Covid to ravage economy

Jo-Maré Duddy – Namibia’s tourism industry will take an “unprecedented hit” from Covid-19, Simonis Storm has warned, slashing its overall economic growth forecast for Namibia this year to -2.1%.

Pre-Covid, Simonis Storm (SS) expected the domestic economy to exit recession in 2020 by growing 0.9%.

Namibia experienced a deep contraction of 1.1% last year, according to preliminary figures by the Namibia Statistics Agency (NSA). The economy has posted negative growth since 2016, with the exception of 2018 when growth of 0.7% was recorded.

Whereas the analysts penned in an estimated expansion of 1.5% in 2021, they now forecast zero growth.

Namibia will join the rest of the world in its economic woes. The World Bank expects the entire Sub-Saharan Africa to fall into a recession for the first time in 25 years. The institution forecasts growth of -2.1% and -5.1% in 2020. The African Development Bank’s (AfDB) current estimation is between -0.7% and -2.8%.

Besides tourism, SS also foresees tough times for Namibia’s mining sector, as well as wholesale and retail trade.

“The mining sector will be hit hard given the drop in commodity prices due to mounting global fears of the virus. We further expect the wholesale and retail trade sector to record a temporary increase in revenue due to panic buying by the consumer. However, if the outbreak persists, we could experience massive losses in that space,” SS says.

Tumbling revenue

SS says they are aware of “numerous booking cancellations as a result of travel bans”.

According to the Namibian Tourism Board (NTB), tourism related income could decline by N$2 billion in 2020, SS states.

The NSA uses hotels and restaurants as a proxy for tourism in compiling the gross domestic product (GDP).

Preliminary NSA figures show hotels and restaurants pumped more than N$3.89 billion at current prices into the economy last year, about N$927 million more than in 2018. The industry’s contribution to GDP in 2019 was 2.2%, up from 1.7% the previous year.

The NSA uses 2015 constant prices to measure annual growth. According to this, hotels and restaurants grew by 2.7% in 2019, down from 4.9% in 2018. The industry was in recession in 2017.

With the reduction in the number of passengers using airlines, many hospitality and tourism establishments’ profits will be affected, SS says. The impact will also filter through to the hotel and restaurant sector as people opt to stay home, the analysts add.

“Many people are cancelling their travel plans as businesses from airlines to cafes and those closely related to the sector will suffer great losses,” they say.

Like the NSA, SS uses hotels and restaurants as a proxy for tourism, coupled with indicators from the bed and room occupancy index.

“Historically, January has always been a slow month for tourist movement as the tourism peak season in Namibia is between May and October. Although it’s the normal trend to have a reduced number of bed and room occupancy in January, with the pandemic outbreak and numerous country lockdowns, we expect a prolonged decline,” SS says.

Job losses

The ailing sector will result in lay-offs this year, SS says.

The Federation of Namibian Tourism Associations (Fenata) last week submitted a report to finance minister Iipumbu Shiimi, warning that about 30 000 people will lose their jobs within the next two to three months.

Currently the only official employment figures are those of the NSA’s Labour Force Survey 2018. According to this, accommodation and food services activities provided jobs to 83 056 people, or 11.4% of Namibia’s active labour force.

The average monthly wage earned in the industry was N$2 819, according to NSA stats.

Nearly 44% or 36 314 jobs in the industry in 2018 were occupied by young people of 15 to 34 years.

In total, 56 956 of workers in the industry were in informal employment. This is nearly 69% of all job opportunities in the sector.

SS says workers in the informal economy may not have the luxury of staying at home without paid sick leave. In addition, people living in or near poverty often lack disposable cash and cannot easily stockpile food, they add.

“Hunger, malnutrition, pneumonia and other forms of health-related shocks and stresses compound vulnerability to the [corona]virus and contribute to a vicious cycle of disease, destitution and death.

“Poverty can fuel contagion, but contagion can also create or deepen impoverishment. The virus will be another source of impoverishment and reinforce existing factors, in turn limiting the ability of vulnerable households to escape from – and stay out of poverty, SS says.

Conservation

Reuters last week reported that as Africa's wildlife tourism sector evaporates, so too are revenues many conservation projects rely on to protect some of the continent's most endangered animals.

It's a concern shared by Maxi Pia Louis, who heads the Namibian Association of CBNRM Support Organisations (Nacso) - an association that helps coordinate Namibia's community-based natural resource management programmes. They too raise the bulk of their revenues from wildlife tourism.

"There is just zero tourism in those areas now. Zero," she said.

Community-run conservancies earned over N$60 million from hunting and lodge operations in 2018. Another N$65 million went directly to households, mainly from salaries earned by the roughly 600 local game wardens.

"If they don't get their salaries, we fear poaching will return, because they [communities] will be poor," Louis told Reuters.