Food and Non-Alcoholic Beverages (16.5% of the Consumer Basket):
Inflation in the Food and Non-Alcoholic Beverages category edged up slightly to 5.9% year-on-year (y/y) in February 2025, compared to 5.8% y/y in the same period last year. While the increase appears modest, underlying cost pressures—driven by rising global commodity prices for corn, wheat, and grain, alongside higher supply chain costs—continue to influence price movements in essential food items.
Early signs of renewed inflationary pressures are becoming evident, particularly in staple foods such as meat and bread, which remain vulnerable to both global and domestic supply shocks. A particularly concerning development is the sharp increase in bread and cereals inflation, which surged from -0.4% y/y in February 2024 to 6.1% y/y in February 2025. This reflects escalating production costs, exacerbated by global supply chain disruptions and higher input costs in agricultural markets.
Looking ahead, price volatility in essential food categories could persist, with weather-related disruptions and fluctuating import costs posing further risks to price stability. These factors are particularly concerning for lower-income households, which allocate a significant portion of their income to food expenditures. Close monitoring of global and domestic supply dynamics will be crucial in assessing the trajectory of food inflation and potential affordability challenges in the months ahead.
Transport (14.3% of the Basket):
Namibia’s transport inflation slowed significantly to 1.3% year-on-year (y/y) in February 2025, down from 6.5% y/y in February 2024. This sharp deceleration has been largely driven by declining global fuel prices, which have eased production and transportation costs, offering relief to businesses and consumers alike.
However, early warning signs of renewed inflationary pressures are beginning to emerge. Between January and February 2025, transport inflation rose from 0.4% to 1.4% month-on-month (m/m), marking the first fuel price increase of the year. This trend persisted into March, with fuel costs climbing for a second consecutive month. As a result, transport inflation is expected to gain momentum in the coming months, exerting upward pressure on Namibia’s overall Consumer Price Index (CPI).
Beyond fuel prices, several other factors could drive transport inflation and broader cost pressures:
- Exchange Rate Fluctuations: A weaker Namibian dollar, particularly against the US dollar, could make imported fuel and vehicle parts more expensive, adding to transport-related costs.
- Supply Chain Disruptions: Geopolitical tensions, logistical bottlenecks, and shipping delays could increase transportation costs, with knock-on effects on consumer prices across multiple sectors.
- Rising Insurance and Maintenance Costs: Inflationary pressures on vehicle insurance premiums and maintenance expenses could further elevate the cost of transport.
- Fiscal and Regulatory Changes: Adjustments in fuel levies, road taxes, or transport subsidies could directly impact cost structures, influencing both businesses and households.
While the recent slowdown in transport inflation has provided temporary relief, the trajectory of fuel prices and external economic conditions will be critical in determining future trends. With cost pressures beginning to re-emerge, businesses and consumers should prepare for potential increases in transport-related expenses in the months ahead.
Housing, Water, Electricity, Gas, and Other Fuels (28.4% of the Basket):
As the largest component of Namibia’s consumer basket, housing and utilities recorded an inflation rate of 2.9% y/y in February 2025, a significant slowdown from 4.5% y/y in February 2024. This deceleration suggests a more moderate rise in housing-related costs, despite persistent pressures in key subcategories.
The primary drivers of inflation in this category were:
- Rental prices, which rose by 4.2% y/y, reflecting continued demand in the property market.
- Repair and maintenance costs, up 3.8% y/y, largely due to higher material and labour expenses.
- Electricity tariffs, which remained steady at 3.1% y/y, in line with municipal cost adjustments.
While electricity tariffs have remained stable, Nampower’s proposed 17% tariff increase for the 2025/26 fiscal year presents a potential upside risk to inflation. If implemented, this adjustment could place upward pressure on Namibia’s Consumer Price Index (CPI), particularly affecting electricity- intensive sectors such as manufacturing, retail, and hospitality. Rising energy costs may also weigh on household budgets and business operations, amplifying inflationary pressures across the economy.
What to expect in March
We expect headline inflation to rise to 3.8% y/y in March, with monthly inflation accelerating to 1.1% m/m. While price pressures have eased in some areas, certain components remain stubborn, keeping inflation firmly in focus.
Food Prices: Demand Pressures Meet Global Uncertainty
In our view, food inflation will climb another 0.8% m/m, mainly due to seasonal demand for meat, vegetables, and beverages. While improved weather conditions have supported local agricultural output, global food price volatility and supply chain constraints remain a real risk. Namibia’s food inflation is directly tied to the rand and South African imports, and any currency depreciation or supply shocks could filter through to local prices in the months ahead. This is something we are watching closely.
Transport Costs: Fuel Inflation Isn’t Going Away
The fuel price hike in March is set to push transport inflation up by another 1.0% m/m, marking the second straight month of rising fuel-related costs. This isn’t just about petrol—it feeds into logistics and freight costs, which could drive up retail prices across multiple sectors. With global oil prices still volatile, and a real possibility of further fuel levy increases, we don’t see transport inflation easing anytime soon.
Housing & Utilities: Structural Pressures Keep Prices Elevated
We see housing and utility costs edging higher, fuelled by a
mix of short-term trends and deeper structural issues:
- Post-holiday energy consumption – A rebound in
electricity and gas usage is lifting household utility bills. - Imported energy costs – Namibia’s reliance on fuel-
based power generation and gas imports makes it
vulnerable to price shocks. - Housing market constraints – Urban rental prices
in Windhoek and coastal towns remain high, and the
affordable housing shortage isn’t improving.
For now, we don’t see a quick fix to these underlying pressures.
Key Inflation Risks to Watch
1. External Cost Pressures: The Trade Factor We Can’t Ignore
Protectionism is back in full swing, and Namibia will feel the impact. US tariffs on Chinese goods, supply chain bottlenecks, and rising global shipping costs are already pushing up import prices, particularly for fuel, machinery, and consumer goods. In our view, this is one of the biggest risks to inflation staying higher for longer.
2. Rand Volatility: A Key Driver of Imported Inflation
Namibia’s currency moves with the rand, and right now, a weaker rand means higher import costs. If SARB holds off on rate cuts, we could see more currency pressure, keeping inflation elevated well into the year. Simply put: if the rand weakens further, Namibia’s inflation outlook worsens.
3. Domestic Policy: Higher Levies Could Cancel Out Easing
Any government policy shifts—whether fuel levies, road taxes, or subsidy reductions—will have a direct impact on price levels. If the cost of fuel or energy rises due to policy changes, it could offset some of the relief expected from eventual interest rate cuts. The bottom line? Inflation is still contained for now, but we see several risks that could delay any meaningful relief. The Bank of Namibia will likely take a cautious approach to further easing, keeping a close watch on how these inflation risks evolve.
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