Seek opportunity in Covid-19 challenges
The ratings agency, Moody's Investors Service, recently announced that it had changed the outlook on the Government of the Republic of Namibia's ratings to negative from stable. It said the negative outlook reflects the economic and financial pressures the Covid-19 shock is exerting on Namibia's credit metrics, exacerbating existing vulnerabilities.
The ratings agency forecasts Namibia's Gross Domestic Product (GDP) will contract by a record 7% this year, in line with the latest Bank of Namibia expectations that the domestic economy will contract by 6.9% in 2020, mainly due to Covid-19-induced travel restrictions and a nationwide lockdown that began with Khomas and Erongo regions on March 27.
While Moody's expects GDP growth to rise to 1.8% in 2021, it warned that the strong growth rates seen in the first half of this decade are unlikely in the foreseeable future as the expansionary fiscal policy and favourable commodity prices and investment dynamics that fuelled Namibia's growth back then is not likely to be repeated in the coming years.
There was even more concerning news when results of a survey by the Namibia Statistics Agency on the effects of Covid-19 on businesses showed that the pandemic has brought disruptions in most economic activities in Namibia.
While the actual impact of the pandemic on the economy remains unknown until critical variables can be identified, including the duration of the pandemic and the measures that are put in place to fight it, there is no doubt that many businesses and individuals will battle cash flow challenges with devastating effects to the economy and households.
The majority of businesses have seen a reduction in customer demand, likely a result of the many redundancies recorded so far across different sectors and cuts in salaries.
The Covid-19 era is, thankfully, not the apocalypse yet, especially for the savvy investor. Forbes Magazine reported recently that 25 of the wealthiest people on earth are worth a whopping US$255 billion more than when the U.S. stock market hit a mid-pandemic low on March 23.
It is interesting to note that the billionaires all have one thing in common – they are providing solutions to the Covid-19 pandemic. Forbes says billionaires with their worth tied to stakes in technology companies have led the way for gains amid the pandemic. The tech-heavy Nasdaq composite index turned positive for the year-earlier this month, and it's up 37% since March 23. The S&P 500 and Dow Jones, meanwhile, are up about 31% each – still down roughly 10% and 15% for the year, respectively.
With the manufacturing, hotel and restaurant, and construction sectors bearing most of the brunt of the Covid-19 pandemic in Namibia, businesses and individuals must take a leaf out of the top 25 billionaires' book; it is proven that any business providing solutions to challenges posed by the virus are performing well amidst the crisis. Whatever business model that might have served you well over the past years, might not necessarily work for you now or any time in the future. There is a new normal in town.
For example, logistical challenges as a result of the partially closed borders have hurt stock or reduced raw materials for most businesses in import-dependent Namibia. However, this logistics nightmare provides an opportunity for the eagle-eyed Namibian entrepreneur who can identify and plug the gaps in the market.
All indications are that the next 12 months will be bumpy. How businesses react to the Covid-19 storm will determine whether they will enjoy the ride or not.