Embed Size (px)
Citation preview
Research Report
Dr. Jeremy Wakeford
An Overview of the Namibian Economy
Dec 2017
2
Contents List of Figures ................................................................................................................................................ 3
List of Tables ................................................................................................................................................. 3
Highlights ...................................................................................................................................................... 4
SWOT Analysis........................................................................................................................................... 4
Investment ratings .................................................................................................................................... 4
Macroeconomic outlook ........................................................................................................................... 5
Key macroeconomic indicators ................................................................................................................. 5
Macroeconomic Performance ...................................................................................................................... 6
Economic growth and inflation ................................................................................................................. 6
Composition of GDP .................................................................................................................................. 6
Sectoral growth rates ................................................................................................................................ 8
Fiscal sector ............................................................................................................................................... 8
Monetary and financial sector .................................................................................................................. 9
External sector ........................................................................................................................................ 11
Investment and savings .......................................................................................................................... 14
Business Environment ................................................................................................................................. 15
Governance & Political Stability .................................................................................................................. 16
Sectoral Issues ............................................................................................................................................. 17
Infrastructure .......................................................................................................................................... 17
Energy ..................................................................................................................................................... 19
Mining ..................................................................................................................................................... 20
Conclusion ................................................................................................................................................... 28
References .................................................................................................................................................. 28
3
List of Figures
Figure 1: Macroeconomic performance indicators ...................................................................................... 6
Figure 2: Broad sectoral composition of value added, 2006-2015 ............................................................... 7
Figure 3: Sectoral composition of GDP, 2016 ............................................................................................... 7
Figure 4: Government revenue, expenditure and debt ................................................................................ 9
Figure 5: Money supply and credit extension ............................................................................................. 10
Figure 6: Consumer inflation and interest rate........................................................................................... 10
Figure 7: Imports and exports (current US$) .............................................................................................. 11
Figure 8: Prices indices of Namibia’s export commodities ......................................................................... 12
Figure 9: FDI, remittances, current account balance and exchange rate ................................................... 13
Figure 10: Total foreign reserves in months of imports ............................................................................. 14
Figure 11: Investment and savings ............................................................................................................. 14
Figure 12: Map of Namibian railways ......................................................................................................... 17
Figure 13: Map of roads and airports ......................................................................................................... 18
Figure 14: Shares of total primary energy supply, 2015 ............................................................................. 19
Figure 15: Mining production indices ......................................................................................................... 20
Figure 16: Map of Namibian geology and mineral occurrences ................................................................. 21
Figure 17: Map showing Namibia's active mining licences ......................................................................... 22
List of Tables
Table 1: Namibia's sovereign credit rating ................................................................................................... 4
Table 2: Forecasts of economic growth in Namibia ...................................................................................... 5
Table 3: Key macroeconomic indicators for 2016 ........................................................................................ 5
Table 4: Growth rates of Gross Domestic Product at constant 2006 prices (percent), 2013-2016 ............. 8
Table 5: Top 5 export and import partners, 2016 ....................................................................................... 12
Table 6: Top 5 export and import products, 2016 ...................................................................................... 13
Table 7: Ease of Doing Business rankings for top 20 countries in Sub-Saharan Africa ............................... 15
Table 8: Namibia’s position on the Ibrahim Index of African Governance, 2016 ....................................... 16
Table 9: Worldwide Governance Indicator rankings for Namibia, 2016 .................................................... 16
Table 10: Namibia's mining tax regime ....................................................................................................... 24
Table 11: Structure of the mineral industry in 2013 ................................................................................... 26
4
Highlights
SWOT Analysis
Strengths Weaknesses
solid economic growth over past decade
moderate and fairly stable inflation rate
still moderate level of government debt
politically stable
strong governance metrics
large mineral resources (diamonds, uranium)
good transport, logistics and energy
infrastructure
solid financial institutions & infrastructure
slow economic growth in 2015-2017 following
commodity price slump
large fiscal deficit, rapidly rising public debt
large and widening current account deficit
exchange rate weakness and volatility
declining and low savings rate
rising household debt
high rate of unemployment, especially youth
very high income inequality
very high dependence on imported petroleum
Opportunities Threats
further investment in infrastructure to boost
growth and competitiveness
further development of mineral resources,
with new mines coming on stream
External:
uncertain global economic environment
commodity price volatility (diamonds,
uranium, copper)
growth of synthetic diamond industry
global financial market volatility
capital flight from emerging markets
Internal:
lack of fiscal consolidation may crowd out
private investment and lead to rising debt
Investment ratings
Namibia was ranked 9th on Quantum Global Research Lab’s Africa Investment Index as of April 2017.
Namibia performs particularly well on the “doing business”, “liquidity factors”, and “domestic
investment” sub-indices.
