 2.0%Transport andCommunication, 4.1%The chart shows the contributions made tooverall economic activity in 2018 by thedifferent sectors of the economy. Servicesectors contributed 56.9% while primaryand secondary sectors contributed 21.2%and 15.3% respectively.Namibian and SA Repo Rates (%)While output from the Mining andElectricity & Water sectors grew strongly in2018, output declined significantly in a widerange of sectors with Construction againbeing particularly hard hit.The Bank of Namibia’s repo rate has been6.75% since August 2017 but the latestMonetary Policy Committee (MPC)meeting on 13 August 2019 agreed on amodest cut to 6.50% to bring it into linewith the corresponding rate in SouthAfrica. The next MPC meeting is due on 23October 2019.Namibian consumer in

The Namibia Quarterly Economic Review is compiled by the Institute for Public Policy Research and is financially supported by the Hanns Seidel Foundation. It is available to download free of charge from or 1 Namibia QER Q3 2019 Namibia Quarterly Econo

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