PRESIDENT of the Namibia Chamber of Commerce and Industry, Sven Thieme, said yesterday that ordinary Namibians will be heavily hit by the current drought through high food prices.
Thieme said currency depreciation will drive up the price level of imported goods in the coming months, which, when combined with drought-related food price increases, will lead to higher inflation.
“With a forex impact of 27% on the price of some packaging materials in just five months, and the current drought situation impacting food production and pricing, it is a sad reality that the ordinary man in the street will not be left unscathed,” he warned.
Thieme said if Namibia’s industrial sector had been firmly established, the devaluation of the South African rand would have dealt the local economy a softer blow.
“While depreciation enhances competitiveness to the exporting sector, it has immediate effects on raising sovereign debt and debt servicing as well as a higher import bill and, consequently, inflationary costs.
“Currency depreciation will drive up the price level of imported goods in the coming months, which, when combined with drought-related food price increases, will lead to higher inflation,” he said.
Annual inflation rose to 5,3% at the end of January compared to a 3,7% recorded in December 2015.
The food and non-alcoholic beverages component of the Namibia Consumer Price Index grew by 6,1% compared to 5,9% in December. Bread and cereals, oils and fats coupled with vegetables such as potatoes remain the main culprits for growth in the category.
Namib Mills increased food prices in January and again announced the next increases in general food prices to be effective on 23 February.
According to tradingeconomics.com, the rand is expected to trade at 15,96 to the US dollar by the end of this quarter. Trading economics estimate the rand to trade at 16,59 in 12 months’ time.
Reacting to the 2016/17 budget speech recently delivered by the minister of finance, Thieme said the NCCI expressed optimism in the direction taken by government, and called for all stakeholders to collaborate so as to ensure the necessary speed of execution.
He said government’s ‘Growth-At-Home’ strategy to develop a self-sustaining economy, needed to be embraced by all, as socio-economic transformation could not be attained through social grants only, but required the development of sustainable industries.
“’Growth at Home’ has never been more needed than now as developing our own sustainable industries is imperative in protecting our economy against the impact of global and local factors, while creating employment and reducing poverty,” he said.
Thieme said the impact of the current drought was amplified further by the effect of various externalities such as the deterioration of the oil price, which he called a double-edged sword in that, while lower oil prices benefit the consumer at point of sale, and the transport sector at large, its negative impacts were felt in other sectors such as the domestic retail sector. The domestic ship repair and marine engineering industries were impacted by oil price fluctuations.
Thieme said that from the sheer size of Namibia as an emerging market which largely consumes what it doesn’t produce, it is extremely vulnerable to externalities which is why ‘Growth at Home’ is the key to a self-sustaining and free economy.
He expressed excitement at the national budget’s focus on economic growth and sustainable development, as well as poverty eradication. Thieme stressed that necessary services need to be prioritised to effectively support this growth agenda, citing in particular water, energy, and rail service delivery.
The Food and Agriculture Organisation (FAO) forecast world cereal output in 2015 would be 2,52 billion tonnes, down 6,3 million tonnes from its prior prediction, mainly due to lower wheat production estimates in India and Iran.
FAO estimated that this year’s harvest will total 723 million tonnes, 10 million tonnes lower than the record hit in 2015.