Both Fitch and Moody’s currently rate Namibia’s sovereign debt as “junk” (non-investment grade
speculative), one notch below investment grade.
Table 1: Namibia's sovereign credit rating
Fitch Moody’s
Rating
Outlook
Date
BB+
Stable
20 November 2017
Ba1
Negative
11 August
5
Macroeconomic outlook
Having posted an average rate of economic growth of 4.2% over the past 10 years, Namibia’s economy is
set to expand at moderate rats over the next few years. The World Bank expects growth to average 4% in
2018 and pick up slightly to 4.2% in 2019. The IMF’s forecasts, which are in local currency terms, are
somewhat lower at 2.5% for next year and rising to 3.5% by 2020. The ramp of production at some new
mines is expected to contribute to a pick-up in economic growth next year. However, the outlook has
recently dimmed somewhat, in the light of rising debt, slowing growth, a credit rating downgrade to junk
status, and current account weakness.
Table 2: Forecasts of economic growth in Namibia
Agency 2017 2018 2019 2020
World Bank* 3.0 4.0 4.2
IMF** 0.8 2.5 3.4 3.5
Source: World Bank (2017b), IMF (2017)
Note: * 2010 USD; **Constant local currency units
Key macroeconomic indicators
Table 3: Key macroeconomic indicators for 2016
Indicator 2016
Population (million) 2.5
Population growth rate 2.2%
Real GDP growth rate 1.2%
Real GDP per capita growth rate -1.0%
GDP per capita (purchasing power parity) $10,550
Inflation rate (annual %) 6.7%
Fiscal deficit (% of GDP) -7.7%
Government gross debt (% of GDP) 40%
Current account balance (% of GDP) -14%
Gini coefficient (income inequality) 61
Unemployment rate 19%
Poverty headcount at national rate 30%
Source: World Bank (2017a) and IMF (2017)
6
Macroeconomic Performance
Economic growth and inflation
Real GDP grew by an average rate of 4.4% between 2007 and 2016. After a big dip amidst the global
economic crisis in 2009, the growth rate remained above 5% between 2010 and 2015, but fell sharply to
1.2% in 2016 following the collapse in commodity prices. Growth was negative in 2017Q1 (-1.04%) and
Q2 (-2.15%), and is projected to average about 0.5% for the year. Real GDP per capita growth averaged
2.5% between 2007 and 2016, while the population grew on average by 1.9% per annum. In 2016, the
level of GDP per capita stood at US$4,140, or $10,585 when measured in purchasing power parity (PPP)
terms (current international dollars). Namibia still has a very small population (2.5 million) in relation to
its geographic size.
The rate of consumer price inflation averaged 6.3% between 2007 and 2016. Inflation has been relatively
stable at around 6%, except in 2008 and 2009 when it climbed above 8%. The inflation rate tends to move
counter-cyclically to economic growth, partly because it is influenced heavily by the exchange rate, which
is tied the South African rand, which in turn depends heavily on commodity prices. Thus when commodity
prices slump, the exchange rate tends to weakens, imports become more expensive, and inflation picks
up.
Figure 1: Macroeconomic performance indicators
Source: World Bank (2017a)
Composition of GDP
Figure 2 shows how the composition of Namibia’s economy has evolved over the past decade.
Agriculture’s share of gross value added declined from 10.5% in 2006 to 6.7% in 2016. The share of
industry (including mining) in the economy also diminished, from 35% to 31% over the period. Services,
by contrast, have expand from 55% to 62% of the economy. These trends show a continued maturing of
-2
0
2
4
6
8
10
12
14
An
nu
al %
ch
ange
Real GDP Real GDP per capita Consumer price inflation
7
Namibia’s upper-middle income economy, although industry (including mining) still plays a large role
compared to many of its regional peers.
Figure 2: Broad sectoral composition of value added, 2006-2015
Source: World Bank (2017a)
Figure 3 shows the percentage contribution to GDP of the main economic sectors in 2016 (based on
revised, but not final, GDP estimates). Public administration (including defence, education and health
spending) was the single largest sector (26%), followed by retail and hospitality (15%), financial services
and real estate (14%), and manufacturing (12%). Mining accounts for 12% of GDP, with diamonds making
up 6.6% and uranium 1.2%. Fishing is nearly as important to the economy as land-based agriculture.
Figure 3: Sectoral composition of GDP, 2016
Source: Namibia Statistics Agency (2017)
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Val
ue
add
ed (
% o
f G
DP
)
Agriculture Industry Services
Agriculture & fishing
7% Mining12%
Manufacturing12%
Electricity & water2%
Construction4%
Trade & hospitality15%
Transport & communication
5%
Finance & real estate14%
Community services
3%
Public administration
26%
8
Sectoral growth rates
As Table 3 shows, the sectoral growth rates have varied greatly, both over time and across sectors, in
recent years. Mining and quarrying has been hard hit by the commodity price slump, with the sector
contracting in 2014, 2015 and 2016 by 5-6% per year. Between 2008-16, construction was the fastest
growing sector, expanding by 11% per annum on average. Some of this construction was related to new
mines, including the Husab uranium mine. Most of the service sectors grew at robust rates (over 5%),
while agriculture floundered and manufacturing grew very slowly and erratically.
