Trading Nations

Originally published in the Informanté newspaper on Thursday, 23 August, 2018.

Over the last century, a web of trade has developed between countries, and it is largely responsible for the economic development we’ve seen globally since the mid twentieth century, due to the economic theory of comparative advantage. In short, it postulates that certain economic actors can produce certain goods or services at a lower opportunity cost than others. To maximize economic output, then, it makes sense to produce that which a certain country can produce at lower cost than anyone else and export it, and then import those goods which can be produced by other countries at a lower cost.

To maximize economic benefit, then, every nations imports some goods and services and exports others. These two do not always match, however, and this mismatch is called the balance of trade. The balance of trade is a large part of a country’s current account – which not only includes trade, but also capital flows in and out of an economy. Usually, countries produce a trade surplus during economic boom times, and then records a deficit during tougher times.

Namibia is no exception, with government’s trade policy aimed at developing, promoting and diversifying the country’s exports while reducing our reliance on imports. It is therefore quite important that we monitor our trade to see if government is, in fact, successful in its stated endeavours. Let’s then examine the Trade Statistics Bulletin compiled by Statistician General Alex Shimuafeni’s Namibia Statistics Agency to see what trade occurred during the first quarter of the year.

During first quarter of 2018, Namibia’s exported N$ 18.8 billion worth of goods, while importing N$ 27.1 billion, leaving us with a total trade deficit of N$ 8.3 billion. As such, we’ve effectively exports locally created wealth abroad. This is a deterioration from both the first quarter of last year (N$ 4.8 billion) and the previous quarter (N$ 5.5 billion). It thus remains worrying that Namibia now consistently has a trade deficit, instead of a trade surplus, every year since 2008.

Let’s take a look at exports and imports individually. Namibia’s largest export market has changed in the first quarter, with the European Union taking the top spot, with N$ 6.2 billion exported to that group of countries, or 35% of our exports. In second place now is the Southern African Customs Union, with N$ 5.2 billion in exports (30%), with BRIC (Brazil, Russia, India, China) rising to third place with N$3.6 billion (20%), followed by non-SACU SADC with N$ 1.3 billion (8%) in exports, and finally, the Common Market for Eastern and Southern Africa (COMESA) contributing N$ 1.2 billion (7%) in exports.

When we take a look at the individual countries we export to, China took the lead for the first time with N$ 3.4 billion exported, or 18.3% of our exports, with South Africa second at N$ 3.3 billion (17.8%), Belgium another N$ 2.4 billion (13%), Botswana with N$ 1.9 billion (10%) and Italy with N$ 1.4 billion (7.5%). Together, these 5 account for 67% of our exports.

However, 82% of our exports were from only 5 categories – Copper cathodes (N$ 5.2 billion), Diamonds, jewellery and precious metals (N$ 4.2 billion), Fish (N$ 2.4 billion), Ores (N$ 2.2 billion), and Zinc (N$ 1.2 billion). The increase in copper coincided with higher foreign demand from China and Belgium, while diamonds were more in demand in Botswana. Ores saw an increase in exports also to China, but France contributed as well, with Zinc in demand from South Africa and Italy. Fish declined a bit, with the DRC no longer importing as much from us, but the slack was reduced due to demand from Spain and South Africa.

In terms of imports, the SACU, in contrast to our exports, remains by far the largest source of imports, with N$ 12.2 billion imported, or 50% of our imports. Non-SACU SADC is second with N$ 3.9 billion (16%) imported, then COMESA with N$ 3.6 billion (26%) imported, and the BRIC countries with N$ 2.4 billion imported (10%). Taking a look at the individual countries we import from, South Africa stands at N$ 40 billion, accounting for 40% of our imports, with a surprise of the Bahamas at N$ 3.6 billion (13%), Zambia at N$ 3.5 billion (13%), China at N$ 1.7 billion (6.5%), and Botswana at N$ 1.2 billion (4.7%)


Notably, 53.5% of our imports came from just 5 categories – Vessels (N$ 3.7 billion), Copper cathodes (N$ 3.5 billion), Mineral fuels & oils (N$ 3 billion), boilers (N$ 21.2 billion) and vehicles (N$ 1.9 billion). Technically, the vessels category is a bit misleading – it was one vessel, and it instantly catapulted the Bahamas to our second biggest import market. Copper cathodes are imported from Zambia for smelting and export, as can be seen in the export statistics. Mineral fuels are imported from South Africa and India, following a greater domestic demand for it, but vehicle imports have dropped from South Africa and Germany. Strangely, between South Africa and China, we’re importing a lot of boilers…

When we take a look at this data, that one vessel clearly sticks out as an outlier in the data. If we were to exclude it from the calculation of our trade deficit, we’d find our trade deficit down to about N$ 4.8 billion – the same as last year, and an improvement from the previous quarter. Even so, that single import represented a vast transfer of wealth from Namibia. It would be quite interesting to find out what vessel this was, and if this asset will generate at least a comparable return for the Namibian economy. Either way, we need to start developing our own manufacturing industries, so we can export more to cover our imports. Until we do, we’ll simply keep exporting our natural wealth – and when that runs out, our current economic climate will look quite rosy by comparison.

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