Foreign investment inflows improve for the second straight quarter as mining sector recovers
Namibia recorded a much larger net Foreign Direct Investment (FDI) inflow of N$3.31 billion in the third quarter of 2017, thanks to an increase in reinvested earnings and foreign investment in debt instruments.
Increase in net inflows related to reinvested earnings went from N$1.04 billion to N$1.41 billion, while debt instruments recorded and increase from -N$47.10 million to N$1.58 billion, the Bank of Namibia reported.
During the period under review, Namibia’s FDI stock was mainly concentrated in the following sectors: financial intermediation (50.4%), mining and quarrying (26.7%), fishing & fish processing (5.4%) and wholesale & retail trade (5.2%).
The central bank highlights that the majority of the FDI stock in the financial intermediation and retail sectors originated from South Africa, while investments in the mining & quarrying sector stemmed mainly from Mauritius and China, and FDI in the fishing & fish processing sector from Spain.
Analysts from PSG Konsult Namibia noted that FDI can be a major driver of economic growth and job creation, besides being an important indicator of investor confidence.
“In 2016, Namibia’s net FDI fell by nearly 70% due to the completion of several large mining and infrastructure projects, suspensions of government infrastructure projects due to fiscal consolidation, heightened global uncertainty and concerns over Namibia’s mooted black economic empowerment policy,” PSG Konsult stated.
The majority of net FDI inflows in period under review were in the form of debt instruments and PSG Konsult advises that this can be used by subsidiaries to either expand current investment projects or repay outstanding debts, as opposed to greenfield investments that have a stronger impact on economic growth.
“Net FDI should improve somewhat during 2018 on the back of an expected ongoing recovery in commodity prices, which would boost mining companies’ profits and encourage new investment in the industry,” PSG Konsult added.