Is the national budget contributing towards Namibia’s industrialisation?

Naufiku Hamunime - “With primary commodities accounting for over 50% of exports, the Namibian economy remains at the bottom of the global value chain.” These words, spoken by Finance Minister Calle Schlettwein during his 2017/18 Budget Speech, couldn’t describe the state of the Namibian economy more accurately.With GDP growth averaging at 4% over the last decade, Namibia - like many other Sub-Saharan African countries - appears to be proof that a country can grow in the absence of deep seated structural transformation. However, with high unemployment and poverty rates, not only does this growth face significant limitations, but as 2016 proved, it is also extremely vulnerable to global and regional headwinds. Vision 2030 states that Namibia aims to be an industrialised knowledge-based country where manufactured goods and services contribute 80% of GDP by 2030. However, over the past decade Namibia’s manufacturing sector has remained largely underdeveloped with its contribution to GDP having steadily declined from 14.4% to 8.3% between 2006 and 2015. And whilst manufacturing has been on the decline; within recent years, mining has come to constitute a higher percentage of GDP relative to the manufacturing sector.Insert graph: Percentage contribution to GDPThis indicates that the country has not only regressed in terms of achieving the priorities set out in Vision 2030, but that the structure of the economy has actually become less sophisticated as value-added goods have come to form an even smaller base of the Namibian economy than in previous years. Historically manufacturing, rather than agriculture or mining, has been the sector that has played a pivotal role in driving advanced industrialisation. Initiating the process of industrialisation in Namibia will not be dependent on achieving high growth rates, but rather, will be contingent on shifting resources from low to high productivity uses within which increasing the size of manufacturing as a share of output and employment is prioritised.The budget allocations dedicated to the Ministry of Industrialisation, Trade and SME Development, which is mandated to spearhead trade and industry and increase the country’s global competitiveness, indicate that over the last decade historically low levels of investment have been present to support Namibia’s manufacturing sector. This is evident in that the Ministry of Industrialisation’s budget allocation has gradually decreased from 1.8% of total expenditure in 2012 to 0.8% in 2016. Whereas allocations to government ministries such as the Ministry of Safety and Security have increased from 5.8% of total expenditure to 8.1% over the same timeframe. Insert graph: Budget allocations as a percentage of total expenditureIn a recent publication by the McKinsey Global Institute, Namibia was identified to have significant growth potential in the automotive, chemicals and machinery sectors – all industries that possess significant export potential. Similarly, in the ‘Growth at Home’ Industrialisation policy - the automotive, chemicals and agro-processing industries were all singled out as priority sectors. Due to its linkages to the agriculture sector, agro-processing in particular possesses significant potential to increase value addition and create jobs. In 2015, agriculture and the manufacturing of food and beverages contributed 7.6% to GDP and was believed to be the country’s largest employer. However, despite the potential the industry possesses, the sector is believed to be severely constrained by a lack of funding. Of the N$2 billion allocated to the Agriculture Ministry annually, on average between 71% and 78% of the agriculture budget is dedicated to personnel expenditure and construction spending alone – which leaves much to be desired in the way of investment. Where learning and financing costs of industrial development are too high for the private sector to undertake, state intervention through the provision of investment capital, and research and development are needed to reduce the uncertainties that capitalists face in venturing into the production of non-traditional exports.If Namibia is to truly pursue an industrialisation strategy which involves shifting the economy away from its reliance on basic primary goods towards diversified exports and complex activities, the state will need to actively prioritise the manufacturing sector in order to reverse current trends of de-industrialisation and thereby increase the nation’s resilience to external shocks.

Is the national budget contributing towards Namibia’s industrialisation?

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Republikein 2025-12-23

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Is the national budget contributing towards Namibia’s industrialisation?

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Republikein 2025-12-23

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