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B2Gold’s Otjikoto Mine near Otjiwarongo produced a quarterly record of 55,151 ounces of gold in the third quarter of 2017,

14 percent (or 6,793 ounces) above both (original) budget and reforecast production, and 16 percent (or 7,587 ounces) higher than the third quarter of 2016, latest production figures show.

The company said as mining advances into the consolidated rock in the Wolfshag Phase 1 Pit, the amount of high-grade ore tonnage mined from Wolfshag continues to be significantly higher than modelled.

“Analysis of the Wolfshag model is ongoing to determine whether this positive variance in the amount of high-grade ore tonnage continues throughout the entire Wolfshag ore body,” the company said in a statement.

B2Gold said grade exceeded budget due to the higher amount of high-grade ore being sourced from Wolfshag , which increased the overall average mill feed grade at Otjikoto.

Mill throughput for the quarter was 873,516 tons compared to the budgeted 832,784 tons and 910,036 tons in the third quarter of 2016.

Otjikoto’s third quarter cash operating costs were US$447 per ounce, slightly better than budget, but US$103 per ounce higher compared to the same period last year as the prior-year quarter had benefited from a weaker Namibian dollar and lower fuel prices.

During the first nine months of 2017, the Otjikoto Mine produced a record 139,088 ounces of gold, 16 percent (or 19,148 ounces) above (original) budget and five percent (or 6,793 ounces) more than reforecast production, and 16 percent (or 19,649 ounces) higher compared to the same period last year.

“For full-year 2017, the Otjikoto Mine remains well on track to meet or exceed the high end of its previously increased production guidance range of between 170, 000 to 180,000 ounces of gold (original forecast was 165,000 to 175,000 ounces).

According to the Bank of Namibia 2016 Annual Report, gold production increased during 2016, compared to production levels in 2015.

The rise in production could largely be ascribed to better ore grades mined.

Furthermore, international gold prices rose to an average of US$1,248 per ounce in 2016, up from the average price of US$1,160 per ounce in 2015.

“The increase, which was based principally on investors seeking less risky assets, stemmed from negative interest rates in advanced economies and uncertainty in the global market.”

According to the Chamber of Mines of Namibia 2017 Annual Report, B2Gold produced 4,714 kg in 2016, 12,3 percent up from the 2015 figures, resulting from increased throughput owing to the completion of the mill expansion project which was successfully completed in September 2015. The chamber said production from Navachab remained stable in 2016, amounting to 1,878 kg of gold bullion.

Cabinet has approved the listing of mobile operator, MTC, on the Namibian Stock Exchange (NSX), the Ministry of Public Enterprises (MPE) confirmed this week.

“At this stage, only the listing of MTC has been approved by Cabinet. The process of identifying and preparing a restructuring plan for SOEs to be either listed, restructured or enhanced by Public Private Partnerships arrangements is underway and should be ready for discussion early next year,” said Johnathan Swartz, spokesperson of the MPE in an interview.

This decision comes as the Namibian Competition Commission (NaCC) is in the process of approving the acquisition of Samba Dutchco B.V’s 34 percent stake in MTC by the State-owned Namibian Post and Telecom Holdings Limited (NPTH).

The transaction, however, faces hurdles after the Communications Regulatory Authority of Namibia reportedly blocked the deal, citing concern over future ownership of the shares.

If this deal is approved by the NaCC, it means that NPTH will have a 100 percent stake in MTC. The Government has previously said that it will find a technical partner for MTC once the shares have been transferred from Samba and the company has been listed on the NSX.

NSX CEO, Tiaan Bazuin, said he has no information on the pending listing of MTC. He, however, said that any listing would deepen the capital market.

“This is a goal of the financial sector charter and good for us all by allowing ourselves and our pension funds to invest locally,” he said.

Swartz said that his ministry has done research and found out that half of the State-owned enterprises are profitable.

Minister of Finance, Calle Schlettwein, recently said that Government plans to list some of the loss-making parastatals next year, a move meant to push them to start operating profitably and contribute to public revenues.

Swartz said the ministry has been putting mechanism in place, including how SOEs will be governed in order to enhance performance and governance targets.

He said SOEs earmarked for listing will be prepared and properly restructured before they are listed in order to comply with the NSX listing requirements and to attract the necessary investor interest.

“The process of designating an SOE as commercial or non-commercial is determined in the new amendment to the Public Enterprises Governance Act. We anticipate the amendments to be tabled before Parliament early in the New Year after which the list of commercial SOEs will be gazetted. Approximately 20 SOEs might be classified as commercial,” he said.

Swartz said SOEs are now starting to be subjected to financial performance reviews, thorough scrutiny of business plans, governance compliance and the appointed requirements of boards of directors.

He said the ministry will soon start to regularly publish performance and compliance reports for all SOEs in order to enhance transparency.

At the same time a more enabling environment will be created for SOEs to perform through enhanced shareholder support.

Swartz also disclosed that a technical team consisting of representatives from the public enterprises ministry, works and finance and Air Namibia are currently working on the overall business plan for the airline.

“The process will conclude on how the Frankfurt –Windhoek route should be approached,” he said.

Air Namibia is said to be losing N$300 million on the route annually.

Swartz further disclosed that the necessary legislation required to put RCC under judicial management was approved by Cabinet and is currently in Parliament for consideration.

The downgrading of Namibia to sub-investment grade by Fitch, had been expected since early 2016, investment analysts, Cirrus Capital, said this week.

The firm believes that the main reason for the downgrade, which follows Moody’s August downgrade, was the major deterioration in the Government fiscal position, driven by aggressive expenditure increases, despite weak revenue collection.

