By: Justicia Shipena
Namibia continues to have monthly trade deficits even though exports have been growing faster than imports in recent months, financial research firm Simonis Storm has observed.
This week, Simonis Storm published a report on trade figures for the month of May, which revealed that Namibia’s trade activity increased in value by 18.7% over the same period.
The report states that this increase was caused by an increase in exports of 45.3% and an increase in imports of 4.0% on a yearly basis.
“Despite exports growing at a faster rate than imports in recent months Namibia continues to record trade deficits on a monthly basis,” the firm’s research assistant Angelique Bock said in a report.
In May 2023, Namibia’s trade activity climbed in value by 18.7% year over year, led by higher exports and imports.
According to the report, the trade balance decreased from a deficit of N$5.5 billion in May 2022 to a deficit of N$2.8 billion in May 2023 as a result of quicker export growth than import growth.
On a monthly basis, the trade balance worsened by 110.8% month over month, going from a deficit of N$1.3 billion in April 2023 to a deficit of N$2.8 billion in May 2023, according to the report.
Bock stated that the weak rand and high price of petroleum are the reason for the ongoing record in trade deficit.
“This is a result of the weak rand exchange rate and expensive petroleum imports that continue to cause the import bill to come in larger than export bill,” she said.
Namibia has seen an average monthly trade deficit of N$1.9 billion so far this year. In comparison to the same period last year, which saw an average monthly loss of N$3.2 billion, this Simonis Storm sees it as an improvement.
“This is supported by higher economic growth rates, primarily being driven by the mining sector and metal processing activities in the manufacturing sector,” the report stated.
Bock also pointed out that Namibia’s mining industry has experienced better growth, which has contributed to the country’s increased export growth. However, the country’s exports are still insufficient to cover its import costs, she said.
As a result, she stated that moving forward, Simonis Storm anticipates Namibia to post ongoing trade deficits.
“Despite this positive trend in exports, we still expect the import bill to be inflated above export earnings and so lead to further trade deficits in 2023.”
According to the firm’s analysis, the import bill is projected to stay high due to a weaker rand exchange rate compared to levels in 2022 and high fuel prices.
It further stated that the top five exports from Namibia in May 2023, which accounted for 70% of the nation’s export revenue, were uranium, pearls and diamonds, fish, gold and copper, with 15.7% of these top products, primarily pearls, diamonds and copper, having been re-exports.
The report further stated that 46% of Namibia’s import bill in May 2023 was made up of petroleum oil, copper, commercial vehicles, building materials and passenger vehicles.
The quantity traded increased in May 2023 as well, rising from 524,198 tonnes in April 2023 to 795,068 tonnes in May 2023, an increase of 51.7% month over month.
The amounts traded that Simonis Storm mentioned were increased by both import and export volumes.
“The export bill recorded N$9.2 billion inflows into the country, of which N$6.9 billion was local production and N$2.3 billion were re-exports, compared to N$7.6 billion in April 2023,” the report explained.
According to the Baltic Dry Index, shipping costs have decreased by 26.9% so far this year.
In May 2023, 61% of Namibia’s imports arrived via sea, which Simonis Storm observed could explain why import volumes climbed higher than Namibia’s import bill, as the product is less costly to import.
The report also indicated that the volatility observed in Namibia’s import and export values speaks to the rand’s volatility as volumes remain relatively flat.
Hencethe firm noted that shipping costs are set to increase as the International Maritime Organisation plans to become more green and decrease carbon dioxide emissions by 50% by 2050.
“New investments in engines, port infrastructure and fuel supply will be needed to achieve this target, putting upward pressure on long-term shipping costs.”
According to Simonis Storm, Namibia’s primary import sources have been South Africa and the rest of Africa. Compared to 35% for the same period in 2022, imports from South Africa alone make up 38% of Namibia’s total import bill so far this year.
