Spiking cost of living

Namibia’s real gross national income per capita is 8% below that of 2015, overall food inflation has doubled, individuals’ personal loans and credit card debt have spiked by more than 235%, and interest rates are up around 400 basis points since the end of 2020.This is the harsh personal economic landscape the average consumer has to survive in.Namibia’s overall inflation last month was 4.5%, compared to 6.8% in July 2022.However, Simonis Storm (SS) puts this into perspective: “Although headline inflation rates are declining, it does not detract from the fact that living costs are still expensive and increasing (just increasing at a slower pace). “Monthly inflation came in at 0.3% m/m [month-on-month] in July 2023, compared to 0.1% m/m in June 2023. This is the 23rd consecutive month that monthly inflation is positive, increasing at an average of 0.5% each month since September 2021.”The country’s staple food basket remains under pressure, the latest figures by the Namibia Statistics Agency (NSA) proves.Food and non-alcoholic drinks carries the second biggest weight in the Namibian consumer basket. Out of every N$100 in the average Namibian’s pocket, N$16.45 is spent on food, while N$28.36 go towards housing, water, electricity and gas.Food basketIn July, bread inflation printed 13.2% compared to 13.1% a year ago. Maize inflation soared from 8.9% in July 2022 to 16.8% last month. The figure for rice changed from -3.5% to 12.7%, while inflation for macaroni and spaghetti increased from 10.3% to 13.4%.Overall bread and cereal inflation rose from 8.9% to 13.3% year-on-year (y/y).The overall figure for meat surged from 3.7% to 9.2%. Inflation for chicken surged from 5.2% to 15.3%, while sausages escalated from 0.3% to 15.2%. Beef inflation more than tripled to 7.0%.Although milk was down from 9.2% to 7.3%, inflation for cheese was nearly five times higher at 13.6%, while that of eggs rose from 8.3% to 9.2%.Potatoes were up from 15% to 22%, onions from 7.2% to 45.7%, carrots from 3.2% to 21%, and pumpkin from -0.2% to 14.9%.Inflation for citrus fruits grew from 12.7% to 29.7%, while the figure for apples rose from -4.6% to 8.3%.Sugar inflation reached double digits – 10.4% against 9.5% - while jam rose from 6.5% to 11%.Consumers did get a breather with oils and fats. Cooking oil has been in deflationary territory since May this year, coming in at -10.7% last month. In July 2022, its inflation rate was 37.1% Cooking fats have registered deflation in June and July. Last month, the rate was -4.2% compared to 23.2% a year ago.Strategic reservesThe Crop Prospects Food Security and Drought Situation Report for July, issued recently by the ministry agriculture, water and land reform, Namibia’s national strategic food reserves (NSFR) level stood at 3 560 tonnes at the end of last month. Its total holding capacity is 22 900 tonnes.Local production for this season is estimated to be only about 52% of the total national cereal requirement.The report states a shortfall of 179 100 tonnes is estimated, which is 48% of the national cereal requirementThe deficit, consisting of 50 100 tonnes of wheat, 70 500 tonnes of maize and 58 600 tonnes of pearl millet and sorghum, is expected to be covered through commercial imports.As it stands, there is still a total deficit of about 173 800 tonnes of cereals that still needs to be covered through commercial imports during the 2023/24 marketing year.OutlookIn its latest Agri Report, released in June, SS said the anticipated El Niño weather conditions, characterised by projected heatwaves, droughts and severe storms, are expected to increase farmgate prices. Based on Bloomberg Economics modelling, previous El Niño cycles contributed an additional 3.9 percentage points to global non-energy commodity prices and 3.5 percentage points to global oil prices, SS said. “Across the globe, meteorologists predict that the upcoming El Niño cycle will likely be the costliest, further heightening the risk of stagflation (i.e. low growth and high inflation).“Due to the capital expenditure required for borehole drilling and irrigation systems, farmers in Namibia and South Africa will exert upward pressure on prices during this El Niño cycle. This expenditure will contribute to inflationary pressures for Namibians and keep food prices expensive,” the analysts said.The most recent La Niña cycle (2020 to 2023) was the hottest period compared to all El Niño years before 2015, they added.The World Meteorological Organisation reports a 98% probability that the combination of greenhouse gases and the return of El Niño will make the next five years the warmest on record, SS said. “While this can have numerous economic impacts, the impact on food prices, food production and therefore food security will be most intense,” the analysts said.Other expensesHousing, water, electricity, gas and other fuels weigh the heaviest in the Namibian consumer basket. Rent inflation increased from 1.4% in July 2022 to 2.1% last month.Electricity charges surged from 1.4% to 10%, while gas inflation dropped from 20.2% to 11.7%.The rate for paraffin and methylate spirits rose from 5.1% to 13.8%.Coal and charcoal are up from 1.6% to 4.5%.Transport inflation – the third biggest item in the consumer basket – has dropped from 20.9% last July to -2.5% last month.Purchasing powerIn its mid-year review of its Economic Outlook 2023, Cirrus Capital said the diminishing purchasing power of consumers does not appear to reflect in the wholesale and retail trade print in the first quarter of this year, mostly due to increase in products prices and uptake personal credit uptake in 2022.According to Bank of Namibia (BoN) statistics, individuals owed local commercial banks nearly N$11.9 billion in “other loans and advances” (which includes personal loans and credit card debt) at the end of June this year. Compared to the same month in 2022, this is an increase of about N$1.6 billion or 15.9%. In June 2015, the figure was around N$3.5 billion.Namibia’s wholesale and retail sector grew by 5.7% y/y in the first three months of this year, its eighth consecutive quarter of growth.“However, we do not expect this pace to continue unless we see a material uptick in wages,” Cirrus said.Spending patterns exhibited in 2022 continued into 2023, with individuals substituting downwards and increasing anecdotal evidence from retailers of customers shopping around for the most affordable prices, the analysts said. “There has been strong growth in lower-end products (lower margins), but luxury and high-end product volumes have dropped. Revenue growth has been much stronger, largely owing to price increases and not volume growth. “This has been the dominant theme in engagements with retailers, although there have also been substantial changes in market share over the past year, owing to consumers searching for the best combination of price and quality, which has typically disadvantaged the franchising model (given unit costs, transportation costs and mark-ups),” Cirrus said. - Additional reporting by Ellanie Smit

Spiking cost of living

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