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Namibian Economics to the Point – April 2017

Avatar of inke inke - 03. May 2017 - Economics

Sunset at Gondwana's new Zambezi Mubala Lodge.

Namibia’s rainy season continued to the end of April improving water levels of major dams though some areas northwest of Omaruru received little rainfall. The mining sector featured prominently during the annual mining conference and expo. Government announced that an updated version of the economic empowerment draft law – NEEEF – is in preparation.

The international rating agency Fitch upgraded Namibia’s national rating from AA+ to AAA, but rated the outlook as negative. This indicates that Namibia might not be too adversely affected by South Africa’s recent international downgrades. South Africa is Namibia’s largest trading partner. The Bank of Namibia, the country’s central bank, kept its lending rate at 7 percent this month.

National budget adopted

In the National Assembly the national budget of N$62,5 billion (about 4,5 billion euros) for the new financial year (April ‘17 – March ’18) was adopted. It was sent to the National Council, the House of Review. While presenting their individual votes, Cabinet Ministers lamented the budget cuts due to austerity measures. Funding for education, development projects, public enterprises and infrastructure had to be slashed to reduce the current deficit of 6.3 percent to 3.6 percent for 2017-18.

State of the nation

In his third annual state of the nation address since he took power in March 2015, President Hage Geingob said in Parliament the government would re-dedicate itself to implement policies and projects, improve service delivery and reduce poverty. On the land question he said “all those born in Namibia are Namibians, irrespective of race or colour and are entitled to own land legally. Settling on any land without permission is against the law and land grabbing will not be tolerated,” Geingob said.    

Mining is economic backbone

Namibia’s mining sector contributed some N$17.7 billion (about 1.3 billion euros) or 11.1% to the GDP in 2016. Diamond production took the lion share (N$10.7bn =770 million euros) followed by metals (N$4.7bn = 330 million euros) and uranium (N$1.47bn = 100 million euros).  

Mines and Energy Minister Obeth Kandjoze this month said he was unhappy about the fact that 80 percent of locally sold rough diamonds produced in Namibia were afterwards exported. “This must change,” he told diamond buyers during a meeting. Government preferred that the diamonds sold via the State owned Diamond Trading Company of Namibia (NDTC) should be mostly cut and polished locally and only exported after this beneficiation [value adding] process. “The mining sector is however concerned about NEEEF, additional mining license conditions and the new investor law of 2016, which needs revision before it is enforced,” a member of the Chamber of Mines said.  

Jobs saved

Negotiations between the government, the owners of the Skorpion Zinc mine and the mineworkers’ union saved the jobs of some 253 workers. In a last minute agreement only 43 instead of 278 mineworkers were retrenched. The Indian company Vedanta, which owns Skorpion Zinc, even imported zinc from Turkey and Morocco, to increase production of the on site zinc refinery. Some 85,427 tons of refined zinc were produced for export in 2016. A new pit is developed over the next 3 years to mine zinc ore.

Meanwhile, the international oil giant Shell announced its intention to drill for oil off the Namibian coast. Shell was active along Namibia’s coast several years ago and found the Kudu gas field. Shell withdrew from Namibia afterwards.

More renewable energy

Investments in renewable energy increase. The northern town of Tsumeb, the gateway to the Etosha National Park, will get a solar power plant. A subsidiary of the local Ohlthaver & List company, O & L Solar Energy, won the bid to construct a 6,4 mega watt (MW) solar plant at Tsumeb. A 5 MW solar plant is already up and running at Otjiwarongo, another one near Okahandja is nearing completion. Namibia’s first wind park - 40 MW - is under construction near Lüderitz. Interestingly, the towers for these wind turbines are made from wood. 

News on economic empowerment
 

Government has consulted widely on the New Equitable Economic Empowerment Framework (NEEEF) in 2016. These views and proposals will be reflected in a revised draft document, the Office of the President announced end of April. A fresh draft law and new recommendations will be submitted to the Prime Minister in May, who will present them to Cabinet. Once approved the Cabinet Committee on Legislation deals with it and will “possibly [hold] further targeted stakeholder consultations”, the Office of the President said in a press statement. The text must be approved by the Attorney General before tabling in Parliament. Mines and Energy Minister Kandjoze said this would take 4 to 6 months.   

New law for private property rentals

Government held a first round of consultations this month with the private sector on draft law to control renting of private properties. The draft bill was distributed at the occasion. Rent tribunals are to be set up in most regions. Each rental contract must be made in writing, a copy must be sent to the tribunal of the relevant region. The envisaged law will only be applicable to residential property. Commercial property is not included anymore, despite an earlier announcement to that effect. Officials in the Trade Ministry informed the meeting that future rents must be calculated according to a net profit of ten percent after deductions. Should commercial bank rates for housing loans decrease, rentals must also be adjusted downwards. 

Meanwhile 2 private companies will construct over 1,000 houses in northern Namibia. Some 500 houses are constructed in Ondangwa and 600 houses are to be built in Rundu to address the large housing backlog. 

Former US President Bush in Namibia

On his fifth African trip former US-President George W. Bush managed a 2-day stop over in Namibia for the first time. Accompanied by his wife Laura, updated himself on progress made with the US support for anti-retroviral medication for HIV-AIDS patients. Bush started the President’s Emergency Plan for Aids Relief (PEPFAR) during 2004 mainly in support for African countries, including Namibia.  

Bush also familiarised himself with the results of the N$3 billion (about 200 million euros) support for Namibia, initiated while he was in power. Called the Millennium Challenge Account (MCA), Namibia’s government received direct financial and infrastructure support for agriculture, tourism and education. 

Tourism development 

Namibia Wildlife Resorts (NWR) revamped its Hobas campsite at Fish River Canyon. Since 1 April, Hobas boasts with 5 rooms for overnight stay, a small restaurant and improved sanitation. The revamp and improvements cost a total of N$6,5 million. The Gondwana Group announced it bought the former Kalizo Lodge in the Zambezi Region. Renamed Zambezi Mubala Lodge, it is undergoing renovation and will open on 17 November. The World Economic Forum released its latest tourism competitive index. Namibia is Number 4 among the top 10 African tourism destinations after South Africa, Mauritius and Kenya. Namibia dropped from 70th rank in 2015 to 82nd worldwide 2016 among 136 countries scrutinised.  

Brigitte Weidlich

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