Country Report Namibia March 2011

Highlights

Outlook for 2011-12

  • The South West Africa People's Organisation (SWAPO), which has governed Namibia since the country gained independence in 1990, will dominate the political scene throughout the forecast period.
  • The government will resist pressure from extremists in the party to adopt more radical policies, particularly over transferring the ownership of land and businesses to black Namibians, which will proceed at a measured pace.
  • The fiscal deficit will increase substantially over the first half of the forecast period as the government maintains higher spending to stimulate the economy while revenue from the Southern African Customs Union falls.
  • Real GDP growth will rise to 4.3% in 2011 as global demand for Namibia's minerals increases, and to 4.5% in 2012 as uranium output increases further.
  • The trade deficit will widen as faster growth and new mining ventures draw in imports and technical problems limit mineral export growth; current-account deficits of 3.5% of GDP in 2011 and 4% of GDP in 2012 are forecast.

Monthly review

  • The High Court has dismissed an application by nine opposition parties to have the 2009 National Assembly election, or its official results, declared null and void.
  • In its judgment the High Court blamed the Electoral Commission of Namibia (ECN) for a number of lapses in its handling of the election, and called for an overhaul of election law; it also criticised the ECN's conduct of its defence.
  • The parties have declared their intention to appeal to the Supreme Court.
  • Proposed changes to the revenue-sharing formula used by the Southern African Customs Union could lower Namibia's share of the common revenue pool from 15% to 9%.
  • In its new Economic Outlook, the Bank of Namibia estimates real GDP growth in 2010 at 4.6%, owing to the rebound in mineral sector growth, and forecasts that it will slow to 4.1% in 2011 as the rebound effect fades.
  • Production by Namdeb, the government-De Beers diamond joint venture, rose by 57% to 1.47m carats in 2010, owing to the recovery in global demand.
  • Higher prices boosted the sales of the Rossing uranium mine by 31% to US$493m in 2010; however, increased operating costs reduced pre-tax earnings by over two-thirds, resulting in a net loss.
  • Rio Tinto and Australia's Extract Resources are considering working together to develop Extract's Husab uranium project.
  • Namibia's first cement plant, Ohorongo, was formally opened in February.

Outlook for 2011-12: Political stability

The South West Africa People's Organisation (SWAPO), which has governed Namibia since independence in 1990, will dominate the political scene throughout the forecast period. Although policy continuity will be maintained during the forecast period, radical elements in SWAPO will press for the land-resettlement programme to be accelerated and for the implementation of the long-delayed comprehensive black economic empowerment (BEE) law. This provides for a shift in the ownership of private-sector firms in favour of "historically disadvantaged Namibians", including minimum equity stakes for BEE entities. However, the growing perception (even among some SWAPO leaders) that most BEE initiatives have worsened corruption and resulted merely in the enrichment of a few politically well-connected Namibians may cause the authorities to re-examine the means of implementing BEE.

The High Court in Windhoek has dismissed the application by nine opposition parties to overturn the results of the 2009 National Assembly election, the judges finding that the applicants had provided insufficient evidence to prove that the elections had been flawed by irregularities such as would have enabled the widespread ballot-rigging they alleged. The Court accordingly rejected the parties' request for a rerun of the election or a recount of the votes. However, the judges sharply criticised the Electoral Commission of Namibia (ECN) for mistakes in the conduct of the poll, and urged parliament to revise Namibia's confusing electoral law. This may not be the end of the matter, as the nine parties intend to appeal to the Supreme Court by mid-March.

Outlook for 2011-12: Election watch

SWAPO retained control of most authorities in the regional and local elections on November 26th-27th, although voter turnout was 38%, the lowest ever level in nationwide elections. The unwillingness of the main opposition party, the Rally for Democracy and Progress (RDP), to enter into electoral pacts with other parties contributed to the opposition's poor showing. Opposition disunity is certainly a factor in SWAPO's continued ability to win decisive election victories: in the regional elections SWAPO secured almost one-half of the 107 constituencies by either a wafer-thin majority or a minority of the vote. Personal rivalry between the party leaders will make a broad opposition alliance difficult to achieve, but now that the RDP has found that it cannot make significant progress by itself, the prospects for an election pact-to contest the next national elections in November 2014-may have improved.

Outlook for 2011-12: International relations

There are no external threats to Namibia. Relations with South Africa will remain strong and Namibia's small economy will continue to be closely linked with that of its southern neighbour. Relations with Western trading partners are generally good, and the government's reservations about signing an economic partnership agreement (EPA) with the EU may soon be resolved, as both Namibia and South Africa have agreed to resume talks on the issue. Political and economic links with China, India and Russia are expanding, as all are keen to gain access to Namibia's natural resources.

Outlook for 2011-12: Policy trends

The Namibian economy, particularly the mining sector, recovered strongly in 2010, boosted by the resumption of global demand for commodities and higher prices. As a consequence, the stimulus measures pursued by the government since 2009-lower interest rates and increased government spending-will begin to be reversed during the outlook period, when economic recovery is judged to be secure. Increasing uranium production will be the main generator of growth. Economic policy will be broadly unchanged under the current national development plan, although its average annual GDP growth target of 5% is unlikely to be achieved. Other goals include increased employment (the rate of unemployment was 51% in 2009); faster land redistribution; and reduced poverty and income inequality (Namibia is judged to have the most unequal distribution of wealth in the world: it is classed as a middle-income country, but around one-half of the population lives on less than US$1.25 a day).

