The prolonged nightmare being experienced by the construction sector has continued with the latest Gross Domestic Product statistics for the third quarter of 2022 showing that the sector has suffered a decline, now for the fifth consecutive quarter.
A contraction of 10.0 percent in real value added recorded during the third quarter of 2022 is however a slight positive when compared to a decline of 25.6 percent registered in the corresponding quarter of 2021, Namibia Statistics Agency (NSA) revealed last week.
“The improved performance of the sector is reflected in the real value of both buildings completed and government expenditure on construction that registered declines of 8.4 percent and 6.9 percent during the period under review compared to a contractions of 67.4 percent and 45.9 percent in the corresponding quarter of 2021
“However, declines in real value of residential buildings and additions and alterations is attributed to the decline in related number of buildings completed,” Statistician-General, Alex Shimuafeni said.
It has been reported that Namibia’s construction sector is projected to remain in contraction during 2022 before recovering to growth in 2023. The sector is expected to contract by 2% in 2022 before expanding by 2.5% in 2023. This is according to the Bank of Namibia’s economic outlook earlier this year, which stated that the projected contraction in 2022, is a moderation from a deeper contraction of 19.2% in 2021, and marks the seventh year of consecutive contractions for the sector.
In 2019 the construction sector’s annual contribution to Namibia’s gross domestic product declined to US$788,6 million (roughly N$11 billion at the time), compared to US$1,2 billion (roughly N$16,8 billion) in 2016.
At the time, Justina Jonas, the general secretary of the Metal and Allied Namibian Workers Union (Manwu) said in a statement that this drop was an all-time low, adding that going back to 2000, the 2019 average record is lower at US$770,3 million (roughly N$10,7 billion).
REGULATION
The Namibian Construction Industries Federation (CIF) has previously appealed to lawmakers to establish a national council for the construction sector to regulate it.
The federation has argued that regulating the industry could ensure better opportunities for the sector, as well as address the extent of foreign involvement that is detrimental to local contractors.
Critically, a less regulated environment will provide a scope for tenderpreneurs and foreign companies, to operate without being registered in Namibia.
“The effect of such an unregulated environment is that legitimate local contractors with adequate capacity are increasingly being pushed aside, and that ongoing local capacity-building, continued employment and the provision of decent work are increasingly being undermined,” CIF has argued in the past.
DOMESTIC ECONOMY EXPANSION
Last week, Shimuafeni also stated that the domestic economy expanded by 4.3 percent during the third quarter of 2022, slow growth, when compared to a growth of 5.6 percent posted in quarter three of the preceding year. The economy continued to remain in the positive trajectory for six consecutive quarters.
The slow performance is largely attributable to the contractions being observed in the sectors of ‘Agriculture and forestry’, ‘Financial services activities’ ‘and Public administration and defence’ which posted declines in real value added of 14.2 percent, 4.7 percent, and 2.7 percent, respectively. Furthermore, activities slowed in the sector of ‘Mining and quarrying’ and ‘Hotels and Restaurants’ from a growth of 34.4 percent and 19.6 percent in real value added recorded in the third quarter of 2021 in comparison to the 14.9 percent and 1.7 percent in real value added, accordingly.
“Conversely, positive growths were primarily driven by sectors of Manufacturing and ‘Wholesale and retail trade’ sectors posting increases of 12.9 percent, and 10.2 percent in real value added, in comparison to the 6.9 percent, and 0.4 percent registered in the corresponding quarter of 2021, respectively. In the quarter under review, Gross Domestic Product in nominal terms, stood at N$50.0 billion, up by N$4.4 billion when compared to the N$45.6 billion registered in the corresponding quarter of 2021,” Shimuafeni said.
Total demand in the economy slowed down as observed in all the components of final demand except, Gross Fixed Capital Formation. Private final consumption expenditure slowed down to register a 12.8 percent during the period under review, compared to the 30.1 percent recorded in the parallel quarter of 2021.
“The slowdown in demand for final goods is due to the pressure on income as prices rises resulting in reduced imports for consumption. Furthermore, government final consumption expenditure posted a slower growth of 0.2 percent, in comparison to the 1.2 percent recorded in the third quarter of 2021, reflecting the on-going fiscal consolidation as government continue to curb expenditure. In as much as Gross fixed capital expenditure posted a decline of 12.8 percent during the period under review, this shows an improved performance relative to the contraction of 24.6 percent registered in the same quarter of 2021,” expressed Shimuafeni.