By: Nghiinomenwa Erastus
Restructuring and diversifying from the mineral sector and financial intermediaries might be the most challenging for Namibia, as almost every FDIs inflow goes to the two sectors.
Secondly, the capital inflow primarily emanates from China and South Africa- the two accounted for more than 70% of the direct investment every year.
By the end of September 2021, cumulatively, Namibia foreign direct investment (FDIs) amounted to N$101,4 billion owing to the uptake of debt by corporates in the mining sector, according to the Bank of Namibia, 2021 Third Quarter Bulletin released last month.
Another observation is that the direct investment flow is coming through the acquisition of debts as Namibia branches or subsidiaries borrow from parent companies abroad.
The country has spent some months now in Dubai attracting investment, and it also has embassies around the world, marketing the country and theoretically attracting investments.
Despite all that, after more than 31 years of independence – much of the country’s investments will primarily extract minerals.
The bank analysis shows that “the mining and quarrying sector dominated the stock of foreign direct investment liabilities by sector with 61,9%”.
Tailing the mining is the financial intermediation sector with a share of 22,8% at the end of the third quarter of 2021.
The manufacturing, wholesale and retail trade and repairs sectors completed the top four by getting 5,8% and 5,1% of the FDIs, respectively.
Moreover, the bank analysis found that the share of distribution and selling of petroleum increased by 0,7 percentage points due to borrowing in the form of long-term debt.
The mining dominance in attracting FDI is not a new trend despite the restructuring and diversification conversation; it has been the status quo.
The central bank highlights that “Namibia’s direct investment liabilities by sector showed the same broad patterns as a year ago with mining continuing to dominate”.
Direct investment flows increased from N$99,4 billion, representing 2,2% and 2% both yearly and quarterly, respectively, to N$101,4 billion.
Other investments also contributed to the increase in gross foreign liabilities observed both on an annual and quarterly basis through the incurrence of multilateral loans extended to the government to finance the budget deficit.
Every year, the stock of foreign direct investment liabilities was mainly sourced from China and South Africa with a combined share of 72%, concentrated primarily on the mining and financial intermediation sectors, the central bank revealed.
Over the year, the share of China and South Africa increased due to the uptake of debt and revaluation gains through price changes.
Moreover, Mauritius, the United Kingdom, Canada and the British Virgin Islands jointly accounted for 14,9% of the total stock, with investment concentrated in the mining sector.
By the end of the third quarter last year, the value of foreign investment (foreign liability) stood at N$74,9 billion.
Investment through various portfolios (equity and debt securities) was valued at N$22,9 billion.
Other general investments that cannot be categorized were valued at N$50,5 billion by September 2021.