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Manufacturing sector overview… sustainable and productive manufacturing is imperative

2021-11-17  Staff Reporter

Manufacturing sector overview… sustainable and productive manufacturing is imperative
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Namibia is classified as an upper-middle-income developing country, with an estimated annual GDP per capita of US$5 931 (World Bank, 2020).  

This is largely on account of the country’s mineral resources and a small population, estimated at around 2.5 million in 2019. 

Between 1990 and 2017, Namibia’s Human Development Index (HDI) value increased from 0.579 to 0.647, placing the country in the medium human development category above the Sub-Sahara African average. However, socio-economic inequalities remain high by global standards. Namibia’s Gini coefficient of 0.55 in 2018, makes it one of the most unequal countries in the world.

Unemployment levels are also high at 33.4% in 2018. Unemployment is higher for females than males, with the overall female unemployment standing at 34.3% as compared to 32.5% unemployed males. Youth unemployment stood at 46.1% (Namibia Labour Force Survey, 2018).

Namibia’s national production base is primarily driven by extraction and processing of natural resources, such that real sector growth trends display heavy vulnerabilities to external shocks, mainly through movements in global commodity demand and prices (mining and quarrying), as well as recurring droughts (agriculture). 

The relatively limited, less diversified but steadily growing manufacturing sector is heavily dependent on inputs from the country’s natural resource endowment.  

Since independence in 1990, Namibia had relatively experienced moderate positive rates of annual economic growth. 

Between 2000-2015, GDP per capita grew at 3.1% on average, largely on account of an export boom in diamonds, minerals and metals. 

However, since 2016, the economy has been in a recession. 

Over the past 30 years, inflation has gradually declined, bringing greater predictability for economic agents. 

For example, Namibia has registered favourable inflation conditions from 6.7% in 2016 to 2.2% in 2020 (Bank of Namibia, 2020). 

Monetary policy has generally been accommodative, cushioning the business and household sectors against adverse impacts of recession – and in particular, of Covid-19.  

However, there are critical key macroeconomic challenges and risks, which are further aggravated by Covid-19, namely:

increasing budget deficit and rising public debt, with debt to GDP ratio surpassing the conventionally accepted 35% threshold and now estimated at 60% of GDP at end of 2020;  

public revenue pressures, largely on account of volatile SACU receipts and pressing Covid-induced adjustment needs;

volatility in foreign direct investment (FDI) flows and declining private domestic investment; skills shortage, particularly undermining the country’s ability to attract investments in new sources of growth and export diversification, and 

high unemployment and income inequality levels, amongst others.

Overall, Namibia’s production base has relatively remained unchanged over years, characterised by high levels of product concentration and less diversification.

The mining sector is a pivotal contributor to the Namibian economy, contributing around 10% to GDP and at least 50% to foreign exchange earnings. 

Key mining activities are diamonds, uranium and metal ores. 

Mining remains a strategic economic sector for Namibia’s economic diversification strategy, i.e., value addition necessary to enhance manufacturing base, boost exports and create employment. 

A Minerals Beneficiation Strategy (MBS) on how minerals may be beneficiated locally has been developed by the ministries of Mines & Energy and Industrialisation & Trade.  

This will contribute to downstream industrialisation and the provision of feedstock and other inputs to the manufacturing industry. 

While the agricultural sector’s contribution to GDP is relatively small, accounting for around 6% of GDP, over 70% of the Namibian population is dependent on the sector for their livelihoods. 

Agricultural activities are dominated by livestock farming, accounting for around 3.5% of GDP, mostly cattle, goats, sheep and pigs. 

Crop farming mainly consists of pearl millet, sorghum, maize, wheat, beans and some fruit and vegetables. 

A growing export-oriented table grape sub-sector has emerged in recent years, providing additional employment during peak (harvesting) seasons. 

Another subsector, Charcoal is also becoming increasingly valuable in terms of employment creation and the earning of valuable incomes. 

The agricultural sector contributes significantly to manufacturing as the principal input into food processing industries. 

The fishing sector’s contribution to GDP is relatively small, accounting for around 3% of GDP. 

The sector is a major source of export earnings and government revenue through quota fees, corporate taxes, license fees and other levies. 

Greater value addition is a key government objective for the fisheries sector.

 Current value addition activities are filleting, canning, packaging, smoking, fish oil and fish meal production. 

The growth of manufacturing in this sector will also be driven by the recently availed National Policy on the Blue Economy by the ministry of fisheries. 

Namibia is mostly semi-desert – such that the forestry sector contributes a much smaller share to GDP. 

Namibia’s forest species are dry and mostly utilised for a variety of purposes, including the production of charcoal, firewood and timber on a commercial basis.  Charcoal production is increasingly becoming an important export-oriented sub-sector.

