Question

write an essay about the covid-19 impact on equity performance on the namibia stock exchange

Answer 1

KOVID 19 has put a stop to the economic activities of Namibia. The major sectors that are affected are mining, tourism, manufacturing, trade, logistics and financial markets.

Tourism sector which contributes greately to the GDP is one if the worst hit sectors. The World Tourism Organisation estimates that tourism activity would go down by 20 to 30 percent. If 20% is considered for Namibia, the loss could be very high. In addition losses to the hospitality industry would also be very high.

Mining activity is virtually stoped due to the hazardous nature and easyness to spread the virus.

According to the Namibia Labour Force Survey, about 420,000 Namibians are employed in the informal sector consisting of small traders, petty shops, part time workers etc. Precautionery measures such as quarantine etc. has stoped the movement of the population and hence this sector has been hard hit. In addition to loss of sale and services, stocks of unsold goods perish and the financial capacity of the people are destroied. The Ministry of Finance has launched an economic stimulus package of abour 8 billion Namibian Dollers.

Government"s income by way of corporate tax, property tax and taxes on goods and services are bound to decrease considerable sue to the lack of economic activity. International trade has also tapered off and Namibian dollar has depreciated. This means that import of essential medication etc. will become costlier.

A majority of the country"s imports and exports and done through South Africa. The lock down of the boarders by South Africa has affected the logistics industry adversly. In addition, most of the trading partner countries also have shut their boarders leading to virtual stand still in the logistics sector.

While the exact effects of the coronavirus on the Namibian economy is not fully known, it clearly does pose a serious risk to the wellbeing of the general economy. The importance of focusing on the assessments on the ways in which the outbreak may affect consumers, businesses and governments at large is of paramount importance.

Stock Market The Namibia (NSX)  had a drastic historical fall hitting an all-time low of N$ 735 on the 23 March 2020. According to Trade Economics, the NSX Overall index decreased by 445 points or nearly 33.73% since the beginning of 2020. This has been its lowest return since its historical low return of -41.82 % in 2016. After the announcement of the country’s COVID-19 economic stimulus packages, the index regained some of its grounds and traded above 920 levels.

However, these recoveries may be short-lived as there are high chances of further extension of the lockdown period to combat the further spread of the virus. Thus, expectations are that, NSX Overall index may continue to trade below 800. Overall, local financial markets reacted to the COVID-19 shocks. The financial markets may remain extremely volatile for a long period, at the very least till the number of infected cases start coming down. Therefore, if Namibia and South Africa in particular, continue to see a rise in infected case, the local financial markets situations could get far worse, despite the recent further rate cuts announced by the Bank of Namibia as well as the economic stimulus announced by the Finance Minister at the end of March 2020. The expectation is therefore that, the two, among other government interventions may have a significant role to play in calming local financial markets volatilities.