Namibia: Covid-19's Scar On Economy

25 September 2020

ECONOMIC activities in Namibia between April and June this year decreased by around N$4 billion when compared to last year - an 11,1% shrinkage and the worst ever.

This dip, as announced by the Namibia Statistics Agency (NSA) yesterday, has the agency blaming Covid-19 mostly, and analysts on the other hand saying outside Covid-19 the economy was already lean.

Some analysts even say a revision for a more severe number should be expected, as the 11,1% less reflects the damage of both Covid-19 and the pain delayed reforms have had on the economy.

The gross domestic product (GDP) figures - a measure of how economic activities performed over a period of time have also proven that Covid-19's damage on economies did not skip Namibia.

Analysts say the deep scar left by Covid-19-imposed restrictions on the economy has exposed that if reforms remain unattended to, history is set to repeat itself again.

There is, however, a possibility of building an economy that is resilient to shocks, they argue.

Announcing the figures, statistician general Alex Shimuafeni said the 11,1% contraction was the most severe blow ever to economic activities in Namibia.

The severity of the contraction was mainly on the back of Covid-19, he said, which saw 13 sectors at the mercy of the virus and its restrictions.

"The contraction in the economy during the second quarter of 2020 is observed across entire sectors of the economy as domestic activities were under pressure due to the impact of Covid-19 measures," Shimuafeni said.

He said even during the 2008 financial crisis, economic activities were not as badly affected.

"The last severe contraction of 6,1% was recorded in the first quarter of 2009," he said.

Eloise du Plessis, head of research at PSG Namibia, however, said while for some sectors the contraction was inevitable given the border closures, lockdowns and alcohol sales ban, other sectors show that Covid-19 should not be made a scapegoat.

"The question is whether the lockdowns were worth the cost. The economy was already suffering," she said.

Shimuafeni said only three sectors had reason to smile - agriculture, health, and information and communication technology sectors with growth of 47,2%, 6% and 11%, respectively.

These advantages, the NSA chief said, came from good rainfall for agriculture, particularly in the crop farming space, increased employment in the health sector, and increased internet usage as workers switched to working from home.

Hotels and restaurants had been hit hardest, recording a contraction of 64,2%.

This was followed by other services, manufacturing, and transport and storage, recording contractions of 43,7%, 30,8% and 30,4%, respectively.

Sectors such as fishing, financial services and public administration also entered negative growth for the quarter under review with 10,5%, 1,3% and 5,1%, respectively.

Mining contracted by 2,6%, and the wholesale and retail trade decreased by 22,5%.

The sectors that have always been in the red were also the ones that were hit hardest, and this calls for speedy attention to proposed reforms, local economist Salomon Hei said.

Hei agreed with Du Plessis that Covid-19 simply exposed an already weak economy.

The NSA said the earlier announced 0,8% contraction recorded for the first quarter (January to March) this year was also revised to a negative of 1,8%.

Hei had predicted that the second quarter figures would show a contraction of between 15% and 20%, and still holds his position on this.

He said he expected a deeper revision with the next release.

Ensuring that small and medium enterprises are empowered through support and an enabling environment to grow, and allowing policies to be responsive to economic realities timely would help cushion the economy should another crisis arise, Hei said.

He said there should be deliberate efforts to ensure that businesses in sectors that are less affected by crises and downturns are encouraged to pull others out of the dungeons.

South Africa released their second quarter figures early this month, posting a 51% contraction, which the NSA said is based on a different analysis than what is used in Namibia, hence the lower figure for Namibia.

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