Chamwe Kaira
Capricorn Asset Management chief economist Floris Bergh says the Bank of Namibia (BoN) is close to the end of its cutting cycle.
He noted that the monetary policy committees (MPCs) of both the Bank of Namibia and the Bank of Botswana are likely to hold rates steady for an extended period through 2026.
In August, the BoN’s MPC kept the repo rate unchanged at 6.75%.
The central bank said the stance followed a review of current and projected domestic, regional, and global economic developments.
“Inflation trends will determine for how long. Elsewhere, we expect the Fed and the South African Reserve Bank (SARB) to lower rates, reaching their lows over the course of the next year. The SARB has proposed a new, tighter inflation-targeting framework, which is the subject of intense research and debate because it holds profound implications for monetary policy in South Africa and Namibia,” Bergh said.
He noted that demand for credit from households and businesses in Namibia and South Africa has been slow for several years, growing at low single-digit rates of 3% and 4% annually on average over the past five years.
“The interest rate-cutting cycle, which is now close to ending, will take more time to have a positive effect. In Botswana, credit growth tended to be higher, averaging around 7% per annum over the past five years. The recent acceleration is probably due to distress borrowing, while money supply growth has stalled,” he said.
Bergh said Namibia’s economy is relatively resilient, while Botswana and South Africa remain fiscally constrained and economically subdued.
Namibia registered 3.7% growth in 2024, with a rate between 3% and 4% expected over the next several years, supported by mining and energy sector developments.
He said the outlook for agriculture has improved, as has manufacturing, where food and beverage production accounts for two-thirds of activity.
“Wholesale and retail trade, tourism and transport are on a relatively firm footing. The financial industry continues to heal gradually from bad debts and insurance policy lapses, while government spending should grow at positive real rates,” Bergh said.
On commodities, Bergh said global grain prices are generally down. South African maize futures have dropped sharply, with white maize down 30% and yellow maize down 24% this year.
Uranium, which had been lower earlier in the year, staged a late comeback, rising 17%.
“There seems to be a positive global sentiment shift in favour of nuclear power, which has regained some stature as a climate-friendly energy source. So much so that Rössing is considering a significant expansion of operations,” he said.
Bergh added that Namibia’s debt-to-GDP ratio is set to decline, though funding pressures remain.
“However, funding pressures persist, with maturities, most notably the Eurobond, making this year especially tricky to navigate. Botswana’s position is more precarious. Fortunately, the starting fiscal position is healthier than most other countries. However, with diamond revenue falling away precipitously and a shallow capital market, borrowing is problematic in its present malaise. South Africa’s fiscal spiral continues, but we do not foresee defaults,” he said.
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Floris Bergh