Namibia’s debt stock has doubled over the past 30 months, largely attributed to bonds that were listed on the Johannesburg Securities Exchange and the 10-year US$750 million Eurobond issued in October 2015, with a coupon of 5, 25 percent per annum.

Cirrus Capital believes the domestic economy has been saved by the bell somewhat because of the changes to pension fund regulations, which is forcing large amounts of capital into the country, much of which is being invested in Government debt.

In 2016, Namibia had about N$110 billion invested in South Africa in the form of pension funds, long-term insurance and other investments.

Finance Minister, Calle Schlettwein, disclosed in September that changes to regulations on domestic asset requirements to lift the domestic asset thresholds from 35 to 45 percent over time are now with the legal drafters and are expected to be gazetted before the end of the year. The threshold will be raised to 40 percent by January 2018, 42.5 percent by April 2018 and 45 percent by October 2018.

The firm is of the view that while this solution may be helpful in the short-term, a weaker rating is likely to see the cost of Government funding increase over the longer-term, meaning more money will be spent on servicing debt and less will be available for other Government projects and priorities.

Namibia’s sub-investment grade rating is likely to negatively impact on foreign investment inflows into the country, which may well result in lower and slower growth over the coming years.

“This downgrade is particularly concerning at the time when pension fund and life insurance assets are being forced to return to the country due to regulatory changes. We are going to see increased concentration of these savings invested in junk-rated Government debt,” said Cirrus.

Recovery to an investment-grade rating will likely take as much as five years, the firm said.

The Economic Association of Namibia said the writing was on the wall after Moody’s downgrade in August and after the tabling of the mid-year Budget Review on 2 November, which did not meet expectations.

It said the budget review focussed to a large extent on the revenue side in spite of the fact that tax revenue is dependent on the performance of the economy or, in the case of SACU receipts, on the performance of the South African economy.

The association said more emphasis needs to be placed on the expenditure side, in particular the huge wage bill.

It also called for the merging of ministries or directorates with similar and or overlapping functions

“The downgrading is expected to increase the future costs of borrowing, which will increase the allocation to statutory expenditure and will reduce the funds available for other vital expenditure. However, borrowing costs are unlikely to be affected in the short-term, since the financial markets have to some extent factored in the possible downgrading,” the association said in a statement.

Finance Minister, Calle Schlettwein, said in retaining Namibia’s long-term rating on the South African scale at an investment grade and assigning a positive outlook on the downgraded foreign currency denominated bonds, Fitch recognised material improvements in the macro-economic and fiscal policy.

“The Government recognises the policy significance to address the weaknesses raised by credit ratings agencies. As such, the Government has proposed a package of policy interventions in the 2017/18 Medium-Term Budget Policy Statement for the next MTEF to address these concerns, consistent with the principle policy stance implemented since 2016/17 Mid-Year Budget Review,” Schlettwein said after the latest ratings downgrade.

Among the key policy interventions are the targeted measures to support domestic economic growth objectives, protecting spending in the social sectors, maintaining fiscal consolidation, albeit in a gradual manner, and implementing structural policy reforms to reinforce the impact of the policy interventions.

Eloise du Plessis, Head of Research at PSG Namibia said the lower credit rating will adversely affect the ability of the central government, parastatals and banks to borrow on the international market and will weaken the attractiveness of Namibia as an investment destination.

“To recover its investment grade status, the Government will have to get back on the fiscal consolidation path, which may require unpopular decisions such as reducing Government personnel, defence and security expenditure.”

She added that the Government will have to improve its financial management and revenue collection capabilities, and amend any legislation that is causing investor uncertainty.

Lopes urges govt to reign in expenditure

In view of the downgrading of Namibia’s credit rating to junk status by ratings agencies, Fitch and Moody’s, the Windhoek Observer’s Chamwe Kaira (CK) asked well-known African economist, Carlos Lopes (CL) about what this means for Namibia.

Lopes is a Development Economist, author, educator and civil servant from Guinea-Bissau who served as the eighth Executive Secretary of the United Nations Economic Commission for Africa (UNECA) from September 2012 to October 2016.

CK: Do you think Namibia can turnaround from this recent Fitch downgrade – revenue is down and debt as a percentage of GDP has reached over 40 percent?

CL: All these factors are intertwined. Revenues are down because commodity prices and demand were at a low point last year globally. Namibia suffers from its lack of industrialisation, which enhances its dependency on exports from natural resources, prices which it does not control.

Another important factor is the mediocre South African economic performance. Being a small economy within a customs, and de facto, monetary union dominated by South Africa, it pays a disproportionate price for the locomotive stoppage. There is little margin for manoeuvre.

Sovereign debt is one avenue but it requires caution. For the time being, 40 percent debt to GDP ratio is below the African average.

CK: Fitch just said that the reforms by the finance minister may not be enough, what is your opinion on the measures that have been put in place by the Government?

CL: Fitch is market friendly even if there is a too high social cost for measures they may prefer. They know the system externalises social and environmental costs and push for comparisons and competition that does not include such concerns. A Government cannot afford that. The minister’s assumptions are based on a better performance resulting from higher demand, internal consumption and South African recovery.

CK: What should Namibia do in face of the downgrades by Fitch and Moody’s?

CL: Namibia will be basically under watch. Measures envisaged will have to be under review constantly for adjustments to be made. Government expenditure will have to be reduced in the short run until revenue streams get back to usual patterns.

CK: Anything else to add?

CL: Namibia has to consider more daring tax revenues around land as part of dealing with inequalities, while at the same time increasing public resources. Enormous progress has been made since independence for a reduction of inequality, but not enough.

