NAMIBIA Martha PHIRI / Principal Country Economist, AfDB

Transcription

1 NAMIBIA 2015 Martha PHIRI / m.phiri@afdb.org Principal Country Economist, AfDB Ojijo ODHIAMBO / ojijo.odhiambo@undp.org Economic Advisor, UNDP Namibia

2 Namibia NAMIBIA 2014 growth accelerated to 5.3% and should remain strong in coming years as new mines start production and exports grow. Political stability and prudent fiscal management have made Namibia attractive for investment but it must boost quality of education and training to improve skills and enhance competitiveness. Namibia must deepen reforms to get better value from agriculture and extend nonmineral diversification to create jobs and reinforce spatial inclusion. Overview Namibia held off the global economic slowdown, posting growth rates above 5% since Recovery remains on course despite the winding down of official fiscal stimulus measures. Gross domestic product (GDP) growth accelerated to 5.3% in 2014 from 5.1% in 2013 with robust construction activity and high consumer demand. Growth is expected to improve to 5.6% in 2015 and 6.4% in 2016 as external demand improves and new mines start production and exporting. Tight monetary policy has kept consumer price index (CPI) inflation within the target range of 3% to 6%. The Bank of Namibia in August 2014 implemented a second increase in the repo rate by 25 basis points to 6% to stabilise rising inflation caused by escalating food and transport prices. Consequently, the CPI inflation rate moderated from 6.1% in June to 4.7% in December. Political stability and prudent fiscal management have helped anchor Namibia s high growth rates and poverty reduction efforts. With strong ties to South Africa, the region s second biggest economy, Namibia has stronger competitiveness and investment attraction than average sub- Saharan countries. However to accelerate convergence with high income countries in line with its current National Development Plan, the authorities need to address remaining structural bottlenecks. Work on a new Public Procurement and Public Finance Management law must be speeded up to reinforce economic governance and public sector management. Namibia also needs better regulatory capacity for public-private partnerships to help public sector investment programmes. Fiscal consolidation, including rationalising public sector wages, should continue to achieve efficiency gains and help attain a more sustainable current account balance. Efforts to enhance education and training quality must be stepped up and anti-corruption efforts redoubled to recapture public confidence and strengthen the country s strong governance record. Namibia has made progress reducing geographical income disparities despite its largely arid climate, extremely low population density and a dual economy where a highly productive capital intensive mining sector operates alongside an agriculture sector that is of low productivity but a major employer. Thanks to the government s Vision 2030 and national development plans, Namibia has seen a 40% reduction in poverty between 1993/94 and 2009/10 with the biggest improvement in rural areas. Accelerated implementation of the Decentralisation Enabling Act of 2000 and deeper structural reforms to intensify value addition in agriculture and broaden nonmineral diversification will be key in consolidating progress made in promoting spatial inclusion in Namibia. 2 African Economic Outlook AfDB, OECD, UNDP 2015

3 % AfDB, OECD, UNDP Figure 1. Real GDP growth Real GDP growth (%) Southern Africa Africa (%) (e) 2015(p) 2016(p) Source: AfDB, Statistics Department AEO. Estimates (e); projections (p) Table 1. Macroeconomic development (e) 2015(p) 2016(p) Real GDP growth Real GDP per capita growth CPI inflation Budget balance % GDP Current account % GDP Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations. Recent developments and prospects Robust construction and mining activities have kept the domestic economic recovery on course with gross domestic product (GDP) growing by 5.3% in 2014, up from 5.1% in Accounting for 60% of GDP in 2014, the tertiary sector remains the largest contributor to GDP although a weak performance in tourism is slowing growth. Tertiary sector growth is estimated to have fallen from 6.5% in 2013 to 6% in 2014 as tourism s weak growth countered robust wholesale and retail activities. By the end of the third quarter of 2014, hotels and restaurant activity grew by just 0.1% in 12 months, as the number of beds booked declined and international arrivals slowed. However, benefiting from strong consumer demand, wholesale and retail activities grew by 14% during the period.. The secondary sector accounts for 19.3% of GDP and grew at 10.6% in 2014, from 8.7% the previous year, to help drive growth. The construction sector was buoyant and electricity and water rebounded. Construction benefited from accelerated investment in mining and public housing. Good rainfall and the rehabilitation of the Ruacana power plant contributed to increased electricity supply. Manufacturing, which at 68% dominates the secondary sector, contracted because of a slowdown in mineral processing and a decline in the textiles sector. The primary sector, representing 20% of GDP, saw near zero growth in 2014 as agricultural growth declined and falling global uranium prices and weak offshore mining slowed mining African Economic Outlook 3Namibia

