The Road Ahead
Like every major company, Trustco needs to plan ahead. With the Namibian economy in the state it’s in, it thus becomes important to review the information released by the various government bodies to guide it in its decision-making process. During December, the Bank of Namibia released its Economic Outlook Update, and the group reviewed it in detail.
The outlook shows that global growth is expected to remain steady at 3.7% in 2018 and 2019 after being revised downwards in October, as a result of certain trade measured that have swept the globe during the last year. The advanced economies are expected to growth by 2.4% and 2.1% in 2018 and 2019 respectively, which is good news, as it means there exists the opportunity for foreign direct investment in not only Trustco, but also the Namibian economy.
When we take a look regionally, it appears that growth in Sub-Saharan Africa will improve during the next year, with growth of 3.1% in 2018 expected to increase to 3.8% in 2019. With South Africa’s prospects increasing from 0.8% in 2018 to 1.4% in 2019, and Angolan growth turning around from a 0.1% in 2018 to 3.1% in 2019, Namibia’s trading partners are set for a turnaround, which could in turn boost our flailing economy via trade.
The outlook, however, confirmed that our economy is still quite weak, with a 0.2% contraction expected in 2018, and only 1.5% growth in 2019 – which has already been revised downwards from the July 2018 figures. While this is certainly not good news for the economy as a whole, Trustco needs to dig deeper into the figures, as it operates in certain sectors of the Namibian economy.
In the primary sectors of the economy, growth is expected to moderate – where growth is expected to have been 8.3% in 2018, that figure will reduce to growth of 0.7% in 2019. Agriculture and forestry will only show growth of 3% in 2018, while increasing to 4.7% in 2019, as fewer animals were available for slaughter during the year. Fishing and fish processing also had a less-than-stellar year, due to increased costs as a result of higher fuel prices, and as a result 2018 saw a contraction of 4.7%, which is expected to bounce back to growth of 1.4% in 2019.
Mining and quarrying was the big boost in the primary sectors this year, with growth of 14.4% in 2018, but is expected to contract by 1% in 2019. This is due to 2018 growth being driven by the scaling-up of a new uranium mine, which has resulted in a high base for growth going forward. Trustco now also operates in the mining space – specifically in the diamond mining subsector, which showed growth of 10.9% in 2018 in the face of reduced volumes of diamonds produced. With Trustco’s NNDC having been awarded a diamond license in the latter part of 2018, it can be expected to contribute to this sector once it achieves full operational capacity.
In the secondary sectors of the economy, the era of contractions seems to have come to a close. The electricity and water sector continues to grow steadily, with growth in 2018 projected at 3.7% and moderating to 3.2% in 2019. The construction sector also seems to have bottomed out, with a 5.2% contraction in 2018, but facing a return to growth of 1.6% in 2019, on the back of an increase in government spending on construction.
The manufacturing sector is the mainstay of the secondary sectors, and started on a upward trend, with growth of 0.3% in 2018 and increasing to 2.2% in 2019. This is a space Trustco operates in as well, specifically in the diamond processing subsector, which grew by 11% in 2018 and is set to grow by 5% in 2019. When Trustco’s aforementioned mine goes into operation, it’s diamond polishing factory will start to contribute in this subsector as well.
Finally, the tertiary sectors, which continued to show negative growth of 1.5% during 2018 but is expected to bounce back to growth of 1.8% during 2019. This is where Namibia continues to feel the effect of the ongoing recession. The retails and trade subsector faced a 5.1% contraction during 2018 due to low household spending but is projected to face a moderate recovery in 2019 with growth of 1.8%. Hotels and restaurants similarly saw a contraction of 2.7% in 2018 but is projected to increase to growth of 3.9% in 2019.
Trustco, naturally, continues to operate in this space – specifically in the financial intermediation, real estate and education subsectors. Financial intermediation has remained relatively stable, with growth in 2018 of 2% but increasing to 2.6% in 2019, while real estate saw itself contract with 0.5% during 2018, yet ready to return to growth in 2019 of 0.8%. Education has also seen growth this year of 1.1%, but is projected to grow by 3.3% in 2019.
Namibia’s economy seems to have a slow turnaround planned, but a lot of it is dependent on external factors, such as recoveries in our trading partners and international commodity prices. Trustco remains positioned in the economy in such a way as to not only enable growth for its stakeholders, but potentially also to assist in creating the growth our country so desperately needs.