Table 4: Growth rates of Gross Domestic Product at constant 2006 prices (percent), 2013-2016
Sector 2013 2014 2015 2016 Average
2008-2016
Agriculture -19.3 11.1 -10.4 0.8 -2.1
Fishing 3.0 -2.5 2.3 7.7 5.0
Mining & quarrying 1.7 -6.0 -4.9 -5.7 -0.2
Manufacturing 4.4 -0.1 -4.6 3.4 1.8
Electricity & water -4.4 1.5 14.2 6.8 1.3
Construction 28.7 42.6 26.0 -26.5 11.0
Wholesale & retail trade 14.8 13.9 7.4 3.4 7.0
Hotels & restaurants 9.0 10.8 5.6 5.1 7.1
Transport & communication 6.4 5.7 6.9 6.1 7.9
Financial intermediation 17.9 10.9 3.7 3.7 8.0
Real estate & business services 4.6 2.8 4.7 2.5 4.5
Public administration & defence 3.8 1.4 13.0 3.3 5.5
Education 3.3 10.3 4.1 3.5 5.6
Health 8.9 10.2 16.7 10.5 7.2
Community services -9.9 3.0 12.6 1.9 0.4
GDP 5.6 6.4 6.0 1.1 4.2
Source: Namibia Statistics Agency (2017)
Fiscal sector
Tax revenue as a proportion of GDP has been on a slightly upward trend over the past 15 years, rising
from a low of 25% in 2004 to a high of 19.6% in 2015 (see Figure 4). However, government expenditure
has grown even more rapidly as a percentage of GDP, from 16.2% in 2002 to 34% in 2015, before being
curtailed to 31% in 2016. Government expenditure as a proportion of GDP has grown even more rapidly,
from 25% in 2007 to 42% in 2015. After running a budget surplus from 2006 to 2009, the Namibian
government budget has subsequently been in deficit, which has widened to 7.6% of GDP in 2016.
Consequently, gross government debt has been increasing, from a low of 15.5% of GDP in 2009 to 38.5%
of GDP in 2016. This is still a manageable level of debt, especially compared to many other countries in
Sub-Saharan Africa. Nevertheless, the rapid increase in debt in recent years is cause for concern, and in
the absence of further deficit reductions, the IMF (2016) expects public debt to rise to above 60% by 2021.
The government’s Medium Term Expenditure Framework (MTEF) presented in November 2017 projects
9
that general government debt will expand to 44.2% of GDP in FY19. The rising debt levels, together with
slower growth, were major reasons why Fitch downgraded Namibia’s credit rating to junk status on 19
November. The Namibian government will need to adopt prudent fiscal management to contain debt
levels in the future. Furthermore, any additional increases in real government expenditures should be
directed towards productive investments that lay the foundation for future economic growth.
Figure 4: Government revenue, expenditure and debt
Source: IMF (2017)
Monetary and financial sector
Domestic credit extension to the private sector has grown at a brisk pace over the past decade (13.2% per
annum on average), consequently rising from 48.3% of GDP in 2007 to 56.7% in 2016. The broad money
supply has grown at a similar pace, averaging 15.1% per annum over the past 10 years, taking it to 56.9%
of GDP in 2016. The pace of growth in credit and money supply has facilitated economic growth but has
not led to strong inflationary pressures.
0
5
10
15
20
25
30
35
40
45
0
5
10
15
20
25
30
35
40
45
% o
f G
DP
(d
ebt)
% o
f G
DP
Debt Revenue Expenditure
10
Figure 5: Money supply and credit extension
Source: World Bank (2017a)
The rate of consumer price inflation averaged 6.3% over the past 10 years, and increased slightly to 6.7%
in 2016, partly as a result of drought-induced higher food prices. Overall, Namibia’s monetary regime is
relatively stable, with sound management of inflation by the Bank of Namibia, taking its cue from the
South African Reserve Bank (because of the exchange rate peg to the South African rand). The monetary
policy rate (MPR) is currently at 6.75%. The lending rate declined from 13.7% in 2008 to 8.3% in 2013, but
picked up to nearly 10% in 2016.