4 Namibia growth. Mining (63%) dominates the primary sector with diamonds contributing the largest share. Agriculture is mainly driven by livestock production because of the arid climate. A decomposition of aggregate demand shows that private consumption and investment continue to drive growth. Anchored by a stimulus environment, private consumption, grew by 13% in 2013 after 11.8% in 2012,. Gross Domestic Fixed Capital Formation grew by 13% to 29.8 billion Namibian dollars (NAD) in 2014 driven by private investment in mining. Private sector investment accounted for about 75% of that and expanded by 17.3% compared to 4.4% for public investment. The contribution of net exports of goods and services to GDP growth improved slightly although it remained in negative territory. Benefiting from the slight improvement in exports and significant capital flows, the current account deficit narrowed to 4% of GDP from 5.1% in Exports from new mines should bolster the current account. The persistent current account deficit also reflects a slower growth in savings compared to investment. Although higher than the regional average, at 20.3% in 2014 the savings rate rose at a much slower pace of about 2% since 2012 compared to the investment rate which had risen by about 37% during the period Net foreign direct investment slowed to NAD 8.93 billion in 2013 after a peak of NAD 9.52 billion in 2012 due to reduced inflows of reinvested earnings. In the first half of 2014, foreign investment was estimated at NAD 588 million, down from NAD 3 billion during the corresponding period of South Africa was the main source and destination for Namibia s foreign investment. The medium term growth outlook remains positive as external demand improves and new mines start production. GDP is expected to grow by 5.6% in 2015 and 6.4% in Risks come from any slowdown in global mineral prices particularly for uranium. Keeping on schedule full scale production at the Husab uranium mine, the Tschudi copper mine and B2Gold Corp. s mine scheduled for 2015 and 2016 and the implementation of port expansion will be key to full economic recovery. A slowdown in trend growth however, threatens long term prospects. Namibia s five year rolling GDP growth rate decelerated from 6.3% in 2007 to 4% in To sustain long term growth Namibia needs to undertake broad-based structural reforms to accelerate productivity and promote diversification into high value added non-mineral sectors that could create additional jobs. Fiscal consolidation measures are expected to bolster Namibia s strong national savings rate helping to gradually ease pressure on the current account balance. Table 2. GDP by sector (percentage of GDP at current prices) Agriculture, forestry, fishing & hunting of which fishing Mining and quarrying of which oil Manufacturing Electricity, gas and water Construction Wholesale & retail trade; repair of vehicles household goods; Restaurants and hotels of which hotels and restaurants Transport, storage and communication Finance, real estate and business services Public administration and defence Other services Gross domestic product at basic prices / factor cost Source: Data from domestic authorities 4 African Economic Outlook AfDB, OECD, UNDP 2015

5 AfDB, OECD, UNDP 2015 Macroeconomic policy Fiscal policy Fiscal policy remained expansionary in 2013/14 as the authorities sought to revive domestic economic activity amidst a severe drought and weak external demand. Nonetheless showing commitment to consolidation plans announced in 2012, the three-year Targeted Intervention Programme for Employment and Economic Growth, which anchored the expansionary policy, wound down as scheduled in 2013/14 having created an estimated jobs, about 19% of them permanent. While revenue growth benefited from robust domestic tax mobilisation and higher than projected Southern African Customs Union (SACU) receipts, expenditure increased at a much faster pace. The revenue of 34.6% of GDP in 2013/14 performed better than pre-crisis levels with SACU receipts increasing by 23% to NAD 14.9 billion while tax revenues grew by 6% to reach an estimated NAD 37.5 billion. Overall spending remained below the fiscal cap of 40% of GDP, but it was 10% higher than the previous year. In tandem, public debt increased from 25% of GDP to 26%. As a result, the budget balance is estimated to have worsened from a balanced position in 2012/13 to a deficit of 1.1% of GDP in 2013/14. The deficit was largely financed through domestic debt and sovereign issuance on the Johannesburg Stock Exchange. Government borrowing was not inflationary and did not crowd out private sector borrowing which increased by 14.3% at the end of 2013 against the previous year. Forecasts indicate the government could achieve a budget balance of 5% of GDP for 2014/15, returning to a surplus for the first time since 2007/08. The