Mining to drive economic growth

The mining sector, particularly the diamond subsector, is expected to be a key driver of economic growth in 2023, according to the Bank of Namibia (BoN).

Projections for the primary sector indicate a growth rate of 5.2% in 2023 and 2.8% in 2024, compared to the robust 12.9% growth achieved in 2022. The central bank’s forecast is contained in its latest Economic Outlook Update, released in March.

Growth of 6.9% and 2.7% is forecast for Namibia’s mining and quarrying sectors in 2023 and 2024, respectively.

The diamond mining industry experienced significant growth in 2022, mainly due to high production from the Benguela Gem mining vessel. However, growth is expected to slow down moving forward.

Projections indicate a growth rate of 8.2% in 2023 and 1.3% in 2024 for the diamond mining sector. This follows a growth rate of 45.1% in 2022, which was largely supported by the deployment of the Benguela Gem mining vessel in the second quarter of that year.

Ongoing oil exploration and appraisal activities are also expected to contribute to mining growth from 2023 onward.



Uranium, ores

After experiencing a contraction in 2022, the uranium mining industry is expected to return to growth in 2023.

BoN projections indicate a growth rate of 4.5% in 2023 and 4.3% in 2024 for the uranium mining sector, an improvement from the contraction of 2.5% observed in 2022.

The uranium sector is still facing challenges caused by water supply interruptions, which have resulted in mines frequently reducing their production targets in the past.

Additionally, the occasional presence of high sulphur content in the sea has forced a halt in the production of desalinated water, further exacerbating the problem of water supply interruptions, the BoN said.

After experiencing meagre growth in 2022, the metal ores sub-sector is projected to expand in 2023 and remain robust in 2024.

Projections indicate a growth rate of 5.3% in 2023 and 5.4% in 2024 for the metal ores sector, recovering from 0.5% in 2022.

This recovery is expected to be driven by an anticipated increase in gold production from the two mines currently in operation.



Overall growth

Namibia's economic growth is expected to decelerate in 2023 and 2024, largely due to weaker global demand.

The International Monetary Fund (IMF) forecast economic growth of 2.8% for Namibia in its latest World Economic Outlook, released in April. The IMF’s projection is lower than finance minister Iipumbu Shiimi’s 3.2%, which he mentioned in his budget speech at the end of February, as well as the Bank of Namibia’s (BoN) 3.0% in its Economic Outlook Update in March.

According to the Namibia Statistics Agency (NSA), Namibia’s economy grew by 4.6% in 2022.

Going forward, growth is expected to moderate further to 2.9% in 2024, according to the BoN.

Risks

There are several risks to domestic growth, including global monetary policy tightening and high import costs of key commodities such as fuel, wheat, and cooking oil, which are expected to remain high during the forecast period, the BoN said.

The ongoing conflict between Russia and Ukraine is expected to prolong the high prices for affected commodities, while water supply interruptions, potential electricity cut spillovers from South Africa, and uncertainty around the impact of climate change on the economy are also contributing factors.