Namibia is strategically poised for stellar growth thanks to a substantial natural gas and oil discoveries off its coast. However, with a small opulation of approximately 2.6 million people, and a large land mass of 825 square kilometres and an immense distance to cover in terms of service and connectivity infrastructures, the country has its fair share of challenges...
The Namibian government has a strong focus on the pursuit of free market economic principles to promote commercial development and job creation. Although a large portion of the population engages in more traditional subsistence farming and herding activities, the country also has a more modern market sector that is the largest contributor to its economy. The Namibian dollar was introduced in 1993 and is closely linked to the South African Rand at an exchange rate of 1:1. This makes its economic trajectory very similar to that of South Africa.
AN EXTRACTION ECONOMY
The mining, agriculture and tourism sectors have always been the traditional backbones of the economy with the success of the country being largely dependent on the extraction and processing of minerals for export. Almost 50% of the country’s foreign exchange earnings are derived from mining which makes up approximately 13% of the gross domestic product (GDP), while overall, mining contributes to just below 30% of the GDP, which has remained constant for the last five years with just a slight dip in 2020, probably due to the COVID-19 pandemic. Belgium, China, South Africa and Botswana are Namibia’s main export partners, and export commodities include diamonds, copper, gold and uranium, of which Namibia is the world’s 5th largest producer.
Namibia’s import partners are a little more limited, with just South Africa and Zambia being key players in the importing of copper, petroleum, diamonds, cars and delivery trucks. The Namibian economy is intricately integrated with South Africa, with the bulk of its imports originating in South Africa.
Namibia’s favourable location and impressive transportation and communication bases make the country a leader in economic integration. The country has membership in the Southern African Development Community (SADC). The SADC region is rich in diverse natural and mineral resources and shares a regional transport corridor that boosts economic growth through the import and export of commodities from and to landlocked countries.
When it comes to strategic locations, Namibia is in perfect view of the global nature of business. Situated on the southwest coast of Africa, surrounded by the Atlantic Ocean in the west, Zimbabwe, Angola and South Africa in the East, North and South respectively, there are immense opportunities for any investor looking to do business in the entire Southern African region. The country is linked by road to South Africa, Zambia, Angola, Botswana and Zimbabwe, giving it the ideal location to emerge as the logistics and trade hub of Southern Africa. Namibia is also a politically stable country with credit ratings above those of its African neighbours. With a well-defined judiciary, doing business in the country is simple.
OPPORTUNITY KNOCKS
Even with its SADC membership and ideal strategic location, Namibia has had its fair share of logistic challenges. Exports from the SADC region comprise mostly unprocessed goods and the region, in general, receives a low-value return. This has prevented it from achieving industrial development and structural transformation. There is huge potential to transform Namibia from a logistics hub into an economic corridor through economic and technological innovation and transformation. Bearing in mind the value of the entire region’s natural resources, transformation is indeed necessary to move the country to an investment and efficiency hub.
This hub will eventually mature into a thriving economy driven by business sophistication, knowledge and innovation.
GLOBAL OUTLOOK
Namibia’s economy has struggled over the last few years due to high unemployment levels and ever increasing income disparity. This was exacerbated by the COVID-19 pandemic which saw the Namibian dollar fall by 7% against the US dollar. Global exports have also continued to decline as the economy struggles to recover with a slowdown in activity in the mining and construction sectors heavily impacting the economy.
WHAT DOES THE FUTURE HOLD?
With the recent Graaf and Venus Discoveries, the Namibian oil and gas industry has received a much needed injection. The Graaf 1 site alone is projected to produce 190 000 barrels of oil per day with the first flow expected in 2027. The $9-Billion Green Hydrogen project is set to produce 300 000 tons a year of green hydrogen and green ammonia for export from 2026.
Analysts also believe that the Venus well can produce a minimum of 120 million barrels. There are a variety of projects on the horizon including the Kudu Gas project, Nambots Mobile Refinery and Kavango Basin, and it’s evident that Namibia is one country that we need to keep our eye on.