authorities estimated the 2014/15 budget at NAD 60.3 billion and expressed their commitment to deepen fiscal consolidation. At NAD 13.1 billion, education received the largest share, 22.7% of the budget, followed by defence (11%) and health (10%). Transport dominated the development budget at 15.9% of the total. Nonetheless, the rising level of public sector wage bill needs attention to achieve fiscal sustainability. The budget calls for NAD 22 billion for public sector wages which could push the share of the wage bill up to 22% of GDP in the medium term from 14.5% in 2013/14. Namibia s wage bill is almost double the average for Middle Income Countries at 9% of GDP. The slow execution rate for the development budget, estimated at 88.6% in 2013/14, also points to the need to build public sector capacity to achieve efficiency gains in service delivery. Table 3. Public finances (percentage of GDP at current prices) 2005/ / / / /2014(e) 2014/2015(p) 2015/2016(p) Total revenue and grants Tax revenue Grants Total expenditure and net lending (a) Current expenditure Excluding interest Wages and salaries Interest Capital expenditure Primary balance Overall balance Note : a. Only major items are reported. Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations African Economic Outlook 5Namibia

6 Namibia Monetary policy The authorities undertook monetary tightening in 2014 to stabilise consumer prices. The Bank of Namibia in August implemented a 0.25 percentage point increase in the annual repo rate to 6%, the second straight quarterly increase. In tandem, the year-on-year inflation rate moderated from 6.1% in June 2014 to 4.97% in December. Rising food and transport costs put pressure on Namibia s inflation, which tracks that of South Africa because of the currency peg and strong trade ties between the two countries. Inflationary pressures are likely to continue moderating on the back of a stronger Namibian dollar and tighter monetary policy, keeping medium term inflation within the policy target range of 3% to 6%. The Namibia dollar, which is pegged to the South African rand, weakened against major trading currencies in the first half of 2014 as the US Federal Reserve ended its bond buying to support US economic activity. It fell by 11% against the US dollar and 16.4% against the euro. International reserves increased by 9.2% to reach NAD 15.9 billion at the end June This was driven by increased SACU receipts. Nonetheless the stock of international reserves at 2.3 months of imports stood below the international benchmark of 3 months coverage, although it remains adequate to sustain the currency peg. Broad money supply grew by 6.9% in the year to June 2014, down from a 7.5% increase the previous year, owing to a significant decline in net domestic claims, mainly claims on the government. On an annual basis, credit to the private sector increased by 15.3% as at the end of June 2014 driven by higher borrowing in mining and manufacturing. Growth in household credit slowed to 13.6% from 14.4% as mortgage credit moderated. Nonetheless at 65% of the total, individual mortgage credit presents a risk as the repo rate rises. Individuals make up 55.1% of banks concentration of credit exposure. Bank of Namibia s plans to implement policy measures to stem private sector indebtedness is a step in the right direction. Economic co-operation, regional integration and trade Namibia has strengthened economic co-operation and integration to regional value chains. In addition to being a SACU member, it has ratified the 2006 SADC Protocol on Finance and Investment. SADC citizens are issued visas at the point of entry, although Namibia is yet to ratify the 2005 SADC Protocol on Facilitation of Movement of Persons in Southern Africa. Progress towards macroeconomic convergence under SADC has been positive. Namibia has achieved targets on government debt, current account balance, inflation and the budget deficit, which is on the border line. It is working to achieve targets on growth and international reserves. Namibia has double tax avoidance agreements with 11 countries including South Africa, Botswana and Mauritius in the region. In 2013, South Africa, which buys beverages, beef, live animals and fish, was the leading export destination, accounting for a 26.7% share, followed by the Euro area at 18.1%, mostly for beef exports. Botswana accounted for 15.3%, principally diamond exports which are benefiting from the relocation of the De Beers diamond trade counter from London to Gaborone. Service exports could benefit from the SADC Protocol on Trade in services which the country is yet to ratify. Minerals account for a 45% of Namibia s exports. Its services trade remains modest at 13.5% of exports. In terms of Namibia s imports, South Africa accounted for a 62% share. It was the main source for vehicles, fuel and pharmaceuticals, followed by the European Union (EU). The conclusion of an Economic Partnership Agreement with the EU in July 2014 alongside South Africa, Mozambique, Botswana, Lesotho and Swaziland may bolster Namibia s trade. The agreement, which awaits ratification, is designed to be compatible with SACU provisions and paves the way for duty and quota free access to the EU market. The current account balance improved on the back of a narrowing merchandise trade deficit and significant capital inflows. In the third quarter of 2014 the current account registered a deficit of NAD 2.4 billion compared to NAD 2.7 billion in the second quarter. Benefiting from the improved 6 African Economic Outlook AfDB, OECD, UNDP 2015

