Transforming Namibia’s Economy with Effective Trade and Industrial Policies

Josef Sheehama

The political climate in Namibia is among the most tranquil and stable in Africa. To enhance Namibia’s potential growth rate, reforms must be put in place.

One of the main obstacles to Namibia’s industrial development, especially for small and medium-sized businesses, has been a lack of human and financial resources. With institutions not producing enough skilled human resources to meet market demand, skills mismatches and gaps are common.

Maintaining competitiveness and facilitating long-term growth through the implementation of flexible trade and industrial policies should remain a strategic policy priority.

Industrial goods have a higher income elasticity of demand, particularly in global markets, thus manufacturing is a key driver of economic growth.
A successful trade and industrial policy should be flexible, goal-oriented and based on the idea of embedded autonomy.

Prioritising and justifying interventions are necessary for focused industrial and trade policy, and experience-based learning fosters flexibility.

Embedded autonomy is necessary to support focus and flexibility. To do this, the government must obtain relevant data from the private sector.

Urgent reforms to boost Namibia’s relevance in the short term are required, while also creating the conditions for higher long-term sustainable growth. Growth reforms should promote economic transformation, support labour-intensive growth and create a globally competitive economy.

The current state of the Namibian economy is unsustainable. Low economic growth entrenches poverty and inequality. High income inequality aggravates social fragmentation and poses a risk to economic growth.

A growth-oriented policy agenda must be accompanied by interventions that change how the benefits of growth are distributed and fundamentally transform patterns of ownership. Initiatives that transform the economy must meet the dual tests of sustainability and intergenerational equity.

At the heart of our economic policy must be a concurrent emphasis on economic transformation, inclusive growth and competitiveness. This is the most sensible strategy to address the challenges of unemployment, poverty and inequality.

Current trade and industrial policies have made some progress towards attaining economic and structural transformation and contributing to inclusive growth. Namibia’s industrial policy is on the right track, but some important adjustments could significantly improve its effectiveness.

Furthermore, foreign direct investment (FDI) in particular has become a major component of industrial policies.

Namibia aims to become a green hydrogen superpower in the near future by positioning itself as a leader in emerging markets and an international exporter of green hydrogen.

Green hydrogen will be a significant source of foreign investment, as well as an important contributor to the country’s energy security and transition.

According to the Bank of Namibia, the oil and gas sector generated N$33,4 billion in FDI inflows between 2021 and 2023.

As a part of private investment, an increase in FDI will, by itself, contribute to an increase in total investment. An increase in investment directly contributes to growth. FDI beneficially influences other macroeconomic variables, such as employment, export, consumption and saving. These, in turn, enhance growth.

Moreover, Namibia should promote local contents and a sense of ownership in energy sectors. However, it is important to state that creating the regulatory and legal frameworks alone is not sufficient to promote economic growth using energy revenues; it must strictly adhere to the frameworks, as done by other countries.

Strong institutions and administrative capacity for transparency and accountability are important tools. Namibia has a competitive advantage because of its peace and political stability, which attracts investors who will pay royalties and taxes and create employment.

If managed well, the discovery of oil has the propensity to transform a structurally weak economy into a self-sustainable economy. Or, it can lead to social, economic and political instability as evidenced in some resource rich countries where the economies are characterised by corruption, poverty and conflict. Availability of both short and long-term economic measures and macro-economic policies are needed to avoid the resource curse.

Namibia should promote good corporate governance, effective regulatory frameworks, corporate accountability, and sound, transparent and predictable government policies to promote quality standard of living and reduce the poverty rate.

In order to succeed in the economic transformation, we should pay attention to education, health and infrastructure development.

In conclusion, industrial and trade policy interventions cannot effectively achieve their desired outcomes if they are not complemented by an overall supportive business environment. For this reason, Namibia has to move its focus towards increasingly attractive international growth opportunities which hold significant potential to economic development.

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