Figure 6: Consumer inflation and interest rate
Source: World Bank (2017a)
0
10
20
30
40
50
60
70
% o
f G
DP
Broad money Credit to private sector
0
2
4
6
8
10
12
14
16
18
%
Consumer price inflation Lending interest rate
11
External sector Namibia’s exports (in US dollar terms) were on a rising trend from the early 2000s until 2011, after which
they flattened out and subsequently declined. Since 2007, imports have consistently exceeded exports,
with a growing gap between the two. The current account deficit has widened to 14% of GDP in 2016. This
is one of the major weaknesses of the Namibian economy. Namibia, along with South Africa, Lesotho and
Swaziland, is part of the Southern African Customs Union (SACU). SACU has an export revenue sharing
formula, which makes the smaller countries dependent on the state of their larger neighbour’s economy.
SACU revenues have declined significantly in recent years, contributing to Namibia’s current account
deficit.
Figure 7: Imports and exports (current US$)
Source: World Bank (2017a)
The prices of some of Namibia’s main commodity exports have been volatile in recent years (Figure 8).
Gold had a long upswing from 2000 until 2011, but from 2013 lost more than a third of its value as
jewellery demand in China and India slackened. Uranium rose to stratospheric heights in 2007, but soon
collapsed again, and have continued a downward trend since Japan’s Fukushima nuclear disaster in 2011.
Copper has followed the pattern of most base metals, with a major slump between 2011 and 2016
followed by a partial recovery.
0
1
2
3
4
5
6
7
8
9
US$
Bill
ion
s
Exports Imports
12
Figure 8: Prices indices of Namibia’s export commodities
Source: World Bank (2017c)
Switzerland is Namibia’s largest export destination (18.8%), as the largest share of Namibia’s raw diamond
exports are sent to that country for global trading and processing. Other major consumers of Namibia’s
exports in 2016 were South Africa (16%), Botswana (14%) and Zambia (6.2%) - the latter two countries
receiving transhipments via Namibia’s port at Walvis Bay. Total exports were valued at $4.8 billion in 2016.
Namibia’s total imports were valued at $6.7 billion in 2016, with by far the largest share (57.2%) sourced
from South Africa, followed by the Botswana (6.8%), Zambia (4.1%) and China (2.9%).
Table 5: Top 5 export and import partners, 2016
Market
(for exports)
US$ million % share Exporter (source
of imports)
US$ million % share
Switzerland 905 18.8 South Africa 3 843 57.2
South Africa 772 16.0 Botswana 456 6.8
Botswana 677 14.0 Zambia 278 4.1
Zambia 303 6.3 China 197 2.9
Unspecified 298 6.2 Unspecified 175 2.6
World 4 816 100 World 6 721 100
Source: WITS (2017)
Table 6 displays Namibia’s top five export and import products. The top five exports are diamonds, copper
core, gold, uranium and frozen fish. The top import products are petroleum fuels, diamonds, copper
products and ores, and vessels.
0
200
400
600
800
1000
1200
1400
1600
0
100
200
300
400
500
600
700
800
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Ind
ex (
Jan
20
0 =
10
0)
Ind
ex (
Jan
20
0 =
10
0)
Copper Gold Uranium
13
Table 6: Top 5 export and import products, 2016
Exports US$ million Imports US$ million
Diamonds 1 237 Petroleum 802
Copper ore 544 Diamonds 527
Gold 287 Copper 219
Uranium 240 Copper ore 207
Fish 221 Vessels 166
Source: WITS (2017)
Namibia’s current account balance has been in negative territory since 2009, with the deficit steadily
worsening since then and reaching -14% of GDP in 2016 (Figure 9). Given that the Bank of Namibia
maintains an effective peg of the Namibian dollar to the South African rand, it has had to draw down its
foreign reserves as the current account deficit has widened. Net foreign direct investment (FDI) has been
fairly strong over the past decade, reaching a peak of 9% of GDP in 2015. Remittances are negligible
relative to GDP. The nominal exchange rate (NAD/USD) has weakened considerably over the six years,
falling from 7.26 in 2007 to 14.7 in 2016 – driven of course by movements in the South African rand.
Figure 9: FDI, remittances, current account balance and exchange rate
Source: World Bank (2017a)
Namibia’s stock of foreign reserves, measured in terms of months of import cover, has fluctuated greatly
since 2001 (Figure 10). After peaking at 4.5 months of imports in 2009, total reserves have subsequently
fallen to 2.5 months of imports in 2015 as the current account deficit widened.
0
2
4
6
8
10
12
14
16
-20
-15
-10
-5
0
5
10
15
NA
D/U
SD
% o
f G
DP
Current account FDI net inflows Remittances Exchange rate
14
Figure 10: Total foreign reserves in months of imports
Source: World Bank (2017a)
Investment and savings
Total investment (gross capital formation) gradually rose as a percentage of GDP between 2000 (22.3%)
to 2015 (34%), but declined sharply in 2016 to 25.7% (Figure 11). The savings rate has declined
precipitously from 36% of GDP in 2007 to 11.6% in 2016. This is a cause for concern, as lower savings mean
less capital available for investment in future productive capacity. Together with the large current account
deficit, it suggests that Namibian consumers are living beyond their means, and a rebalancing will be
necessary.
