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Wholesale sector performance unstable

Sun, 16 September 2012 19:19
by Business Writer



This year, the wholesale retail sector has been negatively affected by hikes in international commodity (food and energy) prices, hence impacting on the Namibian import and export in the African region.
As of 2010, this sector was one of the main drivers of the Namibian economy with an 8% GDP growth and Bank of Namibia (BoN) acting director of strategic communication and financial development, Emma Haiyambo explains that: “Hikes in food and transport prices have lowered consumer demands and pushed up input costs. Trading with Angola, although still vibrant, has reached a stage of lower growth than in the past.”
Institute for Public Policy Research (IPPR) research associate, Klaus Schade, emphasises that the economic uncertainties witnessed globally, especially within the Euro-zone will keep affecting the domestic economic performance.
“Namibia is an exporter of raw materials (particularly minerals). The demand for commodities depends on the performance of the global economy and there are a lot of prevailing uncertainties - high unemployment, sovereign debt crisis and trade imbalances. Global economic growth is expected to slow down, with the Euro-zone entering a period of recession while China and India experience lower than expected growth; thus impacting on the demand and prices for commodities and affecting exporting countries such as Namibia,” Schade says.
BoN’s Monetary Policy Committee (MPC) stated in August that the wholesale sector future performance does not look bright, hence might lower the domestic economic performance in the remainder of the year compared to the beginning of this year’s performance.
However, Schade argues that the cut on interest rate imposed by BoN will boost the wholesale sector; the low interest rates will influence more borrowing and spending by the Namibian consumer, thus improving the sector.
“The reduction will benefit all Namibian consumers and producers that have borrowed money since they will have to pay less interest rates each month thereby having more money in their pockets to either save or spend otherwise. However, people with savings account might lose out as receiving less interest in their deposits might reduce their income.”
Furthermore, Haiyambo adds that in the past 10 years, manufacturing has contributed over 10% of the registered real GDP growth although the same sector does absorb a huge number of labour forces.
A setback in the manufacturing performance is likely to have drawn down effects on factors such as employment, income and consumer demand.
 “The sector’s setback would eventually result in failing economic growth as the productive capacity of the economy shrinks,” Haiyambo points it out.
Schade advises that one way to protect the citizens from the economic crisis might require working on the income gap between the rich and the poor in the country first.
“The reduction in the income gap will increase the demand for locally produced goods and services rather than the demand for imported products. In turn, it will increase local production and investment leading to more employment, thus increasing demand,” he notes.
He stresses that supporting our own industry would increase local demand and reduce the dependency on exports as well as the vulnerability to external shocks.