1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

N A M I B I A
and wharf facilities. It is expected that the volume of cargo
passing through Namibia will increase with the re c e n t
completion of the Trans-Kalahari or “Coast-to-Coast” transport
c o rr i d o r, linking Namibia with the South African industrial
p rovince Gauteng. F u rther upgrading is to be done to incre a s e
the current capacity of 2m tons of freight to up to 5m tons.
Air Namibia operates domestic, regional (Ango l a , B o t sw a n a ,
South A f r i c a ,Z a m b i a ,Z i m b a b we) and international (Frankfurt,
London) scheduled passenger and freight serv i c e s . O t h e r
airlines flying to Windhoek include South African A i r w ay s ,A i r
Z i m b a b we,Air Botsw a n a ,A n golan A i r l i n e s ,C o m a i r, SA Expre s s ,
and Lufthansa. Namibia has 28 licensed and some 300
unlicensed aero d romes and airstrips.
The mobile telephone network which covers the country ’s main
10-15 centres is curre n t ly undergoing rapid expansion. T h e
i n d u s t ry offers considerable possibilities for further upgrading.
Namibia Te l e kom was re c e n t ly transformed into a commerc i a l
o p e r a t i o n .
E C O N O M I C O V E R V I E W
I n t ro d u c t i o n
At independence in 1990 the new ly elected government faced
the challenge of add ressing economic imbalances and
reactivating growth after a decade of virtual stagnation. It opted
for a strategy designed to gain the confidence of fo reign and
domestic inve s t o r s , n a m e ly broadening of manu f a c t u r i n g
activities and tourism, i n c reased value-adding of domestic raw
materials for export , and expanding skills through investment in
training and education. Details of the strategy are set out in
N a m i b i a ’s first five - year plan covering 1995/96 - 1999/2000.
Recent Macro-Economic Deve l o p m e n t s
Available data suggest that the real economic growth in 1997
d e c reased somewhat from 6.5 percent in 1996 to 4.1 perc e n t .
N a m i b i a ’s economic performance is influenced to a great extent
by weather and oceanic conditions, as well as international
commodity marke t s . Real output benefited from stro n g
external demand for mining and fish export s , as well as the
d e p reciation of the Namibian dollar.Agricultural activities we re
a f fected by the restocking of livestock fo l l owing the dro u g h t .
I n c rease in the interest rates impacted adve r s e ly on the re t a i l
trade and construction, and subsequently led to a decline in
consumption cre d i t .
During the first half of 1997 international re s e rves declined in
response to increase in government expenditure. T h e
government there fo re had to introduce measures poised
t ow a rds reducing expenditure as well as raising add i t i o n a l
reve nu e. Public debt which has been on a declining trend since
1990 was reduced to 21.2 percent of GDP in 1997 reflecting the
writing off of the pre-independence loan by the South A f r i c a n
G ove r n m e n t .
The rate of growth in monetary aggre g a t e s ,which accelerated
in the first half of 1997, s h owed signs of abatement in the second
half of the ye a r.At the end of the ye a r, m o n ey supply incre a s e d
by 7.6 percent compared to 24.3 percent in 1996. A c c o u n t i n g
for growth in money supply in the first half of 1997 was a faster
g rowth in net credit to the government and a substantial
i n c rease in net fo reign assets of the banking system.
The trend in money market rates since the end of 1996 was
g re a t ly influenced by expectations of a dow n w a rd adjustment in
the South African Bank rate. The rates rose sharply betwe e n
N ovember 1996 and Janu a ry 1997, but thereafter declined
t h roughout the ye a r.
Declining consumption expenditure and import prices during
the last two years have contributed in putting a dow n w a rd
p re s s u re on domestic inflation, p a rt i c u l a r ly during the second
half of 1997. Rising labour costs, we a ker rand and rising fo o d
prices in South Africa accelerated the rate of inflation import e d
into Namibia during the second half of 1996, when the ave r a g e
rates rose to 8.2 perc e n t .In fact the rate of inflation has been
falling steadily reaching the lowest year on year rate eve r
re c o rded of 6.9 percent in December 1997.
The current account of the balance of payment re g i s t e red a
surplus in 1997.This was brought about by a combination of a
decline in domestic expenditure, reduced growth in import s ,a s
well as an increase in the value of merchandise export s .C ap i t a l
and financial account re g i s t e red the largest deficit since 1990,
h owever the surplus on the current account led to a rise in
international re s e rves of NAD312m (USD 68m) compared with
an increase of only NAD98m (USD23m) in the previous ye a r.
The Namibian dollar is fixed on one-to-one basis with the South
African rand, t h e re fo re the development of the South A f r i c a
rand affects the Namibian dollar dire c t ly. In 1996 the Namibian
dollar depreciated by 21.9 percent to an average of NAD4.30
against the USD. In 1997 the Namibian dollar declined by 6.7
p e rcent and reached an average of NAD4.61 against the USD.
The Namibian dollar strengthened against the German mark in
the first three quarters of 1997 but depreciated sharply in the
last quart e r. Against the British pound, the Namibian dollar
gained strength in the first half of the year but depreciated on
account of quick growth in the UK economy.
Financial Institutions
The functions of central banking we re prev i o u s ly handled by the
R e s e rve Bank of South A f r i c a ,and we re transfe rred to the Bank
of Namibia in 1990. The Bank became fully operative after
i n t roducing Namibia’s own currency in September 1993.
Six commercial banks dominate the economy, the largest being
First National Bank of Namibia and Standard Bank Namibia.
Other financial institutions include building societies, i n s u r a n c e
companies and public finance institutions, including the
D evelopment Fund of Namibia and the Agricultural Bank of
N a m i b i a . All banks provide compre h e n s i ve domestic and
international serv i c e s . S h o rt-term insurance and life insurance
b ro k i n g ,estate planning and factoring are some of the ancillary
s e rvices provided by the banking sector.
The central bank, the Ministry of Finance and the private
financial sector are active ly pursuing the establishment of
financial instruments and marke t s , such as parastatal bills,
d e b e n t u res and bonds,government tre a s u ry bills and nego t i a b l e
c e rtificates of deposit. A c c o m p a nying this also is the rap i d
d evelopment of a domestic money market and fo reign exchange
m a r ke t .Local interbank lending is limited due to the size of the
m a r ke t ,and local banks are often re fe rred to the South A f r i c a n
interbank marke t .
Namibia Stock Exchange
The Namibia Stock Exchange (NSE) began operating in October
1992 . The stock exchange is a non-profit organization of listed
c o m p a n i e s ,h oweve r.To date the number of companies listed has
risen to 33, constituting a market capitalisation of about
USD31,804.3 m. The increase in the number of listed
c o m p a n i e s ,p a rt i c u l a r ly from 1995 has been due to grow i n g
p a rticipation by fo reign inve s t o r s , which also should have
boosted market liquidity. A new scre e n - b a s e d - c o m p u t e r- t r a d i n g
s y s t e m , based on price-time priority dealing rules on a
c o n t i nuous basis,has been developed by the NSE. Settlement is,
h oweve r, still operated manu a l ly. E f fo rts are afoot for finalising
the introduction of a central depository system.
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