Figure 11: Investment and savings
Source: IMF (2017)
0
1
2
3
4
5
Mo
nth
s o
f im
po
rts
Total reserves
0
5
10
15
20
25
30
35
40
% o
f G
DP
Investment Savings
15
Business Environment
Namibia slipped to 108th position on the World Bank Group’s Ease of Doing Business ranking in 2017, down
from 101st the previous year (Table 7). This puts Namibia ninth in the Ease of Doing Business rankings in
sub-Saharan Africa. In terms of individual doing business criteria within a regional context, Namibia
performed particularly well in “getting electricity” (2nd), “enforcing contracts” (4th), “getting credit” (11th)
and “paying taxes” (11th), but less well in “resolving insolvency” (23rd) and “registering a property” (41st).
Clearly, Namibia is one of the easiest countries to do business in on the African continent, although there
is still room for improvement.
Table 7: Ease of Doing Business rankings for top 20 countries in Sub-Saharan Africa
Country Global Rank
2016
Global Rank
2017
SSA Rank
2017
Mauritius 32 49 1
Rwanda 62 56 2
Botswana 72 71 3
South Africa 73 74 4
Kenya 108 92 5
Seychelles 95 93 6
Zambia 97 98 7
Lesotho 114 100 8
Namibia 101 108 9
Ghana 114 108 10
Swaziland 105 111 11
Uganda 122 115 12
Cabo Verde 126 129 13
Tanzania 139 132 14
Malawi 141 133 15
Mozambique 133 137 16
Burkina Faso 143 146 17
Côte d’Ivoire 142 142 18
The Gambia 151 145 19
Senegal 153 147 20
Source: World Bank (2016, 2017d)
16
Governance & Political Stability
Namibia scored 71.2 (out of 100) on the overall Ibrahim Index of African Governance in 2016, which placed
it 5th out of 54 African countries. Namibia ranked particularly high on Participation and Human Rights (3rd)
and Safety and the Rule of Law (3rd), but performed less well on Human Development (11th). Namibia’s
score on the overall index has risen by 0.42 points since 2007, and by 1.0 points since 2012. Its scores on
all four major sub-indices improved over the decade 2007-2016. Namibia has a strong record as one of
the best governance performers on the continent, scoring significantly better than the African average on
all four major components of the IIAG.
Table 8: Namibia’s position on the Ibrahim Index of African Governance, 2016
Namibia
rank
Namibia
score
Africa average
score
Namibia trend
2007-2016
Overall index 5 71.2 50.8 +0.42
Safety and the rule of law 3 78.1 52.8 +0.26
Participation & Human Rights 3 75.5 49.4 +0.62
Sustainable Economic Opportunity 7 64.2 45.1 +0.51
Human Development 11 67.0 56.1 +0.31
Source: Mo Ibrahim Foundation (2017)
Table 9 shows Ghana’s percentile rankings on the World Bank’s Worldwide Governance Indicators in 2016.
Namibia’s best category was Political Stability (70), followed by Voice and Accountability (64). Namibia
performed relatively less well on Regulatory Quality (50) and Government Effectiveness (60). Namibia
performs quite well compared to its large southern neighbour, South Africa, especially on political
stability. However, Namibia is outperformed by Botswana on all but one category (Voice and
Accountability).
Table 9: Worldwide Governance Indicator rankings for Namibia, 2016
Category Percentile Rank
Namibia
Percentile Rank
Botswana
Percentile Rank
South Africa
Voice and Accountability 67 59 68
Rule of Law 64 71 58
Regulatory Quality 50 70 62
Political Stability and Absence of
Violence/Terrorism
70 90 42
Government Effectiveness 60 71 65
Control of Corruption 66 82 60
Source: World Bank (2017e)
17
Sectoral Issues
Infrastructure
Namibia has solid transport infrastructure, including:1
eight airports operates by the Namibia Airport Company (NAC) Ltd., including an international airport
in Windhoek;
two ports handling merchandise imports and exports and servicing the fishing industry, including a
deep-water port in Walvis Bay and a harbour in Luderitz;
a high-quality road network connecting all the major cities, including 6,664 kilometres of standard
bitumen roads, 25,710 kilometres of standard gravel roads, and 11,460 kilometres (7,120 mi) of earth-
graded roads;2
a railway network comprising 2 382 km of narrow gauge track, with a main line running from the
border with South Africa via Keetmanshoop to Windhoek, Okahandja, Swakopmund and Walvis Bay,
and a northern branch to Tsumeb;
one of the most modern postal and telecommunication infrastructures in Africa, which links Namibia
directly to most countries in the world via fixed telephone, internet and cellular phone networks.
