Economy of Namibia

By | April 29, 2022

Twelve years of independence are characterized by stable economic growth (3.7% per year). In 2001, GDP grew by 4% and amounted to 8.1 billion US dollars, i.e. $4,500 per capita. However, this average figure hides a highly unequal distribution of GDP. According to businesscarriers, the income of white citizens is an order of magnitude higher than the income of Africans. This is a consequence of colonialism, which created an economic structure for the exploitation of the indigenous population, which changes very slowly. The economically active population is 500 thousand people. According to official data, unemployment is 21% (2001), and according to unofficial data – approx. 40%. Inflation 8.8% (2001).

The distribution of GDP by sectors of the economy (2000,%): industry – 28, agriculture – 11, services – 61. Agriculture accounted for 47% of all employed, 20% for industry, and 33% for the service sector.

In recent years there have been important changes in the structure of industrial production. If in 1980 the mining industry accounted for 1/2 of the Namibian GDP, now it is only 12%, according to this indicator, it has been overtaken by the manufacturing industry (16%). The rapid progress of the latter occurred mainly due to the partial processing of mineral raw materials, but the mining industry remains the basis of the country’s industrial development.

The most important mineral is diamonds, which provide 30% of all export earnings. Namibia’s kimberlite pipes contain a high percentage of gem-quality diamonds, and along with Botswana, the Russian Federation, and Angola, it is one of the four main suppliers of these gems to the world market. The shares of the Namdeb diamond mining company are divided equally between the government and the South African corporation De Beers. It is expected that after 2003 diamond production at the main diamond mine in Oranemund will begin to decline due to the depletion of the deposit, but offshore production is currently increasing. The total production in 2000 was 1.54 million carats per year. In April 1998, Nujoma signed an agreement with the Russian company ALROSA on joint exploration and production of diamonds. A little later, a similar agreement was concluded with the Canadian firm DFI of Canada, and, thus,

The Resinga uranium ore mine is the largest in the world, although the uranium oxide content of the ore is low. The mine is owned by the transnational Rio Tinto Zinc, which supplies uranium oxide to the EU, Japan and Taiwan. Due to the not very favorable situation on the world market, the mine does not operate at full capacity (4.5 thousand tons), in 2000 3.2 thousand tons of uranium oxide were mined.

Namibia ranks 2nd in Africa (2000) in zinc production (40.3 thousand tons of concentrate), 3rd in lead (12.1 thousand tons of concentrate) and 4th in copper (5 thousand tons in metal content). A rather difficult situation has developed in the copper mining industry. The Tsumeb Corporation, which owns three copper-lead mines, closed them because of low world prices, and the Australian company Copper Mines and Metals suspended work on the construction of a very large mine at the Khaib deposit and a smelter designed for production of 115 thousand tons of copper cathode. The company said it prefers to wait until global copper prices rise. The South African state-owned company Imkor Zinc is one of the few that has achieved in recent years an increase in the production of non-ferrous metals – tin, zinc and lead. The capacity of the tin mine at Uis increased by 30% between 1997 and 2000, and that of the lead-zinc mine at Rosh Pina by 25%. Not far from Rosh Pina, the Anglo American Corporation completed in 2000 the construction of a mine and a plant for the extraction and processing of zinc ore. The ore reserves in Rosh Pina are estimated at 18 million tons, and it is mined in an open way. Smaller companies also mine non-ferrous metal ores, incl. tungsten and cadmium. Of other minerals, it should be noted the extraction of salt (500 thousand tons), gold (2.3 tons), silver (16.7 tons), and rare earth elements. Smaller companies also mine non-ferrous metal ores, incl. tungsten and cadmium. Of other minerals, it should be noted the extraction of salt (500 thousand tons), gold (2.3 tons), silver (16.7 tons), and rare earth elements. Smaller companies also mine non-ferrous metal ores, incl. tungsten and cadmium. Of other minerals, it should be noted the extraction of salt (500 thousand tons), gold (2.3 tons), silver (16.7 tons), and rare earth elements.

In the manufacturing industry, the most important branch is metallurgy, which was created mainly in the last 15 years. Concentrating factories, smelters and refineries were built near the mines. So, when the mines of the mentioned Tsumeb Corporation were closed, a copper smelter and a lead refinery operated. Most of the mineral raw materials are no longer exported in the form of ore, but in a processed form. Namibian cadmium, for example, is one of the purest in the world.

