Approved building plans contract by 6.2%

Windhoek-The number of building plans approved within the Windhoek municipal area by July 2017 contracted by 6.2 percent year to date (YTD) to 2050 units, compared to a contraction of 27.5 percent YTD in July 2016. On a monthly basis, building plans approved contracted further by 31.5 percent compared to a growth of 8.1 percent in the prior month.

Alongside, the number of buildings completed also contracted by 16.2 percent YTD to 354 units compared to a contraction of 41.7 percent YTD in July 2016. On a monthly basis, buildings completed rebounded by 94.7 percent after a contraction of 62.0 percent was recorded in the prior month. This was ascribed to the category House, which increased by 138.5 percent month-on-month.

In monetary terms, the value of buildings completed continues to contract by 4.1 percent YTD to N$431.5 million in July 2017, compared to a contraction of 33.1 percent YTD in July 2016. This suggests a declining trend in the level of inflation, in our view.

Overall, although the notable contraction in the number of building plans approved and buildings completed to date has relatively improved from 12 months ago, we still believe that the recession in the construction sector may be protracted. This is because most construction activity that drove output in the past was government activity, construction on mines and roads, which have come to a standstill, as government revenue squeeze lingers, commented Frans Uusiku, an economist at Simonis Storm Securities.

Government's pledge to fully settle outstanding invoices of state contractors totalling more than N$3 billion by the end of August is expected to provide much-needed momentum to the ongoing economic recovery.

In this year's budget N$1.7 billion was allocated and was most likely already paid out in the first quarter of the 2017/18 fiscal year with respect to outstanding claims accruing from fiscal 2016/17.

It is our understanding that government realises the importance of its role in the economy, the impact of fiscal consolidation (necessary as it may have been) and resultant impact on business. An additional N$3 billion to service claims which are still outstanding would certainly lend impetus to an economic recovery in the second quarter of the fiscal year and improve liquidity (depending on how much is retained), commented Ngoni Bopoto, Research Analyst at Namibia Equity Brokers during a recent interview.

Source: New Era Newspaper Namibia