• Market Watch

Namibia vulnerable to imported inflation

- 2022-03-09 00:00:00

A country like Namibia which heavily depends on imports will always be vulnerable to imported inflation. Hence, boosting local food production is of critical importance.
According to the Agricultural Bank of Namibia (Agribank), the high dependence on food imports in Namibia remains a concern due to rising external uncertainties such as geopolitical tensions coupled spurring energy prices. There is great need to increase the local procurement of food produce.
Namibia’s trade deficit deteriorated in January 2022, moving up to N$4.1 billion from N$2.5 billion and N$3.2 billion record in December and January 2021.
Export earnings reduced by 24% in January 2022 to N$7.6 billion, compared to N$10 million recorded in December 2021. In addition, imports stood at N$11.7 billion, reflecting an increase of 24.9% on an annual basis, according to the Namibia Statistics Agency (NSA) trade statistics.
With regard to prices, annual inflation rate for January 2022 stood at 4.6%, up from 2.7% recorded in January 2021, the highest rate recorded since February 2019. Specifically, food inflation increased to 5.8% from 5.5% recorded in the same period in 2021.
Fruits were the highest contributor of food inflation recording a 12.8% year-on-year increase in January 2022. Namibia imports most of its fruit and vegetables, resulting into high import cost coupled with high logistical cost as fuel prices surge, Agribank pointed out.
This has an important implication for high costs of living and high cost of production across industries, including the agriculture sector, Agribank added.
Production
The mining and agriculture sectors are expected to drive economic progression in 2022. Good rainfall received in some parts of the country will restore the hope for many farmers after a protracted period of drought.
Agribank said that a total of 225 734 cattle were marketed in 2021, a 10% decline from the 250 441 recorded in 2020, on the back of supply constraints in the industry.
The number of cattle marketed remained stagnant on a monthly basis recording 14 390 in January 2022 compared to 14,419 in December 2021.
In addition, the total number of small stocks marketed (sheep and goats) stood at 21 572 in January 2022, a 50% decline from the 43 465 recorded in December 2021. The decrease is notable in both industries.
Sheep marketing recorded the highest decline of 51% to 15,102 in January 2022 from 31 093 recorded in the prior month.
Furthermore, an upward trajectory in the local production of horticulture crops is anticipated, given strategic efforts towards development of the local horticulture and agronomy industry. The grape industry is expected to maintain positive yields in 2022, Agribank added.
According to the Namibian Agronomic Board, the country experienced insufficient supply of onions, and potatoes in January 2022, thus, borders were opened to imports of these crop products without restrictions. On the positive side, however, sufficient local supply of watermelons, beetroot and english cucumbers are expected over the period January to March 2022, Agribank said.
Credit uptake
The Bank of Namibia (BoN) joined other neighbouring countries and increased the repo rate from its historic low level of 3.75% to 4.00%. Hence, the prime lending rate for local commercial banks also increased from 7.50% to 7.75%.
“Although the increase is expected to exert pressure on household consumption, it remains significantly lower than the historic average of 6.5%,” Agribank said.
The overall Private Sector Credit Extension (PSCE) remained stagnant in 2021, recording a 1.0% increase at N$106.4 billion compared to the N$105.4 billion recorded at the end of 2020.
“Local farmers, financial institutions and stakeholders in the agriculture sector should note that there is an opportunity to place the agriculture sector on a growth trajectory and protect the country from risks of food insecurity driven by external shocks.”
Agribank has also taken note that some parts of the country recorded below-normal rainfall, subjecting them to the continuous spells of the drought. Therefore, the bank will continue to provide drought relief to the affected [email protected]