Opinion: G.R.O.W the Namibian economy
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As the Bank of Namibia recently launched its annual report, it provides an opportunity for us to take a moment to reflect on our collective march as a nation. I would like to share a few ideas and hone in on why Namibia is the next frontier on the African continent and stacks up well despite the challenges we have experienced to date.
The past three years have been a rude awakening for us; the Covid-19 pandemic brought about the loss of more than 4 000 lives and it imposed a terrible economic and social cost. This contributed to Namibia’s growth remaining sluggish. As we reflect, I would like to give a high-level overview of our economic performance during this period.
• The Namibian economy is estimated to have expanded by 2.4% in 2021, following a record contraction of 7.9% in 2020. This recovery was aided by supportive macroeconomic policies and driven by the mining sector, coupled with positive real value addition in the wholesale and retail trade, hotels and restaurants, and the information and communication sectors.
• Namibia’s headline inflation rose from 2.2% in 2020 to an average of 3.6% during 2021 due to rising international oil prices and global supply disruptions.
• Nevertheless, inflation was well contained during this period, though it increased towards the year-end.
• The Bank of Namibia demonstrated its resilience and continued to deliver on its mandate and instituted various relief measures to cushion households and businesses from the pandemic. Among these relief measures was the monetary policy stance which remained accommodative with a record low repo rate of 3.75% during 2021 to support the struggling economy whilst safeguarding the exchange rate peg arrangement.
• Namibia’s banking sector remained profitable, liquid, and resilient, despite the strained economic environment. In fulfilling its oversight mandate, the Bank also assessed the non-bank financial institutions sector to be sound.
• The Bank strives toward an efficient, responsive, modernised and accessible financial system, while linked with regional and international financial institutions. Due to rapid innovation in the FinTech industry, the Bank has recently released the FinTech Regulatory Framework. Furthermore, we are doing groundbreaking research on Central Bank digital currencies. There has also been a rise in cryptocurrency financing services. We must ensure that these platforms are reliable for lending, trading, and secure custody with consumer interests well protected.
Despite the headway made in buffering the Namibian economy, we are not out of the woods yet. Although the relaxation of restrictions and a drop in infection rates at a local level are indeed welcomed, the Covid-19 pandemic continues to loom globally. We must be wary of any renewed large-scale outbreak, which could further stall our economic recovery. Namibia emerged from a terrible drought that lasted many years with disastrous consequences, given that the agricultural industry supports about 70% of the country’s population directly or indirectly. Farmers can replenish and agricultural output can increase due to better rainfall, allowing the industry to thrive again. Nonetheless, the most significant threat to our economy’s recovery is a new conflict raging in Europe. One can only hope for a quick and amicable resolution for us to restore our economy. “Peace is profitable, any war is costly and financial markets prefer stability and predictability for normal functioning.”
The question we should ask ourselves, is whether our stars are aligning? Can we restore our place as one of Southern Africa’s fastest-growing economies? I am optimistic about what the future holds.
We are excited about the prospects of green hydrogen and its economic potential. The prospective investment of between US$ 6-9 billion is absolutely astounding, with the ability to revolutionise the structure of our economy. The discovery of oil, if found to be commercially viable, could enable Namibia to become the third-largest oil producer in Sub-Saharan Africa (after Nigeria & Angola). Debmarine Namibia has procured the world’s largest and greenest diamond mining vessel ever built. Equally, the decision by Namdeb Holdings to extend the current life of the mine by another 20 years by investing in onshore mining activities is noteworthy.
I purposefully highlighted these nascent megaprojects to demonstrate that our future is indeed bright. What is required is a paradigm shift to recognise these possibilities and reposition ourselves accordingly. By maximising the opportunities above, we will ultimately GROW the economy and create wealth for the majority of our people. We will GROW the cake and ensure equitable access and opportunity.
G.R.O.W stands for Green hydrogen, Resources, Oil & Wealth creation. G.R.O.W is the acronym we must recall as we embrace these new game-changers in our economy and maximise their value while harnessing the endowment for future generations.
I invite all Namibians to join us on this transformative journey, seize the opportunities that G.R.O.W will provide, and contribute to the growth of a prosperous Namibia. The time has also come for our vibrant and talented Namibian youth to prepare for this new future by acquiring the necessary skills in these industries. Now is the time to jump on board, seize new opportunities to redefine ourselves on the journey of hope and prosperity.
Mother nature has endowed Namibia with all the natural resources to be self-sufficient and prosperous. Everything we hold of value on this planet, metal, minerals, energy, sun, and the wind are in near-infinite quantities in Namibia. After all, Arthur Young reminds us that: “God sleeps in the minerals, awakens in plants, walks in animals and thinks in man”. We must continue to push the boundaries and be inventive, ambitious, and proactive.
At the bank, we remain committed to safeguarding price and financial stability and will continue to support the economy, particularly these new industries, with the necessary policy research. Furthermore, we should explore establishing a presence in the country’s south – closer to the action – in order to acquire first-hand information and data on these key economic efforts, while also delivering superior macroeconomic and microeconomic analyses.
Finally, the bank is happy to announce that it declared a dividend of N$413.7 million to government, a portion of which will be allocated to the newly created Sovereign Wealth Fund as a vivid example that the central bank is committed to the prosperity of the Namibian people.