19 minute read
COUNTRY FOCUS: NAMIBIA Covered by desert but rich in minerals
Covered by desert BUT RICH IN MINERALS:
A focus on NAMIBIA
By Jackie Muinde Perched between Angola and South Africa is Namibia, one of the least populated countries in the world. The country, which is in most part dry thanks to the expansive Namib and Kalahari deserts, is the 15th largest country in Africa by area. Propped up by thriving mining and tourism sectors, Namibia’s economy is currently the 32ed largest in Africa by nominal GDP terms, according to figures from the International
Monetary Fund (IMF). The African Development bank (AfDB) expects Namibia’s economy to grow by 3.3% in 2022, on the back of a steady recovery in financial services, tourism, retail and wholesale trade, and the mining industries—combined with an improvement in the regional and global economic environment. AfDB however notes that the country’s economy faces substantial risks and challenges in the short to medium term which might hamper growth. Sluggish global economic growth would for instance hold down exports and foreign direct investment inflow while an ambitious economic recovery program of NAD 8.1 billion (US$0.5 billion), is expected to limit the fiscal space needed for infrastructure and human capital investment. In the long-term, the Namibia GDP Annual Growth Rate is projected to trend around 2.30 percent in 2023 and 2.10 percent in 2024, according to econometric models by data firm Trading Economics.
AGRICULTURE: THE BEST PROSPECT INDUSTRY SECTOR FOR NAMIBIA
Only 0.97171 % of the country’s land is arable, according to data from the World Bank. With little to no land to carry rainfed agriculture on, the country’s gross domestic product (GDP) (excluding fishing) over the last five years has been just over four percent. Livestock production comprises approximately twothirds of agricultural production and is a major
foreign exchange earner for Namibia. According to the Namibia Statistics Agency, livestock’s contribution to the nominal GDP rose to 3.5 percent in 2020, compared to 3 percent in 2019. Export of live animals (mostly cattle and sheep) has historically dominated exports but robust meat processing infrastructure is changing this narrative. Today, meat processing contributes about 0.2 - 0.4 percent of GDP. Namibia exports most of its meat to Europe and South Africa. In 2016, Namibia became the first and only African country eligible for beef export to the United States and currently has plans to make China a new market.
Although Namibia’s livestock farming is thriving and arguably one of the best in the continent, a large percentage of Namibians do not directly benefit from it. Most Namibians are engaged in subsistence farming practices, mainly growing millet, sorghum, maize and peanuts. As subsistence farming is characterised by low crop yields, Namibia relies heavily on food imports to feed its population. In 2020 alone, data from Trade Economics show that food imports accounted for about 12.6% of the total goods imported into the country. Low incomes from agriculture also explains why most Namibians, particularly those in the rural areas are living below the national poverty line.
The Ministry of Agriculture, Water and Forestry (MAWF) has over the years been working to improve local agricultural production to not only enhance food security but also as a way of uplifting many of citizens from poverty. The Green Scheme was launched in 2004 to encourage irrigation along perennial rivers, assist small scale farmers with financing for commercial crop production and also build necessary infrastructure such as storage facilities in strategic regions to store produce before sale. Although the targeted 27,000 hectares along the perennial rivers has not been achieved, its impact has resulted in an increase in crops, vegetables, fruits production in the country. Still Namibia is a net cereal importer and Cereal imports (mainly maize and wheat) forecast for 2020 was at 295 000 tonnes. Opportunities for further investment in crop production therefore exist if the nation is to achieve food sovereignty. The government is still aggressively pursuing this goal and has established policies to control the importation of certain grains, mainly maize, wheat and pearl millet This is aimed at protecting local producers from external competition, incentivizing them to produce even more crops.
Under the NHDI, the government also aims to increase local production and facilitate the marketing of fruit, vegetables, livestock fodder, and other horticultural products. One element of the NHDI is an import substitution program dubbed the Namibian Market Share Promotion (NMSP). Under the NMSP, importers must purchase a designated percentage of their turnover within Namibia. As a result of the NHDI (and other initiatives), local horticulture production grew by 52 percent from 2004 to 2010 (from 37,823 tons to 57,809 tons) and by 2010 reached an import substitution level of over 22 percent, up from 7 percent before the initiative started. In further support of the NHDI, government has set up the Fresh Produce Hub in the northern regions with the aim to increase food production while preserving the freshness of food.
