Economy of Namibia

Economy - overview

The economy of
Namibia is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 20% of GDP. Rich alluvial diamond deposits make Namibia a primary source for gem-quality diamonds. Namibia is the fourth-largest exporter of nonfuel minerals in Africa, the world's fifth-largest producer of uranium, and the producer of large quantities of lead, zinc, tin, silver, and tungsten. The mining sector employs only about 3% of the population while about half of the population depends on subsistence agriculture for its livelihood. Namibia normally imports about 50% of its cereal requirements; in drought years food shortages are a major problem in rural areas. A high per capita GDP, relative to the region, hides the great inequality of income distribution; nearly one-third of Namibians had annual incomes of less than $1400 in constant 1994 dollars, according to a 1993 study. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged to the South African rand. Privatization of several enterprises in coming years may stimulate long-run foreign investment.

Economy - detail

The Namibian economy has a modern market sector, which produces most of the country's wealth, and a traditional subsistence sector. Namibia's average GDP per capita is relatively high among developing countries but obscures one of the most unequal income distributions on the African Continent. Although the majority of the population engages in subsistence agriculture and herding, Namibia has more than 200,000 skilled workers, as well as a small, well-trained professional and managerial class.

The country's sophisticated formal economy is based on capital-intensive industry and farming. However, Namibia's economy is heavily dependent on the earnings generated from primary commodity exports in a few vital sectors, including minerals, livestock, and fish. Furthermore, the Namibian economy remains integrated with the economy of South Africa, as the bulk of Namibia's imports originate there.

Since independence, the Namibian Government has pursued free-market economic principles designed to promote commercial development and job creation to bring disadvantaged Namibians into the economic mainstream. To facilitate this goal, the government has actively courted donor assistance and foreign investment. The liberal Foreign Investment Act of 1990 provides for freedom from nationalization, freedom to remit capital and profits, currency convertibility, and a process for settling disputes equitably. Namibia also is addressing the sensitive issue of agrarian land reform in a pragmatic manner.

In September 1993, Namibia introduced its own currency, the Namibia dollar, which is linked to the South African Rand. There has been widespread acceptance of the Namibia dollar throughout the country and, while Namibia remains a part of the Southern African Common Monetary Area, it now enjoys much greater flexibility in monetary policy.

Given its small domestic market but favorable location and a superb transport and communications base, Namibia is a leading advocate of regional economic integration. In addition to its membership in the Southern African Development Community (SADC), Namibia presently belongs to the Southern African Customs Union (SACU) with South Africa, Botswana, Lesotho, and Swaziland. Within SACU, no tariffs exist on goods produced in and moving among the member.

Ninety percent of Namibia's imports originate in South Africa, and many Namibian exports are destined for the South African market or transit that country. Namibia's exports consist mainly of diamonds and other minerals, fish products, beef and meat products, karakul sheep pelts, and light manufactures. In recent years, Namibia has accounted for about 5% of total SACU exports, and a slightly higher percentage of imports.

Namibia is seeking to diversify its trading relationships away from its heavy dependence on South African goods and services. Europe has become a leading market for Namibian fish and meat, while mining concerns in Namibia have purchased heavy equipment and machinery from Germany, the United Kingdom, the United States, and Canada. The Government of Namibia is making efforts to take advantage of the U.S. African Growth and Opportunity Act (AGOA), which will provide preferential access to U.S. markets for a long list of products. In the short term, Namibia is likely to see growth in the apparel manufacturing industry as a result of AGOA.

In 1993, Namibia became a GATT signatory, and the Minister of Trade and Industry represented Namibia at the Marrakech signing of the Uruguay Round Agreement in April 1994. Namibia also is a member of the International Monetary Fund and the World Bank, and has acceded to the European Community/Union's Lome Convention.

Mining and Energy
Mining contributed 13% of GDP in 1999, of which diamond mining activities represented 9%. Diamond production totaled 1.5 million carats in 2000, generating nearly $500 million in export earnings. Other important mineral resources are uranium, copper, lead, and zinc. The country also is a source of gold, silver, tin, vanadium, semiprecious gemstones, tantalite, phosphate, sulfur, and salt.

During the pre-independence period, large areas of Namibia, including offshore, were leased for oil prospecting. Some natural gas was discovered in 1974 in the Kudu Field off the mouth of the Orange River, but the extent of this find is only now being determined.

Agriculture
Although Namibian agriculture contributes only 12% of Namibia's GDP, about 70% of the Namibian population depends on agricultural activities for livelihood, mostly in the subsistence sector. In 2000, agriculture products constituted roughly 10% of total Namibian exports.

In the largely white-dominated commercial sector, agriculture consists primarily of livestock ranching. Cattle raising is predominant in the central and northern regions, while karakul sheep, goat, and ostrich farming are concentrated in the more arid southern regions. Subsistence farming is confined to the "communal lands" of the country's populous north, where roaming cattle herds are prevalent and the main crops are millet, sorghum, corn, and peanuts.

The government introduced its long-awaited agricultural land reform legislation in September 1994, and a companion bill dealing with the communal areas will be presented later. The government remains committed to a "willing seller, willing buyer" approach to land reform. As the government addresses the vital land and range management questions, water use issues and availability considered.

