Tyrone van Wyk
Like many other countries, Namibia is faced with a challenging economic environment created by global macro changes. The immediate financial outlook for Namibia is examined in this article. Additionally, the potential that green hydrogen as an emerging business provides, as well as the current changes in the oil industry.
Global Economic Trends and Namibia’s Near-Term Outlook
With the recognition of a potential US recession and trade conflicts between China and other nations, global economic growth has slowed. The United Kingdom and Europe have been struggling, which has presented difficulties for Namibia’s industries which rely on exports.
However, after reaching multi-decade highs, worldwide inflation is gradually slowing down. It is important to remember that not all inflation is the same, and that regional variances exist. It is for this reason that Namibia must carefully watch these developments.
Economic Sectors in Namibia: Opportunities and Challenges
Construction: Although Namibia’s construction industry struggled in 2022, it is expected to do better in the future because of factors like rising public spending, onshore mining activity, and the possibility of oil exploration.
Vehicle sales: The sales of vehicles is a frequent indicator of consumer activity. Even if there has been some progress since the COVID-19 pandemic, car sales are still low when compared to boom times in the past. However, there is encouraging development potential, helped by a rise in bank lending.
Mining-led growth: Namibia has observed growth driven by the mining industry in a number of its mining industries. The development of this industry, which has the potential to stimulate exports and inward investment, is being aided by the mining of diamonds, the expansion of the gold industry, rare-earth minerals, and lithium reserves.
Tourism: The COVID-19 pandemic has had a substantial negative impact on the tourism industry, with occupancy rates and bed-nights still below pre-pandemic levels. However, there are indications of recovery, and as supply limitations loosen, there is a sizeable window of opportunity for expansion. The industry is still susceptible to a slowdown in Europe.
Government Spending, Revenue and Foreign Direct Investment
The Southern African Customs Union (SACU) and increased domestic revenue have been the main drivers of Namibia’s public financing’s spectacular rebound. As a result of the increased revenue, the government is able to spend more money, and no longer faces contractionary pressure. The budgetary outlook is becoming more stable, as deficits gradually decline. The prospect for increased exports, mining output and oil exploration are boosting inbound investment.
Green hydrogen and Oil developments
Companies like Shell and TotalEnergies have reported promising exploration activities in Namibia in recent oil developments. However, there are still a lot of unknowns, such as national policies, international technology developments and commercial feasibility. Oil offers a chance for economic diversification and growth, but reliance on this possibility must be weighed against the requirement for grassroots reforms.
Globally, the market for green hydrogen is only starting to take off. It has ambitious timetables and employment and tax revenue goals. Although Namibia has several benefits, there are obstacles to be overcome, such as the lack of infrastructure and the distance to markets. In this developing sector, public resources must be used carefully.
Global macro trends influence Namibia’s economic future, and careful analysis of various sectors and risks is required for sustained growth. Despite obstacles, there are prospects for economic growth in the areas of construction, vehicle sales, mining-driven growth, tourism, government revenue and inbound investment.
*Tyrone van Wyk is Chief Investment Officer at Old Mutual Namibia.