7 AfDB, OECD, UNDP 2015 current account position and a robust capital and financial account surplus, the overall balance of payments in the third quarter moved out of deficit to a surplus of NAD 640 million. At 5.6% of GDP in 2013, foreign direct investment, mainly into mining sector, has remained strong, consistently outperforming Mauritius, Botswana and South Africa for nearly a decade. Table 4. Current account (percentage of GDP at current prices) (e) 2015(p) 2016(p) Trade balance Exports of goods (f.o.b.) Imports of goods (f.o.b.) Services Factor income Current transfers Current account balance Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations. Debt policy Public sector debt remains sustainable and below Namibia s fiscal limit of 35% of GDP as set out in the country s 2005 Sovereign Debt Management Strategy. Nonetheless at NAD 30.9 billion and representing 26% of GDP at the end of fiscal 2013/14, public debt had increased by 12% over the year with domestic debt accounting for 64%. Domestic debt stood at 18.6% of GDP at the end 2013/14, compared to 9.2% for external debt. While domestic debt remains within the fiscal limit of 28% of GDP, the government is keen to reign in short term debt which at 33% of the total was above the 30% ceiling. In spite of moderate risks of a rand depreciation, the volatility of SACU revenues and weak prices for Namibia s commodity exports, the medium term public debt outlook is stable. The conservative benchmarks in the government s debt management strategy have kept public debt sustainable during the fiscal expansionary policy period. The strategy envisions lengthening the maturity profile of government debt to reduce roll over and liquidity risk and to diversify the portfolio. The government also encourages state enterprises with strong balance sheets to raise their own funds on markets. The capacity to manage public debt has improved remarkably. The government now discloses an annual borrowing plan at the beginning of the fiscal year and publishes 6-month issuance calendars. In fiscal 2013/14, the government listed three new bonds on the Namibia Stock Exchange, two of which extended the longest maturity for government securities to 22 years. The Fitch Ratings credit agency in May 2014 affirmed Namibia s long-term foreign and local currency issuer default ratings at BBB- and BBB, predicting steady growth, a stable political and economic environment and a strong sovereign balance sheet. According to Fitch, Namibian government debt is well below the BBB median of 40% of GDP. Plans to review the government s public debt strategy and the 1991 State Finance Act should trigger the necessary reforms to strengthen public finance management and public debt sustainability. African Economic Outlook 7Namibia

8 Namibia Figure 2. Stock of total external debt (percentage of GDP) and debt service (percentage of exports of goods and services) % Outstanding debt (public and private) /GDP Debt service/exports Source : IMF (WEO & Article IV) Economic and political governance Private sector Namibia s stable macroeconomic and political environment and close economic ties with South Africa has given it a more favourable business environment than most of its sub-saharan neighbours. The World Bank s Doing Business 2015 report ranks Namibia s overall business environment at 88 out of 189 economies, higher than the sub-sahara average ranking of 142. However, a slowdown in policy and institutional reforms has seen the country s Doing Business performance lagging behind comparator economies. The report observed that starting a business in Namibia requires 10 procedures and 66 days at a cost of 14.7% of per capita income, placing the country 156th out of 189 economies, below the sub-saharan average of 129 and way behind continental leaders Mauritius (29th) and South Africa (61st). Foreign ownership restrictions only apply to agricultural land in Namibia with the government getting the first option to buy agricultural land when it becomes available to redress inequitable distribution. As a member of the Multilateral Investment Guarantee Agency, Namibia has bilateral reciprocal investment promotion and protection treaties with over 20 countries including Mauritius and Angola in Africa. It has ratified accession to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Tax incentives are available to investors, including in export-oriented activities, with the possibility of special tax packages through the Ministry of Trade and Industry. An industrial policy approved in 2012 strengthens the government s trade and investment policy regime. It seeks to achieve a diversified, inclusive and environment friendly economy driven by value addition and innovation. An assessment of the state of corporate governance in Namibia in 2013 by the consultancy Deloitte Touche Tohmatsu showed that there has been good progress in compliance since their last Global Competitiveness Report in 2012 with a stronger performance by private companies compared to state-owned enterprises. Nonetheless, Namibia needs more reforms on corporate governance to catch up with leading economies in the region. On strength of auditing and reporting and 8 African Economic Outlook AfDB, OECD, UNDP 2015

