Namibia is a middle-income country whose considerable successes rest on a strong multiparty parliamentary democracy that delivers sound economic management, good governance, basic civic freedoms, and respect for human rights. At independence in 1990, Namibia inherited a well-functioning physical infrastructure, a market economy, rich mineral resources, and a relatively strong public administration. However, the social and economic imbalances of the former apartheid system have left Namibia with a highly dualistic society. The structure of the economy has made job creation difficult, and poverty and inequality remain unacceptably high.  These key challenges are at the top of the government’s development agenda.

Namibia has made significant progress in addressing the structural problems: access to basic education has become more equitable and primary health care services are widely available. Access to safe water and sanitation has improved, and sound public policies are helping to lay the foundation for gender parity and new programs have been launched to protect the country’s environment and natural resources. Namibia not only maintains a social safety net for the elderly, disabled, orphans, vulnerable children, and war veterans, but also has a Social Security Act that provides for maternity leave, sick leave, and medical benefits to the population.

Nonetheless, human development challenges persist. Namibia is ranked 128 out of 182 countries surveyed in the 2009 Human Development Report. Although Namibia is on track to meet the Millennium Development Goals on education, environment and gender, it faces daunting challenges in combating the HIV/AIDS epidemic, making it especially challenging to meet Millennium Development Goal Six.

Economic overview

A politically stable upper middle-income country with a per capita income of approximately US$4,310, Namibia’s economy is closely linked to South Africa’s economy, and the Namibian dollar is pegged to the South African rand. As a result, economic trends including inflation closely follow those in South Africa. Prior to the 2009 global financial crisis, Namibia had experienced steady growth, moderate inflation, limited fiscal debt, a robust mining sector, a fairly developed infrastructure, and a strong legal and regulatory environment.  From 1990 to 2008, economic growth averaged 4.5 percent per year.

However, the 2009 onset of the global economic crisis has not only lowered demand for Namibia’s commodity exports, mainly diamonds, but also reduced the transfer payments the country receives due to its membership in the Southern African Customs Union (SACU). Following years of successive growth, the Namibian economy recorded a negative growth of 0.8 percent in 2009. Following three consecutive years of budget surpluses, the government responded to the sudden economic downturn by running a budget deficit, and fiscal deficits are expected to widen. For the next three years, the International Monetary Fund (IMF) has projected deficits of 8.1 percent, 7.8 percent, and 3.8 percent of GDP respectively.  In 2009 and 2010, public debt stood at 14.9 percent of GDP, well below the government’s target of 25 percent. Nevertheless, in 2010 the economy has shown signs of a significant rebound due to government investment and rising commodity exports, and economic forecasters are now predicting a growth rate of 4.4 percent.

Political Context

The presidential and National Assembly elections that took place in late November 2009 confirmed the dominance of the South West Africa People's Organization (SWAPO) party in national politics, achieving an overwhelming victory. The newly-formed Rally for Democracy and Progress Party, headed by the former SWAPO Party Minister of Trade and Industry, Mr. Hidipo Hamutenya, became the official opposition overtaking the Congress of Democrats Party.

In the 2009 election manifesto, the SWAPO Party ran on the commitment that it would work to “Consolidate monetary and fiscal policies geared towards promoting growth and employment creation, and to ensure forward and backward economic linkages of economic sectors and regions.” Furthermore, the party promised to “maintain prudent macroeconomic policies that are responsive to domestic, regional and international economic developments.”

Development Challenges

Although Namibia has sustained a noteworthy track record on economic growth and macroeconomic stabilization, certain daunting development challenges remain. In particular, while poverty rates have declined since independence, widespread unemployment and distribution of income and assets remain significant issues. With a Gini coefficient of 0.74 (UNDP, 2007), Namibia is among some of the least equitable countries in the world.  Thus, a central policy challenge in Namibia is to achieve higher rates of growth, create jobs, alleviate poverty, reduce inequality, and raise living standards.

Similarly, despite a decline in HIV prevalence rates, which have fallen from 22 percent in 2002 to 17.8 percent in 2008, HIV infections remain a serious concern. Namibia also has one of the highest tuberculosis prevalence rates in the world at 765 per 100,000 with some regions reporting tuberculosis rates as high as 1,000 per 100,000.

In addition, Namibia is expected to face increased budgetary constraints in coming years as SACU transfer payments are expected to continue their downward trend. 

 

World Bank Assistance

Namibia became a member of the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in 1990. In the early years, a number of analytical and advisory activities were undertaken, some jointly with the government focusing on the development challenges it faced.

Namibia has benefited from Global Environment Facility (GEF) grants. There are two active GEF projects at present: the Integrated Community-based Ecosystem Management Project (ICEMA, US$7.1 million) and the Namibian Coast Conservation and Management Project (NACOMA, US$4.9 million). In response to the government’s request for support with the floods in the northern part of the country the World Bank mobilized a team in 2009 to undertake a Post-Disaster Needs Assessment (PDNA) jointly with the United Nations Development Program (UNDP) and other development partners. The joint PDNA report was finalized and published in 2010. Long term reconstruction and transformation costs were estimated at US$460 million, about five percent of Namibia’s 2009 GDP. The World Bank is assisting the government in its efforts to increase the country’s resilience to natural disasters in a variety of ways, including through analytical work and technical assistance programs.

Annual business planning discussions between the Namibian government and the World Bank took place on March 26, 2010. The following key areas of engagement – comprehensive study of unemployment, poverty assessment, assistance with macro-modeling and climate change -- were identified as priorities for FY11.

The first IBRD loan for Namibia – an Education Development Policy Loan (DPL, US$7.5 million) – was approved in May 2007.  A second DPL was approved in November 2008, and signed on Sept. 17, 2010. The DPLs support development of specific policies and instruments to implement the Government’s education sector reforms and build institutional capacity required for effective implementation of reforms.

 

The grants from the Global Environment Facility have achieved good results. The Integrated Community-based Ecosystem Management Projectsuccessfully promote a new Tourism and Wildlife Concessions Policy in protected areas, while the Namibian Coast Conservation and Management Projecthelpedto both successfully consolidate previous and recently-proclaimed protected areas while providing support for the establishment of the Namib-Skeleton Coast National Park, which covers 107,540 square kilometers and is now the largest park in Africa and the eighth largest protected area in the world.

Following consecutive years of massive, widespread flooding in the northern part of the country the World Bank responded to a request from the government of Namibia to undertake a Post-Disaster Needs Assessment (PDNA) jointly with UNDP and other development partners. Overall damage to physical assets totaled $130 million. Losses in production flows were estimated to be $70 million and were also mainly incurred by the private sector. Long term reconstruction and transformation costs were estimated at $460 million, about five percent of Namibia’s 2009 GDP. The PDNA report has provided the Namibian government with a strong analytical base for developing a robust strategy for financing a climate-resilient infrastructure.

The International Finance Corporation (IFC) has been involved in small investments: a fisheries project (Pescanova), and an equity investment in the country’s first indigenous life insurance company (Namibia Life). An IFC loan supported the construction of a 110-room Best Western hotel in northern Namibia. On the technical assistance front, IFC worked with the Namibian Agronomic Board to raise trust funds for a feasibility study for a cotton ginning industry. In August 2008, IFC extended a $10 million loan for the construction of a Protea Hotel in Central Windhoek by United Africa Group, marking its second investment.

The Multilateral Investment Guarantee Agency (MIGA) is not active in Namibia.