Capricorn Group has scooped the Regional Company Award at the Annual Integrated Reporting Awards of 2017, hosted by Chartered Secretaries Southern Africa in partnership with the JSE Limited at a recent ceremony held in Johannesburg,

the group said in a statement this week.

Close to 100 companies entered their Integrated Reports in ten categories, with Capricorn Group winning the Regional Company category, which was previously won by a Swaziland-based company in 2015 and 2016.

Chartered Secretaries Southern Africa’s Integrated Reporting Awards have been rewarding excellence in corporate reporting since 1956.

It is an independent professional body with an interest in good corporate governance and committed to promoting reporting excellence in southern Africa.

The ceremony recognised the importance of integrated reporting and the information it provides to shareholders and stakeholders. The judges scored entries against a scoresheet similar to the Integrated Reporting (IR) Framework.

“We are extremely proud that we have been honoured with this award, which is recognition that our 2017 Integrated Report, only our second that adheres to the International Integrated Reporting Council’s IR Framework and our first report that includes our subsidiaries in Botswana and Zambia, is regarded as best practice in transparent communication with shareholders and other stakeholders. As a leading financial institution listed on the Namibian Stock Exchange, Capricorn Group believes that credibility is key to value creation,” said Marlize Horn, group executive of brand and corporate affairs at Bank Windhoek.

She said being part of a bigger, interconnected global system, Capricorn’s approach to being a responsible, regional and global citizen is built into the DNA of all its businesses in Namibia, Botswana and Zambia.

Horn said the 2017 Integrated Report provides a holistic view of the group and reflects the value created during the financial year ended 30 June, adding that the report is primarily aimed at providers of financial capital, but also takes a holistic and stakeholder-orientated view of the social, environmental and governance aspects that are related to the group’s activities and performance.

Namibians must find innovative ways of overcoming the current economic challenges, Executive Chairman of the O&L Group, Sven Thieme, said this week.

Speaking during a motivational breakfast meeting attended by senior executives of State-owned enterprises, which was organised by The Namibian, he said “we must explore opportunities at this time,” making reference to the current tough economic environment.

He urged companies not to cut spending, but in fact increase their advertising and marketing budgets.

Without giving figures, he said the O&L Group had produced its best results in the first quarter of the year.

Thieme urged Namibians to motivate themselves on a daily basis and secure a better future for the next generation.

He said Namibians must be made to understand that corruption affects the provision of social services such as health and education because money meant for these services end up in the pockets of individuals.

He also bemoaned Government’s continued spend on the construction of multi-million dollar unproductive offices.

In terms of local manufacturing, Thieme said Namibia must start buying local products to create jobs.

Citing the example of the O&L Group, he said the group has started to source more products locally, beginning with clothing for their staff members, which is now being sourced from local company, Dinapama.

“Someone was telling me that we can’t buy milk from you anymore because it’s more expensive than the one imported from South Africa. Later that person came to me and asked if I could give a job to his son. In my mind I thought why don’t you find a job in South Africa, where you buy your milk,” Thieme said illustrating a point that local value addition creates jobs.

He challenged Namibian companies to keep on innovating and keep up with the changing times.

He cited Kodak, which at one time came up with a camera that would take a picture and develop it, but filed for Chapter 11 bankruptcy protection in January 2012.

“Kodak thought they had arrived and never bothered about innovation. Where is Kodak today? Let’s not be part of something that will not exist tomorrow.”

Oryx Properties CEO, Carel Fourie, has resigned from his post, just months after he was appointed.

Oryx announced Fourie’s departure on Wednesday without giving reasons.

Fourie’s resignation will be effective on 31 May 2018, the company said.

Late last year, the company announced that Fourie had been appointed as the new Chief Executive Officer, effective from 1 March 2017.

Fourie had been Chief Operating Officer since June 2014, after serving as Chief Financial Officer since 2011. He replaced Gerhard van Zyl, who was appointed as CEO on 1 July 2016.

Oryx Chairman, Francois Uys, said then that the board and van Zyl had mutually agreed not to continue with a management structure which incorporates both a CEO and COO. It was therefore agreed that van Zyl’s appointment would be terminated on 28 February 2017.

Oryx said at the time of Fourie’s appointment that he was more than capable of taking on the new responsibilities.

In the financial year ended 30 June 2017, Oryx said it had succeeded in returning satisfactory results. Net rental income increased by 2,1 percent (2016: 1,5 percent) to N$201 million (2016: N$196,7 million), which, after investment income and allowing for administration expenses and finance cost, resulted in distributions and dividend to unitholders of N$130 million (2016: N$130 million) for the year. Total distributions to unitholders remained unchanged at 167 cents per unit (2016: 167 cents per unit) comprising of 156,75 cents interest and 10,25 cents dividend per linked unit.

All the properties in the Oryx portfolio were independently valued at N$2,4 billion (2016: N$2,3 billion) as at end June 2017, representing an increase of 5,5 percent (2016: 8,4 percent) in the core portfolio over the previous years.

Oryx Properties was established in 2002 and has a diverse portfolio in Namibia and South Africa. It is listed on the Namibian Stock Exchange in the Financial Real Estate sector.

Oryx Properties has 287 tenants in 25 properties in premium-quality retail, industrial and office real estate. In the retail sector, the company owns Maerua Mall, Gustav Voigts shopping centre and Baines shopping centre, all in Windhoek.

MTC announced this week that its academy had trained 14 new employees in customer service.

The employees graduated on 21 November after three months training. Company executive, Tim Ekandjo, said in a statement that “MTC understands the significance of good customer service, hence the academy is an indispensable establishment, which ascertain that employees are empowered and gain thorough company knowledge.”