Outlook for 2011-12: Fiscal policy

The budget for fiscal year 2011/12 (April-March) due to be delivered on March 8th will contain measures to boost employment through public- and private-sector initiatives, implying higher government spending levels than projected in the current medium-term expenditure framework (MTEF). The new MTEF-covering 2011/12-2013/14-to be published with the budget will also have to factor in a steeper decline in Namibia's share of receipts from the Southern African Customs Union (SACU), due to the impact of reduced trade with the rest of the world during 2008-09 (payments lag by two years). The current MTEF projects that the deficit will widen from 7.1% of GDP in 2010/11 to 8.2% of GDP in 2011/12 owing to lower SACU receipts, although following estimated real GDP growth of 4.6% in 2010, income tax receipts are likely be revised upwards. Expenditure in 2011/12 was projected-implausibly-to increase by only 0.6% in nominal terms, representing a cut in real terms. However, in the light of the promised employment-creation measures, this will be far exceeded. The Economist Intelligence Unit therefore forecasts a deficit of 8.7% of GDP.

The new MTEF is expected to raise substantially the current government projection of a narrowing of the fiscal deficit to 4.4% of GDP in 2012/13, owing to a 24% increase in revenue, mainly resulting from a doubling of receipts from SACU, whereas spending is forecast to rise by 7%. As inflation is likely to be around 5.5%, this still represents almost no increase in real terms, so we forecast another overshoot. In addition, we expect a smaller increase in SACU receipts, although this may again be partly offset by a larger-than-forecast increase in income tax revenue. This is projected to rise by 14%, the same as in 2011/12. However, tax receipts should grow faster than this, owing to higher profits generated by mining firms in particular. In summary, revenue will be lower and expenditure higher than the MTEF projects, resulting in a deficit of 4.7% of GDP.

To cover the deficits, the government currently expects to increase its debt by nearly 50% to N$26.5bn (US$3bn) by March 2012, and by 21% to N$32bn (29% of GDP-just below the 30% ceiling set in 2010) by March 2013. If higher deficits require additional borrowing, then these targets are likely to be increased in the new MTEF.

Outlook for 2011-12: Monetary policy

The Bank of Namibia (BoN), the central bank, held Namibia's repurchase (repo) rate at 6% on February 23rd, maintaining the 50-basis-point differential with South Africa's repo rate. As sharply higher crude oil prices will increase inflationary pressures no further rate cuts are expected, and the South African Reserve Bank (SARB) may begin to tighten monetary policy in the second half of 2011 or in 2012 as inflation in South Africa approaches the bank's 6% ceiling. The SARB's interest rate changes are likely to be matched by the BoN.

Outlook for 2011-12: International assumptions

International assumptions summary
(% unless otherwise indicated)
 2009201020112012
Real GDP growth
World-0.84.84.14.1
US-2.62.92.72.2
EU27-4.21.81.61.7
Exchange rates
¥:US$93.787.982.081.0
US$:€1.3931.3261.2651.200
SDR:US$0.6460.6520.6560.668
Financial indicators
¥ 3-month money market rate0.390.180.300.89
US$ 3-month commercial paper rate0.260.260.340.70
Commodity prices
Oil (Brent; US$/b)61.979.690.082.3
Copper (US cents/lb)233.6344.5447.5465.0
Zinc (US cents/lb)75.197.9109.6126.8
Uranium (US$/lb)46.748.370.080.0
Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.

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Outlook for 2011-12: Economic growth

The Bank of Namibia estimates real GDP growth at 4.6% in 2010-a stronger recovery than we had previously estimated owing to substantially higher diamond output and sales. We forecast that real GDP growth will slow to 4.3% in 2011. Diamond output will increase more modestly than last year to some 1.6m-1.7m carats, but uranium production will expand by 10% to some 5,800 tonnes. The increase will be less than previously forecast, as stage 3 expansion at the Langer Heinrich mine will not now become fully operational until mid-2011 and the commissioning of the Trekkopje mine has been delayed from the end of 2011 to early 2013 because of technical problems. Overall mining output should expand by 7%, as two copper mines closed at the end of 2009 have resumed production and output of gold, zinc concentrates and fluorspar will increase. Our mining growth forecast is double that of the BoN, which explains why we forecast higher GDP growth in 2011 than the bank's 4.1%. Good rainfall in the 2010/11 wet season should result in higher livestock and crop production, but despite improved stocks and landings, fishing output, which is largely exported, will again contract, although more modestly than in 2010, owing to weak demand in the main European markets. The commissioning of the Ohorongo cement plant in February and planned doubling of capacity at the Tsumeb copper smelter will boost manufacturing growth to 6%. These projects, as well as government spending on infrastructure, will underpin a modest improvement in construction real value added to 5%.

