Namibia

major macro economic indicators

(e): Estimate (f): Forecast *Fiscal year from April 1 to March 31. 2021 Data: FY 2023/2024

RISK ASSESSMENT

Moderate growth

Growth will benefit from buoyant diamond, gold and uranium production, driven by external demand and high prices. In particular, demand for local diamonds will continue to be driven by North American sanctions and the voluntary embargo on Russian diamonds by major jewellers. The measures affecting the Russian diamond company ALROSA, which held an approximate 30% share of the world market before the war in Ukraine, have opened up opportunities for Namibian diamonds and boosted their price. Furthermore, the addition of the diamond recovery vessel "Benguela Gem" to the Debmarine Namibia fleet in March 2022 will also increase production in 2023. Activity will also be supported by the uptick in tourism due to the improved health situation. Tourism and diamonds will consequently sustain exports. However, persistently high food and energy prices will continue to weigh on imports. The outlook will be clouded by the very limited fiscal headroom - public investment has historically been an important driver of growth - and by uncertainty over agricultural production. The majority of agricultural production is rain-fed and highly dependent on increasingly volatile weather conditions. In addition, the sector will continue to suffer from the high price of fertilisers and animal feed. Last, monetary tightening, both locally and globally, could weigh on investment: while the policy rate has already been raised by 175 basis points since February 2022, the pegging of the Namibian dollar to the South African rand could lead to further tightening against a background of durably high inflation. Inflation will continue to weigh on household consumption.

Persistently large twin deficits

The current account deficit will narrow as a result of improved export performances, which will partly offset the high cost of imports. However, the deficit will remain deep as the economic slowdown in the region reduces SACU revenues. Part of the deficit will be financed by foreign investment, especially in oil and gas exploration.

The budget deficit, which widened as a result of pandemic-related spending and which subsequently remained high owing to the effects of the war in Ukraine, will decline as a result of higher mining royalties, particularly from diamonds, and reduced pandemic-related health spending. However, the budget deficit is expected to remain high as current inflation forces the government to keep on with considerable public spending, e.g., the fuel subsidy introduced in May 2022 that has been extended indefinitely. This deficit will be financed largely by the issuance of long-term domestic debt, thereby pushing up public debt and its domestic share (over 70%). Its external share is around 40% multilateral due to emergency financing granted by the IMF and the African Development Bank, and 50% composed of eurobonds issued in the 2010s.

SWAPO holds onto its lead in the run-up to the 2024 elections

The South West Africa People's Organisation officially known as the SWAPO Party has dominated the political landscape since the country’s independence in 1990. Party leader, Hage Geingob, was re-elected President for a second five-year term in 2019. Despite a dip in popularity owing to the challenging economic conditions in place since 2016 that were exacerbated by Covid-19, and persistently glaring inequality, the SWAPO Party is the front-runner for the 2024 elections. Netumbo Nandi-Ndaitwah was appointed Vice-President at the 2022 SWAPO Party Congress and is likely to take Geinbog’s place, as the latter will have reached the end of his two terms of office. The controversial question of land redistribution favouring the black population, which although outnumbering the white population, owns only 16% of agricultural land, needs addressing urgently and is symptomatic of the divisions dogging the country.

Namibia’s business climate, although relatively positive compared with other African nations, is beleaguered by cumbersome and lengthy red-tape and is rivalled by numerous African peers that have made the fight against bureaucracy one of the linchpins of their development strategies.

Last updated: April 2023