The second most important manufacturing industry is the processing of fish and seafood for export. The main enterprise is a cannery in Walvis Bay. A fish processing plant is under construction in Lüderitz and another one is planned in Move Bay. In 2000, exports of processed and frozen seafood brought in 1.5 billion namib. dollars. Other significant enterprises operating mainly for export are meat processing plants, a car assembly plant, three clothing factories, a brewery and a soft drinks factory. In 2000, beer exports to the countries of South Africa increased by 40% at once.

In 2001, approx. 300 firms, the annual growth of this sector averages 3.9% per year, but the narrowness of the domestic market and the competition of cheap consumer goods from South Africa are serious obstacles to its further development.

Agriculture is divided into two sectors – subsistence, which employs the majority of the rural population, and commodity (4,045 farms, of which about 4,000 belong to whites).

Animal husbandry provides more than 90% of agricultural marketable products. It is mainly beef production. Ostrich farming is rapidly developing in the south of the country, but in 2000 a flood caused great damage to ostrich farms. The south of Namibia is also the main area for karakul breeding, but in the 1990s. demand for it fell sharply, and astrakhan production was almost halved. Livestock (thousand, 2000): cattle – 2505, sheep – 2446, goats – 1850.

Most crop production (beans, potatoes, corn, tropical root crops) is grown in the subsistence sector. In favorable years, the harvest of corn and other grains provides 70% of the country’s needs, and in dry years, one has to apply for international food assistance. In 2000, the harvest (thousand tons): corn – 49, millet – 77, root crops – 255.

In the 1990s viticulture began to develop on the banks of the Orange River. In 1999, 2100 tons of seedless grapes were exported to the EU, and in 2003 its exports increased 10 times, coming in second place after beef in terms of value.

Fishing is one of the most promising industries. The Namibian fishing fleet has tripled since independence and has 70 refrigerated trawlers and 230 small vessels. Fishing is carried out by several private Namibian companies, some of which have foreign capital. The catch of fish unloaded in Namibian ports amounted to 2000 300 thousand tons. In total, up to 450 thousand tons of fish are caught in the marine economic zone, although the optimal allowable catch is estimated at 1.5 million tons.

Construction in 2000 accounted for 2.9% of GDP, and this industry is developing slowly. Almost all building materials have to be imported from South Africa.

Most of the country’s electricity consumption comes from South Africa (890.9 kWh, 2000). Namibia itself produced 30 million kWh. The share of electricity and water supply in GDP is 3%. All power plants are included in a single power grid, which is connected to the South African and Zambian power systems. The largest power plant is the Ruacana hydroelectric power station with a capacity of 320 MW. In 2001 ok. Lüderitz began to build a power plant that will operate on wind energy.

The main rail line runs from Walvis Bay to Nakop and on to South Africa. From this line there are three branches to Gababis, Outjo and Lüderitz. The total length of railways is 2382 km. The annual traffic volume is 130,000 passengers and 1.1 billion tkm of cargo. A plan is being developed to connect the Namibian and Zambian railways.

In 2001, the length of motorways was 64,800 km, of which 5,378 km were paved. In 2000, the construction of a part of the Trans-Kalahari highway from Walvis Bay to Jwaneng (Botswana) and a road linking Namibia with Zambia and Zimbabwe was completed. In 2000-03, the main road construction was carried out in the north of Namibia.

Of the two active seaports – Walvis Bay and Luderitz – only Walvis Bay is deep-water. Almost 1/2 of Namibia’s foreign trade is carried out through it. A plan has been developed to deepen the harbor of Walvis Bay in order to be able to receive large-capacity ships and transfer to Walvis Bay some of the South African cargo that is now going to overloaded South African ports. The possibility of building a third port in Move Bay for the fishing fleet is being explored. Cargo turnover of ports (2000) – 1.8 million tons. Number of ships – 121 (2001).

There are two international airports at Wind Hook and Walvis Bay and 137 smaller airports and airstrips (2001). The main airline is Air Namibia, 30% of whose shares are owned by the state. It flies to South Africa and Western Europe. The company – “Kalahari Express Airlines” carries out transportation mainly within the country. The volume of traffic is 240 thousand passengers and 47 million tkm of cargo (2000).

The number (thousand, 2001) of fixed telephones – 117, mobile – 100. There are 2 television stations and approx. 10 radio stations. Number (thousand, estimate): TVs – 70 (2002), radios – 240 (2000), the number of Internet users – 45 thousand (2001).

