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Namibia Namibia at a Glance: 2002-03

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Namibia Namibia at a Glance: 2002-03 COUNTRY REPORT Namibia Namibia at a glance: 2002-03 OVERVIEW The ruling South West Africa People's Organisation (SWAPO) will face little threat from the divided opposition. Economic policy will focus on accelerating growth and reducing poverty and unemployment. Higher diamond output will raise real GDP growth to 3.5% in 2002 and 5% in 2003. Average inflation will ease to 8% in 2002 and 7% in 2003 owing to the successful implementation of the inflation-targeting policy in South Africa. Greater diamond production will increase the current-account surplus to 4.7% of GDP in 2002 and 6.4% of GDP in 2003. Key changes from last month Political outlook • President Sam Nujoma has told the SWAPO Central Committee that he will not stand for a fourth term in office. He will stand for re-election as party president at the 2002 party congress, but a special SWAPO congress, scheduled for 2003, will choose the party's candidate for the presidential election in 2004. The Economist Intelligence Unit had previously thought that a new party president would be chosen in 2002; it is possible that, as there is no clear successor, a later date was chosen to reduce party infighting in the run-up to the 2004 election. Economic policy outlook • Recent sharp falls in the South African rand have not fed through into higher inflation; therefore we expect some easing in South African, and therefore Namibian, interest rates in 2002. Economic forecast • Diamond production of the Namibian Minerals Corporation over the first nine months of 2001 was 52,600 carats, compared with 163,500 carats over the same period in 2000. The fall was because of technical and financial problems which we had factored into our calculations; therefore we are maintaining our overall diamond production forecast for 2001 at about 1.45m carats. December 2001 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 EIU delivers its information in four ways: through our digital portfolio, where our 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 © 2001 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 EIU 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 2002-03 Political outlook Domestic politics The ruling South West Africa People’s Organisation (SWAPO) will face little threat from the divided opposition. Domestic political activity will focus on a special SWAPO congress, scheduled for 2003, at which a new party president to succeed President Sam Nujoma will be chosen. The new SWAPO president will almost certainly become the party’s candidate in the 2004 presidential election, as Mr Nujoma told the party’s central committee in late November that he did not wish to stand for a constitution-defying fourth term. However, Mr Nujoma will stand for re-election as party president at the 2002 congress, and there is still a possibility that, if the leadership contest causes a serious split within SWAPO, he might decide to stay on. The most probable leadership contenders are the prime minister, Hage Geingob, the trade and industry minister, Hidipo Hamutenya, the agriculture minister, Helmut Angula, the foreign affairs minister, Theo-Ben Gurirab, and possibly the finance minister, Nangolo Mbumba, are. Mr Geingob has adopted an increasingly presidential style, but as a member of the minority Damara community—like Mr Gurirab—he will need to work hard to win sufficient backing from northerners, especially the Kwanyama sub-group of the Oshiwambo, who constitute the majority of SWAPO’s membership. In any event, President Nujoma is set to remain firmly in charge of the country over the forecast period, whoever is chosen to lead SWAPO into the 2004 election. Although the parliamentary coalition of the Democratic Turnhalle Alliance and the United Democratic Front is the official opposition, the Congress of Democrats will continue to be the more effective force in parliament. Opposition pressure has been effective; for example, the recently approved anti-corruption bill has been amended to cover the office of the presidency. The alleged reluctance of commercial farmers to sell their farms to the state at fair prices has created pressure to speed up land redistribution. President Nujoma told the Namibian National Farmers’ Union congress in August that the current “willing buyer-willing seller” policy might be changed if it was not working. However, the Economist Intelligence Unit considers this to be just a warning to commercial farmers to co-operate and does not foresee any imminent change to the current policy. Absentee landowners are expected to be the main targets of a land tax to be introduced soon. Tensions in Caprivi may be reignited by the plans of the ruling SWAPO group on the regional authority to change the name of the region, and by the trial, delayed until early 2002, of over 100 Caprivians charged with treason for their involvement in secessionist attacks in 1999. International relations The situation along the north-eastern border remains largely quiet, but sporadic attacks by the Angolan rebel movement União Nacional para a Independência Total de Angola (UNITA) have continued and a dusk-to-dawn curfew has been renewed along both sides of the Okavango River where it forms the border with Angola. Low-level instability is likely throughout the EIU Country Report December 2001 © The Economist Intelligence Unit Limited 2001 2 Namibia forecast period. The withdrawal of Namibian forces from the Democratic Republic of Congo was completed in October and we do not envisage circumstances under which they will return. Economic policy outlook Policy trends Economic policy during the forecast period will focus on accelerating economic growth, reducing poverty and unemployment, empowering those on low incomes, and tackling HIV/AIDS. Central to these goals will be the stimulation of activity in the private sector, particularly export-orientated manufacturing, in order to diversify the economy away from agriculture, mining and fishing, all of which are vulnerable to external shocks. However, apart from the commissioning of the Skorpion zinc mine and refinery and some activity in the textiles sector, progress towards the policy goals will be achieved by developing the mainstays of the economy. The impact of the global slowdown may prompt the government to examine whether existing investment-promotion policies are adequate. Details of any privatisation programme will not be worked out until after the publication of a review of parastatal performance and pay structures, which is due by the end of 2001. The first actual sales, falling short of full privatisation, will not happen until 2002 at the earliest. Initial candidates for privatisation are likely to include Nampower and Telecom Namibia—which will lose its monopoly supplier status in 2002. Fiscal policy As we had expected, the deficit target of 3.6% of GDP for the 2001/02 fiscal year (April-March) will be exceeded. A supplementary budget issued in October forecasts a deficit of 5.3% of GDP. However this forecast does not seem to take account of lower GDP growth and a downward revision to historical data; therefore we are forecasting a deficit of 6.1% of GDP. The jump in the deficit is a result of the one-off expense of re-capitalising Air Namibia plus increases in public-sector salaries. Following a sharp rise in total spending in 2001/02, the three-year medium- term expenditure framework (MTEF) announced in the main 2001/02 budget restricts spending growth (at constant 2001/02 prices) to 2% in 2002/03 and 5% in 2003/04. The government’s history of overspending suggests that these targets are unlikely to be met. The targeted fiscal deficit/GDP ratio of 2.9% for both 2002/03 and 2003/04 was based on an average annual real GDP growth rate of 4.8% in 2001-04, which looks optimistic.
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