By Josef Kefas Sheehama
Reflecting on the past thirty-three (33) years since Namibia gained independence, it is evident that economic development plays a crucial role in transitioning from a concentrated production and trade structure. Notably, there have been significant increases in per capita income, marking a shift from low-income to middle-income status.
Namibia possesses abundant natural resources, including mining, agriculture, and fishing. However, the utilization of these resources remains relatively low, primarily due to an over-dependence on the mining sector. Currently, Namibia functions primarily as a consumption-based economy, relying heavily on sophisticated products imported from foreign countries. This dependence creates pressure on foreign exchange reserves, exacerbated by the fluctuating exchange rate, which adversely affects the economy. Additionally, the goals of openness and transparency have yet to be fully realized due to the unique characteristics of Namibia’s economy and the prevailing attitudes of its people. The capital flight resulting from this lack of openness can be reversed through a change in attitude and lifestyle.
According to the May 2023 trade statistics issued by the Namibia Statistics Agency, Namibia imported goods worth N$4.4 billion from Africa out of the total N$12.1 billion spent on imports. Meanwhile, exports to Cote d’Ivoire amounted to N$358.9 million between 2015 and 2022, with imports totalling N$267.4 million during the same period. Looking ahead, Namibia boasts tremendous potential for trade and investment in industries beyond energy. The Namibian economy is showing signs of modest recovery and is projected to perform even better in 2024 compared to 2023.
The discovery of oil and the focus on green hydrogen in Namibia represent important drivers of growth with transformative potential for the economy. These developments have the capacity to create numerous jobs and provide an opportunity for Namibia to lead in fostering competitiveness and achieving economic independence. Successful implementation of these transitions could yield significant value for Namibia, while simultaneously reducing poverty and inequality, and securing a more prosperous future for all citizens.
Unemployment poses a pervasive and substantial challenge in Namibia, although it is not unique to the country. Unemployment rates have been a growing concern worldwide. However, the government can achieve remarkable success in combating unemployment by declaring a state of emergency and taking decisive action. Addressing unemployment, increasing power generation, and tackling corruption must become top priorities for the Namibian government, as many individuals are frustrated with the prevailing joblessness. The unemployment rate in Namibia averaged 21% from 1991 to 2021, reaching an all-time high of 24.5% in 1997 and a record low of 16.8% in 2012. By the end of 2022, it had risen to 22%. According to Trading Economics’ global macro models and analysts’ expectations, the projected medium-term unemployment rate for Namibia is around 23% in 2023 and 22.5% in 2024.
In the current economic context, characterized by both a revival and rising inflationary pressures, questions arise regarding the impact of commodity price increases on the prices of final consumer goods and the overall Namibian economy. Higher interest rates and inflation rates contribute to increased living costs. As the Bank of Namibia continues to normalize policy throughout 2023, the cost of borrowing for consumers and businesses will rise, weakening demand and curbing prices. However, this can also strain people’s budgets, resulting in reduced spending elsewhere. Increasing inflation and uncertainty about the future can further diminish consumer and business confidence, leading to decreased household and business expenditures. Consequently, businesses and startup owners in Namibia will face challenges posed by rising inflation, higher borrowing rates, and a rapidly depreciating currency, worsening the ease of doing business and impacting the overall economy.
Furthermore, the imperative for economic diversification remains strong, given the highly volatile nature of commodity prices and the limited employment potential in primary sectors. Currently, Namibia heavily relies on its mining industry and mineral resources, with mining and quarrying contributing nearly 34.3% in the first quarter of 2023. It is evident that over-dependence on mining has adverse consequences, underscoring the urgent need to diversify the Namibian economy towards non-mining export trade. While the extractive sector has attracted more foreign direct investment (FDI), the non-extractive sector has proven to have a significant impact on economic growth. It is essential to recognize that diversification is a gradual process that requires adequate time to effect substantial change. Namibia operates within the context of globalization, emphasizing the need to diversify the economy and create a competitive environment. Such measures would ensure Namibia’s success and foster a development-oriented framework that benefits its citizens.
Looking ahead, past and present economic developments serve as a foundation for long-term future growth. The necessary actions are relatively clear; however, the question remains whether there is sufficient political will to implement them. It is crucial to acknowledge that no nation has achieved economic diversification without skilled technical manpower and technological capabilities. To fulfil the dream of becoming an industrialized nation, Namibia must formulate effective policies to address economic challenges, attract investors, uphold the Constitution and the rule of law, and invest in human capital development, particularly in technology education. Despite significant challenges, the goal of achieving Vision 2030 remains within reach.
Therefore, there is no magic recipe for economic diversification. As Namibia embarks on the path toward desired industrialization, it is imperative to understand how value is created and by whom, as well as how to maximize the impacts in terms of job creation and poverty reduction.