In 2012 real GDP growth will increase to 4.5%, provided demand for mineral commodities continues to grow and prices remain strong. Diamond output will increase only to some 1.8m carats, but uranium production will increase by 10% to 6,400 tonnes owing to a full year's Stage 3 output from Langer Heinrich. Copper concentrate production from the reopened mines will also increase. Without a significant rise in the total allowable catch, the fishing sector will record modest growth at best. Manufacturing growth will rise to 8% with higher output by diamond cutters and the first full year's production at the Ohorongo cement plant and expanded Tsumeb smelter. Depending on the weather, cattle and sheep marketing for local slaughter should continue to improve. Growth in the construction sector will remain strong, owing to high government spending on infrastructure, and the likely start on construction of the Husab and Etango-and possibly the Valencia-uranium mines.

Outlook for 2011-12: Inflation

Average consumer price inflation, which nearly halved in 2010 to 4.5%, is forecast to rise in 2011, owing particularly to higher fuel prices. Stronger domestic demand coupled with higher inflation in South Africa (the main source of most of Namibia's consumer goods), further increases in electricity tariffs (both domestic and South African) and historically low interest rates will push up annual average inflation to 5%. Inflation will increase to 5.5% in 2012 under the impact of stronger economic growth and higher electricity prices.

Outlook for 2011-12: Exchange rates

The South African rand, to which the Namibia dollar is fixed at parity, averaged R6.82:US$1 in December-around 9% stronger than a year earlier. However, in early January the currency began a steady depreciation, which sharpened as political events in Tunisia and Egypt eroded investors' confidence in emerging markets, South Africa among them: the exchange rate in the first week of February averaged R7.21:US$1. Over the next two years, owing to South Africa's relatively high inflation and large current-account deficit, we expect the rand to depreciate further, from an average of R7.32:US$1 in 2010 to R7.64:US$1 in 2011 and R8.37:US$1 in 2012.

Outlook for 2011-12: External sector

The current account will return to deficit in 2011 as the trade deficit widens. Import growth will accelerate to 11%, owing to higher demand for consumer goods due to faster GDP growth. Exports will increase by 10%, slower than previously forecast owing to a more modest increase in uranium exports. The deficit on the services account will narrow, as higher services imports for development projects will be more than offset by increased tourist arrivals and spending, but higher profit remittances (mostly by mining companies) will widen the income account deficit. The current transfers surplus will fall as SACU receipts decrease as a result of lower regional trade volumes in 2009. Overall, the current account is forecast to decline from a surplus of 1% of GDP in 2010 to a deficit of 3.5% of GDP in 2011.

In 2012 export growth will accelerate to 13%. The first full year of expanded capacity at Langer Heinrich and the Tsumeb smelter will increase exports of uranium and blister copper, and cement exports from the Ohorongo plant should reach the planned 400,000 tonnes per year. Imports will grow by 16% in response to faster economic growth and demand for capital equipment for at least two new uranium mines and a second desalination plant. If it receives approval, the long-delayed Kudu project will increase equipment imports. Currency depreciation will favour growth in tourism, offset by increased freight costs, and the services deficit will widen. Rising profit remittances by foreign investors will push the income account further into deficit. However, the current transfers surplus will rise strongly owing to a recovery in SACU revenue caused by increased regional trade. Nevertheless, largely because of the widening trade deficit, the current-account deficit will grow to 4% of GDP.

Outlook for 2011-12: Forecast summary

Forecast summary
(% unless otherwise indicated)
 2009a2010b2011c2012c
Real GDP growth-0.74.64.34.5
Gross agricultural production growth-4.1-0.22.02.7
Consumer price inflation (av)8.84.5a5.05.5
Consumer price inflation (end-period)7.03.1a4.17.3
Lending rate (av)11.19.79.510.0
Government balance (% of GDP)d-3.4b-7.1-8.7-4.7
Exports of goods fob (US$ m)3,5354,0754,4835,066
Imports of goods fob (US$ m)-4,519-4,859-5,393-6,256
Current-account balance (US$ m)-161128-467-543
Current-account balance (% of GDP)-1.71.0-3.5-4.0
External debt (year-end; US$ m)2,1602,5952,6282,712
Exchange rate N$:US$ (av)8.427.32a7.648.37
Exchange rate N$:¥100 (av)8.998.32a9.3210.33
Exchange rate N$:€ (end-period)10.558.88a9.7310.41
Exchange rate N$:SDR (end-period)11.6110.30a12.0413.09
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years beginning April 1st.

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The political scene: The opposition loses its case but the ECN gets a roasting

On February 14th the High Court dismissed an application by nine opposition parties to have the November 2009 National Assembly election, or the announcement of its results, declared null and void (February 2011, The political scene). The parties had hoped to secure a rerun of the election or, failing that, a recount of the votes. However, according to the long-awaited judgment by the judge president of the court, Petrus Damaseb, and judge Collins Parker, the High Court had not heard evidence of the alleged irregularities that could have enabled a rigged election. Specifically, the "very unspecific and generalised" allegation of ballot-stuffing due to unrealistically high voter turnout and turnout of over 100% in some areas was rejected, as the Court accepted the submission of the Electoral Commission of Namibia (ECN) that the applicants had relied on the wrong voters' register and not on the latest one gazetted on November 9th 2009. Other allegations-including duplicate voter registrations, irregularities in tendered votes (those cast outside a voter's registered constituency), and the inclusion of dead people on the voters' roll-were deemed too general and lacking in evidence. The applicants had produced no direct evidence of ballot-stuffing; the judges reminded them: "Courts work on proven facts and not on conjecture, innuendo and unsubstantiated conspiracy theories."