Trade accounts for 10% of GDP. All trade is in private hands, in wholesale trade a significant share of South African capital.

Tourism is developing rapidly. In 2001, more than 600 thousand tourists visited the country. Tourism income – approx. $400 million.

The economic policy is aimed at further development and diversification of the mining and manufacturing industries with the help of foreign capital. The government is carrying out reforms to liberalize the tax, investment and financial spheres. The value of VAT was revised, incentives for investments were expanded, corporate tax was reduced from 40 to 35%, and incentives were provided for investments aimed at processing the extracted raw materials. As a result, factories for the production of copper products for the electronics industry, for the manufacture of diamonds from diamonds, appeared. In the agricultural sector, the main efforts are aimed at increasing the production necessary for the country’s self-sufficiency in food without prejudice to agricultural exports. The main direction in social policy is the course towards the gradual redistribution of land. In 2002, several thousand more Africans became owners of the land. The authorities are also paying attention to improving the social conditions of the poorest urban population. The budget annually allocates funds for the construction of 1,000 houses and apartments for the poor.

Particular importance is attached to the socio-economic development of the more backward northern part of the country. In the foreseeable future, Namibia’s economic dependence on neighboring South Africa and on foreign economic conditions will continue, but on the whole, Namibia’s prospects look encouraging. In any case, in the first decade of the 21st century. although not very fast, but constant growth of its economy is expected.

The monetary system of Namibia is tied to South Africa by an agreement on a common currency area – the rand zone. Formally, the Central Bank of Namibia has the right to set the exchange rate of its currency, the discount rate, but in fact they are adjusted with the policy of the Reserve Bank of South Africa. The South African rand is in circulation in the country along with the Namibian dollar. The Bank of Namibia issues money and issues licenses for financial activities. Commercial operations are carried out by 7 banks (state, mixed and foreign). Namibia begins to play a prominent role in the African financial market. The Namibian Stock Exchange has become the second exchange in sub-Saharan Africa in terms of the value of shares offered for sale. Namibia is making efforts to become the leading offshore financial center in the region. The introduced preferential investment regime allows South African firms to circumvent the restrictions on foreign exchange transfers that exist in South Africa. This causes dissatisfaction with the Reserve Bank of South Africa, which believes that Namibia is violating the agreement on a single currency area.

The state budget is chronically in deficit. Revenues – 8.81 billion Namib. dollars, expenses – 10.49 billion, including the capital investment budget (1.78 billion); budget deficit of 3.6% of GDP (2001/02). The main income items are taxes: on foreign trade operations and transfers, on income and profit, on goods and services. The main items of expenditure are education, civil service.

The balance of payments in recent years has been reduced to a positive balance of 50-70 million US dollars.

The government considers it necessary to resort to loans to cover budgetary expenditures and to carry out social and economic development programs. However, the International Development Association and the World Bank do not provide loans to Namibia on concessional terms designed for developing countries, believing that high per capita income does not qualify for such benefits. We have to take loans on less favorable terms from the governments and banks of individual countries. Germany was the main financial contributor in 2000, followed by the US and the Scandinavian countries.

External debt was estimated in 2000 at $217 million. With stable economic growth, it looks very moderate, but it should be taken into account that in 2000 the grace period for servicing many loans ended, which creates certain difficulties. In addition, the state has insignificant reserves of foreign currency (234 million dollars in 2001).

There are no official statistics regarding the standard of living. According to indirect data – the absence of strikes, an increase in the population’s deposits in banks (5.77 billion Namib. dollars in 2000 and 5.81 billion in 2001), the presence of agreements between companies and trade unions providing for wage increases that exceed the growth rates of inflation and the index consumer prices (10% in 2001) – we can talk about improving the lives of workers and employees who have jobs in the public and private sectors. However, this is unlikely to apply to urban residents who are unemployed and receive a meager allowance (before independence, there was no such allowance), and most of the rural population living off subsistence farming.

The economy of Namibia is completely dependent on external market factors, since it was not created to meet the needs of its own population. As a result, 90% of the products created in the country are exported, and 90% of the goods consumed, including half of the food, are imported from abroad. In 2001, exports amounted to 1.58 billion US dollars, imports – 1.71 billion. The main export items: diamonds, non-ferrous metals, uranium, beef, seafood, astrakhan. Main import items: foodstuffs, oil products, machinery and equipment, chemical products. Main export partners: UK, South Africa, Spain. Main import partners: South Africa (81%), USA.

Economy of Namibia