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Namibia’s Economy Booms on Oil and Mining

African nation sees improved growth prospects thanks to natural resources sector

by Victor Adetimilehin

Namibia, a southern African country known for its vast desert and wildlife, is experiencing a surge in economic growth thanks to its oil and mining industries.

The country’s gross domestic product (GDP) grew by 5.6% in 2023, up from 3.5% in 2022, according to the finance minister Ipumbu Shiimi. He said the strong performance was driven by the ongoing petroleum exploration activities and the increase in uranium production following a rise in global prices.

Namibia has attracted significant interest from energy companies such as TotalEnergies and Shell, which have made discoveries in the offshore Kudu gas field and the Walvis Basin. The country also has the world’s fourth-largest uranium reserves, which are expected to boost its exports and revenues in the coming years.

Oil and mining boost domestic demand

The growth in the natural resources sector has also stimulated domestic demand, especially in the wholesale and retail trade and tourism sectors. Shiimi said the government was implementing measures to enhance household incomes and foster a business-friendly environment.

The finance minister also announced a tax reform package that would lower the corporate tax rate from 32% to 28% and provide relief for low-income earners. He said the reforms would increase Namibia’s competitiveness and attract more foreign investment.

The government also plans to invest in critical public infrastructure, such as roads, bridges, water supply, and electricity generation, to address the infrastructure gaps and meet the needs of a growing population. Shiimi said the government would prioritize projects that have a high economic and social impact, such as the expansion of the Hosea Kutako International Airport and the construction of the Neckartal Dam.

Fiscal prudence and debt sustainability

Despite the positive outlook, Namibia faces some challenges, such as high inflation, low COVID-19 vaccine uptake, and a large public debt. Shiimi said the government was committed to maintaining fiscal prudence and ensuring debt sustainability.

He said the government had achieved a primary surplus of 1.2% of GDP in 2023, which means that its revenues exceeded its non-interest expenditures. He said the government would continue to rationalize spending and improve domestic resource mobilization and tax compliance.

The public debt, which stood at 67% of GDP in 2023, is expected to decline gradually to 60% of GDP by 2025, thanks to the establishment of a sovereign wealth fund that would help stabilize spending and save for future generations. Shiimi said the fund, which was launched in May 2022 with $15 million, would receive a portion of the oil and mining revenues and invest them in diversified assets.

The finance minister also said the government had a sound strategy to manage its external debt obligations, especially the $750 million Eurobond that matures in October 2025. He said the government would retire $500 million at maturity and refinance the remaining $250 million in the next fiscal year.

Namibia’s economic transformation

Namibia, which gained its independence from South Africa in 1990, has made significant progress in reducing poverty, improving human development, and strengthening democracy. However, the country still faces high unemployment, income inequality, and climate change risks.

Shiimi said the government was aware of these challenges and was working to diversify the economy and create more opportunities for the Namibian people. He said the government was implementing various programs to support the agriculture, manufacturing, and services sectors, as well as to promote innovation, entrepreneurship, and skills development.

He also said the government was committed to enhancing social protection, health care, and education, as well as to addressing the environmental and social impacts of the oil and mining activities. Shiimi said the government would ensure that the natural resources sector contributes to the sustainable development of the country and benefits all Namibians.

Shiimi concluded his budget speech by saying that Namibia was on the verge of a historic economic transformation that would improve the living standards and well-being of its citizens. He said the government would continue to pursue sound policies and reforms that would enable the country to achieve its vision of becoming a prosperous and industrialized nation by 2030.

Source: Reuters 

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