The mining sector, which is considered one of the most important pillars of the national economy, is expected to be affected by weak global demand.
The Bank of Namibia (BoN) quarterly bulletin released last week, the domestic economy is expected to grow by 3.1%
in 2024, and then expand by 3.9% in 2025.
The projected growth rate for 2024 indicates a slowdown from the 4.2% achieved in 2023, and a downward revision from the 3.7% forecast in March 2024.
“Anticipated sluggish growth in 2024 is primarily driven by subdued global demand, and the prevailing drought conditions. The weak global demand is anticipated to negatively affect Namibia’s mining sector, particularly impacting growth for diamonds and zinc,” read the bulletin.
The estimated contraction in 2024 is largely attributed to the reduced demand for the precious stones due to subdued growth in the world economy, switching demand in the luxury segment from jewellery to travelling, and increasing competition from lab-grown diamonds.
These factors exerted downward pressure on prices for natural
diamonds, and producers are expected to cut supply during 2024 to induce a recovery in prices.
Additionally, the central bank added that uranium production is expected to be constrained by strip-mining activities, as mines try to expand their mining pits. Furthermore, the adverse effects of drought on the agriculture and water sectors are expected to exacerbate overall economic performance.
As a sector, the mining industry is a significant contributor to the gross domestic product (GDP), and continues to be the biggest source of export revenue.
In 2023, the sector recorded 18.9% growth, increasing its contribution to GDP from 11.9% in 2022 to 14.4%.
The growth saw a 12.6% rise in direct employment, and a substantial increase in taxes paid to government amounting to N$6.861 billion.
On the other hand, during an earlier discussion with this publication, Presidential economic advisor James Mnyupe revealed that page 63 of the Vision 2030 document states Namibia must look to be a secondary sector-driven economy that focuses on manufacturing and knowledge.
In 2024, secondary industries are projected to expand by 4.9%, significantly higher than the modest 2% growth recorded in 2023. This strong performance is expected to continue into 2025, with a growth rate of 4.7%.
The positive trajectory of the secondary industry is largely driven by improved growth for electricity and water, and recoveries for manufacturing and construction sectors
Primary industries are expected to register a contraction in 2024 on the back of the drought and reduced demand for minerals, before recovering in 2025.
Despite a significant increase in the government’s construction budget, the construction sector is expected to contract by 0.2% in 2023. Growth rates are projected to be 3.5% and 7.1% in 2024 and 2025, respectively.