By Hilary Mare
AN inference into the scope of the Namibian economy would resemble a typical colonial economy in which there is still an up to 70 percent South African imports dependency even after 26 years of independence.
Truly, this anomaly has the capacity to cut through the developmental progress, adversely influence the economic growth trajectory and restrain self-growth under the growth at home initiative.
In essence, South Africa’s inflation acceleration to an eight-month high in October and the subsequent imported inflation poses a threat to all local industries and may well further choke the local poor.
The rate increased to 6.4 percent from 6.1 percent a month earlier, Statistics South Africa said in a report released last week. That’s the highest rate since February. The median estimate of 19 economists surveyed by Bloomberg was for inflation of 6.3 percent. Prices rose 0.5 percent in the month.
Notably, the South African Reserve Bank has kept its key lending rate unchanged since March as price growth slowed from the seven percent peak in February and the economy is forecast by the Government to expand at the slowest pace this year since a 2009 recession. While inflation expectations have plunged since the start of the year, political uncertainty that causes rand volatility, including attempts to prosecute Finance Minister Pravin Gordhan for fraud, remains a risk to the price outlook.
The central bank forecasts inflation will return to its three percent to six percent target band sustainably in the second quarter of 2017. Governor Lesetja Kganyago will probably keep the benchmark repurchase rate unchanged when he announces the MPC’s decision on borrowing costs today, according to the median estimate of 19 economists surveyed by Bloomberg.
Food prices, which have been pushed up by the worst drought in more than a century, rose 12 percent from a year earlier and 0.9 percent from the month before, according to the south African statistics office.
Core inflation, which excludes food, non-alcoholic beverages, energy and gasoline, quickened to 5.7 percent from 5.6 percent. The median of nine economist estimates was for an unchanged number.
For Namibia food prices will most likely start increasing during this quarter and onwards and remain elevated. Elevated food prices will be as a result of higher grain and protein prices. The effects of the ongoing drought have not really been fully factored in and will likely only pass through going into the last quarter as a result of a reduction in capital stock. Risk remains firmly to the upside.
Conclusively, due to the large import bill that is attributed to the South African imports, the local industry will suffer dearly as the inflation continues to breach peak points and imperatively, this is the time for directly affected businesses to make adjustments if they are to avert drastic revenue reductions.
Confidente. Lifting the Lid. Copyright © 2015