Uranium offers ray of hope

AMIDST the economic turmoil inflicted on the mining industry by the global financial crisis, uranium presents a gleaming ray of hope, says the Namibia Economic Policy Research Unit (Nepru).

In a presentation reviewing Namibia’s economic performance for 2008 and outlining prospects for 2009, Klaus Schade, Nepru’s Acting Director, said: ‘Uranium mines are expected to do well because of increasing demand.’This is despite a fall in uranium spot prices from US$90 per pound in January last year to US$44 in October, with a slight recovery to US$53 by the end of 2008.Nevertheless, a strong interest in uranium mining remained, with increased production due to the Langer Heinrich Mine.This increase is in sharp contrast to production in other areas of the mining sector, where the number of Exclusive Prospecting Licences granted to mining companies dropped significantly during last year. Diamond production decreased considerably, with Namdeb and DeBeers Marine cutting and/or halting on- and off-shore production, due to fallen demand. Namdeb recently announced plans to shed 600 jobs through its voluntary separation strategy, failing which forced retrenchments will be considered. Furthermore, production cuts will undoubtedly bear negative effects on downstream cutting and polishing activity, placing government’s beneficiation process at stake in the midst of this crisis.The copper industry also took a serious blow, with Weatherly Mining Namibia closing its doors at the mine, and retrenching over 640 workers, due to large decreases in copper prices from US$7 000 per ton in January to less than US$3 000 by November last year. Only Weatherly’s copper smelter remains functional.Zinc also experienced tough times with prices falling from US$2 500 per ton to US$1 000.According to Schade, prospects for diamond, copper and zinc mining remain bleak for 2009, leaving uranium as perhaps the only positive contender in the mining sector.Other sectors also took a beating last year, with overall economic growth falling from a growth forecast of 4,5 per cent at the beginning of 2008 to a low 2,5 per cent for 2009. In the agricultural sector, subsistence crop farming was affected by floods and droughts, horticulture was affected by a fruit fly infestation that led to the closure of South African borders for fruit and vegetables, input costs increased significantly due to high oil prices and the debate on the Small Stock Marketing Scheme remained unfinished. Commercial crops, 50 per cent of which are under irrigation, were able to withstand climate changes though, with an overall above average performance.The fisheries sector also had to contend with high oil prices in 2008 and the red tide almost collapsed the marine aquaculture industry, but the overall Total Allowable Catch (TAC) remained unchanged.The manufacturing sector’s contribution to GDP increased over the past year despite some turbulence in the textile industry with the closure of Ramatex, and the construction sector benefited from various infrastructure and development projects. The electricity crisis in the energy sector had to be withstood at high costs, though copper mine closures and the use of energy saving mechanisms reduced demand. In the service sector, tourism and wholesale and retail all faced decreased performance due to high oil and food prices which lowered people’s disposable income, with the transport sector coming under the strain of high oil prices. And in the financial sector, although banks were not directly affected by the crisis, pension funds were affected, and the Namibia Stock Exchange index declined, indicating losses for portfolio investors.But while the economy handled big blows and faces major slowdowns this year, not all is gloomy in the overall economy forecast for 2009, says Schade.’Crop production in the agricultural sector is expected to be average or even slightly above because of early rains and normal to above rain forecasts, but Foot and Mouth disease needs to be addressed to provide market access for Caprivi-Kavango cattle farmers; we can expect to see a doubling of current milk output in the second half of 2009 in the dairy sector; construction will continue doing well because of ongoing projects although high costs and reported shortages of cement will have to be addressed; and while the wholesale and retail sectors will be affected by declining disposable income in 2009, they could receive a boost from salary increases in the public sector and the implementation of the War Veterans Grant.’Schade noted that for 2009, the Government deficit is expected to increase from the current anticipated 2,7 per cent deficit due to its expansionary budget in 2008 which saw a 20 per cent increase in expenditure, explaining that there was limited scope for Government to cut expenditure. – nangula@namibian.com.na