This year, the value of Namibian trade is setting a new record when compared to the same period in previous years, a report released by Simonis Storm reveals.
Namibia exported N$59.9 billion worth of products, 12.5% higher than the prior year, and 8.4% higher than the value of exports in 2019 for the same period. At the same time, the import bill since January amounts to N$74.8 billion, 4.2% higher than 2022 and 14.3% higher than 2019. This further substantiates that trade has fully recovered since the pandemic.
Diamonds (N$2.5 billion) were the top exported product in July 2023, followed by uranium (N$1.3 billion), fish (N$1.1 billion), gold (N$910 million), petroleum oil (N$363 million), and live animals (N$201 million).
“These 6 items account for 77% of the export bill. Gold exports increased by 70.4% y/y, from N$579 million, moving from the 5th highest exported commodity to 4th highest. Fish, being one of our consistently largest exports, accounts for 14% of our export bill and has increased by 33.5% y/y in July 2023. Similar to fish, uranium accounts for 15% of our export value basket and has increased its exports by 26.9% y/y in July 2023,” Simonis Storm said.
Additionally, year to date, trade balance narrowed by 19.8% compared to the same period of 2022. This translates to positive growth expectations for annual GDP of 2023, and an anticipated outperformance of the 2.1% GDP growth in 2022. According to our 2Q2023 Quarterly Economic Review, we forecasted GDP growth of 3.2%.
Essentially however, Namibia’s trade balance widened by 58.3% y/y in July 2023 to the largest deficit since September 2022. The export bill decreased by a meagre 0.2% y/y, however the import bill increased by 12.5% y/y in July 2023. The export bill recorded N$8.3 billion, while the import bill amounted to N$11.9 billion, exceeding the export bill by 0.7 times. This translates to a trade deficit of -N$3.7 billion. This is the widest trade deficit for the month of July since 2019.
Imports have remained costly due to the weaker Rand exchange rate in 2023 compared to 2022. The Rand has depreciated by 8.1% since July 2022, and 5.1% YTD. The average Rand exchange for July was R18.16/$. This is an upside risk for imports to Namibia and inflation rates. Namibia is a net importer of goods, which exposes consumers to import inflation.
“During the month of July 2023, the Baltic Dry Index (BDI) has increased by 3.3% m/m which indicates that shipping prices could have added to the higher import bill, however, during the month of August 2023, BDI decreased by 5.5% m/m indicating that we can expect a lower import bill going forward given that the Rand exchange does not offset lower prices.
“Covid-19 caused major supply issues globally, which hindered trade amongst countries. Trade YTD has improved beyond pandemic levels. YTD, net weight exported, exceeds the number of tons exported during 2020 and is currently 92.2% of total tons exported in 2022. At the same time, the average amount of tons Namibia imports, per month, are on a declining trend since 2022, and we expect this trend to continue in 2023,” explained Simonis Storm.
The firm also said that from 1st October 2023, Europe’s Carbon Border Adjustment Mechanism (CBAM) will become effective – the first carbon tax for imported goods adding that the EU area wants to block the import of “dirty commodities”, which could have large implications for Namibia’s export bill.
“European countries account for 20%, on average, of Namibia’s importers. Figure 9 shows the composition of products that European countries import from Namibia. Such a move will specifically harm the fishing and mining sectors. If this materialises, Namibian GDP could see a marked decrease.
“Namibia’s strong mining sector and foreign interest in the sector promise the country positive results. As the world moves into a just energy transition, the rare earth metals potential in Namibia can offer the country a higher expected export bill. The country however still faces the challenge of lack of manufacturers,” concluded Simonis Storm.