Namibian Economics To The Point - April 2021

30 Apr 2021

Brigitte Weidlich

The summer is ending, bringing less rain, although the northwestern areas welcomed late, strong rains, which helped break the long drought of the Kunene- and northern parts of the Erongo Regions.

The Canadian exploration company looking for oil and gas in the Kavango-East Region Reconnaissance Africa, announced it had found promising results. The first of a 3-well drilling program, provided “clear evidence of a working conventional petroleum system” in the Kavango Basin, the company stated.

Construction has started in southern Namibia to upgrade the gravel road to the Sesriem Canyon to a tar road for low volume traffic. This will boost tourism in the area. The road to the nearby famous Sossusvlei, since several years already has a bitumen layer.

Large swarms of migratory locusts continue to plague central-northern and northeastern Namibia, destroying crop fields. The government has to date spent some N$20 million (about 1,1 million Euros) on chemicals and spraying these by air as well as on the ground. Only the Khomas, Omaheke and the Hardap Regions have been spared.

The finance ministry has finally completed the merger of its department of inland revenue and the directorate of customs and excise into a semi-autonomous revenue authority. Following a transition period since January, the Namibia Revenue Authority (NamRa) was inaugurated on 1 April, the start of the governmental financial year. Income tax returns can now be submitted online.

Namibia‘s central bank has retained its repo rate at 2.75 percent in April.

Inflation moved up by 31 March and stood at 3,1 percent (February: 2,7%) according to the National Statistics Agency.

Huge 5 gigawatt solar project planned

The US government has signed a memorandum of intent with Namibia and Botswana to jointly build a solar power plant of up to 5 gigawatt (GW) in the two African countries. The ‘Mega Solar’ project is a part of USAID’s Power Africa Initiative, committed to assisting southern Africa transform from reliance on fossil fuels to clean energy. Cooperation partners are the African Development Bank, the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC). The project is part of the US government’s Power Africa Initiative under the auspices of that country’s development aid agency USAID.

The solar plants Ejuva 1 and 2 near Gobabis jointly produce 10 MW electricity. Photo: Conrad Roedern

“Mega Solar could be one of the largest solar parks in the world, generating 3,000 - 5,000 megawatts of energy,” said the US-Ambassador to Namibia, Lisa Johnson on 26 April. “This could transform Namibia and Botswana into two of the globe’s most significant producers of solar power, enough to begin exporting renewable energy to the southern Africa region.”

Namibia’s minister of mines and energy, Tom Alweendo said, he was pleased the memorandum was signed after two years of discussions. No details were announced yet as to where the huge solar park would be constructed and if it would be a cross-border site.

Regulatory framework for renewable energy storage

Namibia generates already more than 200 megawatt (MW) of energy through solar and wind power and will soon require large-scale storage systems. The Electricity Control Board (ECB) has drafted the country’s first regulations for storage capacity of renewable energy sources. They were presented to industry players in April during a workshop. After further public input, the ECB plans to finalise these regulations and standards before the end of this year. The chief executive officer of the ECB, Phoibe Namene said they receive strong interest from investors on energy storage. The regulations will come into force within the first quarter of 2022. Several small solar power plants are under construction this year.

Charcoal for barbeques exported to the US

The first consignment of 350 tons of Namibian charcoal was shipped directly to the US this month, with more to follow soon. The companies Africa Burns Charcoal, King Charcoal and their US trading partner The Good Charcoal Company (GCC), negotiated the export agreement, supported by the US Agency for International Development (USAID). The charcoal is produced from invader bush species, which is harvested in areas heavily affected by bush encroachment. In this way, more grazing land is obtained, jobs are created and the invader species enable an extra income for farmers.

Deputy trade and industry minister Verna Sinimbo (L) and US Ambassador Lisa Johnson (R) at the send-off ceremony for charcoal-exports in Windhoek. Photo: US Embassy Windhoek

Many participants joined the launch event in Windhoek virtually. “The ‘Forest Stewardship Council (FSC)’ has coined Namibian charcoal as ‘the greenest charcoal on the planet’, and the charcoal being sent to the US is FSC-certified in terms of international standards for environmental, economic, and social sustainability,” said Ambassador Johnson.

The US market is the biggest charcoal consumer in the world. This first export consignment of 350 tons is valued at N$2 million (about 110,000 Euros). If the US market is receptive to Namibian charcoal, the GCC intends to import a total of 165,000 tons of Namibian charcoal by September 2022, valued at over N$950 million (about 5 million Euros).

President Geingob promises jobs during SONA

In his annual State of the Nation (SONA) address in Parliament this month, President Hage Geingob said an economic recovery programme would be announced soon. New projects to stimulate the economy would be the production of green hydrogen and ammonia. “To date Namibia had received six written offers from prospective local and international developers to locally manufacture these clean fuels”, Geingob said. Investments would range between N$32 billion to N$150 billion (1,8bn. to 8,2bn. Euros) and about 20,000 new jobs would be created. Geingob said he would soon establish a ‘Green Hydrogen Council’, which will report regularly on progress made towards reaching a final investment decision during his term of office, which ends in March 2025.

“Government will explore plans to construct a new deep-water port at Angra Point, off the coast of Lüderitz to export the green hydrogen and ammonia,” the President said.

A Business Rescue Task Force will be set up in May to review Namibian insolvency legislation to add the concept of business rescue into legal frameworks. This will mitigate the number of companies that face liquidation mainly due to the COVID-19 pandemic. This task force must complete its work by 31 October.

The government will – together with the private sector - start a national internship and apprenticeship programme to enhance work-integrated learning and improve the transition of apprentices and graduates into the labour market.

Deposit guarantee for bank clients in Namibia

The Bank of Namibia, the country’s central bank has established an agency with the responsibility of ensuring that in the event a bank fails, clients’ investments are guaranteed – at least partially. The Namibia Deposit Guarantee Authority (NDGA) was introduced to the public this month. At the end of 2020, Namibian commercial banks accepted deposits from more than 1,4 million individuals, businesses and institutions amounting to N$56,6 billion (about 3,2 billion Euros). Seven commercial banks are operating in Namibia. After the collapse of the state-owned SME Bank a few years ago, it was deemed necessary to protect depositors and to guard against panic withdrawals. All banking institutions registered in Namibia, as well as branches of foreign banks and building societies are required to be NDGA members and to pay annual subscriptions.

The guarantee coverage limit is currently set at N$25,000 (about 1,455 Euros) per client and at this limit, over 90 percent of current depositors in Namibia are covered.

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