Figure 12: Map of Namibian railways
Source: Htonl - Own work / OpenStreetMap geodata., CC BY-SA 2.0,
https://commons.wikimedia.org/w/index.php?curid=20231526
1 http://www.gov.na/infrastructure 2 https://en.wikipedia.org/wiki/Transport_in_Namibia
18
Figure 13: Map of roads and airports
Source: http://www.map-of-namibia.com/borderpost-maps.html
19
Energy
Namibia relies very heavily on oil for its energy supply; oil accounted for 78% of total primary energy
supply (TPES) in 2015. Biofuels and waste – mostly traditional fuels such as wood and charcoal – are still
used in some rural areas, and account for 14% of TPES. Hydropower (8%) makes up the remaining
component of TPES, with negligible contributions from coal (0.1%) and solar and wind (0.2%). Oil is used
for both transport and electricity generation. Namibia has offshore gas reserves in the Kudu field, but has
yet to develop them because of the very long distance to any major city.
Figure 14: Shares of total primary energy supply, 2015
Source: International Energy Agency (2017)
Namibia generates 98% of its domestic electricity from hydropower, and a very small amount from diesel
generators (2%). The country also imports substantial volumes of electricity from South Africa, especially
in the dry season when hydropower is constrained. In 2015, net electricity imports accounted for 62% of
total supply (IEA, 2107). Nearly 30 MW of solar photovoltaic power capacity has been added since 2015,
and Namibia has abundant solar resources. Total electricity consumption was 3,790 gigawatt hours (GWh)
in 2015. Electricity consumption stood at 1.54 megawatt hours (MWh) per capita in 2015, which is
considerably higher than the 0.57 MWh average for Africa as a whole (IEA, 2017). Half (50%) of Namibia’s
population has access to electricity, although the figure is considerably higher in urban areas (83%) than
in rural areas (21%). This discrepancy relates to the extremely low population density, which makes it
uneconomical to connect most rural communities to the national grid.
Oil78%
Coal0%
Hydro8%
Biofuels & waste14%
Solar & wind0%
20
Mining
Mining is a very important sector in the Namibian economy, contributing 12% of GDP in 2016 and
accounting for the majority of export revenues. Diamonds are the country’s main mineral export,
generating US$1.2bn in forex revenues in 2016, and accounting for a quarter of all exports. Namibia is
also the world’s fifth-ranked producer of uranium, accounting for about 7.3% of world output in 2013
(USGS, 2015). Several metals are produced in Namibia, including arsenic, copper, gold, lead, manganese,
silver, and zinc concentrates. Apart from diamonds, various other industrial minerals are produced, such
as cement, dolomite, fluorspar, granite, marble, salt, semiprecious stones, and wollastonite (USGS, 2015).
In 2013, some 16,709 people were employed in the mining sector, including temporary employees and
full-time contractors (USGS, 2015). Namibia’s volume of mining production has been somewhat erratic
over the past few years, fluctuating by up to about 30 percentage points (Figure 15). Gold output has been
especially variable, with a huge jump in early 2015 followed by a temporary plunge in early 2017.
Figure 15: Mining production indices
Source: Namibia Statistics Agency (2017), Monthly Mining Report
The general slow-down in the global economy has negatively affected mining in Namibia in recent years.
In particular, the slump in uranium prices has delayed the onset of production from the already-completed
Husab uranium mine, which is set to treble Namibia’s uranium output and boost the country to third in
the world’s uranium production rankings.3 The slump in mining has led to substantial negative spillovers
on many economic sectors, notably external trade and public finances (World Bank, 2017f). Chamber of
Mines members paid a total of N$3.2 billion in taxes and royalties in 2016, plus N$844 million in Pay-as-
you-earn (PAYE) taxes, and dividends of approximately N$1 billion. The mining sector generated N$28.85
billion in foreign exchange revenues in 2016 (Chamber of Mines).
3 http://www.mining.com/namibias-new-uranium-mine-to-boost-growth-make-it-the-worlds-third-main-producer/
0
20
40
60
80
100
120
140
160
180
0
50
100
150
200
250
300
350
400
450
Jan
10
Jun
10
No
v 1
0
Ap
r 1
1
Sep
11
Feb
12
Jul 1
2
Dez
12
Mai
13
Okt
13
Mär
14
Au
g 1
4
Jan
15
Jun
15
No
v 1
5
Ap
r 1
6
Sep
16
Feb
17
Jul 1
7
Ind
ex (
20
08
=10
0
Ind
ex (
20
08
=10
0)
Overall Index (RHS) Diamonds Uranium
Copper concentrate Zinc concentrate Gold Bullion
21
Namibia is well endowed with minerals, with deposits spread over large parts of the country (Figure 16).
Diamonds are concentrated along the coast, both onshore and offshore. Other minerals deposits are
concentrated in the central and north-western regions of the country.