However, the court was highly critical of the ECN-and its director, Moses Ndjarakana, who had made a false declaration under oath and been evasive in his evidence-for the confusion about the voters' register used in the election, a serious lapse that had aroused suspicion among the opposition parties. Those responsible for this and other lapses should be held accountable, the Court said. Indeed, the case had raised "fundamental issues about electoral governance in this country and the need to run electoral affairs in a manner that avoids unnecessary suspicion fuelled by confusion created by those who run elections". The judges said that Namibia's electoral law was scattered, with a "myriad of amendments" and errors of drafting, and called for this to be put right before the next elections. In view of the ECN's poor conduct both of the election and in its defence of the case, the Court departed from usual practice and did not order the losing parties to bear its costs; they were, however, ordered to pay the costs of the second respondent in the case, the South West Africa People's Organisation (SWAPO).

The political scene: Another appeal is to be made to the Supreme Court

On February 22nd the nine parties declared their intention to appeal to the Supreme Court by mid-March. The president of the Rally for Democracy and Progress, Hidipo Hamutenya, expressed the parties' confidence that the case would lead to a different conclusion "when it is properly presented and heard". Mr Hamutenya's confidence appears to be based on an amplified notice of motion filed by the parties on January 14th 2010-ten days after the initial High Court application. The motion was discounted in the latest judgment as materially the same. However, the Court did say that an augmented set of supporting affidavits accompanying the motion, which provided better evidence of alleged irregularities, would if taken into account have "enlarged the applicants' cause of action".

Economic policy: The repo rate is held at 6%

The Bank of Namibia (the central bank) kept the repo rate unchanged at 6% at its executive committee meeting on February 23rd. The decision was the result of evidence of accelerated economic growth in the latter part of 2010 balanced by inflationary pressures from rising fuel prices, according to the governor of the bank, Ipumbu Shiimi. The executive committee had lowered the repo rate at its previous two meetings in October and December 2010, but the latest decision follows that of the South African Reserve Bank, which left South Africa's repo rate unchanged at 5.5% at its monetary policy meeting in January.

Economic policy: SACU receipts will fall under new revenue-sharing formula

Namibia's share of the Southern African Customs Union (SACU) revenue pool could fall from 15% to 9% if recommended changes to the revenue-sharing formula are implemented by the SACU secretariat. A leaked report by the Centre for International Economics, an Australian consultancy firm, also proposes lower payments to Botswana and Swaziland, whereas those to Lesotho and South Africa would rise. The prospect of sharply reduced SACU receipts will increase pressure on the minister of finance, Saara Kuugongelwa-Amadhila, to identify additional revenue sources in the 2011/12 budget to be presented on March 8th. SACU receipts were expected to contribute 27% of total revenue in fiscal year 2010/11 (April-March), compared with 36% in the previous year, and under the current medium-term expenditure forecast (MTEF) are projected to fall to 14% in 2011/12, owing to the impact of the 2008-09 recession on SACU trade with the rest of the world (April 2010, Economic policy).

Contributions to the common revenue pool
(R m; fiscal years Apr-Mar)
 2005/062006/072007/082008/092009/10
Botswana192174150312421
Lesotho998612411081
Namibia178361361443608
South Africa33,49040,56645,39543,17740,956
Swaziland481611356477
Total34,00741,34846,16544,10642,143
Source: SACU secretariat.

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The draft report was discussed by the five SACU members on January 21st and was expected to be finalised and disseminated at the end of February. This will be just the first phase of negotiations about a revised revenue-sharing formula, and these are likely to be prolonged and acrimonious. South Africa is no longer willing to continue making large transfers to other SACU members, whereas the latter believe that they should continue to be compensated for the alleged de-industrialisation caused by free trade with the dominant regional economy. Namibia's deputy minister of finance, Calle Schlettwein, has already registered the government's opposition to the proposed changes, warning that these would polarise SACU and have "very serious" political implications. In early February Mr Schlettwein said that no country should be worse off under any new revenue-sharing formula. However, he added, Namibia was keeping its options open and would study the report before deciding on a course of action.

Economic performance : Central bank estimates 4.6% real GDP growth in 2011

The Bank of Namibia (the central bank), in its Economic Outlook published on February 23rd, forecasts that real GDP growth will slow to 4.1% in 2011. The bank's estimate of real GDP growth in 2010 is now 4.6%, compared with its previous estimate of 4.2%, owing to a stronger than expected rebound in diamond value added, which grew by 41% in real terms in 2010, after contracting by 50% in 2009. This contributed to a 32% increase in mining real value added, which will fall to just under 3% in 2011, as diamond output is expected to increase by only 2%. The growth of non-diamond mining output is expected to double to 6%, mainly owing to higher production at the Langer Heinrich uranium mine and the reopening of two copper mines.

