Fears of economic depression

The possibility that Namibia has moved from a recession into an economic depression was raised by Namib Mills' CEO on Friday during the announcement of a series of price hikes.

“I don't know what you are in if you have nine downturns,” Namib Mills CEO Ian Collard said.

According to the Namibia Statistics Agency (NSA) Namibia saw a -0.2% growth in the second quarter of this year, culminating in the country's ninth consecutive quarter of negative growth.

On Friday, Namib Mills announced price increases for a number of products.

Wheat flour prices are up 20%, rice by 14%, pasta by 16%, yeast by 15%, mahangu by 12% and sugar by 16%.

Klaus Schade of the Economic Association of Namibia (EAN), said in response to the increases that prices were being raised for wholesalers and retailers.

Depending on the shops' price models, there is a likelihood that the shelf prices could differ for consumers.

“Given the increase in fuel prices, shops could increase the transport margin and add higher transport costs to the announced price increases,” he said.

Figures released by the NSA last week show that annual transport inflation reached 12.9% in September, up from 9.7% in August, and 3.9% last year.

IJG Securities noted that this is the first time since June 2014 that transport inflation figures have reached double digits again.



Consumer basket

Schade said the average consumer spends nearly 15% of their monthly expenses on food.

Approximately 5% of the food basket is made up of bread and wheat products, while 2% is spent on wheat flour, pasta, mahangu and rice.

The latest inflation figures show September's inflation rate for bread and wheat products was at 3.8% - the highest to date this year.

In August, inflation for these products was 2.6% and in September 2017 the number was -2.4%.

The inflation rate for sugar, jam and confectionary last month was -2.5%.

The month before, it was -1.9% and in September 2017 it was 7.2%.

Overall food inflation last month was 2.6%, compared to 2.7% the previous month and 3.8% last year.

Namibia's overall inflation rate was 4.8%, the highest this year, but still lower than the 5.6% of September 2017.

Schade expects that should Namib Mill's latest price increases be passed onto the consumer, overall inflation could rise by 0.3 percentage points.



Transport

Following housing, water and electricity, transport is the third heaviest item in the consumer basket.

Out of every N$100 disposable income a consumer has, N$14.28 is spent on transport.

Inflation for the operational transport equipment, a subcategory which includes fuel, was 13.3% in September.







This presents the third consecutive month that the inflation rate has reached double digits.

Shade warned that rising fuel prices could affect other food prices – especially items such as fruit which are imported over long distances from South Africa. The fruit inflation rate last month stood at 15.3%, the highest this year and up drastically since last year when it stood at -1.7%.

Namib Mills

Schade said the Namib Mills price hikes were not unexpected.

“Monthly average prices for white and yellow maize as well as wheat have increased on the JSE since the beginning of the year by 28%, 24% and 11%. Prices for delivery in December point at further increases.”

Collard on Friday said a number of factors influenced the price increases, including the weakening of the South African rand, to which the Namibian dollar is linked. He further said Namibia's economic policies were not supportive of growth.

Indirect taxes such as levies, including fuel levies, affect the cost of doing business in the country, making it “quite expensive”.

Such costs form part of the cost of sales, he said, and no business could afford to carry the costs over a period of extended time, as a company could face bankruptcy.

As a result, businesses have no choice but to pass the costs on to the consumer.

Collard said Namib Mills had made attempts to convince the government that the cost of business has to be kept low in order to protect consumers from unrealistic price increases.

“The economy is not at a good place at this stage,” he said.

Collard added that despite the gloomy news for consumers at the end of the year, there is a glimmer of light at the end of the tunnel.

It is likely, he said, that there could be a price decrease on maize meal at the beginning of next year.

JO-MARÉ DUDDY AND JANA-MARI SMITH