24 May 2018

Namibia: Construction, Wholesale Sectors Set to Contract Further

Bank of Namibia governor Ipumbu Shiimi says activity in the construction and wholesale sectors are expected to contract further in 2018.

He said these sectors were expected to contract at the "rate they contracted for the past two years".

Shiimi made these remarks at State House yesterday after briefing Cabinet about the status of the national economy.

The 'Status of the Namibian economy' report, compiled by the National Planning Commission and the Office of the President earlier this year stated that the construction sector contracted by 44,8%, 45,9% and 36,9% in the first, second and third quarters of 2017.

The wholesale sector registered declines of 7,5%, 8,2% and 4,4% in the first, second and third quarters of 2017. The sector also recorded the highest number of job losses in 2017, with about 13 000 people becoming jobless.

"Unfortunately, the construction and wholesale sectors are still struggling. We expected deep contractions that we have seen in those sectors, of about 40%, to continue. They are not growing. In fact, they are registering negative growth," he stated.

Despite the expected contraction in these sectors, Shiimi said the country was expected to register positive growth this year due to recoveries in the mining, tourism and agriculture sectors.

Although the central bank governor did not provide figures at which the economy is expected to grow, he said positive growth has been recorded in various economic sectors, such as mining, where "prices of copper, diamonds and gold have increased significantly".

"We believe that 2018 is a better year than 2017, when the growth of the economy shrunk. In fact, we even registered negative growth in 2017. We expect to see better outcomes in 2018," he noted.

Shiimi added that the expected growth also depended on the government's efforts to implement plans to transform the economy, as set out in the national development plans, and the Harambee Prosperity Plan (HPP).

"It is important to continue to intensify our efforts to grow the economy. We need to implement the good plans we have to transform the economy. Even though we see positive growth, it is not yet high. Therefore, we can expect the per capita income being depressed because the growth of the economy is less than the growth of the population," he said.

He noted that despite positive recoveries made in some sectors, the government also needed to reduce pressure on its finances, "mainly coming from the public sector wage bill, which is significantly high".

"The wage bill is taking up a lot of resources that are critically needed in other sectors. About 50% of government's budget goes to the wage bill. We cannot continue with this trend," he stressed.

Central bank research director Florette Nakusera added that the bank has submitted recommendations on how the government could reduce the public sector wage bill without retrenching employees.

"The idea should not be to fire people, but to restructure, and where there is an opportunity, not to fill the position. You can gain more efficiency by using two people instead of using five. We should explore those opportunities," she urged.

The government also needed to reconsider budgetary processes so that critical ministries and government agencies, such as health and education, are not deprived of much-needed resources to recruit staff.

"The other thing we need to look at is the salary increases of civil servants that are way above the inflation rate. It is important to contain that, and it can be done and reduced to something sustainable," Nakusera said.

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