By Josef Kefas Sheehama.
Looking back over the past 33 years since Namibia gained Independence, economic development presents us with a key element in which we should move to a less concentrated production and trade structure. There has been an unprecedented rise in per capita income, as we crossed the threshold from low-income to middle-income status.
Namibia is endowed with vast natural resources in mining, agriculture, and fishing. It is worth to note that resource utilization is still low due to over-dependence on one sector, particularly mining. We are mainly a consumption economy since we do not engage significantly in secondary production but are always willing and ready to consume sophisticated products from foreign countries which put pressure on foreign exchange.
The ever-fluctuating exchange rate also has affected the economy adversely. In addition, all that was expected to be achieved through openness is yet to happen due to the peculiarity of Namibia’s economy coupled with the attitude of people which contravenes transparency, accountability, and probity.
Capital in Namibia has directly and indirectly flowed away so much due to openness. A change is still possible if there is a change in attitude and way of life. At present, 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 we had spent on imports.
We have exported goods in the amount of N$358.9 million from 2015 to 2022 to Cote d’Ivoire, while on the demand side, imported goods amounted to N$267.4 million over the same period. Going forward, we are a country with enormous potential that presents prospects for trade and investment in other industries other than energy. The Namibian economy is showing signs of modest recovery and could perform better in 2024 compared to 2023.
Additionally, the discovery of oil in and green hydrogen are important engines of growth in light of the transformational potential for the Namibian economy and the number of jobs to be created. Therefore, we have a chance to leverage these transitions to lead in the creation of competitiveness that will help Namibia to attain economic independence. If successful, a strategic shift of this nature could unlock significant value for Namibia while reducing poverty, inequality, and create a more prosperous future for all Namibians.
Furthermore, unemployment is a great and pervasive problem. However, the point must be made that it is not peculiarly a Namibian problem. All over the world, there are growing concerns of unemployment. And what we are saying is that the government can achieve remarkable success in this regard if it declares an emergency on unemployment and tackle it decisively. The Namibian government needs to make unemployment, increased power generation, and corruption its top priorities, since many people are frustrated with widespread joblessness.
Unemployment is like a disease for which the cure is not yet discovered. The unemployment rate 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. But by the end of 2022, it has jumped back to 22% according to Trading Economics global macro models and analysts’ expectations. In the medium term, the Namibian unemployment rate is projected to trend around 23% in 2023 and 22.5% in 2024, according to their econometric models.
In the current context, in which economic revival co-exists with rising inflationary pressures, we pose ourselves the questions: how are prices of final consumer goods affected by the rise in commodity costs, and what impact does this have on Namibia’s economy?
The higher interest rates and high inflation increase the cost of living. Tightening monetary policy raises the costs of borrowing for consumers and businesses, weakening demand and curbing prices. But it could also pinch people’s budgets as the Bank of Namibia continues to normalize policy over the rest of 2023. Inevitably, money will become more expensive. This means people have less money to spend elsewhere. Increasing inflation and therefore uncertainty about the future can also lead to reduced consumer and business confidence, dragging down household and business spending even further. Therefore, business and startup owners in the country will have a hard time dealing with rising inflation, higher borrowing rates, and a fast depreciating currency as ease of doing business worsens the economy.
Moreover, the imperative for economic diversification in resources remains strong, given highly volatile commodity prices and the low employment potential of primary sectors. Namibia’s economy heavily relies on its mining industry and its mineral resources. Nearly 34.3% contributed by mining & quarrying in the first quarter of 2023.
It is clear, therefore, that the adverse consequences of over-dependence on mining and related industries heightened the need and call to diversify the Namibian economy away from mining to non-mining export trade. Though there was more foreign direct investment (FDI) in the extractive sector, the non-extractive sector proved to have a significant impact on the growth of the economy.
We need to understand that diversification is a strong drive, but must be given adequate time to create a change in the process of whatever it is expected to accomplish. Therefore, the fact remains that Namibia in a globalized world hence we have to diversify our economy to have a viable playground to compete. This would help Namibia to succeed and bring a developmental package that would cater to the well-being of our people.
Going forward, the past and present economic development set the platform for the long-term future. The actions needed are relatively clear, the question is rather whether there is the political will to carry them out. Failure to coordinate appropriate policy responses in the face of these developments can spell troubling consequences for the future of economic development.
History shows that no nation has ever achieved economic diversification without skilled technical manpower and technological capability. Thus without creating effective policies to address economic challenges that lure investors to the economy; and without ensuring that the Constitution and rule of law are respected and without investing in human capital, particularly technology education, Namibia will continue only to dream of being an industrialized nation.
Despite huge challenges, we can still achieve the V 2030 but there is no magic recipe for economic diversification. As we move to the desired industrialization, it is important to understand how value is created and by whom, and how to maximize the impact in terms of job creation and poverty reduction.
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