By: Josef Kefas Sheehama
The surging costs of fuel and electricity in Namibia will undoubtedly pose challenges for all citizens, with the unemployed and lower-income individuals bearing the brunt of the burden.
The impending hike in fuel prices, set at N$0.70 for petrol and N$0.40 for diesel per liter effective May 2, 2024, is poised to inflict considerable strain on consumers and businesses alike.
These price escalations stem from ongoing disruptions in refinery operations globally, driving up crude oil prices and fostering market uncertainty.
Furthermore, the Namibia Power Corporation’s tariff adjustment of 8%, sanctioned by the Electricity Control Board (ECB) for the 2024–2025 fiscal year spanning July 2025 to June 2026, adds another layer of financial strain.
Geopolitical tensions in regions like the Middle East and Russia are exacerbating concerns over energy supply, fueling apprehensions about inflation and the pace of economic recovery.
While price adjustments are deemed necessary to maintain stability, caution is warranted due to potential economic ramifications.
Heightened oil prices can impede economic growth by impacting the supply and demand for non-oil goods. As production costs surge, the supply of various goods may dwindle, amplifying the financial strain on citizens grappling with rising fuel and electricity expenses, which in turn drive inflation.
These price hikes have serious effects across essential commodities such as food and medication, compounding the challenges faced by households.
Escalating energy costs may precipitate reduced incomes, diminished employment opportunities, and decreased returns on production inputs, exacerbating financial pressures on households.
As stated in the Nampower Integrated report, Nampower imports 100 MW from ESKOM (South Africa), 180 MW from ZESCO (Zambia), and 80 MW from ZPC (Zimbabwe). Namibia imported 59% of its total by the end of the 2023 fiscal year.
With a high percentage of outsourcing of power generation from neighbouring nations, the burden that the price increase places on Namibians is exacerbated by the consequences of import costs.
Rising energy costs compel companies to reevaluate their workforce reduction strategies and conduct stress tests on wage increases that will materially affect their cash flow.
Such decisions will have significant effects on Nampower revenue as well as the overall economy of Namibia. The demand for electricity, and the amount of supply needed to meet that demand will all be impacted if businesses decide to postpone, cancel, or even close down their plants.
Because inflation affects the costs faced by the majority of households and businesses, you can anticipate a spike in inflation rates in response to increases in the price of fuel and electricity.
Additionally, because of this lack of electricity production and reliance on imports, I firmly believe that electricity prices will continue to rise.
Furthermore, these kinds of issues are unavoidable if the production of electricity is not bolstered by alternative renewable energy sources. Green hydrogen is expected to present significant economic prospects. In today’s world, energy is not only considered to be a production input but is also regarded as a strategic commodity that constitutes the basis for international relations and shapes the world economy and politics.
Due to the rapid depletion of oil reserves with each passing day, it is thought that this problem can be mitigated in the short term and completely solved in the long term, provided alternative energy sources are mobilised.
Despite the current state of affairs, Namibia still has hope for the future. Oil has been found in Namibia by exploration companies, and with the potential for investors to begin this economic transformation, we will witness a decrease in fuel prices as well as stable electricity because, in the long run, electricity will be abundant from renewable sources.
Exploration and production activities will open the door to thousands of well-paying jobs for Namibians, not to mention the opportunities for building local capacity and technology sharing that come with the presence of international oil companies.
The potential to improve local communities and help establish the right kind of infrastructure. The discovery is set to usher in a wave of new investment across the entire energy value chain.
This discovery will significantly improve energy security in a nation that relies heavily on petroleum imports. The development of a consistent domestic energy supply will prove critical for the country’s economy while reducing imports from neighbouring countries.
To this end, oil prices are surging over the risk of conflict and OPEC+. Considering that the tariff increase is greater than the rate of inflation, pressure is expected to be applied to future inflation and, consequently, to the prices of goods and services.
