Foreign direct investment drying up midst deep recession
Namibians will have to brace themselves for tougher times in the already ailing economy as now statistics have revealed that the country’s foreign direct investment is drying up.
Net foreign direct investment (FDI) inflows decreased on an annual basis during the third quarter of last year, according to the Bank of Namibia’s latest data.
FDI deteriorated mainly due to lower reinvested earnings and reduced borrowing by foreign direct investment enterprises.
Namibia recorded much lower net FDI inflows of N$1.62 billion in the third quarter of 2018 compared to N$4.12 billion during the same period in the previous year.
This was largely due to a decrease in net inflows related to reinvested earnings to N$760 million in the third quarter of 2018 from N$2.76 billion during the same period in 2017.
Furthermore, net inflows from debt instruments also declined to N$760 million in the third quarter of 2018 from N$1.25 billion during the same quarter in 2017.
Meanwhile, equity and investment fund shares decreased to N$970 million from N$1.07 billion during the same period.
By the end of the third quarter of 2018, Namibia’s FDI stock was mainly concentrated in mining and quarrying (66%), financial intermediation (26%), wholesale and retail trade (3%) and manufacturing (2%) sectors.
The central bank highlights that China, South Africa, and Mauritius accounted for over 77% of the FDI stock at the end of the third quarter.
PSG Namibia has said that having started 2018 on a stronger note than 2017, last year is turning out to be another disappointing one in terms of FDI for the Namibian economy.
“Namibia’s net FDI almost halved between 2015 and 2017. During the same period, the real GDP growth rate fell from 6.1% to -0.4%. This period was also associated with a general decline in commodity prices, reduced emerging market sentiment and a slowdown in FDI flows globally.”
“The Namibian government also scored some own goals in this time, in terms of investor-unfriendly policies. While commodity prices have started to recover somewhat since 2016 and Windhoek has recently scrapped some unfavorable policies and policy proposals to lure back foreign investment, the ongoing global trade frictions will likely dampen the expected recovery in FDI in 2019,” reported Shelly Arnold of PSG.