By Hilary Mare
FOLLOWING the admission by Angola’s President José Eduardo dos Santos that his country is broke last week, businesses have raised concerns on fast declining trade between Angola and Namibia plunging several service providers to Angolan clients in turmoil.
Speaking to Confidente this week, NCCI Chief Executive Officer Tarah Shanika lamented that since Angola was now unable to raise foreign currency for the importation of goods and services, Namibia has been highly affected as one of the prime service providers.
“We are heavily affected. Angola has registered negative growth and trade has sharply declined. Today we are trading only at 50 percent to what we traded with Angola just two years ago. This is a worrying trend to service providers to the Angolan client from skills, education and various goods. We hope they find a solution to their balance of payments problem as many of our traders depend on Angola,” he said.
The southern African country has been managed in an “extremely complicated environment” due to the lack of foreign exchange originated by the depression of the oil price in the international market; President Dos Santos was quoted saying last week
According to the President dos Santos the country is now without money to import goods since it relies heavily on imports.
In reaction to this, chairperson of the NCCI northern branch Tomas Iindji whose branch is most affected said: “We expect the retail, hospitality and medical sectors to feel the brunt of the Angolan slowdown. Angolan consumers made up to 30 percent of the customers in these sectors and the financial woes in Angola will mean that Angolans will no longer have the means to travel to Namibia and spend money in the domestic economy. Although the hospitality sector has held up well in the first quarter, retail sector growth has decelerated to a mere 4.9percent, while the health sector contracted during the first. Most of this is due in part to weaknesses stemming from the Angolan market and the rest of the region at large”.
The trade statistics, recently published by the Namibian Statistics Agency, show that exports to Angola fell by 44 percent last year or a staggering N$1.9 billion. This amount effectively wiped out 0.8 percent GDP growth last year and should worsen in 2016.
“Since most of the exports are Angola specific, i.e. left hand vehicles, electrical equipment and furniture, alternative markets are limited as these goods can’t be diverted to other countries due to already existing supply chains. Furthermore our neighbours are all facing economic downturns from the low commodity prices just like Angola, and therefore demand in these economies is weak. Our forecasts suggest a protracted recovery in the oil prices and therefore we expect the Angolan and the rest of SADC markets to remain depressed for the next three years.
“Therefore we will have to look at counter trade as an alternative means of structuring international trade under the restrictive capital controls in Angola. Counter trade is a range of barter like agreements, when goods and services can’t be traded for money. Angola has refined petroleum, diamonds, sisal (key ingredient for making tequila), coffee, fish and tropical fruits. Diamonds and petroleum are too highly regulated to lend themselves to countertrade. However, the other products have counter trade potential.
“Angolan traders could sell sisal, coffee, fish and tropical fruits in the domestic market and use the proceeds of such sales to offset against vehicles, furniture and electrical equipment purchases. This would effectively sidestep the capital controls and allow trade to continue, although under more complex arrangements. Furthermore, this would create secondary switch trading markets that allow third party intermediaries to purchase the counter purchase credits and sell these more profitably across the globe. Under counter trade arrangements, Namibia can restore trade with Angola and at the same time increase its re-exports of the goods that come from Angola, thereby helping to narrow the trade deficit,” Iindji said in view of a possible solution.
Last week, Confidente reported that Namibia is yet to recover its US$366 million (N$5,5 billion) owed by Angola following a currency conversion deal which last year paved way for the Kwanza exchange at Namibian banks with the country’s northern neighbour only managing to pay a measly US$60 million (N$900 million) to date.
Confidente. Lifting the Lid. Copyright © 2015