Windhoek:Higher fuel costs are anticipated to impact inflation over the next three to nine months, with inflation currently at 5.4% as of September. This inflation rate is expected to remain high for at least the next six months, as explained by Cirrus Capital's Robert McGregor during the 2026 Road Fund Administration stakeholder consultation in Windhoek.
According to Namibia Press Agency, McGregor highlighted that motorists have only felt the initial impact of fuel price increases at the pump. He noted that subsequent price hikes would affect sectors such as agriculture, mining, retail, and logistics, driven by increased refining costs and crude oil prices. Despite potential easing in crude prices, pump prices may not decrease proportionately due to the rise in refining costs, which have surged because of reduced global refining capacity.
Cirrus's presentation indicated that September's inflation was the highest since early 2024, largely due to fuel and transport costs. Transport inflation reached 9.8% in the second quarter, with taxi and bus fares increasing by 15% from May 18. Additionally, the Bank of Namibia raised the repo rate to 7.00% on October 28, adding financial pressure on households with debt.
Fuel demand has remained strong, with a 5.1% increase in volumes year-on-year, reaching 313 million litres in the second quarter. McGregor noted that demand is typically price-inelastic but warned that sustained high prices could drive consumers to seek alternatives, as seen in South African households' shift to batteries during load-shedding.
Cirrus forecasts a growth rate of 1.9% for this year, down from the mid-year budget review's 2.3%, with growth expected to slow to approximately 0.7% in the second half. Factors such as the El Niño weather pattern, an outbreak of foot-and-mouth disease, and weak mining performance are likely to impact the economic data negatively.
McGregor also pointed out a shift in freight from rail to road, with road cargo increasing by 12.4% in the second quarter while rail cargo fell by 16.0%. This shift is attributed to challenges with rail capacity, cost, and reliability, which also contribute to the deterioration of the road network.
He cautioned that the government has limited capacity to provide relief, as the development budget has been cut by 13% to N$6.7 billion. McGregor emphasized that fiscus-funded relief could have long-term costs, as deficits are ultimately offset by taxes.