9 AfDB, OECD, UNDP 2015 efficacy of corporate boards the World Economic Forum Global Competitiveness Report for gives Namibia a global rank of 34th and 67th respectively out of 144 economies. South Africa has an outstanding ranking of first and third respectively. The authorities are keen to update the outdated 1996 Tender Board Act to improve procurement efficiency. Financial sector Namibia s financial sector is relatively well developed by regional standards. The Global Competitiveness Report for ranked the Namibian financial sector 54th out of 144 economies, behind South Africa (7th), Kenya (24th) and Mauritius (26th) in the region. Banking institutions remain sound, profitable, adequately capitalised and resilient to international shocks. At the end of 2013, the banking sector s risk weighted capital ratio had increased to 14.4% from 14% 12 months earlier. The quality of assets remained good, as seen in the fall in non-performing loans ratio from 1.3% to 1.29%. The return on assets and equity at 2.4% and 24.8% respectively in 2013 had shown positive growth. Nonetheless household indebtedness remains a major risk to financial sector stability. As a share of disposable income it stood at 87% at the end of 2013, rising by 15% over the year, compared to an 8.9% growth in disposable income. Non-bank financial institutions represent about 150% of the country s nominal GDP. Pension funds and long term insurers dominate the non-bank institutions with a combined 80% of the industry s assets. Driven by pension funds, the sector grew by 19.5% in The proportion of the population with no access to banks and other financial services the financially excluded is declining. It fell to 31% in 2012 from 52% in The authorities want to improve access to financing. However, the Doing Business 2015 report section on Getting Credit ranked Namibia 61st out of 189 economies, down from 55th in Namibia needs to establish a public credit registry and to expand the existing private credit bureau which currently covers only 64% of the adult population. The domestic capital market is relatively well developed although insufficient instruments in the bond market, a relatively illiquid secondary market and limited trading on the Namibian Stock Exchange (NSX) remain obstacles. Nonetheless, the NSX with a market capitalisation of NAD 1.44 billion in 2013 is one of the biggest in Africa by market capitalisation, after the Johannesburg Stock Exchange. Public sector management, institutions and reform As one of the youngest nations in Africa, Namibia has made great strides in strengthening governance although more reforms are needed. The 2014 Mo Ibrahim index of African governance ranks Namibia fourth on safety and the rule of law behind Botswana, Mauritius and Cabo Verde. However, the country s score of 48.9 on the public sector management sub indicator is way below the Southern Africa average of 52.4 and placed the country 22nd in Africa. Over the past five years Namibia has lost about 7.5 points on this indicator. The public sector is the second biggest employer in Namibia accounting for 25% of the total employed persons, behind the formal private sector at 45%. Evidence of a slowdown in reforms and emerging capacity bottlenecks in the public sector need urgent attention. The government will need to expedite initiatives including the Public Private Partnerships framework and finalise the review of Public Finance Management and public procurement laws to improve public sector efficiency and achieve value for money in government spending. Transparency International s corruption perception Index for 2014 ranked Namibia 55th out of 175 countries and sixth placed in sub-saharan African, up one place on the 2013 report. The constitution was amended in 2010 to incorporate anti-corruption measures that oblige the state to put in place administrative and legislative measures necessary to prevent and combat corruption. Anti-corruption efforts should be further strengthened with the new public procurement law under preparation that aims at strengthening the legal and regulatory framework and establishing an independent oversight body. African Economic Outlook 9Namibia

