15 January 2013

Namibia: Shaky Economy Depresses Business Mood in Namibia

BUSINESS is off to a bumpy start in 2013, the Institute for Public Policy Research (IPPR) has warned after a tumble in the latest IJG Business Climate Index.

The Index for November dropped by 7,5 basis points to 134,1 after an impressive run during the third quarter, which included 141,7 in September - the highest reading in 12 years.

The IPPR, compilers of the Business Climate Index (BCI), attributed the depressed business mood mainly to official economic growth figures which showed that Namibia's gross domestic product (GDP) declined by 5,4% in the third quarter. This figure, released by the Namibia Statistics Agency (NSA) in December, was the biggest quarterly drop since the second quarter of 2008.

"As much as the business climate remains favourable, both consumers and the business community are somewhat hesitant to invest and consume given that the economy contracted during the third quarter," the IPPR said.

November's weakening business climate was largely due to the significant drop in the leading indicator, which fell by 26,5 basis points to 162,4. "This is more in line with international leading indicators which have been shaky at best," the IPPR said.

"The weaker leading indicator suggests that business climate may deteriorate six months down the line based on the rising international fuel costs, fewer company registrations and a weak outlook for the construction industry as reflected in the building index."

The IPPR said the outlook depressed business appetite for investment and therefore the Investment Index shed 3,3 basis points on the back of fewer company registrations and fewer building plans completed.

"Consumer confidence also took a knock as international fuel prices began to rise. The exchange rate did not provide consumers with much relief on the imported fuel price and it is thus only a matter of time before local pump prices are adjusted upwards," the IPPR said.

The Export Index moved sideways as metal exporters enjoyed a 6% increase in the price of zinc and copper, while uranium exporters enjoyed their third increase in the commodity's price in 2012. Fish prices continued to trend upwards particularly the skin-on-fillets which rose 7% in the month, while red meat prices contracted marginally.

"Overall, a degree of weakness is beginning to affect the index over the short to medium term," the IPPR said.

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