Restoring the economy to past glory
By Tjivingurura Mbuende
Nedbank Executive for CIB.
Last week in Parliament, Finance Minister Iipumbu Shiimi tabled the national budget under the theme Reimaging, a Better Future for the Youth.
He is right. There is a need to reimage the economy in a more positive light.
Namibia’s economy has gone through significant changes since 1990. The World Bank data indicates that the number of Namibians who were regarded as living below the poverty line decreased from 28,7% in 2009-10 to 17,4% by 2015-16. The credit for this reduction is attributed to political stability and sound economic management that have helped anchor poverty reduction and allowed Namibia to become an upper-middle-income country.
Sectors like mining allowed the country to flourish on the economic front. According to the Ministry of Mines and Energy, the mining sector created 14,000 jobs in 2011 and 19,000 jobs in 2015, indirectly impacting the livelihoods of 100 000 Namibians. In a year of good economic performance, the mining sector can provide 25% of Namibia’s national income.
Similarly, the agricultural sector is important to Namibia’s economic growth. According to the Bank of Namibia, in the early 2000s, the sector accounted for 11, 5% of the total foreign exchange earnings of the country. The agricultural sector is even more crucial to the livelihoods of Namibians because at least 70% of the population is directly dependent on subsistence farming.
Namibia’s Financial Sector Strategy 2011-2021 indicates that the banking system is sound and well-functioning. However, there are structural flaws that need to be addressed to enable the sector to contribute meaningfully to the overall performance of the country’s economy. These flaws include shallow financial markets; limited competition; limited financial safety nets; under-developed capital markets; inadequate and less effective regulation and limited access to financial services.
Another sector that has been important to the country’s economic growth is tourism. Namibia has all sorts of attractions that lure tourists to spend money in the country and contribute to its economic growth in the process. The government’s decision to continuously invest in good roads aligns well with the tourism sector and has reaped rewards. Namibia’s road network has been rated by the World Economic Forum’s (WEF) Global Competitiveness Report Index as the best in Africa.
But that was then. Things have changed since then, and those that are at the bottom of the food chain are hardly benefiting from the country’s resources.
THE ECONOMIC CHAIN
Socio-economic inequalities inherited from the past apartheid system remain extremely high, and structural constraints to growth have hampered job creation. Moreover, the economy has been battling tough economic headwinds since 2016. The economy contracted, leading to a decline in the national output of goods and services, coupled with a drop in real personal income, industrial production, and retail sales.
As a result, all economic sectors have been affected, subsequently leading to Namibia’s worst economic decline since independence in 1990. The economy slipped into recession after failing to grow for 11 consecutive quarters. Reliance on the primary sector is no longer a viable option.
The country has failed to take advantage of the political stability and sound economic management by developing the manufacturing industry. This, coupled with the world’s economic instability, results in big trouble for Namibia. The country now processes fewer raw materials and exports fewer finished goods.
The COVID-19 pandemic has worsened socio-economic inequalities. In January the Ministry of Labour, Industrial Relations, and Employment Creation said that over a period of two years, 1,278 employers had let go of 15,442 employees.
Namibia is swimming in debt, currently at N$140 billion. In order to cut down on this, Hon. Shiimi announced that no major new projects will be embarked upon in 2022. While this could reduce the country’s debt, it will also hamper exponential growth. The lack of growth in Namibia’s main sectors has posed serious problems for the country.
LIGHT AT THE END OF THE TUNNEL
While the bad news is that the economy has been in a downward spiral, the good news is that there is light at the end of the tunnel, and it is not dim. And it’s all in our hands.
Tourism, which was hardest hit by COVID-19, is now experiencing a rebound. Most key markets have cleared Namibia for tourists, and the general expectation is that Namibia can now expect strong tourist inflows.
Mining is currently strongly supported by relatively high commodity prices—specifically uranium and gold. Good rains that are being experienced around the country are expected to boost the agriculture sector for both commercial and subsistence farming.
In the energy sector, the country’s first-ever N$143-billion green hydrogen project, which has the potential to create up to 30,000 jobs, will become a key driver of economic development in all economies. This is a significant investment in the starving economy.
The expansion of the Walvis Bay port and the upgrade of Hosea International Airport are massive investments in the economy.
As per Minister Shiimi’s budget statement, growth is projected to increase to 2,9% in 2022 before accelerating further to 3,7% in 2023.
Although the economy has not been doing well recently, we have the information and tools to turn it around. However, to accomplish this, decisive and intentional action is required.
Nedbank Corporate and Investment Banking is a division of Nedbank – a leading Namibia bank that provides global markets, transactional, corporate and investment banking services, whose client base includes leading corporations, financial institutions, and state-owned entities in Namibia.
Nedbank CIB is more than just a product provider – it is a strategic financial partner with a focused objective to help clients achieve their business vision and expand their opportunities. This is achieved through the provision of tailored solutions, characterised by fresh thinking, innovation and a highly integrated partnership approach.
Tjivingurura Mbuende was appointed as the Executive for Corporate and Investment Banking at Nedbank Namibia in November 2021. Having worked in the financial sector for over a decade, Mbuende received his education in Namibia, Australia, Malaysia, and the United States. Mbuende also holds a Masters of Arts (Economics) from the New School (a university in New York City) and a Bachelor of Business from the University of Technology, Sydney, Australia.