Figure 16: Map of Namibian geology and mineral occurrences
Source: Namibia Mining Cadastre Portal (http://portals.flexicadastre.com/Namibia/)
22
Figure 17: Map showing Namibia's active mining licences
Source: Namibia Mining Cadastre Portal (http://portals.flexicadastre.com/Namibia/)
23
Mining policy and regulations
The Minerals Policy of Namibia (Republic of Namibia, 2002) affirms the following approach to the
country’s mining industry:
The Government of Namibia recognises that the exploration and development of its mineral wealth
could best be undertaken by the private sector. Government therefore focuses on creating an
enabling environment for the promotion of private sector investment in the mining sector. This will
include competitive policy and regulatory frameworks, security of tenure and the provision of
national geo-scientific data to further stimulate exploration and mining. In the same vein the
Government will expect the industry to take the challenge of social responsibility in terms of
planning for closure, community involvement and empowerment of formerly disadvantaged
people.
Companies applying for a Mining Licence (ML) have to submit for the approval/disapproval by the Minister
of Mines and Energy their projected production profile for the first year, and for the next four years
thereafter (Republic of Namibia, undated). There is also a 30% local value addition requirement, and if the
relevant facility is non-existent, the company is obliged to establish one or to “show good cause of its
inability to establish such facilities”. The company management must include “a minimum 20%
representation of historically disadvantaged Namibians”, while the ownership must include at least a 5%
stake for Namibian nationals or a company wholly owned by Namibians. Furthermore, mining projects are
required to address poverty in Namibia: “The proposal should address the Government’s objectives of
poverty eradication by (i) providing an opportunity for Namibian participation, as well (ii) setting out a
strategy to benefit the Namibian youth and women particularly from the disadvantaged groups and the
poorest of the poor.”
There are concerns in the Namibian mining industry that the proposed Economic Empowerment
legislation, which is mooted to include a provision requiring at least 25% ownership of enterprises by
“racially disadvantaged people”, may thwart investment in the mining sector. Bloomberg reports that the
draft Act “has helped see Namibia… lose its spot as Africa’s second-most attractive jurisdiction for mining
companies to invest in, based on policies, to Botswana, the Fraser Institute’s 2016 survey of 2,700 firms
worldwide shows.”4
4 https://www.bloomberg.com/news/articles/2017-08-28/namibia-black-ownership-plan-risks-repeating-south-africa-errors
24
Mining tax regime
Table 10 shows the basic elements of Namibia’s mining tax regime. Ownership of mineral resources is
vested in the State. There is currently no compulsory government ownership share in mining companies,
and 100% foreign ownership is permitted. The corporate tax for non-diamond mining is 37.5%, while the
royalty for base metals is 3%. The value-added tax rate is 15%.
Table 10: Namibia's mining tax regime
Description Rate/Remarks
Foreign ownership allowed 100%
Compulsory government share No
Foreign exchange controls Limited
Tax stability agreements None
Corporate tax rates 32% - 55%
Corporate tax for non-mining companies 32%
Corporate tax for diamond mining 55%
Corporate tax for non-diamond mining 37.5%
Royalties on rough diamonds 10%
Royalties on rough emeralds, rubies & sapphires 10%
Royalties on unprocessed dimension stone 5%
Royalties on gold, copper, zinc & other base metals
3%
Royalties on Semi-precious stones 2%
Royalties on Nuclear fuel minerals 3%
Royalties on industrial minerals (fluorspar, salt, etc)
2%
Royalties on non-nuclear fuel materials 2%
Royalties on oil/gas 5%
Corporate tax on oil/gas 35%
Tax holidays None
25
Deduct exploration/development costs Yes, 100% in first year
Ring fencing Yes (oil and gas)
Forward carry of losses Yes, indefinitely
Depreciation Yes, 20 & 4 – 33.3 straight line, see text
Capital gains tax 0%
Value added tax 15%
Non Resident Shareholder’s Tax (NRST) 20%
NRST-if a Non-resident recipient of dividends is a company which holds at least 25% of the capital of the Namibian company paying the dividend.
10%
Withholding tax 10%
Land tax (on valuation) Namibian citizens - 0.75%, Foreign Nationals –
1.5%
Provincial taxes None
Municipal taxes Services (Rates on Services)
Exploration & Mining Licence Fees Yes, schedule available from the office of the
Mining Commissioner
Surface rent To landowner, on mutual compensation
agreement
Mineral ownership Vested in the State
Training Levy 1% of payroll
Source: Chamber of Mines of Namibia
26
The table below sets out the structure of the mineral industry in Namibia as of 2013, including the major
mineral commodities, operating companies, location of mines and annual production capacity (in metric
tonnes unless otherwise stated). Some of the major companies include De Beers and Namdeb (diamonds),
Rio Tinto and Vedanta (uranium oxide and zinc), Paladin Energy (uranium), QKR Namibia (gold bullion),
Rosh Pinah Zinc Corporation (zinc and lead concentrates). Dundee Precious Metals Tsumeb produces
blister copper from imported copper concentrates at its smelter in Tsumeb.