Gross domestic product
(constant 2004 prices; % change, year on year)
 % of GDPa2008b2009b2010c2011d
Agriculture & forestry5.12.8-0.31.72.7
 Livestock farming3.26.60.21.52.5
 Crop farming & forestry1.9-1.0-0.71.93.0
Fishinge3.6-5.3-14.1-6.0-3.2
Mining10.0-2.9-45.031.82.7
 Diamond mining3.6-0.7-49.740.91.9
 Other mining6.3-12.3-22.53.46.0
Primary industry18.6-1.4-26.913.22.0
Manufacturing13.52.16.55.06.0
 Meat processing0.3-8.33.93.13.6
 Fish processing on shore1.4-3.612.62.43.1
 Other foods & beverages5.410.07.58.09.0
 Other manufacturingf6.4-2.14.63.04.0
Electricity & water2.53.26.04.56.0
Construction3.815.1-7.33.85.0
Secondary industry19.74.83.54.75.8
Trade11.12.83.13.23.6
Hotels & restaurants1.92.74.91.02.6
Transport & communication4.82.75.42.95.7
Financial intermediation4.29.76.65.06.0
Real estate & business services7.74.46.04.54.9
Governmentg21.19.84.03.13.0
Othersh3.81.22.41.61.6
Tertiary industry54.65.84.43.33.9
All industries at basic pricesi91.74.3-1.24.84.1
GDP at market pricesj100.04.3-0.74.64.1
a In 2009 at current prices. b Actual, c Estimates. d Projected. e Includes on-board fish processing. f Includes copper smelting, zinc refining, diamond cutting and export-processing zone output. g Public administration and defence, education and health. h Community, social and personal services, households with private employees. i After allowing for subtraction of financial intermediation services indirectly measured (1.2% of GDP in 2009). j After allowing for taxes less subsidies on products (8.3% of GDP in 2009).
Source: Bank of Namibia, Economic Outlook February 2011.

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Agricultural output is forecast to grow more strongly in 2011, owing to higher livestock and horticultural production, thanks to good rainfall in the 2010/11 wet season and increased crop irrigation, but fishing output will continue to contract. Although both stock levels and landings have increased, the recovery of demand in the sector's European markets is expected to be offset by the Namibia dollar's current strength. In consequence, the primary sector will grow by only 2% overall, compared with 13% in 2010.

Real growth of 5.8% in the secondary sector, will be the result of higher output in the manufacturing, construction, and electricity and water sub-sectors. Increased processing of food products and copper and the start of production at the Ohorongo cement works are expected to be the main contributors to higher manufacturing output. Tertiary sector output is also projected to expand modestly, to just under 4%, reflecting stronger output by hotels and restaurants (a proxy for the tourism industry) along with transport and communications, and more modest expansion by wholesale and retail trade, financial services, and real estate and business.

Economic performance : Higher fuel prices push up inflation

Year-on-year inflation rose to 3.5% in January, the highest since September 2010. The increase was mainly the result of higher domestic fuel prices, which were increased in mid-January following a sharp rise in global crude oil prices. Whereas food price inflation slowed to 1.7%, housing and utilities inflation almost doubled to 11.2%, the electricity, gas and other fuels sub-component rising by 10.6%. In contrast, transport inflation fell slightly to 2.9% even though this is the index component normally showing the greatest correlation with fuel price changes. However, increases of 6-8% in the cost of operating personal and public transport were offset by a fall in vehicle purchase price inflation (the heaviest weighted sub-component) to just over 1%. Domestic fuel prices were raised again on February 16th by 4.5-4.6%.

Consumer prices
(national consumer price index; % change, year on year)
 2010           2011
 JanFebMarAprMayJunJulAugSepOctNovDecJan
Fooda5.35.34.13.92.82.53.92.23.21.72.42.21.7
Housing & utilitiesb5.15.35.35.15.45.36.56.56.26.26.16.111.2
Transportc9.49.38.77.27.66.65.04.73.14.23.93.02.9
All items6.36.35.65.04.74.34.63.63.73.23.43.13.5
 Goods6.77.16.25.43.22.63.11.71.70.91.21.11.9
 Services5.64.85.56.17.27.27.27.07.27.37.26.66.2
12-month average8.37.97.57.06.66.26.05.75.45.14.84.54.2
a Weight of 29.6% in index. b Weight of 20.6% in index; includes water, electricity, gas and other domestic fuels. c Weight of 14.8% in index.
Source: Central Bureau of Statistics.

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Economic performance : Diamond production increases by 57%

Diamond production by Namdeb, the government-De Beers 50:50 joint venture, rose by 58% to 1.47m carats in 2010, owing to a strong recovery in global demand for rough stones (January 2011, Economic performance). Volume sales rose less strongly, by 12% to 1.52m carats, mainly because in 2009 Namdeb sold part of its stock of unsold diamonds to a consortium of Indian diamond-cutting firms. This boosted sales volume above that year's sharply reduced output. However, last year's substantial increase in diamond prices boosted sales value by 70% to US$767m, and the average price per carat sold rose by 51%. Namdeb has not issued any production guidance for 2011; the Bank of Namibia (presumably based on some Namdeb input) forecasts only a 2% real value-added rise in diamond output, compared with 41% in 2010. Production in 2011 is expected to rise further, but only to some 1.6m-1.7m carats, and De Beers expects rough diamond prices to continue rising in 2011, but at a slower rate than the exceptional increase recorded last year.

Diamond production and sales
('000 carats unless otherwise indicated)
 20092010% change
Production9291,47158.3
Sales1,3631,52211.6
 Value (N$ bn)3.85.647.4
  US$ m45276769.7
 Price per carat (N$)2,8023,67031.0
  US$33450350.6
Source: Ministry of Mines and Energy.