10 Namibia Natural resource management and environment Namibia s largely arid climate and heavy reliance on the extraction of natural resources for economic development have propelled the issues of conservation and resource management to the top of the authorities development agenda. Demonstrating the highest level of long-term policy commitment, Namibia s Vision 2030 plan identifies sustainable environmental management as one of the key focus areas for economic transformation. The Fourth National Development Plan for 2012/ /17 puts the emphasis on environmental management as a driver of economic development. In the context of the Vision 2030 and the national development plan, Namibia s 2012 industrial development policy recognises the principle of greening the economy through sustainable manufacturing and development practices. Internal discussions are being held on the possibility of subscribing to the Extractive Industry Transparency Initiative. The usual downside risks of a more affluent developing country are evident. In 1990 Namibia s carbon dioxide (CO2) emissions measured in metric tons of CO2 per capita were negligible but by 2010 they had risen to 1.4 calling for concerted efforts to reduce the rapid rise. There is however, good progress on protecting terrestrial and marine areas. According to the 2014 report on the United Nations Millennium Development Goals (MDGs), at 42.58%, Namibia has more than tripled since 1990 the proportion of protected terrestrial and marine areas in its total area, putting it in the lead position in Africa. Although access to safe drinking water at 92% in 2012 had increased by 36% since 1990, Namibia still trails regional leaders Mauritius (at 99.8%), Botswana (97%) and South Africa (95%). More progress is needed to increase access to sanitation. At 32.2% access, Namibia trails behind all other middle income countries in the region as well as strong performing low income countries such as Rwanda (64%) and Djibouti (61%). Furthermore, while the proportion of rural people with access to clean drinking water and sanitation had increased there was a marginal decline for urban access on both indicators calling for accelerated investment to keep pace with the rising urban population. Political context The results of Namibia s peaceful general election in November 2014, won by the South West Africa People s Organisation (SWAPO), signal possible continuation of current development policies and sustained political stability. Since independence in 1990, Namibia under SWAPO-led governments has enjoyed peace and political stability and a smooth transition of power on three occasions. Constitutional amendments effected by the SWAPO dominated parliament in 2014, give the president power to appoint the vice-president, the prime minister and cabinet ministers; heads of all security organs; the chief justice and judges of the Supreme Court and High Court; governors, commissioners of the Electoral Commission, as well as political heads of the country s 14 regions. While opposition members have expressed concern about the dominance of SWAPO and the decreasing opposition voice, the new administration will be keen to show the positive results of the wide ranging constitutional and legal reforms adopted before the elections. In particular, the 50:50 gender representation adopted by SWAPO in line with the SADC Protocol on Gender and Development reflects a commitment to inclusive governance. In moving forward, the authorities are aware that the challenge ahead is to reinvigorate structural reforms that will enhance productivity and competitiveness to accelerate economic diversification and improve the business environment for job creation and poverty reduction. Efforts to recapture public confidence in the government s fight against corruption and to promote transparency and accountability will also be key to achieving the needed socio-economic transformation. 10 African Economic Outlook AfDB, OECD, UNDP 2015

11 Social context and human development Namibia Building human resources Namibia has a relatively strong human development record. Its score of on the 2014 UN Human Development Index (HDI) is 13.5% higher than 1980, making it a medium ranked country and positioning it well above the sub-saharan African average of The net enrolment ratio in primary education stood at 99.6% in 2012 with literacy rates for 15 to 24 year olds and adults estimated at 94% and 89% respectively. Some 33% of women and 34% of men have at least some secondary education. This is below the average for medium HDI countries. The government has shown commitment to improve education. The 22.5% of the 2013/14 national budget allocated to education is the biggest single expense. Curriculum development; introducing free primary and secondary education, a refocus on early childhood development and expanded education infrastructure all show government efforts. The World Economic Forum 2014/15 Global Competitiveness Report has however, indicated an acute shortage of scientists and engineers which limits Namibia s capacity to innovate and achieve economic transformation. The business community considers the inadequately trained workforce and skills mismatch as the biggest obstacles to doing business in the country. The government is developing vocational training and expanding facilities for specialised training in medicine and engineering. The country has registered mixed progress towards health-related MDGs. While the underfive child mortality rate has declined from about 75 per live