31 January 2013

Namibia: Population Growth a Curse in Disguise


Analysis of the effects from the demographic changes experienced in the mid-1980s, along with the current economic circumstances, produce a frightening scenario, which has now prompted the State Treasurer to make an urgent and passionate plea for the overhaul of public policy initiatives that would quadruple the current rate of economic growth.

The Ministry of Finance found that the combination of birth rate decline, the infertility rate among women, the death rate and population structure of the 1980s, has bestowed Namibia with what is referred to as a 'population bulge' of able-bodied men and women - the majority of whom are aged between 19 and 39 years.

The analysis found that the scenario does not come accompanied by demographic dividends - as is usually the case - but instead places the country in a very precarious position. Compounding this is the realisation that "recent initiatives to tackle unemployment and boost job creation have fallen short of their intended goals."

Youth bulge is generally defined as the explosion in the young adult population as active participants in the economy, while demographic dividends refers to the expectation of such population growth yielding more affluent people and increased ability to buy goods.

Namibia's statistical projections, however, show a public service heading towards being so crippled that it would not be able to cope with the rising demand for healthcare, including the state grant for pensioners along with grants for orphans, the disabled and other categories of beneficiaries that many Namibians take for granted.

The large and disproportionate number of unemployed would compound the unemployment burden, consequently putting "further strain on the fiscus, while economic growth will also be put under pressure - through lower saving rates and weaker domestic demand - as the benefits brought about by the demographic dividend are reversed."

More alarming is the fact there are only 17 years left before reaching the year 2030, which is the date set for the culmination of the ambitious national development master plan known as Vision 2030. The Ministry of Finance made the comments in a special case study published in the Economic Update for December 2012, released a fortnight ago.

The ministry, when reviewing economic activities for last year recently, put forth its views in a special feature paper on Namibia's Demographics Dividends.

It noted that government interventions such as the third National Development Plan (NDPIII) and the subsequent special Targeted Intervention Programme for Employment Creation and Economic Growth (TIPEEG), to tackle the estimated 51.2 percent unemployment rate, did not deliver.

NDPIII targeted employment growth of 2.6 percent a year between 2007/08 and 2011/12, however, employment actually fell during 2004 to 2008. TIPEEG only succeeded in creating 25 338 jobs in its first year, with just 7 326 (or 29 percent) of these jobs being permanent jobs. The ministry further says the execution rate of available funds for the TIPEEG programme was only 71 percent.

"This suggest that greater efforts are still required if Namibia is to be in a position to take full advantage of its demographic dividends," stated the report. The finance ministry has found that the Namibian population structure is in a stage where the majority of the population is of a working age and should be contributing to the country's economy. The average age in Namibia rose from its lowest point of 23.6 in 1985 to 26.0 in 2010.

In addition to these developments, the fertility rate or the average number of children per woman has declined, from a high of 6.6 between 1975 and 1980 to 3.4 during the period 2005 to 2010. The decline in the fertility rate should mean households have fewer children to support, and money could go towards savings and spending or investment in the economy.

However, this is not happening and the Ministry of Finance cautions that this "would pose further problems for policy makers as demand for public services such as healthcare rises and state pensions also increase."

"These issues really underscore the importance of Namibia placing itself in a position to take advantage of the demographic dividends by both absorbing and productively employing the extra workers it provides.

Unless the demographic changes currently underway are combined with effective public policies to harness the benefits on offer, Namibia risks missing out on an important opportunity to boost growth and address key challenges such as reducing poverty and income inequality," the ministry said.

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