22 January 2013

Namibia: Mining to Subdue Growth in 2013

NAMIBIA'S economy is set to grow 4% in 2013, the slowest pace yet since the economy recovered from the global financial crisis of 2008-09, IJG Securities has said.

IJG's forecast is the lowest yet released this year: the World Bank expects the domestic economy to grow by 4,3% in 2013, while FNB Namibia forecasts an average growth rate of 4,3% over the next two years.

In 2010, the economy grew by 6,6%, followed by 4,8% in 2011.

The primary sector will be the main drag on economic growth this year, IJG said, forecasting a contraction of 3,1% for 2013 after growing an estimated 7,7% in 2012. This will be the result of mining contracting 10,7% after growing an estimated 15% last year, IJG forecast.

"The spike in growth in 2012 was a combination of the commissioning of Namdeb's Elizabeth Bay mine and Langer Heinrich's Stage 3 Expansion, while Ro¨ssing also managed to increase uranium production," IJG said.

"Agriculture is expected to rebound in 2013 on the back of increased inventory levels and a recovery in prices," the financial services company said. It expects the sector to grow by 4,9% this year, following an estimated contraction of one per cent in 2012.

IJG said the "excellent state of the fishing resource due to a number of years of good management will also lead to increases in total allowable catches".

Growth in the fishing sector is expected to be 6% in 2013, up from an estimated 4% last year.

The main driver of economic growth this year will be secondary industries, IJG believes, saying that both Government and the private sector will continue their "aggressive capital expenditure profiles". IJG expects the sector to expand by 9,3%, up from an estimated 6,3% last year.

Construction is forecast to grow by 15%, the same as in 2012, while manufacturing is expected to grow by 7,5%, up from 4,5% last year. Manufacturing's growth will be as a result of Namibia Custom Smelters further increasing its production capacity, as well as strong domestic demand supporting food and beverage producers, IJG said.

Government's anticipated lower operational spending will slow growth in the tertiary sector in 2013, IJG said, forecasting growth of 3,8%. Growth in the tertiary sector is estimated at 4,1% for 2012.

On the inflation front, IJG forecasts an average rate of 6,0% for 2013, down from the 6,5% average for 2012. FNB Namibia is forecasting an annual average of around 5,7%.

"In general, we see a repeat of 2012 playing out in 2013, with higher food and transport inflation driving the basket higher and offset by the impact of excess global capacity," IJG said.

FNB Namibia expects the Bank of Namibia (BoN) to kept its repo rate at 5,5% in 2013, putting interest rates on hold for the year. Next year, however, FNB Namibia said there is a "strong possibility" of a rate hike.

IJG, on the other hand, said "recent strong growth in private sector credit extension is creating a bit of a concern and creates the likelihood (albeit very small) of a surprise interest rate hike by the Bank of Namibia".

Standard Bank Namibia managing director Mpumzi Pupuma last week said he expected an increase of 50 basis points in the third quarter of 2013.

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