FIRST CAPITAL NAMIBIA Namibia Economic Transformation Journey 1990 – 2020 by First Capital Namibia Date: May 2020 Knowledge | Creativity | Solutions Namibia Economic Transformation Journey Report 1 | P a g e Asset Management | Investment Banking | Property Management Disclaimer This document is issued by First Capital Namibia. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. Opinions, projections, and estimates are subject to change without notice. This document is for information purposes only. It does not constitute any offer, recommendation, or solicitation to any person to enter into any transaction or adopt any hedging, trading, or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. The contents of this document are not made about the specific investment objectives, financial situation, or the needs of any person. Namibia Economic Transformation Journey Report 2 | P a g e About Us First Capital Namibia is a financial services company specialized in providing treasury and asset (investment) management services. Established in August 2009, First Capital have in-depth, personal knowledge of the Namibian capital markets and the resulting insight enables us to manage Namibian assets across different spectrum including cash management, equity, fixed income, specialist agriculture and property mandates. We are licensed to manage money for private investors, pension funds, insurance groups, public (government) sector, and charities. Our credibility as asset managers is tightly governed by the Namibia Financial Institutions Supervisory Authority (NAMFISA). We are a Namibian based investment team and focus exclusively on the Namibian market and we add value to portfolios through offering specialized Namibian mandates. Namibia Economic Transformation Journey Report 3 | P a g e Table of Contents ACRONYMS ......................................................................................................................................... 13 EXECUTIVE SUMMARY ...................................................................................................................... 14 CHAPTER 1: INTRODUCTION ............................................................................................................ 16 1.1 OBJECTIVES OF THIS RESEARCH PAPER ......................................................................................... 17 1.2 OUTLINE OF THE PAPER ................................................................................................................. 17 CHAPTER 2: OVERVIEW OF NAMIBIA’S POLITICAL ECONOMY (1990 – 2020) ........................... 18 2.1 REDISTRIBUTIVE POLICIES AND STRATEGIES (1990 – 2030) ............................................................ 19 2.1.1 Expansionary Fiscal Policy (Government Expenditure) ....................................................... 19 2.1.2 Affirmative Action (AA) ......................................................................................................... 20 2.1.3 Land Ownership (Land Reform) ........................................................................................... 20 2.1.4 Business Ownership (Black Economic Empowerment - BEE) Policy .................................. 21 2.2 INTEGRATING NAMIBIAN ECONOMY THROUGH REGIONAL ECONOMIC BLOCKS ..................................... 21 2.2.1 Southern Africa Development Corporation (SADC) ............................................................. 21 2.2.2 Common Monetary Area (CMA) .......................................................................................... 23 2.2.3 Southern Africa Customs Union (SACU) ............................................................................. 24 2.3 GLOBALIZATION (GLOBAL ECONOMIC CRISIS & THE NAMIBIAN ECONOMY) ........................................ 24 2.3.1 Asian financial crisis ............................................................................................................. 25 2.3.2 The Dotcom Crisis ................................................................................................................ 25 2.3.3 Commodity Boom and Bust ................................................................................................. 26 2.3.4 The Global Financial Crisis .................................................................................................. 26 2.3.5 COVID – 19 (Corona Crisis of 2020 & the Namibian Economy).......................................... 26 CHAPTER 3: STRUCTURE AND PERFORMANCE OF THE ECONOMY ......................................... 33 3.1 DISTINGUISHING FEATURES OF THE NAMIBIAN ECONOMY ................................................................. 33 3.1.1 Degree of Openness in SADC (2008 – 2018)...................................................................... 33 3.1.2 Trends in GDP Growth over the past 30 Years (1990 – 2020) ............................................ 35 3.2 STRUCTURE OF THE ECONOMY OVER 1990 – 2020 ........................................................................ 36 3.3 SECTORAL CONTRIBUTIONS TO GDP .............................................................................................. 38 3.4 ECONOMIC STRUCTURE DURING THE NATIONAL DEVELOPMENT PLANS (NDP 1 TO NDP 5)............... 39 3.4.1 Gross Fixed Capital Formation (Fixed Investment) Performance........................................ 42 3.4.2 Employment by sector .......................................................................................................... 45 3.5 BALANCE OF TRADE (EXPORTS AND IMPORTS) ................................................................................ 46 3.5.1 Merchandise exports ............................................................................................................ 46 3.5.2 Merchandise imports ............................................................................................................ 47 Namibia Economic Transformation Journey Report 4 | P a g e 3.6 RURAL – URBAN POPULATION MIGRATION ...................................................................................... 48 3.6.1 Urban Infrastructure ............................................................................................................. 49 3.7 HAS THE NAMIBIAN ECONOMY TRANSFORMED (ECONOMIC TRANSFORMATION TRENDS)? ................. 50 3.7.1 Proportion of Labour Employed by sector ............................................................................ 50 3.7.2 Proportion of Capital Employed by sector ............................................................................ 51 3.7.3 Comparison of Labour and Capital resource allocation with Output by sector .................... 52 3.7.4 Labour Productivity Levels by sector ................................................................................... 53 4.7.5 Productivity Comparison between Formal and Informal sectors ......................................... 53 CHAPTER 4: NAMIBIA AGRICULTURE SECTOR TRANSFORMATION ......................................... 55 4.1 THE ROLE OF AGRICULTURE IN THE ECONOMY ................................................................................ 55 4.2 POLICIES AFFECTING AGRICULTURE TRANSFORMATION................................................................... 55 4.2.1 Namibia Agricultural Policy (NAP) of 1995 and 2015 .......................................................... 56 4.3 STRUCTURE OF THE AGRICULTURAL SECTOR .................................................................................. 58 4.3.1 Agricultural Sector Contribution to Gross Domestic Product (GDP) .................................... 59 4.3.2 Agriculture Output ................................................................................................................ 60 4.3.3 Agriculture Sector Growth Volatility ..................................................................................... 60 4.4 AGRICULTURE SECTOR PERFORMANCE ........................................................................................... 61 4.4.1 Livestock Subsector ............................................................................................................. 62 4.4.2 Number of Pigs Marketed .................................................................................................... 66 4.4.3 Milk Production ..................................................................................................................... 67 4.4.4 The poultry industry .............................................................................................................. 67 4.4.5 Crops, Vegetable and Horticulture sector ............................................................................ 68 4.5 CONTRIBUTION OF THE AGRICULTURAL SECTOR TO EMPLOYMENT ................................................... 72 4.5.1. Employment ........................................................................................................................ 72 4.6 CONTRIBUTION OF THE AGRICULTURAL SECTOR TO TRADE (EXPORTS AND IMPORTS) ....................... 72 4.6.1. Imports ................................................................................................................................ 72 4.6.2. Exports ..............................................................................................................................