The latest data by the Bank of Namibia shows that Namibia’s net foreign direct investment (FDI) inflows increased on an annual level during the first quarter of this year.
The economy has recorded a larger net in FDI of N$2.2 billion in the very first quarter compared to that of last year which stood at N$0.5 billion.
This was largely thanks to an increase in net inflows related to reinvested earnings to N$2.6bn in Q1 2018 from N$0.07bn a year ago as well as an increase in equity and investment fund shares (from N$0.7bn to N$2.3bn over the same period).
Meanwhile, net outflows were recorded in both the ‘equity other than reinvestment of earnings’ (-N$0.3bn) and ‘debt instruments’ (-N$0.1bn) categories in Q1.
Says PSG Namibia’s Eloise Du Plessis, “FDI can be a major driver of economic growth and job creation, besides being an important indicator of investor confidence.”
“Net FDI inflows have recently improved on the back of a recovery in mining output and reduced investor fears over mooted black economic empowerment legislation.”
Du Plessis adds that direct investment should continue to improve during 2018 in line with recovering commodity prices, which would boost mining companies’ profits and encourage new investment in the industry.
“However, an escalating global trade war could impede investment into Namibia,” she cautions, “During Q1, Namibia’s FDI stock was mainly concentrated in the following sectors: mining & quarrying (38.1%), financial intermediation (37.0%), manufacturing (9.6%) and fishing & fish processing (6.0%).”
Capricorn Asset Management’s analyst Claudia Boamah has also said a trade war among the world’s largest economies has cast a shadow over optimistic 3.9% global growth forecasts.
“Investment growth is expected to slow down as rising uncertainty arrests investor risk appetite; which is particularly detrimental for developing and emerging markets such as Namibia and SA. The potential slowdown of capital flows into our economies because of the depreciating effect on our currencies which will raise the cost of debt servicing and further compromise our fiscal stability is real concern,” she says.
Meanwhile the Bank of Namibia has highlighted that the majority of the FDI stock in the financial intermediation and retail sectors originated from South Africa, while investments in the mining and quarrying sector stemmed mainly from China and Mauritius and FDI in the fishing and fish processing sector emanated from Spain.