Growth seeks more Investment
Investment in the local economy last year jumped to N$30 billion up from N$24 billion in 2012 while the country’s national savings stagnated at around N$26 billion.
Preliminary national accounts for 2013 released Wednesday by the Namibia Statistics Agency revealed that, as a ratio of GDP, investment in the local economy grew to 24.7% compared to 22.1% recorded in 2012. This was more than the average ratio of investment to GDP over the period 2007 to 2013 which stood at 24.6%.
Statistician General Dr John Steytler told the Economist that although he is satisfied with the increased level of investment, the country still needs to do more to attract investment both domestic and foreign.
“Our investment levels are still not high enough to secure strong economic growth in the future,” Steytler said.
“I would want to see the level of investment increase, but if you want to increase investment you need to have the savings to support that investment otherwise you will have to make use of savings from the rest of the world.”
Steytler said relying on savings from elsewhere brings with it capital flight risk. “So I think we should primarily rely on our own savings to support investment and supplement that with foreign savings.”
In 2012 Namibia’s gross savings were more than the level of investment, but in 2013 the country’s national savings went below the level of investment which means the country had to import capital for investment.
Namibia’s fixed capital formation have more than doubled since 2007 when the level of investment was just under N$15 billion. While this has been the case, the growth in savings lost momentum in 2012 settling at around N$26 billion.
The lower savings rate might partly be explained by the low interest rate environment that have prevailed in Namibia since August 2012.
“We have had a period of extra-ordinary low interest rates. If you want to take your money to the bank it is very difficult to get a rate that will beat inflation. Instead of saving you use that money to put it in other asset forms, it could be housing or motor vehicles, which is not bad,” Steytler said.
He said compared to Asian countries with ratios of 40% of GDP, Namibia’s investment ratio is still very low, adding that he does not support calls by other analysts urging government to slowdown expenditure on infrastructure.
“If we are going to spend less on infrastructure we are going to shoot ourselves in the foot because it will erode our competitiveness. One key element of our competitiveness is our relatively superior infrastructure, but we also know that some of our infrastructure is quite old.
“Investment in the right infrastructure will create jobs in the future and even during the construction phase. It will make us even more competitive and attract more investment, domestic as well as foreign.
“I don’t think a business person would like to set up a shop at a place where there is absolutely nothing and where the overheads are so expensive. You don’t want to run a business with power generators. You don’t want to run a business where there is no reliable telecommunications. You don’t want to run a business at a place where it takes you hours to take your produce to the market because of a bad road.
“So infrastructure investment is absolutely critical and we should continue to invest in infrastructure. Where maybe we should focus on is on the operational budget and see if we can not free up some of that money so we can channel it to investment.”