Table 11: Structure of the mineral industry in 2013
27
Table 11: Structure of the mineral industry (continued)
Source: USGS (2016)
According to the Chamber of Mines, production has begun at three new mines during the past three years,
netting more than N$40 billion in fixed investments. Swakop Uranium's Husab mine, the world's second
largest uranium mine, started production on 30 December 2016. B2Gold’s Otjikoto gold mine went into
production 11 December 2014. Weatherly’s Tschudi mine produced the country’s first copper cathode in
February 2015. The latter two mines increased to full production levels in 2015, giving a major fillip to
export and government earnings. The Lodestone Dordabis iron ore mine, Namibia first such mine, started
production in 2015. These examples testify to the dynamism of the Namibian mining industry, despite the
recent period of low mineral prices.
28
Conclusion
Namibia is a politically stable upper-middle income country with a tiny population and good
infrastructure. Mining plays a very important role in the economy, and is the main source of export
revenues. The main challenges the economy faces are to do with persistently high unemployment and
income inequality. Amidst rapidly rising public debt, the government will have to carefully manage fiscal
consolidation over the next few years. The large current account deficit is also a concern, mainly as a result
of the weaker commodity prices and reduced revenues from the Southern African Customs Union,
although increasing mining output should alleviate this in the coming years. Rising public debt and
household indebtedness are causes for some concern. The commissioning of some new mines will
contribute to an expected pick-up in economic growth in the coming years.
References
Chamber of Mines of Namibia. 2017. http://www.chamberofmines.org.na/ [accessed on 29 November
2017]
Energy Information Administration. 2017. International Energy Statistics.
https://www.eia.gov/beta/international/data/ [accessed 6 November 2017]
International Energy Agency (IEA). 2017. Energy Statistics. http://www.iea.org/statistics/statisticssearch/
[accessed on 21 November 2017]
International Monetary Fund (IMF). 2017. World Economic Outlook database: October 2017.
http://www.imf.org/external/pubs/ft/weo/2017/01/weodata/index.aspx [accessed on 20 November
2017]
International Monetary Fund (IMF). 2016. Namibia 2016 Article IV Consultation. IMF Country Report No.
16/373. https://www.imf.org/en/Publications/CR/Issues/2016/12/31/Namibia-2016-Article-IV-
Consultation-Press-Release-Staff-Report-and-Statement-by-the-44443 [accessed on 23 November 2017]
Mo Ibrahim Foundation. Ibrahim Index of African Governance (IIAG). Available online:
http://mo.ibrahim.foundation/iiag/ [accessed on 20 November 2017]
Namibia Statistics Agency. 2017. https://nsa.org.na/page/publications/ [accessed on 21 November 2017]
Republic of Namibia. 2002. Minerals Policy of Namibia.
Republic of Namibia. Undated. Additional Conditions.
http://www.mme.gov.na/files/publications/1f0_Additional%20Conditions%20ML.pdf [accessed on 29
November 2017]
USGS (Unites States Geological Survey). 2015. Minerals Yearbook: Namibia.
https://minerals.usgs.gov/minerals/pubs/country/2013/myb3-2013-wa.pdf [accessed on 20 November
2017]
WITS (World Integrated Trade Solution). 2017. http://wits.worldbank.org [accessed on 21 November
2017]
World Bank. 2016. Doing Business 2016: Measuring Regulatory Quality and Efficiency. Washington, DC:
World Bank. DOI: 10.1596/978-1-4648-0667-4.
World Bank. 2017a. World Development Indicators.
http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators [accessed on
20 November 2017]
World Bank. 2017b. Global Economic Prospects database. October 2017.
https://data.worldbank.org/data-catalog/global-economic-prospects [accessed 31 October 2017]
World Bank. 2017c. Commodity Prices. http://www.worldbank.org/en/research/commodity-markets
[accessed on 20 November 2017]
World Bank. 2017d. Doing Business 2017: Equal Opportunity for All. Washington, DC: World Bank. DOI:
10.1596/978-1-4648-0948-4. http://www.doingbusiness.org/rankings [accessed 22 September 2017]
World Bank. 2017e. Worldwide Governance Indicators.
http://info.worldbank.org/governance/wgi/#reports [accessed 3 November 2017]
World Bank. 2017f. The World Bank in Namibia.
http://www.worldbank.org/en/country/namibia/overview [accessed 23 November 2017]
29 © Quantum Global Research Lab Ltd 2014. The entire contents of this publication are protected by copyright. All rights reserved.