To further support Agricultural productivity, Namibia secured 1 billion South African Rands (US$62.88 billion) from AfDB in 2017 to finance the country’s Agricultural Mechanisation and Seed Improvement Project (NAMSIP). MWAF is implementing the project over a period of 5 years, in all 14 Administrative Regions of Namibia. According to AfDB, the project will directly benefit 294,500 crop farmers, and 10,000 livestock farmers. MWAF in partnership with German Federal Ministry for Economic Cooperation and Development (BMZ) also launched the Farming for Resilience (F4R) project to strengthen the resilience of the agrifood sector. The 4-year project will work towards diversification of agricultural production systems and adoption of climate-sensitive cultivation Although the country is still not self-reliant when it comes to food production, significant steps have been made towards achieving this goal.
methods and sustainable water management.
Fisheries is another major agricultural activity contributing about 3 percent of GDP since 2007 and about 20 percent of export earnings. Hake fishing makes up the majority of the sector and directly employs more than 10,000 people. Namibia's export of prepared and preserved fish, crustaceans, molluscs, and aquatic invertebrates for quarter one of 2021 stood at N$2.7 billion (US$180 million). This category accounted for more than 90% of the total export of selected manufacturing commodities from agriculture, forestry, and fishing for the country, which stood at N$2,9 billion (US$190 million) in the first quarter. Due to its importance, the government has been making progress in promoting sustainable fishing practices to protect fish stocks which had in that past been decimated by overfishing by foreign fleets. In 2020, the Namibia hake trawl and longline fishery has become the first fishery in Namibia, and the second in Africa, to meet the globally recognised standard for sustainable fishing set by the Marine Stewardship Council (MSC). Namibia sees this as an endorsement for its efforts in sustainable fishing. Government also provides incentives to fishing companies through the “Namibianize” program to increase Namibian participation: companies that employ more Namibians are generally afforded larger fishing quotas.
MANUFACTURING, THE DRIVER OF VISION 2030
The manufacturing sector in Namibia is dominated by fish processing, meat processing, other food and beverage industries. Other manufacturing includes basic non-ferrous metals, fabricated metals, diamond processing, leather and related products, non-metallic mineral products. Data from the National Planning Commission show that the sector contributed 11% to the country’s GDP and employed approximately 7% of all Namibia’s in active employment in 2016. Still Namibia sees manufacturing as the key driver of the country’s Vision 2030. Namibia envisions that the manufacturing and services sector combined should contribute about 80.0 percent of the country’s GDP by the year 2030 and that exports of processed goods should account for not less than 70.0 percent of the country’s total exports.
The government has subsequently initiated efforts aimed at ensuring the achievement of the much-needed sustainable growth. Manufactures can, for instance, take advantage of tax and non-tax incentives through the Registered Manufacturers Scheme, which is basically an incentive package applicable to exporting enterprises who manufacture their products within Namibia. They can also benefit from the Exporters Incentive Regime for locally manufactured goods which provides for an 80% tax deduction scheme for income derived from exports of manufactured goods, other than meat or fish. Finally, and by far the most comprehensive of the three regimes, is the Export Processing Zones (EPZ) regime, available for export processing firms. Under this regime, qualifying prospective manufacturers get to enjoy great tax incentives including zero corporate taxes for goods destined for markets outside SACU. Opportunities in manufacturing particularly exist in steel manufacturing and metal fabrication, automotive, fodder and pet food production, and chemical production. Potential exists in value addition projects of the leather, wool, pelts, silk and textiles industry through enhanced collection, processing, grading and cleaning of raw hides, skins, wool and natural silk.
