At the 2019 Economic Growth Summit, significant issues were raised by investors relating to a lack of clarity and transparency in the rights allocation process as well as significant administrative delays in the licensing process. As Namibia seeks to pursue a sustainable economic growth trajectory, it first needs to optimize the stewardship of its natural resources by assessing the current policy and legislative framework of concessions and licensing, and is high on the agenda of Government. Complementary mechanisms that could enable further discoveries, competitive investment attraction, and optimal production paths are under consideration. A tax reform agenda focusing on mechanisms that govern concessions on natural resources in order to enhance transparency, promote competition will be prioritized.
Employment creation and labour productivity will be a key priority during HPPII, given the extent of economic disruption experienced due to COVID-19, amongst others. The conventional macro-economic approach that emphasizes the importance of GDP growth as a prerequisite for employment creation, will not necessarily lead to optimal outcomes for the pursuit of an inclusive society. Namibia’s economic structure is a good case in point where high GDP growth does not necessarily translate into low unemployment levels. Mining and quarrying represent 10% of GDP and 56% of exports, but only 2% of employment. At the other extreme, agriculture, forestry and fishing represent 7% of GDP and approximately 30% of employment.
Within that context, it is not surprising that the few opportunities that Namibians have to access gainful employment are either in Government or in the non-tradable sector, closely linked to the evolution of public expenditure. Agriculture, tourism, and wholesale & retail collectively employ 47% of total wage earners in the economy. However, the average wage in these sectors is 44% lower than the mean for the overall economy. The latter can be explained by the fact that over half of the employees in the aggregate of agriculture, tourism, wholesale & retail are in the informal economy, where both productivity and wages are significantly lower. Within the formal economy, the average wage in these sectors is roughly 30%-40% lower than the average private-sector wage in the economy. The aforementioned gap suggests that there may still be room for initiatives to enhance productivity beyond formalization. Such initiatives will include engaging in sector-specific strategies such as those geared towards improving yields in agriculture, or cross-cutting initiatives such as those that enable the scaling up of small businesses with high potential.
Namibia’s capacity to attract and retain significant levels of FDI was at the core of the growth acceleration registered between 2000 and 2015. Namibia has developed a credible reputation as a premium destination for mining-related investments, which enabled the country to attract large FDI inflows during the super commodity cycle. By 2019, Namibia had overtaken Botswana as the highest score on the Fraser’s Institute Mining Policy Perception Index in Africa, ahead of international peers such as Chile, Peru and Australia. That record was a valuable asset, as it allowed Namibia to attract sizable investments coming from a wide array of countries, while more than tripling exports between 2002 – 2015.
As the prices of commodities weakened in international markets, FDI flows to countries concentrated in extractive industries decreased accordingly – Namibia was not uniquely affected. As prices recover and the global economy gradually bounces back from the economic impact of COVID-19, it is likely that investment will pick up again, and the competition for attracting and retaining FDI flows will intensify. Within that context, Namibia needs to maintain its competitive advantages as an investment location for mining-related activities and leverage that positioning and expertise to put forth adequate policy frameworks to accelerate investments in other adjacent activities.