26 June 2012

Namibia: Business Should Brace for 'Adverse Headwinds'

CONSUMER spending drove business confidence up last month, causing the IJG Business Climate Index to bounce back from April by 0,5 basis points, registering 119,2.

The index, released by the Institute of Public Policy Research (IPPR) yesterday, showed that the Consumption Index climbed 4,7 basis points to 103,1 "as consumers borrowed more money from the banking sector to sustain their lifestyles".

Bank of Namibia (BoN) Governor Ipumbu Shiimi, last week voiced his concern over consumers borrowing more to finance "less productive activities", saying he wouldn't hesitate to dip into his "tool kit" to curb credit appetite of the trend continues.

Overdraft credit grew by 8,5 per cent from April to May, while passenger vehicle sales rose 11 per cent with 524 units sold, and consumer instalment credit growth remained high.

The latest IJG Business Climate Index showed that the Export Index dropped 2,1 basis points in May, "due to a deteriorating international economic climate, with lower metal prices hurting export confidence". Copper prices were down 12 per cent, zinc dropped nine per cent and uranium prices decreased three per cent from April.

Meat prices also declined due to seasonal weakness in consumer demand during the winter months. Overall, fish prices were higher during May, but this was largely due to much stronger monk fish prices, while hake prices were slightly weaker, the IPPR said.

The Investment Index was in the red for the second consecutive month, shedding 2,4 basis points as commercial vehicle sales dropped 13 per cent. Credit growth to business picked up to 14 per cent on the back of very strong growth in overdrafts, term loans and mortgages. The IPPR said construction work completed remained very low despite the high number of building plans approved. "Therefore very few of the approved plans are being implemented, let alone completed," the IPPR said.

New business registrations were on the increase, but mostly in the form of close corporations which could possibly include sectional title units for residential purposes rather than genuine business operations, the think tank said.

"Looking forward, adverse headwinds are expected six months down the line. The export sector can expect more instability on international markets," the IPPR said.

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