The government is also actively promoting small and medium enterprises in rural and urban areas through provision of direct subsidies and trade facilitation so as to enhance labour intensive light manufacturing activities in these areas. Issues of land, access to finance, utility costs, investment incentives, manufacturing status, unfair trade practices and skills shortages are the critical factors constraining the The electric vehicles boom and clean energy supply technologies are expected to drive demand for minerals which the country has in significant amounts
manufacturing activities in Namibia, according to a study conducted by the National Planning commission. The study further found that the existing policies are playing a major role in boosting the performance of the manufacturing sector, they just need to be executed fully and faster.
TOURISM STIRRING FROM COVID-19 LULL
Namibia has a unique mix of wildlife, spectacular scenery, and diverse cultures that attracts hundreds of thousand visitors each year. Natural attractions include the Namib Desert, which is the oldest desert in the world; the Fish River Canyon, which is the second-largest canyon after the Grand Canyon; the world-famous sand dunes at Sossusvlei; the Skeleton Coast with its extraordinary landscapes; and Etosha National Park, one of the largest game reserves in Africa. Coupled with its natural beauty, Namibia’s good road infrastructure, potable water, and lower levels of crime than most of its neighboring countries make it an ideal destination for tourists.
Namibia as a tourist destination has been growing in importance over the years and in 2019, the country received a total of 1.6 million tourists, according to data from the Namibia Tourism Board. In that year, travel and tourism contributed approximately 14.7 percent of GDP in Namibia, and 15.4 percent to total employment in 2019, according to the World Travel and Tourism Council (WTTC). The Covid-19 pandemic however threatened to wipe away most of the gains that the country had been making for the past ten years. Tourist numbers plummeted to a record low of 192,000, resulting in the country losing about N$3.2 billion in export revenue and an average reduction of about 30 percent in employment numbers.
The sector started to recover in 2021 with IN NUMBERS
5000
tourist numbers rising to 354,508 in 2021 as movement restrictions started to ease. In 2022, the tourism ministry projects an increase in international arrivals to above the 500 000 international travellers, a record number compared to 2020 levels but way below 2019 levels. Experts predict tourism industry recovery will be painful and slow with pre-COVID levels of visitors and revenue unlikely to return until 2024. Still niche tourism opportunities exist particularly in Wildlife safaris, Hunting tours, Cultural / Educational tours, and Adventure tours. As tourism stirs back to life, opportunities also exist in development and construction of new lodging in both urban and remote areas.
FINANCIAL SECTOR IS RELATIVELY WELL DEVELOPED
Namibia’s financial sector is relatively well developed. Banks are profitable, well capitalized and control an asset value of 75% of GDP. First National Bank Namibia, Bank Windhoek, Nedbank Namibia, and Standard Bank Namibia are the four biggest banks in the country. Together they control 99% of total assets in the banking sector. Namibia’s non-banking financial sector, with net assets at 138% of GDP, is solvent and well capitalized and is the main source of deposits for the banking sector. The law requires that 40% of all pension fund assets must be invested domestically widening the pool of investible funds.
Financial inclusion for individuals has increased remarkably in recent years thanks in part to the removal of high fees and charges associated with maintaining a bank account. Today, Namibia stands out for the high percentage of banked individuals; 78.0 percent of Namibian adults are financially included, according to the last inclusion survey conducted in 2017. Modern infrastructure, such as online and cell phone banking have greatly contributed to financial inclusion of the unbanked. All commercial banks also run a microloan portfolio that gives small loans to individuals and Small and Medium Enterprises (SMEs), further encouraging uptake by Namibians.
In addition to the commercial banks, Namibia has four other banking or specialized financial institutions (AgriculturalBank of Namibia (AgriBank), Development Bank of Namibia (DBN), Namibia Post Office Savings Bank (NPSB) and National Housing Enterprise (NHE) . These are thus autonomous government-owned entities provide a specific range of financial products to very specific target populations. The AgriBank specializes in financing the entire value chain from land acquisition, production inputs, harvesting, transporting, processing and marketing of products. The DBN provides SME finance (direct loans, working capital and credit lines) and SME contract-based finance (working capital for those awarded contracts or tenders)
while NHE specializes in provision of housing to low- and middle-income inhabitants of Namibia and financing of housing for such inhabitants. NPSB has the most extensive branch system of all financial institutions and the bank targets poor people in unbanked or under-banked regions and provides a wide range of banking services including tax-free interest rates.