- Staff Writer

As first reported by the Windhoek Observer in May,

Debmarine Namibia has announced plans to acquire a new offshore diamond mining vessel at a cost of N$2 billion, the company said this week.

The new vessel, which will be built by Kleven Verft AS of Norway, will operate alongside five other Debmarine Namibia mining vessels, namely: mv Mafuta, mv Debmar Atlantic, mv Debmar Pacific, mv Grand Banks and the mv !Gariep.

The new vessel is expected to increase Debmarine diamond production and is projected to create 130 new jobs. Currently, the Debmarine Namibia workforce stands at 900.

- Staff Writer

Consumers offered incentives to stimulate spending

With the economy in a slowdown, the financial and retailer industries are offering incentives to stimulate consumer spending.

“Banks certainly always look for new markets and opportunities to attract consumers in particular during times when the disposable income of consumers is constraint,” Economic Association of Namibia (EAN) Executive Director, Klaus Schade said.

He, however, forecasts loan defaults to increase since there is no social safety net in place to cushion people who lose their jobs.

“Lower interest rates and relatively low inflation rates bring a little bit of relief to consumers who are financially under pressure.”

Schade expects the retail sector to feel the drop in disposable income and the increase in unemployment this festive season.

“However, consumers are usually quite generous in their spending behaviour during the festive season and only wake up to reality in January.”

Last week, Nedbank Namibia noted that the Namibian economy is still in recovery with consumers finding it difficult to move forward and to meet their obligations.

“This is a time for consumers to be wise about their financial decisions; to consolidate and pay off their debt and to restructure debt to ease monthly repayments until their situation improves.”

The green bank has launched a campaign to inform consumers that they are able to restructure their home loans over longer repayment periods, to ease the monthly payments.

“The longer-term total repayment will increase as a result, but consumers can also restructure their home loans to shorter repayment periods when their situation improves. The aim is to provide relief in the current economic environment,” the lender said.

The bank also announced a transactional account with one flat fee of N$120 per month, inclusive of all transactions, in order to help Namibians save on banking fees and have more money in their pockets.

Nedbank also said it was shifting its focus to the pre-owned vehicle market, where consumers will still be expected to pay the 10 percent deposit, but allow them to pay the outstanding amount back over 54 months just like new vehicle purchases.

The offer is valid up until 31 December.

“There is unfortunately no published data available on the sale of pre-owned cars. However, it can be assumed that with the current economic climate more people turn to pre-owned cars since they are more affordable than new cars,” Schade said.

Etienne Steenkamp, Deputy Managing Director of the Pupkewitz Motor Division said in an interview that the company has opened five second hand car showrooms this year, emphasising the growing demand for used cars.

He said in a ‘flat economy’ business was down, adding that at this time of the year both manufacturers and car dealers tend to offer discounts so as to meet targets because January is normally a tough month.

“We are hoping to sell cars until 20 December, after that no one buys cars because people are in the north or at the coast,” he said.

The amendment to the Credit Agreement Act in mid-2016, which requires a payment of 10 percent on hire purchases, has also dampened consumer spending on vehicles.

Bank of Namibia statistics released early this month confirmed that consumer borrowing has slowed down. Growth in private sector credit extension (PSCE) slowed at the end of September 2017.

The annual growth in total PSCE slowed to 5,4 percent at the end of September, as reflected in the lower demand for credit by both the household and corporate sectors during the review period.

The Windhoek Observer (WO) caught up with Erongo Red’s Public Relations Officer, Simon Lukas (SL), to discuss his views on changes and developments in the public relations profession.

WO: What are some of the growing trends in the Public Relations industry?

SL: One of the notable growing trends is the explosion of digital and social media. Digital and social media has significantly changed ways of communications to our audiences; in terms of content creation; transforming the way people interact with one another; and the way they receive and consume information.

In addition, digital and social media has given people access to a wealth of information. Thus, companies should incorporate social media platforms such as Facebook, Twitter and Instagram in their communication strategies and channels to interact and communicate with customers.

WO: Do you think all PR graduates should be registered as specialists like any other fields such as health officers?

SL: Graduates will indeed enormously benefit from being a registered or accredited member/specialist with a representative body such PRISA. However, I am of the opinion that registration should occur after one gained extensive practical skills and knowledge in the discipline. What matters most is that PR professionals should stick to a set code of ethics on how to deal with certain situations.

WO: What does it take to be a public relations specialist?

SL: Human relations skills, influencer, proactively thinkers, networker and poses excellent writing and speaking skills. It further requires valuable practical skills and knowledge in various functions of PR such as crisis communication, stakeholder engagements, media relations, brand and image communication and internal communication. In brief, one needs to be knowledgeable and an expert in the discipline.

WO: What is the state of public relations in Namibia?

SL: Public relations, as a discipline, is steadily growing fast in the country. Although PR is a relatively less respected and recognised discipline in the country, in recent years, I have observed a notable increase in the number of qualified and accredited public relations professionals. In the same vein, most of the companies, both private and public institutions have realised the optimal and strategic value PR contributes to succession and attainment of their goals or mandates. Thus, we have either a public relations or communication officer in almost every company in the country. In addition, local tertiary institutions such as UNAM and NUST are offering bachelor’s degree qualifications in PR, hence, a rapid growth in the discipline.

WO: Do you think PROs get the recognition they deserve both from their internal and external publics?

