How to share the wealth

Tom Minney

Although investors are attracted by Namibia’s minerals and good economic management, the country is still struggling to overcome the challenges of widespread poverty and unemployment. 

International bond investors are betting on Namibia. In October, the government took advantage of a brief lull in the Eurozone debt crisis and launched a US$500 million ten-year, hard-currency 5.5 percent Eurobond. The offer was five-and-a-half times oversubscribed as asset managers and others clamoured for the bonds. They were drawn by Namibia’s strong record of prudent economic management, its rising diamond revenues and the big increases expected in uranium output over the coming years. There is even excitement over offshore oil, with British, Brazilian and other companies exploring, although at the time of writing there are still no commercial finds. 

Namibia’s economy is closely tied to the well-managed South African economy, its major trading partner, with the Namibia dollar currency linked one-for-one with the rand. Inflation and interest rates follow those of its giant neighbour, although Namibia’s growth rates have generally been higher. The economy averaged 6.3 percent growth a year during 2004-08 before contracting by 0.4 percent in 2009 after the world economy collapsed and mining output was slashed, but bounced back to 6.6 percent growth in 2010. Between 2011 and 2014, finance minister Saara Kuugongelwa Amadhila expects growth to average 5.3 percent. 

Like South Africa, Namibia is still fighting poverty and unemployment. The problem is structural in that while Namibia’s mines drive exports and pay taxes, they create less than 3 percent of the jobs, according to a recent government survey. At independence, Namibia had the highest disparity of income in the world and, despite good progress, there is still far to go. In 1993/94, average income for the bottom 20 percent of the population was US$167 compared to $9,396 for the top 20 percent, but by 2009/10 the poorest 20 percent averaged $1,102 and the richest $10,557. The government has been creating jobs in the 90,000-strong civil service, but says unemployment stands at 51 percent and is spending billions to tackle it. 

Manufactured goods, such as processed meat and fish, beverages, copper and zinc, rose as a share of total exports from 38 percent in 2000 to 54 percent in 2010, despite some difficulties from unfair dumping by South African competitors. The NAD2.5 billion, ultra-modern Ohorongo cement plant, majority owned by Germany’s Schwenk, opened in February 2011 and is able to produce 700,000 tonnes a year. 

Farming in much of the country takes place on giant ranches on lands too dry for rain-fed crops, with the top-quality beef and cattle exported. Under apartheid, black farmers were forced on to marginal lands while some 4,000 whites owned commercial farms on 44 percent of the land. After independence, efforts to encourage more black Namibians into commercial farming scored some successes, but badly resourced resettlement for poor farmers has also degraded some farms. Plans to create ownership rights for at least 15,000 landowners in the northern communal areas by 2015 could transform many rural livelihoods, particularly benefiting women, bringing better management and productivity. 

Transport is another route to growth. Namibia’s ports are relatively efficient, closer to key markets than those further south, and less prone to theft than those in Angola. There are plans to invest NAD2 billion in transport links through Walvis Bay port and proposals for a 1,500-km Trans-Kalahari rail line (costing $5-9 billion) to the port from South Africa’s Waterberg coalfields and new mines in Botswana. Road corridors are also being upgraded and a railway will lead to the Angolan border. 

Namibia is a top tourism destination and the sector offers growth and rural jobs. The Millennium Challenge Account (the US development aid fund set up by the Bush administration in 2004) is investing $66.5 million and says tourism can increase jobs from 77,000 to 129,000. Breathtaking scenery and ease of operation and access make Namibia a top destination for films, including documentaries and features such as Skeleton Coast, 10,000 BC and Flight of the Phoenix. 

Development indicators are improving as the HIV/AIDS pandemic is tackled. Average life expectancy at birth fell from 62 years in 1991 to 49 years in 2001, but has since climbed back to 51.6 years by 2008, according to the government. Latest figures (2009) suggest that 180,000 Namibians are infected with HIV, and some 86,000 receive anti-retroviral therapy, about 85 percent of the adults who need the life-prolonging treatment. This is subsidised by $100 million a year from the US President’s Emergency Plan for AIDS Relief (PEPFAR) but donor funding for HIV could reduce over 2012-2015. 

State-owned enterprises still dominate many sectors. Some are doing well, such as electricity parastatal Nampower, which is successfully expanding its operations, but others, like Air Namibia, continue to suck taxpayers’ cash. Government spending is increasing fast since the 2009 global crisis. After years of budget surplus and debt down to 15 percent of GDP in 2009, spending for 2011/2012 is up 38 percent compared to the previous year and the budget deficit is set to soar to 10.7 percent of GDP. By 2013/14, public debt is forecast to reach nearly 35 percent of GDP, increasing the debt service burden. An IMF mission in November warned that unless the deficit is cut in the medium term, debt will climb. 

The good news is that Namibia is ranked sixth in Sub-Saharan Africa in ease of doing business, it is peaceful, crime is relatively low and the climate is very pleasant, with beautiful nature, good roads and drinkable water – factors that enhance its attraction for those enthusiastic investors.

About the author:

Tom Minney is an economic analyst specialising in African markets


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