births in 1990 to 54 per live births in 2013, the country is unlikely to meet the MDG target. At 358 deaths per live births, the maternal mortality rate is higher than the 186 average for medium HDI countries. This is largely due to two key factors: one in ten births is not attended by skilled health personnel and the adolescent birth rate of 82% remains high. The national HIV prevalence rate at 16.9% in 2014 had declined by 23% with the prevalence among women aged falling from 22% to 9.8%. Between 1996 and 2013, deaths from malaria per population declined from 31 to one while the percentage of deaths associated with tuberculosis declined from seven in 2000 to 3.5 in Health care remains a top government priority, receiving increasingly higher spending although at 12.2% of the national budget in 2014/15 it still falls short of the target of 15% set by African Union countries in their 2001 Abuja declaration. Poverty reduction and social protection Namibia has made good progress in reducing poverty, although results have been uneven across its 14 regions with two registering increases in poverty over the past decade. The government s 2009/10 Household Income and Expenditure survey used a poverty line of NAD 378 and estimated that 19.5% of the population was poor with 9.6% living in extreme poverty. Between 1993 and 2010, Namibia recorded a 40% reduction in poverty with the biggest fall (44%) in rural areas. Nonetheless, poverty remains stubbornly high in rural areas at 27% compared to urban areas (9%) and among households headed by women, 22%, compared to male-headed households with 18%. Poor education attainment at secondary and tertiary levels causes inequality as few unskilled and semi-skilled youths are likely to find jobs. The unemployment rate, at 29.2% in 2013, remains high, a reflection of a skills mismatch and a weak education and training system that is not responding to the evolving labour market needs. The youth unemployment rate is 41%. Unemployment is higher among women (33.1%) than men (25.8%) and in rural areas at 30% compared to urban areas at 29%. Unemployment for those who have completed junior secondary education is 36.6% while for university graduates it is 7.2%. A marginal decline in the country s Gini poverty coefficient from in 2003/04 to in 2009/10 suggests a slight improvement in income distribution, largely due to the government s AfDB, OECD, UNDP 2015 African Economic Outlook 11

12 Namibia generous social safety net programme for the elderly, youth, the disabled, orphans and vulnerable children which has been in place since independence. The Universal Pension Scheme provides a flat-rate benefit, which is non-contributory and non-taxable, to all resident Namibians over the age of 60. In 2013/14 the grant covered 98% of people above 60, up from 91% in 2011/12 while the number of persons benefiting from the Maintenance Grant and Foster Care Grant increased to from during the period. Nonetheless, the relatively high Gini coefficient suggests that inclusive growth remains elusive. This raises concerns about the quality of Namibia s growth and the effectiveness of the safety net targeting. When Namibia s HDI value of is discounted for inequality, the HDI falls to 0.352, a loss of 44%. The average loss due to inequality for medium HDI countries is 25% and for sub-saharan Africa it is 33%. In exploring options to improve the targeting and monitoring of the safety net, the government could consider creating a social register as Mauritius did when it faced similar challenges. Gender equality Namibia has narrowed the gender divide in education, politics and public service though challenges remain. The ruling SWAPO party has adopted a zebra listing from which the next government will be drawn. This policy is expected to nearly double the female representation in parliament, which stood at 25% before the November 2014 election in which SWAPO won 80 of the 96 seats. While gender parity in pre-primary, adult literacy and secondary education enrolment has been achieved, and good progress recorded in primary and tertiary education, female participation in the labour market at 75% remains below that of men at 82%. This and other challenges, including high female unemployment, high maternal mortality and adolescent fertility rates and high poverty incidence combine to slow women s development. The 2014 UN report gave Namibia a female HDI value of in contrast with for males. With a Gender Inequality Index of 0.450, Namibia was ranked 87th, in the bottom half among 149 countries. The country recently established a National Gender Coordination Mechanism and approved Gender Responsive Budgeting to give more importance to gender in the formulation, implementation, monitoring and evaluation of annual budgets. Thematic analysis: Regional development and spatial inclusion Namibia faces challenges from the largely arid climate and low population density, averaging 2.6 persons per square kilometre in 2011 as it seeks to improve social economic service delivery and achieve spatial inclusion. Namibia s highly erratic annual rainfall ranges from an average of 600 