SL: Not really. PR professionals are relatively undermined and less respected, specifically in companies, were management or the leadership team doesn’t understand what PR professionals actually do or the strategic value of PR to the company. I have learnt that internal publics think PR is merely about publicity. They don’t know that PR is a strategic communication process that builds mutually beneficial and sound relationships between organisations and their publics using different communication platforms.

The external publics hold the misconception that PR professionals are “liars”, who are always defending their companies. But in reality, public relations professionals work to share accurate information about a client and their story. In doing this, we deliver strategic, measured messages that have been defined as the most important and impactful communication points. It is a public relations officer’s responsibility to defend the company’s brand and message and promote and maintain the positive image of the company internally and externally.

WO: Have you ever had to handle a social media crisis? What did you do?

SL: Yes I did. There was “fake news” circulating on social media about my employer.

As a custodian of image building, maintaining and protection of the organisation’s image, I took remedial action and quickly informed our esteemed customers about it because “fake news”, widely circulated has the potential to destroy the brand and reputation of a company.

WO: What is the most challenging aspect of your job?

SL: One needs to build up a public profile to get into the PR industry. That’s why today, we have former journalists occupying positions of public relations or corporate communications, because they are well known. However, journalism and public relations are two different disciplines.

WO: Do you see media practitioners as partners or a threat?

SL: Media practitioners are one of our primary stakeholders or partners as they help us to promptly and timely disseminate information to our customers. It is very vital that we build a healthy working relationship with media practitioners.

WO: Do you have a specific strategy of handling the media?

SL: Yes, through establishing sound relationships (professional and personal) with media practitioners.

WO: How did you end up in PR?

SL: Initially, I wanted to become an Electrical Engineer. I was even admitted at the then Polytechnic of Namibia in that discipline, but due to financial constraints I couldn’t register. However, my family advised me to consider a second option which was less costly, thus I ended up in Public Relations and have no regrets at all. So far, since I joined the industry I can confidently say that I am really enjoying it. I am even planning to register for my Master’s degree very soon.

WO: What do you do to unwind?

SL: In my spare time, I enjoy playing pool and hanging out with my friends.

WO: What is your favourite sport and team?

SL: I like soccer dearly and I am die hard supporter and follower of the English Premier League and Manchester United.

Ratings agency, Fitch, has downgraded several State-owned enterprises following the downgrading of the country’s sovereign rating last month.

On 20 November, Fitch downgraded Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-’ with a stable outlook.

Fitch said the Namibia Ports Authority (Namport) and Namibia Power Corporation’s (NamPower) ratings remain aligned with those of the Namibian sovereign, based on Fitch’s assessment of their legal, operational and strategic ties with the State as strong in accordance with the agency’s ‘Parent and Subsidiary Rating Linkage’ criteria.

“However, we deem the legal links as moderate due to the lack of government guarantees for NamWater’s debt,” Fitch said.

Fitch noted that Telecom Namibia’s ratings, which is rated one notch below Namibia’s Long-Term Local-Currency IDR of ‘BB+’ reflecting strong operational and strategic links, but limited legal ties such as no sovereign-guaranteed debt and no cross-default clauses with the sovereign.

NamPower’s long term foreign currency IDR was downgraded to ‘BB+’ from ‘BBB- with a stable outlook.

NamWater’s Long-Term Foreign-Currency IDR was downgraded to ‘BB+’ from ‘BBB-’; with a stable outlook.

NamPort’s was downgraded to ‘AA+ (zaf)’ from ‘AAA (zaf), with a stable outlook.

The DBN was downgraded to ‘BB+’ with a stable outlook from ‘BBB-’.

“DBN’s ratings are equalised with those of the Namibian sovereign. DBN is a policy bank and its IDRs, SR, SRF and National Ratings reflect a moderate probability of support from the Namibian authorities in case of need,” Fitch said.

The agency said it believes that the Government will continue to support the DBN given its role, status and 100 percent State ownership by the Ministry of Finance.

When it downgraded Namibia’s rating, Fitch said it reflected weaker-than-forecast fiscal outcomes and its projection that public debt-to-GDP will continue to rise over the medium term.

It said this will leave debt in financial year 2019 at nearly double the ratio in 2014.

“The downgrade also reflects a weaker-than-expected economic recovery and our view that medium-term growth has shifted to a lower gear.”

Fitch also noted that the initially projected reduction in aggregate public capital spending will not materialise due to a N$2,5 billion capital injection in a new Public Infrastructure Fund and to the settlement of previously unreported arrears worth N$2,7 billion arising from commitments undertaken in 2016.

Hong Kong company opens Namibian diamond factory

The Hong Kong based KGK Group has set up a cutting and polishing factory in Windhoek and will become an accredited buyer of local diamonds supplied by the Namibia Diamond Trading Company (NDTC).

The KGK Group, founded in 1905 and employing about 12,000 people, has business interests and expertise ranging from global manufacturing of diamond and gemstones jewellery to infrastructure and real estate development.

Paul Rowley, Executive Vice President at De Beers Global Sightholder Sales and a member of the NDTC board, said in an interview that KGK has set up a ‘small factory in Windhoek.’

Rowley said sight holders, as cutting factories are known, change all the time in a three-year cycle. “Some factories are closed; some people do not make it,” he said.

Explaining the entrance of KGK in the middle of the cycle, Rowley said some companies fail even before their three-year contract is over.

Under the sales agreement signed in May 2016 between the Government and De Beers, it was announced that Namibia would see a significant increase in rough diamonds made available for beneficiation, with US$430 million of rough diamonds being offered annually to NDTC customers.

As part of the agreement, all Namdeb Holdings’ special stones will be made available for sale in Namibia.