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Economic performance : Rossing makes a net loss

Higher prices boosted the sales of the Rossing uranium mine by 31% to US$493m in 2010, despite a 13% drop in production. However, increased operating costs, due to the mining of lower-grade ore and dearer electricity, reduced pre-tax earnings by over two-thirds and turned last year's substantial net profit into a net loss. A contributory factor will have been the first full year of Rossing's increased royalty payment of 6%, double the normal rate for uranium mines, which came into effect in mid-2009 (April 2010, Economic performance). This is levied as a fixed proportion of gross sales, and is payable irrespective of profitability.

Rossing Uranium: output, sales and earnings
(US$ m unless otherwise indicated)
 20092010% change
Output (tonnes)4,1503,628-12.6
Gross sales37649331.1
EBITDAab8323-72.3
Net earningsb24-3
a Earnings before interest, tax, depreciation and amortisation. b Rio Tinto's share based on its 69% ownership.
Source: Rio Tinto.

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Economic performance : Rio Tinto and Extract may jointly develop Husab

A partnership to capture "potential synergies" between Rossing and the Husab uranium project is being discussed by London-based Rio Tinto and Husab's 100% owner, Australia's Extract Resources. The initiative is understood to have come from Rio Tinto which, along with Japan's Itochu, holds minority shareholdings in both Extract and its biggest (43%) shareholder, Kalahari Minerals, which is currently listed on London's Alternative Investment Market (AIM). The talks announced on February 21st are focused on sharing resources to develop Husab, through some kind of joint venture, and are also looking at simplifying the Extract-Kalahari shareholding structure.

Husab (formerly known as Rossing South)-one of the world's largest and highest-grade unexploited uranium deposits-is located less than 20 km from Rossing, so a partnership would make technical and economic sense. It would provide a means of prolonging operations at Rossing and avoid the need to build a processing plant as well as a mine at Husab-the cost of the two has been put at US$1bn. A definitive feasibility study for Husab is near to completion and may raise the projected output above the current 6,700 tonnes/year of uranium oxide. However, Rossing's existing processing plant, which has operated continuously for 35 years, would need to be expanded and upgraded to handle ore from Husab.

Economic performance : Ohorongo cement plant starts production

Namibia's first cement plant, and Africa's largest and most modern, was formally opened (September 2010, Economic performance) in February by the president, Hifikepunye Pohamba. Mr Pohamba said that the government expected the Ohorongo plant, near Otavi in north-central Namibia, to have "a multiplier effect in terms of employment creation and service industries". Some 300 Namibians are directly employed at the plant, which will also create some 2,000 indirect jobs and substantially boost manufacturing real value added in 2011-12. Ohorongo, which cost N$2.5bn (US$360m) to build and commission, is 60%-owned by Germany's Schwenk Zement and will reach full output of 700,000 tonnes/year early in 2012. According to Ohorongo Cement's managing director, Hans-Willem Schütte, initial production is for the local market and Angola-Namibia's 380,000 tonnes/year annual demand will be fully supplied in 2011.

Economic performance : WACS offers faster Internet access

Business and personal Internet users in Namibia will soon benefit from faster and higher-capacity "real time" data transmission capacity following Namibia's connection to the 14,000-km undersea fibre-optic cable known as the West Africa Cable System (WACS). This has been installed by France's Alcatel-Lucent Submarine Networks in a project connecting 14 countries, from South Africa along the West African coast to the UK. The Namibian section of the cable was brought ashore at Swakopmund in early February and is a joint venture between the Botswana and Namibia telecommunication corporations, which each contributed US$38m to the US$785m total project cost. WACS is due to become fully operational from mid-2011, at a design capacity of just over five terabytes per second, equivalent to 8,000 DVD downloads. It will also improve voice quality and enable video conferencing.

Data and charts: Annual data and forecast

 2006a2007a2008a2009a2010b2011c2012c
GDP       
Nominal GDP (US$ m)7,9878,8098,9629,28012,77713,49513,668
Nominal GDP (N$ m)54,02862,08074,01678,16993,465103,099114,405
Real GDP growth (%)7.15.44.3-0.74.64.34.5
Expenditure on GDP (% real change)       
Private consumption8.76.15.35.96.75.75.8
Government consumption11.012.68.29.85.37.05.7
Gross fixed investment29.812.113.1-1.67.18.812.0
Exports of goods & services15.36.45.2-14.93.215.114.7
Imports of goods & services16.331.86.94.1-0.915.717.9
Origin of GDP (% real change)       
Agriculture-0.7-9.30.4-4.1-0.22.02.7
Industry14.36.12.2-11.910.15.97.3
Services5.57.45.84.43.34.73.6
Population and income       
Population (m)2.12.12.12.22.22.32.3
GDP per head (US$ at PPP)5,8396,2136,4956,3886,5936,8577,199
Fiscal indicators (% of GDP)d       
Public-sector revenue36.431.831.228.1b25.221.223.8
Public-sector expenditure31.726.729.231.5b32.329.928.5
Public-sector balance4.75.12.0-3.4b-7.1-8.7-4.7
Net public debt28.318.918.015.1b20.026.829.0
Prices and financial indicators       
Exchange rate N$:US$ (end-period)7.046.869.307.366.59a8.058.75
Exchange rate N$:€ (end-period)9.2910.0212.9310.558.88a9.7310.41
Consumer prices (end-period; %)6.07.110.97.03.1a4.17.3
Stock of money M1 (% change)45.66.826.913.211.210.315.4
Stock of money M2 (% change)29.810.117.96.317.210.316.7
Lending interest rate (av; %)11.212.913.711.19.79.510.0
Current account (US$ m)       
Trade balance102-180-717-984-784-910-1,190
 Goods: exports fob2,6472,9223,1163,5354,0754,4835,066
 Goods: imports fob-2,544-3,102-3,833-4,519-4,859-5,393-6,256
Services balance9685-34-88-36-23-38
Income balance-63-158-155-70-337-389-422
Current transfers balance8809469509801,2858561,108
Current-account balance1,01669345-161128-467-543
External debt (US$ m)       
Debt stock1,4759831,8832,1602,5952,6282,712
Debt service paid399342397400439445454
 Principal repayments391334390388423425432
 Interest88812162023
International reserves (US$ m)       
Total international reserves4508961,2932,0511,7971,6371,680
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years starting in April.
Sources: Bank of Namibia; Central Bureau of Statistics; IMF, International Financial Statistics.