As the economy grows, there will be increased demand for finance from companies that are expanding. The Banking sector as it currently stands is well poised to support this growth but the financial sector will have to continue to be developed and deepened, through the introduction of new and specialised products in order to respond to the evolving needs of both corporate and individual consumers.
A MINERAL RICH COUNTRY
Namibia is the fourth-largest exporter of nonfuel minerals in Africa and the world's fourth-largest producer of uranium. The country also produces diamond, lead, zinc, tin, silver, and tungsten. The country also extracts gold, silver, tin, vanadium, semiprecious gemstones, tantalite, phosphate, sulphur, and mines salt. Revenue from mining accounts for 12.5% of GDP (2018) and provides more than 50% of foreign exchange earnings.
Mining in Namibia is regulated by the various acts. Diamond and Petroleum are two natural resources that are closely monitored by the Namibian Government. The Government has a royalty schedule that levies 3% of the market price of base precious and rare metals as well as non-nuclear mineral fuels. A 2 % levy was placed on nuclear mineral fuels and industrial minerals. In 2021, the government issued a directive that locals must keep 15% interest in of licences sold to foreigners.
Diamond remains the country’s leading mining sub-sector. In 2020, Namibia exported US$750M in Diamonds, making it the 15th largest exporter of Diamonds in the world. Namibia has the richest known marine diamond deposits in the world, estimated at more than 80 million carats. This mineral resource is expected to continue driving value for the country as demand remains robust driven by new appetite demand jewellery from Chinese millennials. According to Grand View Research, the global diamond market size valued at US$91.244 billion in 2020 is expected to record a CAGR of 3.0% during the 2020 to 2030 period to reach a market value of 123.83 billion at the end of the forecast period.
Uranium has in the recent years emerged as an important mineral to Namibia. Its importance in the nuclear industry continues to fuel the demand and Namibia, holding the 7th largest known deposits of the mineral, stands to reap huge benefits. Rössing Uranium and Swakop Uranium are Namibia’s most significant uranium mines which together provide 12% of the world’s uranium oxide output. In 2021, Rössing Uranium produced 5.1% of the world’s output. Total revenue from that mine alone amounted to N$4.26 billion (US$310 million). As the current Ukraine-Russia war further reduces the available supply of Uranium in the global market and forces Europe to bring nuclear power to the table, uranium prices are expected to even rally further. This would undoubtedly motivate Namibian miners increase exploration and reopen mines placed on care and maintenance. Langer Heinrich Uranium, which was placed on care and maintenance in 2018, has now secured funding and is scheduled to restart by 2023, with a LoM (Life of Mine) of 17 years. Orano's Trekkopje Mine, which was placed on care and maintenance in 2012 following the fall in uranium prices, is also being rehabilitated and is set to open soon. The mine is envisioned to be one of the largest in the world with a uranium output of 3000t/per annum and has a projected life of 11 years. Other uranium mining projects expected to come to market soon are Bannerman Resources' Etango project, and Norasa's Valencia Mine.
Although a smaller producer of gold (the country produced 6,526kg of gold in 2019), Namibia also benefitted heavily from the gold price rally of 2020. As the preferred asset in times of uncertainty, the price of gold soared to US$2 067 per troy ounce in August 2020, reaching its highest level in recent history. To squeeze as much profit from the current price rally, Namibia's gold
IN NUMBERS
US$ 310M
TOTAL REVENUE CONTRIBUTED FROM MINING
mines are investing in mine expansion through the development of underground operations. Navachab Gold Mine is currently assessing the feasibility of developing underground mining operations, and increasing the capacity of its processing plant by 20%. B2Gold Corporation is also progressing ahead with the development of its underground Wolfshag deposit that will add significantly to output from the Otjikoto Mine. Canada’s Osino Resources is also seeking around US$250m in 2022 to build a gold mine at its Twin Hills project in Namibia.