In addition, the agreement provides for 15 percent of Namdeb Holdings production per annum to be made available to a Government-owned sales company called Namib Desert Diamonds Pty Ltd.

“We are achieving these targets,” said Rowley when asked if supply agreements targets as provided for in the sales agreement are being met.

He said the cutting factories have done well given that Namibia and Southern Africa in general have high costs for manufacturers.

The De Beers executive defended the tendency of some factories to sell rough diamonds instead of polishing them, saying sometimes market conditions are tough and that the companies need to survive.

“We supply goods (diamonds) with the understanding that the majority of them should be manufactured here. That does not mean that everything must be manufactured here. There must be flexibility otherwise the place cannot be competitive.”

He said 2015 was a particularly very difficult period for sightholders, leaving many to sell rough diamonds in order to survive.

Rowley, however, said consumer demand for diamonds has improved lately because of the stable markets in America, China and India.

According to the NDTC website, the company currently sales diamonds to sight holders Almod Diamonds Ltd, Laurelton and Reign Diamonds, Hardstone Processing, Nu Diamond Manufacturing, Namgem Diamond Manufacturing, Schachter and Namdar, Pluczenik, Ankit Gems, NamCot Diamonds, Julius Klein Diamonds Namibia, Trau Bros and Diminco Diamond Manufacturing Namibia.

Interest rates are likely to remain on hold at 6,75 percent over the medium-term because of the recent downgrades of Namibia’s credit rating, economic analysts have said.

On 11 August, Moody’s Investors Service downgraded Namibia’s long-term senior unsecured bond and issuer ratings to Ba1 from Baa3 and maintained a negative outlook.

Last month, Fitch Ratings downgraded Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-’ with a stable outlook.

Megameno Shetunyenga, an Economist at Simonis Storm Securities said because of the over-indebted of consumers, no benefits will be derived from an interest rates point of view.

This comes as the Bank of Namibia (BoN) this week left its repo rate unchanged at 6,75 percent.

She said fuel prices, which increased by 50 cents per litre this week, after an increase in November, will also add additional pressure to the consumer.

“The increase comes amid already depressed consumers and economic recession. Consumers should tighten their belts going into this festive season and as we welcome 2018. Tough times are ahead,” Shetunyenga said.

She said consumers are currently facing heavy fuel inflationary pressure, but respite will come from a moderation in food inflation rather than interest rate cuts over the short to medium term.

“We do not foresee a recovery over the short-term, as consumers remain indebted, interest rate cuts are likely to be halted while services inflation (specifically fuel) continues to go up,” she said.

“Namibia imports most of what it consumes and the main negative effect may result from a currency depreciation (rand) if South Africa gets downgraded by Moody’ next year. Import inflation would further put pressure on households.”

BoN Governor, Iipumbu Shiimi, said this week that annual inflation had averaged 6,4 percent during the first ten months of 2017, compared to 6,6 percent during the same period in 2016.

On a monthly basis, however, inflation decelerated to 5,2 percent in October from a peak of 8,2 percent in January, mainly driven by lower inflation for food and non-alcoholic beverages.

Shetunyenga said businesses will be less likely to hire more staff and may even cut down on the number of employees to reduce costs due to the tough economic environment.

She added that unsecured lending has been increasing and is expect to continue over the festive season and in 2018. Ngoni Bopoto, a Research Analyst at Namibia Equity Brokers said the main impact of a rating downgrade will most likely be on the cost of public debt which will have an impact on households since the taxpayer funds the fiscus.

“It appears that the increase in bond yields since early last year may have already priced in this year’s downgrades to sub-investment grade, but we are still looking at the numbers and monitoring market sentiment to confirm this,” Bopoto said.

In response to a recent report published by Cable.co.uk, which shows that Namibia has one of the most expensive broadband prices in the world,

Telecom Namibia says a lot of countries subsidise broadband prices to make them cheaper.

“In some countries, governments are subsidising broadband infrastructure, like in Botswana and Australia that I know of,” Telecom Namibia Chief Executive Officer, Theo Klein, told the Windhoek Observer in an interview.

“I see Botswana is not featuring in the results, which by demographics and economy is more comparable to Namibia. South Africa does have scales of economy and a highly industrialised economy which helps to bring down the unit cost of production.”

He said South Africa has for a long time been connected to undersea cables compared to Namibia, with local prices approximately twice as costly compared to the neighbouring country.

“We only got connected by one undersea cable as recent as 2012. Our Speedlink Home packages 1 Mb/s – 6 Mb/s cost N$ 499 (SA) Namibia (N$ 1099). Our Speedlink Lite packages 1 Mb/s – 10 Mb/s N$ 349 (SA) and N$1584(Namibia),” he said.

Klein said the 10 Mb/s package in SA is about N$790, while it costs N$990 in Namibia.

Telecom announced recently that it is upgrading the speeds of its Speedlink broadband products free of charge.

The company is also introducing a minimum download speed of 1 Megabit per second (Mbps) as entry-level package nationwide, totally doing away with the 512 kbps package.

Telecom is planning to upgrade the Speedlink broadband packages for both residential and business customers with 512 kbps upgraded to 1 Mbps, 1 Mbps upgraded to 2 Mbps, 2 Mbps upgraded to 4 Mbps, and so forth.

Customers with a 10 Mbps Speedlink broadband package will not be upgraded, but will receive a price reduction since they are already at the threshold of the package ranges.

The migration to higher speeds, which began on 27 November, will take place in a phased approach, the company said.

Telecom Namibia upgraded customers’ Speedlink access in 2012 and again in 2014 for free to coincide with the landing of the West African Cable System (WACS) in order to facilitate access to faster internet connectivity as well as to enable customers to access media content such as video, music and seamless live streaming.

