N$14,2 billion leaves Namibia to South Africa

Capital outflow from Namibia to South Africa since January amounts to N$14,2 billion.

This is a N$3,6-billion increase compared to last year.

Johannes !Gawaxab, the governor of the Bank of Namibia, says this is mostly due to the interest rate differential with South Africa.

He says capital outflow is largely recorded in payments for import merchandise.

“N$3 billion of that N$3,6 billion was payment for merchandise,” he says.

!Gawaxab says the country is still importing more than it exports.

Last year, outflow was recorded to be N$10,6 billion in the same period.

!Gawaxab says the difference is not driven in pursuit of better interest rates in South Africa.

“The remaining N$600 million still requires further analysis, but N$3 billion of the N$3,6 billion is coming from trade,” he says.

The governor says there is an increase in the country’s foreign reserves.

“Foreign reserves have increased from N$55,6 billion to N$60,8 billion,” !Gawaxab says.

This was mainly attributed to an increase in revenue from the Southern African Customs Union and diamond sales.

“This most recent level translates to an estimated import cover of four months, remaining adequate to sustain the currency peg between the Namibia dollar and the rand,” he says.

However, the governor says the local diamond industry has been seeing a decline in demand due to lab-grown diamonds.

“The challenges in the diamond industry continued, driven by a protracted recovery in demand and higher inventories in the midstream.

There is also a weak demand from China and competition from lab-grown diamonds,” !Gawaxab says.

This has impacted production, export revenue and diamond taxes to the government, he says.

He says economic growth has been projected to decline due to the ongoing drought, water disruptions and a decline in diamond sales.