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Opinion Pieces

Namibia Needs a Different Approach to Change the Structural Economy

todayJuly 9, 2024 14

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Opinion Piece By Josef sheehama

 

To attain V2030, Namibia will need to adopt structural reforms that will increase economic growth, facilitate more labor-intensive growth by opening up the labor market, and address an expensive and generally ineffective system of education, training, and skills.

The government should support businesses in the manufacturing, construction, and agriculture sectors among others, paying attention to both the educated and the uneducated. As a result, a labor-intensive market is required to address unemployment and create opportunities for both. Namibia’s economy needs structural change to move away from its reliance on commodities and toward a more diversified base. The mining industry has become the main focus of Namibia’s economy over time, taking precedence over other industries like manufacturing, construction, and agriculture. As a result, economic activity has also shifted toward the mining industry. As mining has thus been the main driver of Namibia’s economic structure, we must strategically implement economic reform and technological change. This will support Namibia’s structural transformation toward diversification, which will increase the country’s export of resources other than raw materials.

According to the Namibia Statistical Agency (NSA), the nation’s GDP increased to N$38.9 billion from N$37.2 billion during the same period in 2023, with the economy growing by N$1.7 billion in the first quarter of 2024. The manufacturing sector fell by 1.4%, but this was better than the 2.0% drop in the first quarter of 2023. The construction sector also experienced a slowdown. Hence, Policymakers will be better able to make decisions about future energy price changes in relation to output at sectoral levels if they have access to more information about how various sectors have behaved in relation to price changes. Furthermore, Namibia’s deficit increased to N$11.4 billion in the first quarter as a result of more goods and services being imported than exported. Measured export growth, lower imports, and economic diversification initiatives can help control and mitigate a trade deficit. The successful management of a trade imbalance requires an equilibrium strategy that supports home businesses, promotes economic growth, and upholds financial stability. In order to preserve a positive trade balance and guarantee sustainable economic growth, it is imperative that economic policies be flexible and up to date. Since the downstream operations are farther away, a greater number of new capabilities must be developed concurrently in order for them to be realized. Additionally, for structural change to be accelerated, Namibia needs a well-thought-out plan that incorporates funding for education, technology acquisition, modernizing agriculture, visionary leadership, and private sector involvement. Namibia can create the foundation for a more resilient and diversified economy by tackling these issues. Considering the current situation, the GDP increased by N$1.7 billion in the first quarter of 2024, to N$38.9 billion, from N$37.2 billion during the same period in 2023. The central government debt of Namibia is currently 66% of GDP, which is a decrease from 67.2 percent in the previous year. The country has succeeded in lowering its debt-to-GDP ratio even in the face of a slowdown in economic growth. Furthermore, Namibia must assist businesses in overcoming both soft and hard infrastructural constraints, allowing industries with comparative advantages to gain a competitive advantage in both local and global markets. Namibia’s economic structure is genetically determined by its resource wealth.

Moreover, the only way to guarantee that the economic transformation process is successful is to marketwise it. Because government-owned companies do not react to price signals, privatization is necessary. In governance, economics, and new structural economics are all closely related disciplines. The main focus of new structural economics is on how infrastructure development, comparative advantage, and industrial policy may help the government promote economic growth. In the meantime, the main focus of the domains of economics and government is on how the government actively engages in economic activity inside the market economy. This includes both structural change, where resources shift across sectors, and within-sector productivity increase, which comes from adopting new technologies and management methods.

Enhancing SOE governance is essential for Namibia’s efforts to achieve sustainable economic growth. Through the establishment of strong regulations and the maintenance of openness, the country can effectively oversee its state-owned businesses. PEs experience financial loss, damage to their image and reputation, and market distortion, public trust erosion, and a decline in the confidence of both domestic and foreign investors due to corruption and other irregular practices.

A new approach to economic structure transformation should take into account the importance of the informal economy in Namibia, which provides livelihoods and incomes for a considerable proportion of the country’s population, the majority of whom are self-employed, with more than half being women. Furthermore, the raw material export banning will encourage the development of processing facilities in Namibia, allowing Namibians to claim a larger share of the value chain. Furthermore, local content policies must be taken seriously in all of our projects in response to the need to increase local engagement in the extractive industry. Local content regulations strive to control the extractive industry by allowing local enterprises to access different value chains and gain major economic benefits.

Therefore, Namibia intends to accelerate economic growth by using its recent discoveries of oil and gas deposits in the Orange Basin, as well as its abundant renewable energy resources, which include multiple green hydrogen projects.

Moreover, a new approach to economic structure transformation necessitates the Fourth Industrial Revolution’s (4IR) ability to revolutionize Namibia’s economy, increase productivity, and improve global commerce. Namibia can create jobs, develop wealth, diversify its economy, substitute imports, improve exports, and expand its tax base by adopting technological advancements. Namibia is also planning to launch an Instant Payment Solution, which will change financial transactions, particularly for individuals living in rural areas. To fully reap these benefits, it is critical to address digital literacy and invest in education and skill development, assuring a workforce prepared for the fourth industrial revolution. These aims are aligned with Namibia’s vision of a knowledge-based society powered by technology, innovation, and entrepreneurship.

To this end, Namibia can use a genuine model economy to plan its development strategy, upgrade infrastructure such as TransNamib and institutions to cut transaction costs, implement diverse industrial policies, and accelerate economic development.

Therefore, a new strategy to changing the structural economy and governance, as well as economics, are both concerned with the role of the government and are inextricably linked. This indicates that strong government-market cooperation is important to Namibia’s drive of being a prosperous industrialized modern economy by 2030.

 

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