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Data and charts: Quarterly data

 20082009   2010  
 4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr
Prices        
Consumer prices (Dec 2001=100)157.5161.6164.2167.2168.4171.4171.9173.8
Consumer prices (% change, year on year)11.511.59.67.46.96.14.74.0
Financial indicators        
Exchange rate N$:US$ (av)a9.9359.9468.4577.7967.4947.5127.5447.306
Exchange rate N$:US$ (end-period)a9.3049.5177.7307.4087.3617.3307.6256.951
Bank of Namibia overdraft rate (end-period; %)10.09.07.07.07.07.07.07.0
Deposit rate (av; %)8.68.16.45.45.15.35.24.9
Govt bond yield rate (av; %)10.010.010.010.010.010.1n/an/a
Lending rate (av; %)14.013.110.910.210.210.19.89.7
Prime rate (av; %)15.114.112.011.411.311.311.311.1
Treasury bill rate (av; %)10.59.98.67.17.17.06.76.4
M1 (end-period; N$ m)18,57119,83620,16919,49421,02022,96121,19023,050
M1 (% change, year on year)26.914.710.72.313.215.85.118.2
M2 (end-period; N$ m)29,24130,06730,25629,36331,09133,21431,65932,832
M2 (% change, year on year)17.911.28.01.36.310.54.611.8
IJG/IPPR Business Climate Index (Jan 2006=100)117.5118.0116.9121.1121.8122.5120.4124.4
IJG/IPPR BCI (% change, year on year)-0.6-1.1-2.5-2.53.73.83.02.7
Foreign trade & reserves        
Goods exports fob ( N$ m)9,5986,8975,5526,5777,2366,9966,9117,609
 Diamonds1,2135089822,0621,0061,0251,1631,163
 Other minerals2,9911,9763103963511,9562,0602,060
 Food & live animals938844658764878746869869
 Manufactures2,6921,7401,3691,6841,4271,7031,5501,550
Goods imports fob (N$ m)-10,022-8,799-8,572-9,849-9,394-8,647-7,996-9,716
Trade balance (N$ m)-424-1,902-3,020-3,272-2,158-1,651-1,085-2,107
Services balance (N$ m)-479-115230401-25-189892
Income balance (N$ m)-650-31384802-110-503-608-519
Transfers balance (N$ m)2,4852,6652,6732,6552,6212,6181,8042,651
Current-account balance (N$ m)932281-461,254442358119117
Reserves excl gold (end-period; US$ m)1,2931,4371,6402,1642,0511,9321,8031,833
a The Namibia dollar (N$) is fixed at parity with the South African rand.
Sources: Bank of Namibia, Quarterly Bulletin; IMF, International Financial Statistics; Irwin, Jacobs, Greene/Institute for Public Policy Research, Windhoek; US Federal Reserve.

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Data and charts: Monthly data