millimetres in the far northeast to less than 50 mm in the extreme south and along the coast. Most of the soil is extremely poor, holding little nutrients and water, leading to low agricultural productivity. The country is however blessed with rich mineral deposits including rough diamonds, uranium oxide, zinc, gold bullion, blister copper, lead concentrate, manganese, salt and dimension stone. Namibia suffers from the legacy of a dual economy inherited at independence. The highly productive, capital intensive mining sector employs 2% of the labour force, while agriculture with its low productivity employs 31.4%. Local governance is underpinned by 14 regional councils and 52 local authorities in the country. The urban regions of Erongo and Khomas, and regions with commercial agricultural activities have seen large numbers of migrants arrive over the past decade. The rural and predominantly agricultural regions, such as Zambezi, Ohangwena, Omusati and Oshikoto, have experienced the highest population loss, up to 5.5%. An estimated 43% of Namibians now live in urban areas, compared to 30% in African Economic Outlook AfDB, OECD, UNDP 2015

13 Khomas, the commercial hub which includes the capital city Windhoek, is the main employment centre, providing jobs to 21% of those in work. Erongo region, a leading tourist destination with the highest concentration of uranium and which includes Walvis Bay, Namibia s largest port and fish processing hub, contributes about 10% of employment. Oshana, the second most populous region, has experienced dramatic urban growth in recent years and contributes about 8% of employment, while Karas region provides about 5% of Namibia s employment. Karas includes Luderitz, the country s second port, with boat building, fishing and tourism industries and a leading diamond mining zone. While the urban regions have lower jobless rates, five of the six regions with an unemployment rate higher than the national average (29.6% in 2013) are in the agricultural belt. In general, agricultural regions not only have high unemployment, they also experience high informality, underemployment and low pay with 75% classified as unpaid family workers and 20% reporting underemployment. Namibia The geographical patterns of poverty in Namibia show some relationship to regional variation in economic activity and opportunities. The poor are mostly found in rural areas, 37% of the rural population against 14% in urban areas. More subsistence farmers (39%) are poor than those who have salaried work. The two poorest constituencies, at sub-regional level, are Epupa in Kunene region (with a 69% poverty headcount) and Tsumkwe in Otjozondjupa region (64% poverty headcount). Both are in some of the remotest and least accessible parts of the country and are inhabited by the nomadic Himba and indigenous San communities, respectively. There are however, three notable agricultural regions Hardap, Karas and Omusati that show lower poverty levels. These regions have important commercial farming and non-agriculture activities are growing. While poverty has been significantly cut across the country, urban areas where there is a big informal sector as well as high value activities, have higher income inequality with a Gini Coefficient of in 2010 compared to for rural areas. In spite of Namibia s geographical challenges, the government s 2012 poverty report estimated that 68% of the population live within 1 kilometre of a drinking water source. Only 6.5% of the population live within 1 km of a hospital, but an estimated 91% have walking distance access to mobile clinic services. Recognising the importance of removing spatial barriers to inclusion, the fourth National Development Plan for 2012/13 to 2016/17 places special emphasis on increasing value addition in agriculture, where the majority of the labour force is engaged. Namibia s 2012 industrial policy builds on this strategic orientation by adopting the promotion of equitable and broad based economic empowerment as a key principle to accelerate inclusion and breaking the rural-urban divide. Furthermore, the 2011 New Equitable Economic Empowerment Framework specifically aims at promoting the participation of disadvantaged Namibians with a special emphasis on women, youth and people with disabilities. It is hoped that the empowerment framework will also address the skewed distribution of arable land where 52% of agricultural land is mainly owned by large commercial farming households while the remaining 48% of largely communal land supports 70% of rural households. Deeper structural reforms to intensify added value in agriculture and broaden nonmineral diversification will be important in removing spatial disparities in social and economic development. Namibia must also implement in full the various policies and legislation on decentralisation particularly the Decentralization Enabling Act of 2000 and address capacity and institutional constraints. In tandem, the prioritisation and targeting of resources to the poorest and most excluded geographic areas of the country should be enhanced. AfDB, OECD, UNDP 2015 African Economic Outlook 13