12 October 2018

Namibia: Nam Loses N$8,4b in Direct Investments

THE local economy lost N$8,4 billion in direct investments last year, representing a quarterly loss of N$2,3 billion, which could have positively contributed to local economic growth.

Direct investment net outflows are defined as the value of outward direct investments made by residents of the reporting economy to external economies.

Finance minister Calle Schlettwein made these revelations during a consultative meeting with private sector representatives yesterday. The meeting was aimed at mapping out strategies on how to improve the performance of the country's economy.

He said the outflow of investments does not support the role of the private sector as the engine of growth.

The minister stressed that private sector investment in the real and services sectors of the economy remains low, and has declined over the past two years.

"At the same time, the economy has witnessed perpetual outflows of investment and reinvestments elsewhere. The productive capacity of the economy remains narrow and we still import most basic consumables, continually eroding our balance of payments. In fact, our trade current account and international reserve balances are only getting better now inasmuch as domestic demand conditions are weak," Schlettwein said.

He elaborated that public investments and the government consumption of goods and services and the large foreign direct investment in the mining sector have largely driven the robust growth rates over the years prior to 2016.

"As soon as government fiscal policy receded into the consolidative mode, and mining sector foreign investments ran their course, economic activity plummeted and the needed fiscal consolidation is assessed to be the main cause of slackness, as if fiscal expansion is forever," the minister explained.

He further stressed that the local economy has been under concerted recessionary pressure since the second quarter of 2016, adding that the recessionary pressures will be felt for the remainder of the year.

"Considering the past, present and the outlook of our economy, we need to discuss and commit to an effective partnership between the government, industry and the development partners of a more inclusive, home-grown sustainable economic growth trajectory. The defining principle of economic order is that we are a mixed economy, with the private sector supposed to serve as the engine of growth and job-creation," Schlettwein added.

Eloise du Plessis, PSG Namibia's head of research, said one has to consider the fact that the economy is under severe strain due to reduced government spending, drought, a decline in Angolan investments and spending due to low oil prices, and a contracting property sector. Thus, it is not unreasonable for the private sector to have reined in spending in the local economy.

Responding to questions from The Namibian, she said foreign direct investments (FDI) can be major drivers of economic growth and job-creation, besides being an important indicator of investor confidence.

"FDI inflows have recently improved on the back of a recovery in mining output and reduced investor fears over policy uncertainty. FDI should continue to improve during 2018 in line with recovering commodity prices, which would boost mining companies' profits and encourage new investments in the industry.

"In the mining and quarrying sector, we witnessed an increased interest in the exploration for battery minerals such as cobalt, graphite and lithium. However, an escalating global trade war could impede investment into Namibia," she added.

Economics lecturer at the University of Namibia, Omu Kakujaha-Matundu, said the outflow in direct investments should be concerning because it shows that investors prefer taking their money out of Namibia.

He stressed the reason why investors choose to invest outside Namibia may be because there are no guarantees in the local economy on returns from these investments.

The private sector should also assist the government in growing the economy because that is not the responsibility of the government alone, he added.

charmaine@namibian.com.na

See What Everyone is Watching

Copyright © 2018 The Namibian. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 600 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.