Windhoek - Namibia’s economy expanded by 5% in the first quarter of 2023 compared to the same period last year, showing signs of recovery after two years of recession brought on by COVID-19. The financial services, manufacturing, and public administration sectors posted declines but were offset by strong growth in mining, trade, electricity, water, transport, hotels and restaurants.
The mining sector led the growth, expanding 34.3% from the first quarter of 2022. Increased global commodity prices and higher production of uranium, diamonds, gold, and other minerals boosted the mining industry. The wholesale and retail trade sector grew 5.7% as consumer demand recovered. The electricity and water sector grew 16.8% due to increased economic activity.
The transport and storage sector grew 6.7% compared to 2.3% the previous year. The hotels and restaurants sector grew 5.7% compared to 4.6% the previous year, signaling the return of tourism. However, some sectors like financial services, manufacturing and public administration contracted, highlighting their vulnerability.
Agriculture and forestry grew at a slower 3.6% due to drought conditions in parts of the country. The health sector also grew at a slower 2.6% rate. Overall, the economy has been on a positive trajectory for eight straight quarters but still needs to gain momentum to make up for the deep declines of 2020.
Continued growth will depend on a rebound in tourism, strong commodity prices, policy reforms and avoiding another severe COVID-19 outbreak. The government aims to accelerate growth to at least 5% annually to reduce high unemployment, currently around 33%. Growth needs to be more broad-based and inclusive to expand the middle class.
The mining sector’s heavy dependence on fluctuating global commodity markets poses risks to sustained high growth. Also, the small manufacturing base, high wages, and skills shortages are obstacles. However, new mining and gas projects coming online offer opportunities. The African Continental Free Trade Area also provides access to a huge market.
The 5% economic growth in the first quarter is positive news for businesses listed on the Namibia Stock Exchange (NSX). As the economy recovers, it will boost consumer and investor confidence, spurring higher demand and stock prices.
Mining companies like Paladin Energy, Rössing Uranium, and Namdeb Holdings should benefit from continued high commodity prices and increased production. Paladin Energy’s stock price has been solid over the past year. Rössing Uranium and Namdeb are subsidiaries of Rio Tinto and De Beers, so their parent companies will also gain.
Banks and financial services companies like FirstRand Namibia, Nedbank Namibia and Old Mutual Namibia should see improved performance as economic activity increases, reducing loan defaults and boosting new lending and investment. Their stock prices are expected to rise by 10-20% over this year in anticipation of economic recovery, a trend that should continue if growth remains steady. However, the increase in repo rates could offset the performance of the banking sector as the increase will impact Namibian consumers who rely on debt to survive, making it more expensive for individuals and businesses to borrow money, which will lead to a decrease in demand for credit.
Retailers like Pick n Pay and Shoprite are still expected to gain from higher consumer spending even with the Governor recently urging the masses to adjust their spending behavior after the Bank of Namibia raised interest rates to safeguard the currency peg. Shoprite’s stock price is still expected to climb nearly 28% this year. Pick n Pay’s share price will marginally increase by 5%.
Tourism and hospitality companies such as Sun International Namibia and Cresta Hotels will benefit as more business and leisure travelers return. Their share prices plummeted 30-60% during 2020 but have been rebounding in the past 2 years. Higher occupancy and visitation will boost revenue, profitability and investor confidence in these companies.
In light of this sustained economic growth will positively impact most businesses listed on the NSX, especially mining companies, banks, retailers, tourism and hospitality firms. Their share prices is expected to increase in anticipation of improved performance, a trend likely to accelerate if Namibia maintains its recovery momentum. However, risks like low consumer confidence or weak commodity markets due to the increase in repo rates could slow growth and hamper stock gains. But overall, the first quarter’s strong economic data bodes well for listed companies and their investors.
In summary, Namibia’s economy is showing signs of emerging from two years of recession sparked by the COVID-19 pandemic. Several sectors drove strong growth in the first quarter of 2023, though others still face headwinds. Maintaining momentum will require policy reforms, economic diversification, and job creation. With prudent management, the future looks brighter.
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