Proshare - Facebook Proshare - Twitter Proshare - Google+ Proshare - Linked In Proshare - RSS Feed

Uranium Production The Lone Bright Spot for Namibia

Proshare

Thursday, July 06, 2017 2:50 PM/BMI Research

BMI View :
Surging uranium production in Namibia will drive an acceleration of headline real GDP growth over the coming quarters. That said, economic activity outside of the mining sector will remain weak in light of soft investment and elevated inflation.

After real GDP plunged in 2016, we expect the Namibian economy to recover in the coming year, albeit gradually.


Preliminary data suggests that real GDP growth decelerated from 5.7% in 2015 to just 0.3% in 2016, below our already tepid estimate of 1.5%, due to plummeting construction activity and a fall in agricultural production (see 'Uranium Mining Will Provide Major Tailwind To Growth', December 9 2016).


In the coming quarters we see some upside. The Husab uranium mine, which began production in December 2016, will reach full capacity in Q317, becoming the third largest uranium-only mine in the world and driving export and mining sector growth.


That said, we have downgraded our forecast for growth in 2017 to 3.0%, from 4.5% previously, as activity outside of the mining sector will be weak.


Construction activity will continue to lag in light of fairly sluggish investment, while still-elevated inflation will sap domestic demand.


Uranium Mine Offers Upside To Growth

The Husab mine is likely to remain the economy's dominate source of growth over the coming quarters, driving exports and sustaining an estimated 2,100 jobs.


The project, a joint venture between China General Nuclear Power Holding Corp and the state-owned Epangelo Mining Company, is expected to produce up to 6.8 thousand tonnes (kt) of uranium oxide within 20 months, which will feed Chinese nuclear power plants.


Little Other Good News

Outside of the Husab mine, economic activity is likely to remain fairly weak. Low commodity prices have led to a slowdown in investment into the broader mining sector, with downside risks mounting.


In March, Vedanta Resources stated that it would likely shutter its Skorpion zinc mine at the end of the year if an ongoing labour dispute blocks its plans to alter and extend the mine's operations.


Meanwhile, government spending on infrastructure will continue to slow as it addresses its wide fiscal shortfall and rising debt (see 'Deficit will Narrow More Slowly Than Expected', March 23).


Soft investment will most directly affect the construction sector. Local research firm IJG Securities reports that building permits over the first two months of 2017 fell 15.0% y-o-y, the slowest start in seven years.


Given the construction sector's oversized impact on the labour market, a slowdown in construction activity will likely generate headwinds to consumption.


Consumption will be further weighed down by elevated inflation and interest rates. An extended drought has increased food prices, lifting overall inflation over recent months. Inflation came in at 8.2% y-o-y in January and 7.8% in February – post-financial crisis highs.


We expect inflationary pressures to remain high over H117, moderating slightly in H2 (see 'Rate Hikes Unlikely Despite Elevated Inflation', February 17).


Though in a context of elevated inflation, interest rates will remain accommodative, and we expect credit growth will be subdued as sluggish growth discourages lending.




Related News

1.      
Sudan - High Inflation Will Cloud Otherwise Bright Outlook
2.      
Slow Growth in Egypt Until Structural Adjustment Bears Fruit
3.     
Egypt – Emergency Powers Will Help Push Through Reforms
4.     
Algeria – Slow Response to Structural Slowdown
5.     
Nigeria’s Borrowing Spree…Any Cause for Worry?
6.     
Economic Associates States Report - July 2017 Edition
7.      
Congo DRC - New Cabinet Reinforces Likelihood of an Election Delay
8.     
Kenya - Ongoing Drought Will Result In Growth Slowdown In 2017
9.     
Tanzania - Development Expenditure To Widen After Downturn
10. 
Uganda - Shilling Set For Long-Term Depreciatory Trend
11.  
Sub Saharan Africa – Regional Favourites Facing Headwinds
12. 
Pressure Builds on Eurozone Banks to Tackle High NPLs
13. 
Government Cuts Will Weigh On Growth in Congo-Brazzaville
14. 
Nana Akufo-Addo of Ghana to Launch Series of Reforms
15. 
Increased Gold and Oil Exports to Boost Growth in Ghana

READ MORE:
Related News