Calvin Muniswaswa, Chief Commercial Officer at Telecom said this new initiative is a step further in ensuring that Namibia progresses at faster speeds and creates opportunities for locals to make economic gains using ICT services.

The UK based research group, Cable.co.uk, last week said in parts of Africa, monthly broadband packages cost more than the national minimum wage.

In Nigeria, for example, the US$80 average cost of monthly broadband packages is nearly double the national minimum wage of US$50 (18,000 naira), data from the broadband pricing table compiled by Cable.co.uk show.

Of the 36 African countries analysed, only seven countries had monthly broadband packages cheaper than US$50.

The pricing table was compiled and analysed using the cost of over 3,000 individual broadband packages globally in an eight-week period between August and October. The global prices were gathered by BDRC Continental, a research consultancy in the UK.

The report said Burkina Faso props up the global pricing table with average monthly costs pegged at US$973,15 times the monthly minimum wage.

Three other African countries, Angola, Zimbabwe and Namibia, are included in the global bottom ten.

The stock of foreign reserves rose slightly at the end of October, mainly as a result of revenue from the Southern African Customs Union (SACU), latest figures from the Bank of Namibia (BoN) show.

The level of international reserves rose to N$31,6 billion at the end of October, from N$31,4 billion at the end of September. The increase in the level of reserves was mainly due to inflows from SACU receipts, the Bank of Namibia said in its latest money and banking statistics.

Growth in private sector credit extension (PSCE) moderated at the end of October. The annual growth in total PSCE edged lower to 5,2 percent, decreasing by 0,2 percentage points when compared to the previous month.

Growth in total credit extended to individuals moderated to 7,4 percent, decreasing by 0,1 percentage point when compared to the previous month.

“The subdued growth in PSCE was mainly driven by the weak growth in short term credit categories such as other loans and advances and overdraft credit.”

On a nominal basis, overdraft credit extended to businesses stood at N$8,1 billion at the end of October lower than the N$8,7 billion in the previous month.

The annual growth in mortgage credit extended to the private sector tilted up in October with mortgage credit, rising to 8,2 percent, compared to 7,5 percent at the end of the preceding month.

“Notably, mortgage credit has observed a moderate downward trend since the Loan-to-Value (LTV) ratio was introduced to the market in the middle of 2016,” the central bank said.

The overall liquidity position of commercial banks declined somewhat during October. The overall liquidity position declined to N$2, 9 billion at the end of October from N$3, 5 billion at the end of September.

The decrease in the overall liquidity position was as a result of cross border payments done during the month. The October average liquidity position was, however, about N$1, 7 billion higher than the N$1, 1 billion average balance recorded in October 2016.

Namibia resists EU manufacturing incentives calls

Finance Minister, Calle Schlettwein has hit back at calls by the European Union (EU) for Namibia to reform its tax regime.

The EU wants Namibia to remove its manufacturing incentives because it suspects that they could be used for tax evasion.

“The EU wants Namibia to make changes to its tax regime but the proposed changes were unilaterally created and it’s wrong for Namibia as a sovereign state to be expected to make changes to its laws without taking its own interest into consideration,” Schlettwein said this week.

“The decision is unilateral and partisan.”

Schlettwein said Government believes removing the incentives would hurt efforts to promote local manufacturing.

“The Government emphatically rejects this assessment,” he said.

The minister said the EU perceives Namibia’s tax incentives for manufacturing to build its manufacturing capacity as potentially harmful and Namibia has problems in being forced to abandon schemes meant to improve manufacturing in the country.

“We believe that as a developing country, we must improve our capacity. It’s unfair to say, we should not improve our capacity.”

Namibia offers attractive fiscal incentives to investors via its Export Processing Zone (EPZ) regime.

Companies registered as Export Processing Zone entities pay between zero or 32 percent (dependent on the export destination).

Namibia was on Tuesday blacklisted by the EU together with 16 non-cooperative jurisdictions for tax purposes.

Recently officials from the Inland Revenue Department met with officials from the EU Delegation to Namibia to discuss this matter and to seek clarification on criteria.

Schlettwein said since not all explanations could be provided to all the ministry’s questions, it was agreed that further engagement with local EU staff and or EU tax experts from abroad was needed.

“After further engagement with the local EU staff, we were advised of the deadline to inform EU of our commitment to implementing proposed actions or how we react to them. Due to miscommunication we missed that deadline, but that does not make Namibia a non-compliant country or tax-haven.

“We are therefore perplexed to learn that the EU has revealed names of non-cooperative jurisdictions for tax purposes including on the 5th December 2017 which include Namibia,” he said.

In further defence of the country, the finance minister said cash flows in and out of Namibia are monitored by the Bank of Namibia.

“Before cash is introduced or leaves Namibia, the Bank of Namibia approves the application to move funds. The regulator, therefore, is made aware of the purpose of the cash flow to be satisfied that the cash movement is legitimate.”

Namibia has eleven double taxation agreements with several European countries, including Germany, the United Kingdom, France and Romania.

Schlettwein argued that Namibia was not on the list of the 15 Worst Tax Havens, which was published by Oxfam last year.

He, however, admitted that Namibia is exposed to illicit financial outflow as revealed in the recently published “Paradise Papers”.

The Namibian taxation system is not based on individual residency but where the income arises.

Individuals pay between 18 percent and 37 percent. Non-manufacturing companies pay 32 percent and with their opposites paying 18 percent. Mining companies excluding those mining diamonds, pay tax at 37,5 percent. The tax rate for diamond mining is 55 percent.

