The Weakening Rand: A glimmer of hope for Namibia?

By Kelvin Chiringa
July 2016
Prime Business

As the debate among economists, business analysts and politicians around the possible domino effect of the weakening Rand on the Namibian economy escalates, it seems there still remains a glimmer of hope for Namibia’s tourism sector and the economy in general.

 Panic is flaring around the possible negative impact of the South African liquidity crunch on Namibia given that the two countries’ financial markets are very closely linked and as of late Standard Bank Namibia’s manager of economic and market research Mally Likukela has been painting a gloomy picture in the media.

But there seems to be a chance for the local tourism sector to capitalize on the ripple effects caused by South Africa’s sick Rand since tourists are likely to take advantage of the devalued Namibian dollar and come in droves.

The tourism sector is however much broader and includes transport (car rentals), financial services (cash withdrawals, credit card use, etc.) and is estimated at contributing more than 15 percent to GDP.
Executive Director for Economic Association of Namibia, Klaus Schade points out that although the current devaluation of the Rand paints an unflattering picture for Namibia’s economy but there still remains a silver lining in the dark cloud.

“Since the Namibia dollar has depreciated against major currencies such as the US dollar, British pound and Euro, tourists from these countries pay less in their currencies for the same goods and services in Namibia.  It is therefore cheaper for them to spend their holidays in Namibia and that should make Namibia a more attractive tourism destination,” he says.
Nevertheless, Manager for Research and Competitor Intelligence for FNB Namene Kalili notes that the positive development has a reverse negative since the weak currency has culminated to the sky-rocketing of the price of commodities.
 “The immediate opposite of this is that due to the fact that our currency has become weak so our average price of commodities has gone up,” says Kalili.

However building on the opportunities created by the weak currency in Namibia by relaxing restrictions on transit visas is imperative since an influx of tourists will open up chances for job creation which would possibly curtail a further downward spiral of the economy.

Quest Consultancy economic analyst James Cunning notes that a combination of good marketing during the first and second half of 2015 together with the weakened currency had breathed more life in the tourism sector.
“The tourism sector does seem to be very busy and the bookings do seem to be very strong this year possibly due to a combination of the weak Namibia dollar and probably also the fact that Namibia was marketed heavily last year during the expos and other related international events,” says Cunning.

The tourism sector is labour intensive, therefore, increases in tourist arrivals will benefit the labour market, generate more income which in turn will benefit other sectors of the economy, such as the retail sector.
Cunning further reiterates that Namibia’s ranking as the fourth most peaceful country in Africa, with one of the lowest population densities in the world, could further play well in the tourism court during the second half of 2016.

“The fact that we have favourable rankings when it comes to being peaceful, we have a financial sector that still works since tourists can withdraw money anytime and couple as well as the good medical system all builds to a boom in our tourism during these harsh times,” says Cunning.
Schade of Economic Association of Namibia agrees that Namibia’s ranking as the fourth most peaceful African country with its small population gives it a competitive advantage when compared to other countries languishing in the same high inflation lagoon.

“Peace and security are very important for the tourism sector.  The current situation is certainly in favour of Namibia compared to other countries on the continent that have to cope with rising insecurity.  The low population density attracts tourists who are interested in nature, unspoilt landscape and wildlife,” he says. As the inflation remains high, hope is likely as the devaluation of the currency impacts positively on exports and the situation would translate to Namibia selling more products.

“Again with regards to the immediate benefits, in most cases a loss of value in our currency will mean that our exports will increase from a value perspective so we would sell more because our currency is a little bit weaker,” says business analyst Kalili.

However it would have been more positive if Namibia had a broad export base that translates to having the capacity to export more goods which would be relatively cheaper on the other side of the border.

This would have played well in the hands of the meat industry since beef is the main export to the European Union yet again the industry has been hit hard by the economic downturn which deems the light of any short term hope.

 What is haunting Namibia is that the bulk of exports are commodities, despite the fact that the dollar is becoming weaker unfortunately commodity prices have also weakened so the full benefit of export prices has not been realised.

Against a backdrop of panic and pessimism everywhere as a result of the South African economic downturn there seems to be a little bit of hope, however the country still is faced with the task of fighting the  current high inflation which remains detrimental to government’s prosperity blue print.
 

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