01 March 2024

Statement By The Minister Of Finance, Namibia, Hon. Saara Kuugongewa - Amadhila - SACU Breakfast Dissemination Seminar On The African Economic Outlook 2006/07

18 June 2007

Ladies and Gentlemen, dear Colleagues,

Good morning to you all on this occasion, to which I am honoured to have been invited as Key Note Speaker. The African Economic Outlook is among the most important publications on the economic development of the continent, and I am pleased that our small-but-beautiful nation Namibia is featured in this year’s edition. The theme of the publication is “Access to drinking water and sanitation”, which is also of particular interest to Namibia, and I am sure Dr Temitope Oshika of the AfDB will give us a more detailed overview later on.

Besides Namibia, the Outlook also covers our neighbours Angola, Botswana and South Africa, as well as Malawi, Mozambique and Zambia. With plans for an increased sample – and we hope that they can consider Lesotho and Swaziland on the way – this publication can provide the background for comparative economic analyses of SACU and SADC member states.

Economic growth in Africa

Looking at Africa on the whole, it gives me pleasure to observe that our continent has displayed unprecedented economic growth over the past few years. As the report highlights, “2006 was the fourth consecutive year of economic growth above 4 per cent in Africa, with economic activity expected to remain high over the next few years.” It goes on to state that “oil and mineral exporting countries are outpacing others by a substantial margin, a trend which is set to sharpen in 2007 and 2008.”

This puts Namibia into an interesting middle position, since we are a mineral exporter, but also an oil importer. Strong global demand for both these commodities has thus had a mixed effect on our economy. On the one hand, high crude prices have contributed to an increase in inflation, which has put a strain on consumers and prompted the Bank of Namibia to raise the interest rate repeatedly over the past financial year. As Minister of Finance, this is of concern to me, as Government borrowing becomes more expensive. On the other hand, high mineral prices – not least for uranium – have meant healthy profits and foreign exchange earnings for the Namibian mining industry. This also puts a smile on my face, as tax revenue collections from this sector have increased drastically.

The lesson to take away from this is that the African Economic Outlook highlights a reality that is as prominent in our country as anywhere: Globalisation is a dominant force behind domestic economic performance.

World market developments have a direct effect on what is happening in the most remote corner of Namibia. This brings with it enormous opportunities for growth, but also the risks of dependency on factors beyond our control. It is undeniable that our current growth is externally driven, and we cannot rely on a favourable world economy forever. This makes it all the more important that we are proactive in capitalising on the current fortune. We need to use the gains from our exports to build up a solid base for domestic expansion. In doing so, it is my belief that the opportunities far outweigh the risks, especially for a small economy like ours.

Regional Economic Integration

Opening up to the world is therefore our best strategy to sustain growth, but it has to be done in a strategic manner. To that end, Government is following an agenda of regional economic integration. Africa with its small markets is to gain enormously from creating free trade areas, which will facilitate the realisation of economies of scale and comparative advantages. Moreover, by working together, small countries have more bargaining power when they face economic heavy-weights like the European Union or the United States in trade negotiations. I am pleased that all over Africa, more and more regional economic agreements have been signed and deepened in recent years.

For us in Namibia, there are different layers of integration. Firstly, we have the Common Monetary Area to facilitate economic interaction with our neighbours and to provide macroeconomic stability. Secondly, we are a member of SACU together with Botswana, Lesotho, South Africa and Swaziland. Under the umbrella of SACU, we have concluded a Free Trade Agreements with the European Free Trade Association (EFTA) and MERCOSUR. In addition, plans are underway to begin negotiations with China and India. By linking regionally dispersed groups of trade blocs together, markets open up and risk is diversified away from having only a few trade partners. Finally, there is SADC, which is integrating at a more and more rapid pace towards the creation of a common market in Southern Africa.

The drive towards regional and inter-regional economic integration has been significant for economic convergence. I therefore encourage all of us to have a positive outlook and embrace the opportunities of globalisation, which will be to the benefit of all participants in the long run.

I am not saying that this is a simple task. Experience has shown that Africa has struggled to take advantage of the possibilities opened up by globalisation. External vulnerability is a reflection of the marginal role played by the continent in that process, and of its limited integration in international trade and investment flows in particular. Africa can become the active architect of its global integration by better mobilising internal resources and using external catalysts for growth more strategically.

Development aid and relations with donors Two of the most important catalysts in this respect are private investment and development aid. Namibia has received substantial amounts of development aid from international donors since independence, which have helped build up infrastructure and alleviate social hardships. We are therefore very grateful for all the assistance we have received and continue to receive.

However, we also experience a few complications in the relationship with external donors. Recently it has been the case that Namibia was classified as an MIC for some purposes, and then as a Least Developed Country for others – by the same institution!

In another case, we qualified for assistance from a donor only because of our Middle Income status and the fact that we were attested good governance and development. However, we are requested to adhere to the same conditions as least developed countries.

These two examples highlight how development cooperation should not be conducted. After emerging from decades of apartheid, there are peculiar social needs in our country that need to be addressed. The approach of “One size fits all” that some donors use should be replaced by more sensitivity to local circumstances. That way, international cooperation could become even more powerful in promoting sustainable economic development on our continent.

Foreign investment

The other external catalyst to bring growth to Africa is private investment.

Attracting investors not only brings capital to our continent, but also fresh ideas and much-needed skills. This is just another benefit of globalisation and interacting with the world at large. Africa has seen foreign direct investment picking up recently on the back of the strong world demand for commodities.

In order to make these investments sustainable, we need to do more to retain capital once the commodity boom slows down. To attract foreign investment, it is not only necessary to provide a business-friendly environment, but also to create awareness among international players of the opportunities we have to offer.

This is where the African Economic Outlook can be of tremendous service by putting us squarely on the map for investors interested in Africa. In the same vein, I am looking forward to the latest African Competitiveness Report, which was launched in Cape Town a few days ago and in which Namibia also features.

Africa is up and coming, Ladies and Gentlemen, and today’s launch is just another step on the road to development and prosperity on our continent.

Thank you!