Tough year, but hope prevails
Economic overview 2023
Namibia needs to balance policies that try to moderate, says independent economist Josef Kefas Sheehama.
The business and economic space was characterised by several challenges in 2023.
Investors had to contend with the typical constraints of the business environment, high inflation, a global energy crisis, geopolitics, tightening monetary policy, a slowdown in the economic recovery, climate, high employment, weak economic growth and insecurity, among others.
The surge in inflation that started end of 2021 was only accelerated when the Russian invasion of Ukraine dented global energy and food commodity markets, and demand for goods, which was supposed to abate as the economy to rebalance, has mostly remained at elevated levels.
But inflation has become much more broad-based. High inflation usually means that you have too much money chasing, too few goods and services, and too much demand and too little supply.
Monetary policy
But I think ideally what we want to do, is to balance policies that try to moderate.
The situation is complicated by the Bank of Namibia (BoN) needing to walk a tightrope with interest rates, given soaring inflation.
They may need to continue to raise rates to keep inflation in check, but this makes debt for individuals and businesses more expensive.
The access to and cost of funds remain a big issue for many Namibian companies.
With the commercial bank lending rate kept at 11.5%, enterprises, especially SMEs, could not successfully access funds capital for their businesses. Furthermore, the government amended its tender requirements, requesting businesses to provide liquidity assets that kill SMEs.
Labour
The labour market is very tight in certain industries. In others, conditions are worse than ever, with greater workloads being handed to employees by companies struggling to recruit.
This issue tends to be in industries with lower-paid workers, where labour shortages are becoming increasingly common.
The supply chains, rising energy prices and high cyclical inflation have led the BoN to engage in an unprecedented pace of rate unchanged this year, with target interest rates remaining constant on 6 December 2023.
Hydrogen
It is not all doom and gloom, and the good news is that there is light at the end of the tunnel.
Namibia is indeed making strides in the green hydrogen sector. Government is looking to harness the abundant wind and solar renewable energy resources to establish a new synthetic fuels industry.
The aim is to drive industrialisation across the country striving for the successful execution of the designated pilot projects. The project is expected to create 15 000 direct jobs during the first four years of construction and a further 3 000 permanent jobs, with 90% being locals.
Oil
Additionally, oil discoveries in Namibia are likely to bring in an equivalent of N$53 billion in revenues for the state, a prominent global consultancy group has estimated.
This discovery will significantly improve energy security in a nation that relies heavily on petroleum imports. The development of a consistent domestic energy supply will prove critical for the economy while reducing imports from neighbouring countries.
Notably, the creation of a domestic petroleum market will create thousands of jobs for the local population across every industry in the value chain while motivating the creation and establishment of various domestic companies.
SMEs
The BoN and the ministry of finance and public enterprises relaunched the SME Economic Recovery Loan Scheme in February with a share capital of N$500 million.
The relaunched scheme is a revamp of the earlier loan scheme and is designed to provide small and medium-sized businesses access to government-guaranteed loans to help their businesses recover from the impact of Covid-19.
For the SMEs that survived, their immediate financial needs have been increasing sharply to minimise the negative impacts of business disruptions and to retain employment as well as take precautionary measures for the uncertainty.
SMEs provide some form of employment and income to 160 000 people, representing approximately one-third of the nation’s workforce. In terms of full-time employment, this sector currently employs about 60 000 people.
Investors had to contend with the typical constraints of the business environment, high inflation, a global energy crisis, geopolitics, tightening monetary policy, a slowdown in the economic recovery, climate, high employment, weak economic growth and insecurity, among others.
The surge in inflation that started end of 2021 was only accelerated when the Russian invasion of Ukraine dented global energy and food commodity markets, and demand for goods, which was supposed to abate as the economy to rebalance, has mostly remained at elevated levels.
But inflation has become much more broad-based. High inflation usually means that you have too much money chasing, too few goods and services, and too much demand and too little supply.
Monetary policy
But I think ideally what we want to do, is to balance policies that try to moderate.
The situation is complicated by the Bank of Namibia (BoN) needing to walk a tightrope with interest rates, given soaring inflation.
They may need to continue to raise rates to keep inflation in check, but this makes debt for individuals and businesses more expensive.
The access to and cost of funds remain a big issue for many Namibian companies.
With the commercial bank lending rate kept at 11.5%, enterprises, especially SMEs, could not successfully access funds capital for their businesses. Furthermore, the government amended its tender requirements, requesting businesses to provide liquidity assets that kill SMEs.
Labour
The labour market is very tight in certain industries. In others, conditions are worse than ever, with greater workloads being handed to employees by companies struggling to recruit.
This issue tends to be in industries with lower-paid workers, where labour shortages are becoming increasingly common.
The supply chains, rising energy prices and high cyclical inflation have led the BoN to engage in an unprecedented pace of rate unchanged this year, with target interest rates remaining constant on 6 December 2023.
Hydrogen
It is not all doom and gloom, and the good news is that there is light at the end of the tunnel.
Namibia is indeed making strides in the green hydrogen sector. Government is looking to harness the abundant wind and solar renewable energy resources to establish a new synthetic fuels industry.
The aim is to drive industrialisation across the country striving for the successful execution of the designated pilot projects. The project is expected to create 15 000 direct jobs during the first four years of construction and a further 3 000 permanent jobs, with 90% being locals.
Oil
Additionally, oil discoveries in Namibia are likely to bring in an equivalent of N$53 billion in revenues for the state, a prominent global consultancy group has estimated.
This discovery will significantly improve energy security in a nation that relies heavily on petroleum imports. The development of a consistent domestic energy supply will prove critical for the economy while reducing imports from neighbouring countries.
Notably, the creation of a domestic petroleum market will create thousands of jobs for the local population across every industry in the value chain while motivating the creation and establishment of various domestic companies.
SMEs
The BoN and the ministry of finance and public enterprises relaunched the SME Economic Recovery Loan Scheme in February with a share capital of N$500 million.
The relaunched scheme is a revamp of the earlier loan scheme and is designed to provide small and medium-sized businesses access to government-guaranteed loans to help their businesses recover from the impact of Covid-19.
For the SMEs that survived, their immediate financial needs have been increasing sharply to minimise the negative impacts of business disruptions and to retain employment as well as take precautionary measures for the uncertainty.
SMEs provide some form of employment and income to 160 000 people, representing approximately one-third of the nation’s workforce. In terms of full-time employment, this sector currently employs about 60 000 people.
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