- Basic data
- Public finances and the state budget
- Banking system
- Tax System
According to cheeroutdoor.com, the Namibian economy has been in recession since 2016, which was understandably further exacerbated in 2020, which was most marked by the pandemic, when there was negative GDP growth of 8.5%. In the next two years, growth in the range of 3-4% of GDP is expected, due, among other things, to the globally increased price of mineral resources and a number of embargoes imposed on Russia, which is also a significant exporter of mineral resources. The expected level of inflation this year in Namibia will most likely attack the 7% mark, due, among other things, to rising inflation in neighboring South Africa, to whose currency the Namibian dollar is pegged 1:1. Due to this interconnectedness, the Central Bank of Namibia essentially derives its monetary policy from the South African Central Bank, which is gradually increasing its interest rate due to rising fuel prices, of food and fertilizers as a result of the fading pandemic and the war in Ukraine. The high unemployment rate, which the government has been unable to reduce for a long time, is over 20%, with an estimated 50% worrying for youth.
In terms of the structure of its economy, dependence on the mining industry, which also has the largest share in its exports, is traditionally predominant. Other key sectors include fishing, agriculture and tourism. Namibia’s basic infrastructure, i.e. transport communications, railways, ports, airports, but the energy and telecommunications infrastructure is relatively modern and well developed. Experts propose to the government the privatization of part of the state-owned companies as a way out of the crisis. However, the radical left wing within the ruling SWAPO party protests against such a solution. Another reason for the outflow of capital is the uncertainty surrounding the effects of land reform and the implementation of the so-called NEEEF (New Equitable Economic Empowerment Framework) program for the purpose of transforming the economy and supporting the indigenous population.
|GDP growth (%)||-1.7||-7.2||1.5||3.1||3.3|
|Export of goods (billion USD)||3.9||2.8||3.6||3.8||4.2|
|Import of goods (billion USD)||5.2||4.4||5.8||5.9||6.3|
|Trade Balance (Billion USD)||-1.3||-0.9||-2||-1.7||-1.6|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||06.VII||06.VII||06.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-9.7|
|Public debt (% of GDP)||68.2|
|Current account balance (billion USD)||-1.2|
The government’s budget deficit reached 9.7% in 2021. However, the dismal state of public finances caused by excessive regulation, poor management, corruption, lack of investment and capital outflow was a major problem even before the pandemic. In 2021, the national debt rose to 68.2% of GDP, but it is expected to decrease slightly in the next two years due to, among other things, the globally increased price of mineral resources. For the future, the government declared its determination to return to a balanced budget. However, without significant structural reforms, there is not much room for savings. Debt service and interest payments amount to US$1,896 million per year, which is close to 20% of Namibia’s GDP.
Moody’s upgraded the Ba3 rating outlook to “stable”, while Fitch’s rating remains BB with a “negative outlook”.
The banking market is regulated by the central bank, the Bank of Namibia, and the financial sector by the Ministry of Finance. There are a number of commercial banks operating in Namibia, the most important of which are listed below. The state controls the state financial and banking institutions Nampost Savings Bank and Agricultural Bank of Namibia. Most privately owned financial institutions operate with a substantial share of South African capital. The stock market is operated by the Namibian Stock Exchange, which is connected to the Johannesburg Stock Exchange. Namibian private insurance companies are predominantly owned by South African insurance companies and offer a full range of insurance services. Pension and insurance funds are required by government regulation to direct 35% of their investments within Namibia. Compliance with the rules within the financial market is overseen by the Namibia Financial Institutions Supervisory Authority (NAMFISA), an organization for the regulation and supervision of banks and financial institutions.
Overview of the most important banking institutions in Namibia:
Standard Bank Namibia Limited (owned by South Africa’s Standard Bank)
First National Bank Namibia Limited (owned by South Africa’s First National Bank)
Bank Windhoek Limited
Nedbank Namibia Limited
Trustco Bank Namibia Limited
Atlantico Namibia (branch of Banco Privado Atlantico)
Bank BIC Namibia Limited
Letshego Bank Namibia Limited
Agricultural Bank of Namibia (a banking institution with a significant share of state capital)
Nampost Savings Bank (state delivery company; also provides banking services)
The current value added tax (VAT) is 15%. The basic corporate income tax rate is 32%. The mining company tax is set at 37.5%, with the exception of the diamond mining tax, which amounts to 55%. The tax of companies producing petroleum products is 35% and increased by an additional share of the profit (determined according to the specific commodity). The tax for manufacturing companies is standard at 18% during the first ten years. Personal income tax is progressive and ranges from 18-37%.
The tax system for legal entities has undergone changes in recent years and contains a number of exceptions depending on the specific field of business. Special tax breaks can usually be negotiated if production is moved to Namibia. On the other hand, in 2020 the government approved an amendment to the tax law (the so-called The Income Tax Amendment Bill 2020), which canceled the system of so-called export processing zones (Export Processing Zones, EPZs), which, according to the Ministry of Finance, were abused and taxes were reduced by companies. At the same time, the government started the preparation of the so-called special economic zones (SEZ), in which they are trying to attract investments with the help of tax incentives. One of these zones is located in the Walvis Bay Port Terminal area. Investors in these zones have a favorable tax regime. An overview and current amount of all taxes is available aton the website of the Ministry of Finance of Namibia.