The leading economic sectors are agriculture (cattle and sheep), fishing and mining (mainly diamonds but also uranium, zinc, copper, lead and gold). Economic planning is conducted through standard five-year development strategies, with broad policy aims of poverty reduction, improving income distribution, job creation through the private sector, black economic empowerment (as in South Africa) and alleviation of the human, social and economic costs of HIV/AIDS. Despite attempts at diversification, mineral extraction (particularly diamonds) is the principal domestic source of foreign exchange earnings. In addition, Namibia receives revenue allocations through its membership of the Southern African Customs Union (SACU). A small population (2.35mn) and economy (USD13.4bn) engender a marked degree of dependence on its large neighbour South Africa, but relations tend to be very good.
External accounts reflect links with South Africa and the regional customs union
Principal exports are diamonds, gold and uranium. As with most aspects of the economy, developments in the external sector are closely associated with links with South Africa. The latter is Namibia’s largest trade partner and revenue allocations from SACU account for a large share of government income (see also below).
In the period 2000-08, the current account registered annual average surpluses of +4.4% of GDP but deficits have been commonplace since then. Current lower international oil prices provide some relief to the external accounts but weak gold and industrial metal prices limit any potential gains. Foreign exchange reserves at the end of 2014 were USD1.6bn, equivalent to an import cover of only two months. In 2015-16, import cover is unlikely to increase significantly, partly reflecting South Africa’s economic problems and associated weak allocations through SACU. Even so, external liquidity is not forecast to cause systemic problems.
Namibia does not have a financial facility with the IMF and has not sought external debt relief through HIPC or MDRI initiatives. External debt is relatively low and debt servicing requirements comfortable.
The business environment is above average of the region
The World Bank’s Doing Business 2015 survey ranks Namibia 101 (equal with Kuwait) out of 189 countries. Contract enforcement is substantially better than the regional average and insolvency resolution takes less time than the regional average and the recovery rate is far higher.