Bank of Namibia Deputy Governor, Ebson Uanguta said there are plans underway to extensively endorse the economic diversification strategy instead of over relying on the mining sector.
Speaking to our sister publication, Prime Focus Magazine, Uanguta said the country has been diversifying its economy away from the mining sector by growing other economic sectors with specific reference to secondary sectors such as construction.
“While I agree that at independence the country has too much reliance on the mining sector, the current statistics present a completely different picture. In 2014, for instance mining and quarrying activities only contributed 11.6% to the country’s GDP, clearly indicating that the reliance on mining activities has become a theme of the past,” Uanguta said.
The construction sector is currently the fastest growing sector averaging a growth of 15.3% over the past five years. However, its contribution to GDP growth is very minimal averaging only 3.5% over the same period.
Through its contribution to total GDP is very low compared to other sectors, the construction sector is among the top 5 sectors in terms of job creation, as it accounts for over 7% of the total employed after agriculture, trade and private household sectors in Namibia. Put differently, this means that the construction sector significantly employs more people than mining, fishing, finance and other sectors.
The mining sector’s growth averaged 7.7% over the past five years. Furthermore, the sector’s contribution to GDP over the same period averaged 11.5%.
In terms of employment, the sector employs roughly 5% of the total amount of people employed. Additionally, in terms of growth in employment numbers, the sector has been able to grow marginally by around 2% over the last two years.
The local economy has seen a growth rate of 6.4% in 2014 compared to the South African economy that grew by 1.5% in the period under review. The local growth rate is largely attributed to activities on the domestic front with activities such as construction, wholesale and retail trade taking first priority.
“Nonetheless, let me emphasize that of recent the Namibian and South African economies have been on two divergent growth paths. Although the slowdown in South Africa will affect our trade activities and Southern African Customs Union (SACU) receipts, in terms of growth we remain insulated,” Uanguta said.
Uanguta reiterated that when the South African economy slows down, it would have negative implications through the trade channel and it would also negatively affect the size of SACU’s pool and thus affect receipt available for distribution to members, translating to lower transfer of receipt to Namibia. Speaking on the reliance on the Southern African Customs Union (Sacu) revenue, Uanguta said receipts are expected to decrease from 34.5% in the 2014/15 financial year to 29.3% in the 2015/16 financial year.
“I am aware that the Government is in the process of strengthening its domestic tax collection, broadening the tax base and introducing new tax categories in order to further reduce the reliance on SACU revenue. Some measures envisaged by government include tax reforms efforts as well as awareness campaigns to encourage citizens and corporates to start seeing honouring tax obligations as an essential and necessary service to the citizenry. The Government is also in the process of introducing a revenue agency with the aim to ensure efficiency in revenue collection,” he said.
He said the country is a small open economy which trades mainly in the export of commodities, such as diamond, uranium and other minerals. Meanwhile, 70% of the country’s imports come from South Africa whereas the country only exports 16% of its goods to that country.
“In addition, Namibia is also a destination of choice to many visitors around the globe given its peculiar beauty and serenity of its nature and environment. Now given that structure, when key trading partners’ economies slow down, Namibia’s exports will be affected, and this is not an exception in the case of South Africa,” he said.