Namibia’s manufacturing sector is relatively small, contributing around 13% to GDP in 2019.  

Manufacturing is heavily dependent on inputs from the country’s natural resource endowments entailing value addition activities, namely: diamond and semi-precious stones cutting and polishing; beneficiation of basic non-ferrous metals, focusing on the smelting of copper and zinc; production of table and fine salt; the processing of meat and grain mill products for the food sub-sector; production of beer and soft drinks (beverages); production of animal feed and other food products, and other simple manufactures. 

In light of the above, we believe the current workaround the Sustainable Special Economic Zones Policy and framework and its accompanying incentives will further lead to domestic and foreign investment in the manufacturing sector to achieve various economic development goals, such as a) increased exports, b) increased employment and skills development, c) attracting foreign investment and d) developing capabilities in selected industries.

Brief overview of the manufacturing sector in Namibia

According to Kaldor’s Law, the manufacturing sector in developing countries represents the engine of economic growth and development. The manufacturing sector has a crucial role to play towards the positive contribution on the Gross Domestic Products (GDP) growth as well as enhancing the employment intensities of output growth with the aim of reducing the unemployment rate and industrialising of the Namibian economy. 

In Namibia, manufacturing is conducted within the framework of the industrial development policy and is, therefore, guided by clear principles. The main principles of the industrial policy of the country include equality, the reduction of poverty and increased growth through product and market diversification. 

The policy furthermore gives preference to the promotion of small and medium-scale businesses in recognition of their capacity to create jobs. 

This policy framework is guided by broader national documents such as the National Development Plans and Vision 2030, which suggest that the contribution of the manufacturing sector should grow significantly to achieve the objectives of the national development policy.

Since Independence, Namibia has had limited industrial development and continues to import most of the manufactured products, mainly from South Africa. 

This is evidenced by the limited range of manufactured products the country is able to export. 

However, Namibia is blessed with many untapped natural resources that require manufacturing, such as timber, minerals and others. 

Activities in the manufacturing sector in Namibia have, to a great extent, been concentrated in the food sub-sector, which has accounted for an average of 44.8% of the total manufacturing output during the period 1995-2005. 

The second-largest subsector within manufacturing included sub-sectors such as textiles and leather goods; wood; paper and printing; chemicals and plastics; non-metallic minerals; basic metals; fabricated metals, machinery and equipment. 

The fish-processing sub-sector has also represented a significant share of the manufacturing sector in the country, accounting for an average of 20.0% of the sector, while meat processing is the smallest contributor to the sector, with a share of 5.8%. 

There was evidence of linkages between the economic sectors of Namibia and the manufacturing sector through inputs being generated from the agricultural (i.e. meat for processing, milk for dairy products) and the fishing (i.e. fish for processing) sectors, in particular. 

In addition to the above products, Namibia has also ventured into the production of value-added products, such as textiles and clothing, the polishing and processing of diamonds, as well as the refining of copper and zinc. 

This new area of the manufacturing sector of the country has created the strongly desired backward and forward linkages within the Namibian economy, particularly the mining sector.

In terms of its contribution to employment, manufacturing is the second-largest productive sector employer in the country after agriculture.

The Industrial Development Policy enabling investment environment into the manufacturing sector and the broader industrialisation area are:

Sector Development Strategies launched in 2016 covering sectors, such as Charcoal and Biomass, Arts and Handicraft, Metal Fabrication, Seafood Production and Processing, Game Meat and Wildlife
Products.

National Automotive Assembly and Development Policy launched in 2019 and an Automotive Production and Development Programme gazetted.

Mineral Beneficiation Strategy by the Ministry of Mines and Energy (MME) and Ministry of Industrialisation and Trade (MIT), with additional work that will lead to a Policy to be finalised by the end of 2022.

Regional value chains development leading for a need and movement towards an effective agglomeration strategy, such as SADC Industrialisation Protocol that Namibia recently ratified and current work on SACU Sector Strategies.

Namibia ratification of the Kigali Amendment to the Montreal Protocol on the Ozone Layer, which also heralds our resolve to move towards greener and low carbon industrialisation pathways. The MIT has a National Ozone Unit with the explicit aim not only to manage the import and exports of hazardous gases but also to start supporting the development of our key industrial capabilities in the heating, ventilation and cooling sectors (HVAC). A national cooling strategy is being
finalised. 

MSME National Policy that supports the need to create linkages between MSMEs and larger enterprises through agglomeration effects.

In conclusion, in order to increase the resilience of the Namibia economy in the context of economic globalisation and to assure sustainable economic growth and development, and industrialisation through sustainable and productive manufacturing is imperative. 


2021-11-17  Staff Reporter

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