Investment and business environment

Economic and business prospects

Namibia has proved politically stable since independence with a functioning multiparty democracy and respect for human rights entrenched in the country's constitution. The second elections since independence in 1990 are scheduled for the end of 1999 when President Sam Nujoma will end his second, five-year term of office. Under a recent constitutional amendment, which has upset opposition parties, Nujoma will be allowed to stand for a third term. Political stability combined with a good infrastructure and a large market for its output in the rest of Southern Africa makes Namibia a good manufacturing base. Although the downturn in the world's commodity markets has had a negative impact on recent economic performance and has depressed the outlook for the mining industry, there are still good prospects for some of the country's newer economic sectors.

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Recent economic developments

Namibia recorded 5 per cent average annual GDP growth during 1991-95, but economic performance has been weaker in recent years. Drought has affected agriculture and livestock and the depression in the world commodity markets has hit the mining industry. After growth of 2.4 per cent in 1997, there was an improvement to 2.6 per cent in 1998 as a result of increased output in fishing and the fish processing industry and the continued expansion of tourism. But growth is thought unlikely to exceed 3 per cent in the coming years. According to Finance Minister Nangolo Mbumba in his budget speech in April 1999, no increase in mineral production is anticipated and major Investments in new base metal ventures such as Haib Copper are unlikely to materialise before 2000. Any real growth is expected to come from a rise in offshore diamond production, a continued recovery in the fishing sector and increased agricultural output following improved rainfall.

The government is committed to fiscal stability and reducing the budget deficit to 3 per cent of GDP in the medium-term. However, that figure will remain out of reach as long the cost of the civil service continues to absorb as much as 46 per cent of total public-sector spending. The cost burden was aggravated when, in December 1998, the government offered jobs to 6,000 unemployed Swapo excombatants in the army, police force and other government services. It also provided pensions to another 1,000 veterans, boosting the already excessive public wage bill by a further N$ 160 million. In addition, the government has been unable to curb overspending by ministries. To finance this growing budget deficit, the government has been obliged to increase borrowing on the domestic market. Domestic debt has therefore risen sharply in recent years to over N$l billion. External debt has also been rising following a debt cancellation agreement with South Africa in 1997, which wrote off the bulk of inherited bilateral liabilities. In September 1998 external debt stood at N$700 million.

No large-scale privatisation programme has been launched, as most parastatals are profitable. None-the-less a commercialised company has taken over responsibility for bulk supplies of water and Telecom. Namibia is to lose its sole service-provider status from 2000. While the planned privatisation of the national carrier Air Namibia has been postponed until the company's operating costs have been cut, talks have been taking place between its executives and Germany's Lufthansa about possible future co-operation, although no details of the talks have been released.

The Namibian Stock Exchange, the second largest in Africa as measured by market capitalisation, has been upgrading its systems. In November 1998 it switched over to a JET computer trading system, which is to be further upgraded with the help of Sweden under an agreement between the two worth N$2.9 million, signed in January 1999. The exchange had a market capitalisation of N$160 billion as of end-1998. This largely reflects the dual listing of a number of large South African companies, including De Beers. Local market capitalisation stood at N$2.5 billion at the end of 1998.

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