The central bank in its sixth and last monetary policy decision for the year left the key benchmark rate unchanged at 6,75 percent on Wednesday.

Governor Iipumbu Shiimi said the current level is deemed appropriate to continue supporting domestic economic growth, while maintaining the one-to-one link between the Namibian Dollar and South African Rand.

Commenting on the global economy, Shiimi said while the global economy is projected to grow by 3,6 percent in 2017, from the 3,2 percent in 2016, the domestic economy showed more evidence of weakness during the first ten months of 2017.

Additionally, inflation and growth in private sector credit extension (PSCE) continues to slow, while the stock of international reserves rose.

He said the economic activity in key domestic sectors remained weak during the first ten months of 2017, relative to the corresponding period of 2016.

The weak performance was mainly reflected in the construction, wholesale and retail trades as well as transport sectors, he said.

At the same time, other sectors such as mining, agriculture, communication and the manufacturing output improved over the same period.

“The momentum displayed by the latter activities, if sustained, would create better prospects and help with economic recovery going forward,” he said.

“Going forward, economic activities in the advanced economies as a whole are expected to improve with estimated growth of 2,2 percent in 2017, compared to 1,7 percent last year, supported by stronger investment and expansion in manufacturing and service activity.”

Three learners from the coastal town of Swakopmund are the lucky receipts of a N$15 000 sponsorship from MMI Holdings Namibia Limited to attend the Orate Africa Debating Competition that will be held from 9-13 December 2017 in Randfontein,

South Africa.

The sponsorship covers accommodation and pocket money, while the three learners were also given MMI Holdings branded drinking bottles and T-shirts to wear during the debating competition.

The three learners, Theopolina Shikongo, a grade 10 learner at the Coastal High School in Swakopmund, Innocent Narib, who just completed his grade 12 this year at Coastal High School and Audrey Kanditie, from Namib High School, received the cheque on Thursday from MMI Holdings Namibia Limited Marketing, Brand and CSI Specialist, Vido Tjozongoro.

The three learners will be joined by 27 University of Namibia (UNAM) debating society members who will also represent Namibia in South Africa.

“Our values system guides our actions, behaviours, and shapes our culture to always be authentic and behave in the right way. We believe that it is always important to support the communities within which we operate. I request you to go wear these items with pride and make us proud as your sponsors and the Namibian nation at large,” Tjozongoro urged the learners.

The Orate Africa Debating Society will be contested by other African countries such as South Africa, Nigeria, Gambia, Zambia, Botswana, and Swaziland among other countries.

Namibian housing value drops 10pct – IMF

The International Monetary Fund (IMF), which has in the past warned that the housing market in Namibia is a bubble waiting to burst if not controlled, this week said the value of houses in Namibia ‑ which it says are overvalued ‑ has dropped by 10 percent compared to 2015.

“The problem is getting smaller,” said Geremia Palomba, IMF Mission Chief for Namibia, this week.

IMF has in the past warned that mortgages may pose a risk to the Namibian financial system should defaulting increase since banks were heavily exposed to home loans.

Palomba said the risk has since been downsized after the Bank of Namibia introduced measures for home buyers to put down larger deposits for second and subsequent properties, in an effort to rein in speculative buying.

The apex bank announced in March that home loan applicants will be required to pay a sliding percentage of the purchase price or market value of the property as a deposit, while the lender providing the loan will finance the rest.

To buy a second residential property, the loan-to-value ratio was set at 80 percent of the purchasing price or market value of the property, while for a third loan commercial banks now fund 70 percent and clients must pay the remainder.

The central bank also said that home owners will no longer be allowed to use the equity in a first home to finance a second one, saying this worsens the cycle of debt.

The IMF Mission also assessed the financial sector and found it stable.

“The financial sector remains sound. The authorities are taking steps to manage possible risks and advance key reforms, such as strengthening bank’s liquidity monitoring and asset classification, introducing a bank resolution regime, expanding the macro-prudential toolkit, and upgrading the non-bank regulatory and supervisory framework,” Palomba said.

IMF said after years of exceptional growth, the economy has entered an adjustment phase.

“Namibia’s key challenges are to manage the ongoing adjustment process and preserve macroeconomic stability, while reducing unemployment and income inequality,” IMF said in a statement.

Palomba said the growth is expected to turn slightly negative in 2017, compared to a growth of 1.1 percent in 2016, as large constructions in the mining sector have been completed and the government continues consolidating.

“Growth is projected to resume in 2018 and accelerate thereafter to about four percent, as production from new mines ramps up and manufacturing and retail activities recover. Downside risks to this outlook include volatile SACU revenue, subdued commodity prices, and fiscal slippages that could undermine policy credibility,” he said.

Palomba said Namibia’s key challenges going forward are to manage the ongoing adjustment process and preserve macroeconomic stability, while reducing unemployment and income inequality.

He said he is happy that the Government and the Bank of Namibia have already taken steps to reduce the fiscal deficit and preserve financial stability.

However, fiscal and external vulnerabilities are rising and call for additional action, he said.

Minister of Finance, Calle Schlettwein, said during a briefing with the IMF delegation that receipts from the Southern African Customs Union (SACU) are expected to drop to N$17.3 billion in 2018 from N$17.9 billion this year.

Palomba said with SACU revenue declining, significant fiscal adjustment is needed to ensure debt sustainability and macroeconomic stability.

“Reforms targeted at addressing the shortage of skilled workers, better aligning wage dynamics to productivity trends, and simplifying business regulations have the potential to significantly boost employment and deliver more inclusive growth.”

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Namibian housing value drops 10pct – IMF