Fishing
The clean, cold South Atlantic waters off the coast of Namibia are home to some of the richest fishing grounds in the world, with the potential for sustainable yields of up to 1.5 million metric tons per year. Commercial fishing and fish processing is becoming the fastest-growing sector of the Namibian economy in terms of employment, export earnings, and contribution to GDP.

The main species found in abundance off Namibia are pilchards (sardines), anchovy, hake, and horse mackerel. There also are smaller but significant quantities of sole, squid, deepsea crab, rock lobster, and tuna. However, at the time of independence, fish stocks had fallen to dangerously low levels due to the lack of protection and conservation of the fisheries and the overexploitation of these resources. This trend appears to have been halted and reversed since independence, as the Namibian Government is now pursuing a conservative resource management policy along with an aggressive fisheries enforcement campaign.

Manufacturing and Infrastructure
In 2000, Namibia's manufacturing sector contributed about 20% of GDP. Namibian manufacturing is inhibited by a small domestic market, dependence on imported goods, limited supply of local capital, widely dispersed population, small skilled labor force and high relative wage rates, and subsidized competition from South Africa.

Walvis Bay is a well-developed, deepwater port, and Namibia's fishing infrastructure is most heavily concentrated there. The Namibian Government expects Walvis Bay to become an important commercial gateway to the Southern African region.

Namibia also boasts world-class civil aviation facilities and an extensive, well-maintained land transportation network. Construction is underway on two new arteries-- the Trans-Caprivi Highway and Trans-Kalahari Highway--which will open up the region's access to Walvis Bay.

Labor
While most Namibians are economically active in one form or another, the bulk of this activity is in the informal sector, primarily subsistence agriculture. In the formal economy, official estimates of unemployment range from 30% to 40% the work force. A large number of Namibians seeking jobs in the formal sector are held back due to a lack of necessary skills or training. The government is aggressively pursuing education reform to overcome this problem.

Namibia's largest labor federation, the National Union of Namibian Workers (NUNW) represents workers organized into seven affiliated trade unions. NUNW maintains a close affiliation with the ruling SWAPO party.

Statistics

GDP: purchasing power parity - $12.6 billion (2002 est.), $7.1 billion (1999 est.)

GDP - real growth rate: 3.2% (2002 est.), 3% (1999 est.)

GDP - per capita: purchasing power parity - $6,900 (2002 est.), $4,300 (1999 est.)

GDP - composition by sector:
agriculture: 11% (2002 est.), 12%(1998 est.)
industry: 28% (2002 est.), 30%(1998 est.)
services: 61% (2002 est.) 58% (1998 est.)

Population below poverty line: 50% (2002 est.)

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 8% (2001), 8.5% (1999)

Labor force: 725,000 (2000)

Labor force - by occupation: agriculture 47%, industry 20%, services 33% (1999 est.)

Unemployment rate: 35% (1998), 30% to 40%, including underemployment (1997 est.)

Budget:
revenues: $883 million
expenditures: $950 million, including capital expenditures of $NA (1998)

Industries: meat packing, fish processing, dairy products; mining (diamond, lead, zinc, tin, silver, tungsten, uranium, copper)

Industrial production growth rate: 10% (1994)

Electricity - production: 26.95 million kWh (2001), 1.198 billion kWh (1999)

Electricity - production by source:
fossil fuel: 2%
hydro: 98%
nuclear: 0%
other: 0% (1999)

Electricity - consumption: 603.1 million kWh (2001), 1.81 billion kWh (1999)

Electricity - exports: 0 kWh (2001), 56 million kWh (1999)

Electricity - imports: 578 million kWh (2001), 890 million kWh (1999)
note: imports electricity from South Africa

Oil - production: 0 bbl/day (2001 est.)

Oil - consumption: 13,000 bbl/day (2001 est.)

Natural gas - proved reserves: 31.15 billion cu m (January 2002 est.)

Agriculture - products: millet, sorghum, peanuts; livestock; fish

Exports: $1.21 billion f.o.b. (2002 est.), $1.4 billion (f.o.b., 1999 est.)

Exports - commodities: diamonds, copper, gold, zinc, lead, uranium; cattle, processed fish, karakul skins

Exports - partners: EU 79%, US 4% (2001), UK 43%, South Africa 26%, Spain 14%, France 8%, Japan (1998 est.)

Imports: $1.38 billion f.o.b. (2002 est.), $1.5 billion (f.o.b., 1999 est.)

Imports - commodities: foodstuffs; petroleum products and fuel, machinery and equipment, chemicals

Imports - partners: US 50%, EU 31% (2001), South Africa 84%, Germany, US, Japan (1995 est.)

Debt - external:$517 million (2002 est), $159 million (1999 est.)

Economic aid - recipient: ODA $160 million (2000 est.), $127 million (1998)

Currency: 1 Namibian dollar (N$) = 100 cents

Exchange rates: Namibian dollars (N$) per US$1 - 10.5407 (2002), 8.6092 (2001), 6.9398 (2000), 6.10948 (1999), 5.52828 (1998), 4.60796 (1997), 4.29935 (1996), 3.62709 (1995)

Fiscal year: 1 April - 31 March

See also : Namibia

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