Breather for business, but not for consumer

BUSINESS confidence continued to gain ground in Namibia during February, fuelled by an increase in commercial vehicle sales and company registrations.

The latest IJG Business Climate Monitor shows its index climbing 2,8 points to 114,5, the highest since January 2006.According to economist Namene Kalili, who compiles the index on behalf of the Institute of Public Policy Research (IPPR), the business sector bought 459 vehicles in February, an increase of 32 per cent over January. Fourteen per cent more companies were also registered with the Ministry of Trade and Industry.This boosted the Investment Index, which rose from 124,6 points in January to 136,8 points in February.The private sector’s optimism is also reflected in the credit extension figures.Nedbank Group economist Robin Sherbourne said the overall figures for February suggest that the business sector is continuing to borrow and invest, albeit at much lower levels than last year.Credit extension to the business sector rose by 13,3 per cent compared to February 2008. Instalment credit increased by 9,6 per cent year-on-year, while mortgage loans rose 10,3 per cent.Sherbourne’s view that investment in Namibia is still fairly healthy, is also supported by the March figures for cement imports.A total of 33 991 tonnes of cement was imported in March, nearly 20 per cent more than in February. The March figure is also 42 per cent higher than that of March last year.’While too much should not be read into a single month’s figure, the latest figures continue to support our view that investment continues to be relatively strong despite weak overall growth,’ Sherbourne said.He added that one needs to bear in mind that a portion of the imports, roughly 40 000 tonnes per year, is exported to Angola.However, according to the Business Climate Index the construction industry remains under pressure.’Businesses are still shying away from long-term capital expenditure in the current economic climate as 80 per cent of the plans approved are for residential developments,’ the index states.Kalili added that, judging by Finance Minister Saara Kuugongelwa-Amadhila’s recent budget speech, Government is also significantly behind with the implementation of its N$2 billion capital expenditure programme.’The construction industry relies heavily on the full implementation of the capital expenditure budget for their survival and when the Budget falls behind schedule the industry comes under pressure, especially in the current economic climate, adding to the current woes of high interest rates, low private demand for capital expansion and high building costs,’ Kalili said.The Export Index also came under pressure during February, dropping from 115,9 points in January to 113,1. The continuing economic slump and resulting dampened demand in the United States and the Organisation for Economic Development and Co-operation (OECD) countries remain the major culprit.Beef prices fell a further 1,5 per cent to N$20,94 per kilogram, while mutton prices rose by 1,8 per cent to N$20,45. The Namibia dollar also lost some ground against the Greenback.The Consumption Index continued slipping, mirroring the severe pressure on consumers. For February it stood at 88,1, down slightly from the previous month’s 89,0.The index plummeted from three to two digits in March last year and has since remained there. The last time the Consumption Index reached the 80-point level was in 2002.Consumers’ subdued demanded is mainly due to continued high inflation, especially food inflation.Credit extended to consumers in February was up only 8,1 per cent compared to February last year – significantly lower than the credit growth in the business sector.According to Sherbourne, the household sector in Namibia is far weaker than the private sector. The Business Climate Monitor expects that consumers’ credit appetite will grow in the coming months, driven by the salary increases for civil servants and lower income-tax levels.jo-mare@namibian.com.na