By Josef Kefas Sheehama
Namibia’s 2024 general elections are drawing closer, and political leaders are under immense pressure to tackle the country’s economic challenges and implement policies that promote an inclusive and competitive economy. The country’s economy is expected to grow by 3.2% in 2023, down from 3.4%, and socio-economic conditions have not improved significantly despite the gradual recovery in 2022. Namibia has a choice to implement macroeconomic and structural reforms that can reduce crisis vulnerabilities, increase growth, and sustainably reduce poverty. The government must boost private sector development, and competitiveness, and expand social protection to protect the poor and most vulnerable.
Foreign direct investments (FDIs) can boost the economy by creating better-paying jobs that require higher skills, but high unemployment rates in Namibia require domestic investment as a driver of economic growth. The re-launch of the SME Economic Recovery Loan Scheme is an excellent example of creating liquidity within domestic markets, sustaining growth, creating employment, and laying the foundation for poverty reduction. Policies aimed at attracting and encouraging linkages between foreign multinationals and local companies are necessary to leverage the full potential of FDIs.
However, it is crucial to ensure that FDIs do not exploit Namibians or compromise the country’s sovereignty. The government must legally correct any prevailing situation with urgency and ensure that FDIs benefit the country’s people and economy. Moreover, the government should design and implement national skills programs aimed at upskilling young Namibians to take advantage of the full potential of FDIs.
Namibia’s economy is not yet out of the woods, and inflationary pressures are plaguing economies worldwide. The country’s annual inflation rose to 7.2% in February 2023, prompting the Bank of Namibia’s Monetary Policy Committee to hike interest rates by 0.25 basis points on February 15, 2023, taking the benchmark repo rate to 7%. The bank is expected to raise interest rates by 0.50 basis points on April 19, 2023, to curtail inflation and a fast-depreciating Namibian dollar. The Bank of Namibia will play a vital role in bringing down the cost of living without stalling the economy. Namibia’s economy is closely linked to South Africa, and the Namibian dollar is pegged one-to-one to the South African rand. Therefore, Namibia will increase the repo rate to strike a balance as South Africa’s repo rate stands at 7.75%, compared to Namibia’s repo rate at 7.00%.
Namibia has many challenges to overcome, but the government can leverage domestic and foreign investments, boost private sector development and competitiveness, expand social protection, and implement macroeconomic and structural reforms that can reduce crisis vulnerabilities, increase growth, and sustainably reduce poverty. It is not all doom and gloom, and Namibia has a choice to make that can deliver better life outcomes for its citizens. – Namibia Daily News
