Productivity, trade, investment and capital to keep dragging

AFTER losing around N$12 billion worth of goods and services last year, sluggish productivity, trade, investment and capital formation are expected to continue before the economy bounces back.

This is according to the board chairperson of the Development Bank of Namibia (DBN), Tania Angula, in her foreword of the bank’s annual report for 2020.

She says Covid-19 has had a significant reversing effect on national economic activity, and the DBN will thus need to remap its priorities – especially in the short to medium term.

Angula says the pandemic has exposed vulnerabilities in Namibia’s economy.

Key among this is the country’s reliance on imported manufactured goods, which has fallen prey to disruption.

“This indicates the need for renewed vigour in expanding existing manufacturing capacity, establishing new manufacturing capacity, or diversifying existing entities,” she says.

Relying on imports has led to various companies, such as Power­com, not completing projects as they struggled to obtain necessities through imports.

Namib Mills earlier this month indicated it is increasing some of its consumer prices due to the high cost of importing plastic.

The global polyethylene industry is currently facing supply and shipping constraints, which have significantly affected the supply of packaging material.

The second major vulnerability is the overreliance on inward-bound international tourism.

Angula says even though the impact on the tourism sector can only be assessed over time, a rebalancing would need to take place to replace a portion of its contribution to the country’s gross domestic product (GDP) until it fully recovers.

There have been increasing calls for a tourism strategy to increase domestic and regional tourism.

The third major vulnerability observed by Angula is food security.

Although drought has been a concern, Namibia has been able to import goods to cover gaps in local productivity.

“The immediate requirement would be to restore the supply chain,” she says.

In the short to medium term, the country would have to compensate with measures to further enhance capacity, she says.

Angula highlighted that the DBN has provisionally developed a facility for agriculture under controlled circumstances or processes to promote value-chain development.

She says the focus of the facility lies in the provision of infrastructure and technology, rather than direct investments in land and stock.

“The facility, once implemented, would complement the DBN’s existing activities in the field of agro-processing and food manufacturing,” Angula states.

The development bank’s loan approvals for last year involved almost the equivalent to the Ministry of Agriculture, Water and Land Reform’s current budget of N$1,7 billion.

Reporting on the bank’s financial performance, chief executive officer Martin Inkumbi says it has approved a total of N$1,14 billion in loans to fund various projects from 2019 to 2020.

This is an increase from N$682,1 million extended to the economy in 2018/19.

Land servicing took up a chunk of the capital (N$442,9 million) for the servicing of 5 040 erven comprising 228,8 ha.

This was followed by business services, with N$177 million in loans.

The country’s ambition to industrialise was boosted with capital amounting to N$130,7 million.

Regionally, Khomas led the economy with N$476,7 million in approvals, followed by the Oshana region with N$138,3 million, and the Erongo region with N$110,8 million.

Out of the one billion loans extended in 12 months, N$279,3 million was allocated to small and medium enterprises (SMEs).

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