 JanFebMarAprMayJunJulAugSepOctNovDec
Exchange rate N$:US$ (av)
20086.9967.6587.9927.7597.6087.9377.6167.6658.0759.77110.1109.923
20099.9089.9779.9548.9648.3748.0337.9497.9417.5037.4877.5097.485
20107.4637.6687.4067.3447.6517.6367.5217.2887.1106.9116.9756.824
Exchange rate N$:US$ (end-period)
20087.4537.6348.1227.5947.6157.8797.3907.7008.3159.87010.1009.304
200910.20010.0359.5178.4408.0287.7307.8137.7787.4087.7707.3777.361
20107.5807.6407.3307.3527.5527.6257.2927.3736.9516.9767.0866.670
M1 (% change, year on year)
20086.719.716.618.716.436.425.818.325.116.915.626.9
200922.37.914.711.714.410.72.66.32.318.113.213.2
201017.017.015.818.918.95.17.314.718.29.9n/an/a
M2 (% change, year on year)
200811.520.219.720.418.224.519.813.012.816.713.417.9
200915.45.911.28.48.28.02.16.31.35.33.06.3
20107.08.210.513.214.54.65.810.011.89.8n/an/a
Deposit rate (av; %)
20088.18.28.48.18.38.38.38.48.58.78.68.6
20098.38.57.56.86.55.85.65.45.35.25.25.1
20105.35.35.35.15.35.15.04.94.84.8n/an/a
Lending rate (end-period; %)
200814.014.213.913.113.213.513.113.813.914.014.313.7
200913.013.812.611.411.210.210.49.810.69.910.010.8
201010.010.210.19.69.99.89.89.69.69.7n/an/a
Consumer prices (av; % change, year on year)
20087.87.98.49.39.710.311.912.011.912.011.710.9
200911.611.611.210.09.69.17.57.67.17.16.77.0
20106.36.35.65.04.74.34.63.63.73.23.43.1
Foreign reserves excl gold (US$ m)
20081,1971,1331,1161,2771,2391,2251,5391,4011,3601,4281,2581,293
20091,5691,3771,4371,6151,6971,6401,7241,9012,1642,3222,1222,051
20102,1602,0641,9322,0351,8571,8031,8221,8251,8331,859n/an/a
Sources: IMF, International Financial Statistics; Haver Analytics; Bank of Namibia; US Federal Reserve.

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Data and charts: Annual trends charts

Please see graphic below

Data and charts: Monthly trends charts

Please see graphic below

Data and charts: Comparative economic indicators

Please see graphic below

Basic data

Land area

824,269 sq km

Population

2.17m (mid-2009 IMF estimate)

Main towns

Population ('000; 2010 World Gazetteer estimates)

Windhoek (capital): 315.9

Rundu: 81.5

Walvis Bay: 67.2

Oshakati: 39.7

Swakopmund: 34.3

Grootfontein: 29.0

Katima Mulilo: 27.9

Climate

Semi-arid and subtropical

Weather in Windhoek (altitude 1,833 metres)

Hottest months, January and February, 17-39°C (daily minimum and maximum); coldest months, June and July, 6-20°C; driest month, July, 1 mm average rainfall; wettest month, January, 350 mm average rainfall

Languages

English (official), Oshivambo (various dialects), Nama-Damara, Afrikaans, Herero, Rukavango, Lozi, German, Tswana and several Bushman (San) dialects

Measures

Metric system

Fiscal year

April 1st-March 31st

Currency

Namibia dollar (N$) = 100 cents; introduced in September 1993, pegged at parity with the South African rand

Time

2 hours ahead of GMT

Public holidays

January 1st, March 21st (Independence Day), Good Friday, Easter Monday, May 1st (Workers' Day), May 4th (Cassinga Day), Ascension Day, May 25th (Africa Day), August 26th (Heroes' Day), December 10th (Human Rights Day), December 25th and 26th (Christmas Day and Family Day)

Political structure

Official name

Republic of Namibia

Form of state

Unitary republic

Legal system

Based on the constitution of 1990 and Roman-Dutch law

National legislature

Bicameral; National Assembly, with 72 members elected by universal suffrage and serving a five-year term, and up to six non-voting members appointed by the president; National Council, with limited powers of review and 26 members, two of whom are nominated by each of the country's 13 regional councils, serving a six-year term

National elections

November 2009 (legislative and presidential); next elections due in November 2014

Head of state

Hifikepunye Pohamba, elected president by universal suffrage in November 2009

National government

President and his appointed cabinet; reshuffled in March 2010

Main political parties

South West Africa People's Organisation (SWAPO), the ruling party (54 of the elected seats in the National Assembly); Rally for Democracy and Progress (RDP; 8 seats); Democratic Turnhalle Alliance (DTA; 2 seats); National Unity Democratic Organisation (NUDO; 2 seats); United Democratic Front (UDF; 2 seats); Congress of Democrats (CoD; 1 seat); Republican Party (RP; 1 seat); All People's Party (APP; 1 seat); South West Africa National Union (SWANU; 1 seat); Monitor Action Group (MAG)

Prime minister: Nahas Angula

Deputy prime minister: Marco Hausiku

Cabinet ministers

Agriculture, water & forestry: John Mutorwa

Defence: Charles Namoloh

Education: Abraham Iyambo

Environment & tourism: Netumbo Nandi-Ndaitwah

Finance: Saara Kuugongelwa-Amadhila

Fisheries & marine resources: Bernard Esau

Foreign affairs: Utoni Nujoma

Gender equality & child welfare: Doreen Sioka

Health & social services: Richard Kamwi

Home affairs & immigration: Rosalia Nghidinwa

Information & communication technology: Joel Kaapanda

Justice: Pendukeni Iivula-Ithana

Labour & social welfare: Immanuel Ngatjizeko

Lands & resettlement: Alpheus Naruseb

Mines & energy: Isak Katali

National Planning Commission: Tom Alweendo

Presidential affairs & attorney-general: Albert Kawana

Regional & local government, housing & rural development: Jerry Ekandjo

Safety & security: Nangolo Mbumba

Speaker of parliament: Theo-Ben Gurirab

Trade & industry: Hage Geingob

Veterans' affairs: Nickey Iyambo

Works & transport: Erkki Nghimtina

Youth, national service, sport & culture: Kazenambo Kazenambo

Governor of the central bank

Ipumbu Shiimi

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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