Namibia Economic Problems Part I

By | May 27, 2021


Namibia’s structural economic problems are partly a consequence of Namibia’s history and its peripheral location on the south-western end of the African continent. But a substantial part of the economic problems is also ‘homemade’.

The main problem areas of the Namibian economy are:

  • low diversification
  • Dependence on South Africa
  • lack of sales markets
  • Bureaucracy and loss-making state enterprises
  • problematic legal framework

Little diversification

As mentioned earlier, the backbone of the Namibian economy essentially consists of just four areas. These are agriculture, mining, fishing and tourism. All four areas are struggling with problems that unfortunately can only be partially solved. Agriculture is dominated by extensive animal husbandry, especially cattle and sheep breeding. If, as happens regularly in southern Africa, there are several years of drought in a row, agricultural production collapses in the second year of drought at the latest. The farmers then have to significantly reduce their herds, the rest of the animals have to be slaughtered little by little due to a lack of sufficient feed. With a time lag, this leads to an oversupply of animals for slaughter and a fall in meat prices.

At the same time, the production of crops (mainly maize and millet), which is low in Namibia anyway, is falling sharply and in some years the harvest is almost completely lost. If this is followed by a few more years of good rainfall, agriculture gradually recovers, but the same cycle begins again with the next few years of drought. These climatic disadvantages of Namibia cannot be changed, the country has to live with them. But there are now clear signs that the drought problem has even intensified due to climate change in the last 10-20 years.

According to payhelpcenter, the second area, mining, is very capital-intensive and very dependent on world market prices, especially for uranium. The uranium price has always been volatile, but since the Fukushima nuclear disaster in 2011 it has been almost permanently below US $ 50 per pound of yellow cake and has even been below US $ 35 since 2016. Uranium has now been at the same level for almost a decade on which it is actually no longer worth dismantling. Numerous planned uranium mining projects in the Erongo have therefore been put on hold until further notice and even mines that were already producing were shut down or reduced to care and maintenance operations in the hope that the uranium price would again reach a level at some point in the future that would make production profitable again power.

Income from diamond and gold mining and other mining products are also difficult to plan and calculate due to the fluctuating world market prices. In addition, mines only have a limited lifespan (approx. 10 – 15 years for gold mines, approx. 20 – 40 years for uranium mining) and are therefore not a long-term sustainable source of income. Even the offshore diamond deposits are likely to be gradually exhausted within 30 to 40 years at the latest. Due to the small number of jobs, mining also makes little contribution to reducing the extremely high unemployment. Last but not least, the majority of the profits from mining go to the predominantly foreign owners of the mines. (Which, however, also bear the not inconsiderable economic risk and the enormous initial investments.)

The third area, deep-sea fishing and the downstream (rather limited) fish processing industry in Walvis Bay and Lüderitz, offers more jobs than mining and can also be sustainable (with appropriately careful management of fish resources). But here, too, most of the added value goes abroad, and the non-transparent granting of fishing licenses also benefits from the part of the income that remains in the country, primarily well-connected individuals who then put these profits primarily into private consumption. (For Namibians, fishing licenses are probably the fastest, easiest and most risk-free way to get rich without having to do anything yourself. See also the sections on “Corruption” and the comments on the ‘Fishrod scandal’ in the section ”

The fourth area, i.e. tourism, is much more stable and better positioned than the other three areas, but tourism is also repeatedly strongly influenced by external influences, in both positive and negative ways. Due to the corona pandemic, tourism has now almost completely come to a standstill since March 2020, but there were similar (albeit less severe) effects from external factors before. For example, the Ebola pandemic in West Africa a few years ago had a very negative impact on holiday bookings in Namibia. (At that time Namibia was in a sense taken into ‘kin custody’, although there was never an Ebola case in Namibia and West Africa is (spatially) closer to Western Europe than to Namibia!) In addition, the preferred travel destinations can change quickly, e.g. as a result of political developments, changes in the exchange rate or more frequent negative press reports, for example about increasing crime. Tourists are a ‘shy game’ who can change their vacation plans at any time without warning. Nobody is dependent on vacationing in Namibia of all places. If the vacation is somewhere else, better, safer and perhaps also cheaper, Namibia is quickly ‘out’ again as a destination!

If you put the four main pillars of the Namibian economy side by side, a problem becomes immediately clear: three of the four areas belong to the primary economic sector, only one (tourism) to the tertiary sector and not a single one falls into the secondary sector. Unfortunately, it is precisely the secondary sector – and especially the manufacturing industry – that could potentially create many jobs, especially for the many low and low- skilled Namibians. But it is precisely these that are really needed urgently!

Logo of the Rössing mine