Namibia is also a leading producer of zinc. There are two operational mines: Skorpion Zinc (operated by Vedanta Resources) and Rosh Pinah (owned by various shareholders, with Exxaro Base Metals owning the largest interest at 46 percent). Skorpion Zinc, which was placed on care and maintenance as a result of geotechnical instabilities in the main pit, is assessing options to mine the remaining ore body safely. Skorpion's owner, Vedanta, is also building a viable case to repurpose the plant to process oxides from external operations, and convert the refinery, which would produce Special HighGrade Zinc from zinc sulphides produced by the neighbouring Gamsberg Mine in South Africa.
With record high copper prices there is growing incentive for the commencement of new copper projects in Namibia. Canadian mining exploration and development company Trigon Metals reopened the Kombat Mine in 2022 after 14 years of closure due to underground flooding. Once full commercial production starts at the expected time of March 2022, the Kombat Mine will have a 4,000t copper in concentrate production capacity which will be further increased to 14,500t of copper in 2024. This will be followed by the start of higher-grade underground ore recovery and upgrades to crushing and milling.
Namibia has until recently been largely overlooked by the oil majors. A spate of farm-in agreements over the last six months suggests that this is changing. International oil companies are keen to secure a stake in the southern African country’s oil boom, should one materialise. Austria’s OMV and Murphy Oil Corporation from Arkansas are the latest companies to make their first foray into the Namibian oil and gas sector, buying 25 and 40 per cent, respectively, of Cowan Petroleum’s licence to explore two blocks off the Namibian coast. The country also has potential to develop new mining projects for cobalt and lithium. Global lithium exploration and development company Lepidico is developing a lithium mine in western Namibia and is in discussion with multiple U.S. companies on possible off-take for its lithium and by-products cesium and rubidium.
MINING TO CONTINUE DOMINATING ECONOMY
Since gaining independence in 1990, Namibia has made progress in diversifying its economy away from mining. Noticeable efforts have been made in Agriculture, and although the country is still not self-reliant when it comes to food production, significant steps have been made towards achieving this goal. Attractive government incentives through various programs such as the NHDI and the Green Scheme coupled with investments from multilateral finance players such as the AfDB and GIZ are expected to edge Namibia close to food security. Namibia’s shift towards manufacturing is also a positive step towards achieving its 2030 industrialization goal. The various incentives provided by the government will further encourage investment in the sector, creating the necessary jobs that the country desperately needs, and helping further diversify the economy away from mining. Still, mining is expected to continue playing a major role in the country’s economy. Diamonds are still in plenty, particularly in offshore deposits, and investments are still flowing into gold, another high-net-worth mineral. The electric vehicles boom, and clean energy supply technologies coupled with significant infrastructure expenditures in China and the USA are expected to drive demand for minerals such as Uranium, lithium, cobalt, and copper which the country has in significant amounts. Namibia may not achieve its vision 2030 in its entirety, but it will certainly come close CBA
Subscribe
Get your own personal copies
Keep up to date with the healthcare & pharma industry in Africa Subscription form
KENYA REST OF AFRICA REST OF WORLD
1 year KSh 5,900 USD 120.00 USD 200.00 2 years KSh 11,500 USD 220.00 USD 380.00
* HealthCare Africa is published 6 times a year. Prices inclusive of airmail where applicable
DETAILS OF SUBSCRIPTION
Number of copies
Number of years
Name:
Company:
P.O. Box: Post code:
Town:
Physical Location:
Country:
NOTE: An invoice will be generated once we receive this form
Would you like us to have a feature on your company? Yes
Please complete the following details
Telephone: Website:
Email:
What best describes your main business activity (e.g. hospital, banking, consultant, packaging supplier, NGO)
What best describes your job:
Chairman, CEO, Director
Sales/Marketing
QA/R&D
Others (specify) General Management
Purchasing/Supply chain
Process Management
Applicant’s Signature & Stamp:
Date:
FW AFRICA PO BOX 1874 - 00621 Village Market, Nairobi, KENYA Tel: +254 20 8155022 | Cell: +254 725 343932 Email: info@fwafrica.net Corporate Website: www.fwafrica.net
