Tough year for mining

Diamond mining in Namibia is expected to face a significant downturn this year, as weakened global demand and rising competition from lab-grown diamonds weigh on the sector.

According to Bank of Namibia’s (BoN) latest Economic Outlook Update, diamond output is projected to decrease by 8.2% in real terms, marking a stark contrast to the previous year’s robust growth of 10.9%.

This decline reflects subdued demand for diamonds, further exacerbated by the increasing popularity of synthetic alternatives, the BoN said this week.

Last year, diamond production was bolstered by the full deployment of the new diamond vessel, Benguela Gem, which contributed to the strong output that year.



Hope

The outlook for next year, however, offers some hope, with a slight recovery expected, forecasting a 1.8% growth.

Despite this, uncertainties remain, the BoN said.

Global geopolitical factors like the change in leadership in the United States and the evolving Russia-Ukraine conflict could potentially influence market dynamics. If sanctions against Russia are eased, the global diamond market, along with other economic sectors, could see a period of stabilisation, according to the central bank.

The revised forecast for 2024 is notably more pessimistic than earlier projections, as recent data has shown much lower diamond production during the first three quarters of the year. These adjustments reflect the reality of current market conditions and the growing pressures on the diamond mining industry, said the BoN.



Uranium

The uranium mining sector is also set to experience a slowdown in growth, with production volumes expected to increase by only 3.6% in 2024, down significantly from the 24.5% growth seen last year.

The BoN attributes this moderation in growth largely to the impact of ongoing strip-mining activities, particularly the expansion of mining pits at certain sites, which will affect production in the short term.

However, a resurgence is anticipated in 2025, with growth expected to reach 5.2%, according to the BoN.

Despite the slowdown, uranium remains a key resource for the country, and these growth projections have remained consistent with those published in the August 2024 Economic Outlook.



Gold

In contrast to the decline in diamond and uranium mining, the metal ores sub-sector is poised for another year of exceptional growth, driven largely by increased gold production. The sector is forecast to expand by 26.2% this year before slowing to 5.9% in 2025.

This growth surge is primarily fuelled by the higher grades of gold ore being mined and the continued rise in global gold prices, spurred by geopolitical instability and central banks' growing demand for gold as a safe-haven asset, the BoN said.

While the August 2024 Economic Outlook had initially forecasted contractions in this sector, the reality of soaring gold prices and demand has resulted in a more optimistic projection for 2024, it added.

The increase in gold prices, in particular, reflects growing concerns over global economic uncertainties, which have had a direct impact on the mining sector's performance.



Other mining and quarrying

The other mining and quarrying sector, which includes oil exploration, is also expected to see robust growth this year, though at a more moderated pace compared to the previous year.

This sector is expected to grow by 9.2% in 2024, followed by a further 4.6% increase in 2025.

While still substantial, the forecast for 2024 represents a significant slowdown from the 37.2% growth registered last year, primarily due to base effects from intensive oil exploration and drilling activities in prior years.

Despite this moderation, the sector continues to play a vital role in the country’s economic growth, with projections for 2024 remaining unchanged from the August 2024 Economic Outlook, the BoN said.