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Namibia Namibia at a Glance: 2005-06

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Namibia Namibia at a Glance: 2005-06 Country Report Namibia Namibia at a glance: 2005-06 OVERVIEW The president, Hifikepunye Pohamba, has outlined a challenging agenda for his new government: tackling corruption, curbing unnecessary public spending and improving the management of parastatals. Much will depend on how well the new government!under Nahas Angula as prime minister and Libertina Amathila, one of the most popular figures in the ruling South West Africa People’s Organisation (SWAPO), as deputy prime minister!translates Mr Pohamba’s directives into effective policies. Speeding up the redistribution of land will be a priority of the Pohamba government, and white commercial farmers are coming under growing pressure to co-operate with the government’s policy of the compulsory purchase of selected farms. The new cabinet includes representatives of most factions in SWAPO, and the party appears to be united, at least for the time being. Real GDP growth is forecast at around 5% in 2005, owing largely to robust diamond production, together with the first year of full-capacity production at the Skorpion zinc mine and refinery. It will fall back to 4.5% in 2006 as output from Skorpion levels off and the increase in diamond recoveries slows. Inflation will follow the trend in South Africa, remaining at an average rate of around 4% in 2005 but rising to 4.4% in 2006. The trade deficit will widen in 2005-06, as imports are expected to grow faster than exports. The surplus on the services account will narrow in line with increasing import-related services and slowing growth in tourism receipts, and increasing remittances of profits by mining companies will cause the income surplus to fall. Payments from the Southern African Customs Union (SACU)!the main source of current transfers!will be slightly higher in 2005, but will fall back in 2006 when SACU’s new revenue-sharing formula begins to take effect. In consequence of these factors, the current-account surplus is forecast to narrow to 7.7% of GDP in 2005 and 3.8% of GDP in 2006. Key changes from last month Political outlook • There is no change to the political outlook. Economic policy outlook • There is no change to the economic policy outlook. Economic forecast • There is no change to our economic forecast. June 2005 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2005 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 1356-4218 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Namibia 1 Outlook for 2005-06 Political outlook Domestic politics After months of activity within the ruling South West Africa People’s Organisation (SWAPO), as different factions vied for a place in the new govern- ment, the transition to a new political era under the presidency of Hifikepunye Pohamba came almost as an anticlimax. The formal transfer of power to Mr Pohamba took place as scheduled at the end of March. Some of the rancour that had swirled around SWAPO since the election has dissipated, with the decision in March of the party’s central committee to promote reconciliation and with Mr Pohamba’s careful accommodation of SWAPO’s different constituencies in his first cabinet. In his initial public statements Mr Pohamba has also impressed observers with his specific pledges to combat corruption and curb unnecessary public spending, along with his evident intention to govern in a more collegiate manner than his predecessor. Much will depend on how well the new government!under Nahas Angula as prime minister and Libertina Amathila, one of SWAPO’s most popular figures, as deputy prime minister!translates Mr Pohamba’s directives into effective policies. Speeding up the redistribution of land will be a priority of the Pohamba government, and white commercial farmers are coming under growing pressure to co-operate with the government’s policy of the compulsory purchase of selected farms. It is uncertain how much influence the former president, Sam Nujoma, will exercise behind the scenes, as he remains president of SWAPO until at least 2007. So far, Mr Pohamba shows every sign of being his own man, as he promised before he was elected in November 2004. Mr Pohamba appointed several Nujoma loyalists to key posts in the cabinet, but they are not expected to exercise undue influence over policy. Although Hidipo Hamutenya, the former foreign affairs minister and Mr Pohamba’s main rival for election as SWAPO’s candidate for president, was not offered a post!and is reported to have told Mr Pohamba that he did not want one at that stage!Mr Pohamba is unlikely to allow the campaign of vilification against Mr Hamutenya to continue and may offer him a post in a future cabinet reshuffle. Mr Hamutenya and a former prime minister, Hage Geingob, who was unexpectedly left out of the cabinet, could prove to be influential critics from the SWAPO backbenches if Mr Pohamba’s government were to run into early trouble. In the meantime, they are expected to keep a low profile. So far, those within SWAPO who reportedly orchestrated the campaign against Mr Hamutenya, with Mr Nujoma’s blessing, appear to have kept their heads down, partly in response to Mr Pohamba’s pledge to promote party unity and also because some are now constrained by having been appointed deputy ministers, as was probably the president’s intention. International relations As the situation along the Angolan border is stable, there are no perceived external threats to Namibia during the forecast period. Relations with the Angolan and South African governments will remain close, and Mr Pohamba appears to be less strident in his support of the Zimbabwean president, Robert Country Report June 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 2 Namibia Mugabe, than was Mr Nujoma. It is significant that Mr Pohamba chose to make his first foreign visits as head of state to Angola and Botswana!with which relations have not always been at their friendliest!rather than to Zimbabwe. Economic policy outlook Policy trends The main aims of economic policy are set out in the second five-year national development plan (NDP2), covering fiscal years 2001/02-2005/06 (April-March). These include reducing poverty and income inequalities, creating employment in the private sector, promoting black economic empowerment (BEE), achieving sustained economic growth and diversification, and combating the spread of HIV/AIDS. Progress in most areas is likely to continue to be slow, although the government has committed itself to speeding up the implementation of BEE initiatives and has reportedly finished drafting a new donor-supported programme to combat HIV/AIDS, which is due to be implemented in 2005. It will become increasingly necessary (although not legally required) for every new foreign investor to form a partnership with a local BEE firm or trust. Most new foreign direct investment (FDI) in export-oriented manufacturing will continue to benefit from incentives under the export-processing zone regime. A privatisation programme, as advocated by the IMF, is off the agenda in the short term, as the government prefers to improve the performance of state- owned enterprises by commercialisation and better management. However, in line with Mr Pohamba’s pledge to manage parastatals more efficiently, a system of performance-related contracts is expected to be introduced by the new Central Governance Agency, and this is due to become fully effective in 2005. Fiscal policy The 2005/06 budget, tabled in parliament on May 12th 2005 by the minister of finance, Saara Kuugongelwa-Amadhila, estimates the fiscal deficit for 2004/05 at N$872.4m (US$137m), or 2.4% of GDP, compared with 1.6% of GDP projected when the budget for the year was presented in March 2004.
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