The Bank of Namibia (BoN) says Namibia’s massive oil discovery have the potential to make Namibia rank among the top 15 oil rich countries in the world, with the country having attracted N$33.4 billion in oil and gas sector foreign direct investments (FDI) inflows between 2021 and 2023.
“Exploration activities have so far contributed positively to economic growth, estimated at an average of 0.4% between 2021 and 2023. On a sectoral basis 17.7% average contribution to the mining and quarrying sector, while these contributions are expected to keep rising – as explorations intensify and development of oil and gas and Green Hydrogen takes place,” BoN Governor Johannes !Gawaxab
He made these remarks at Lüderitz where he addressed the community and various stakeholders in the //Kharas Region, on how to position Namibia’s oil and gas endowments and manage the inherent Dutch Disease (Oil curse) risk that comes with natural resource development.
//Kharas Region, and mainly the town of Lüderitz will be the centre of economic activities due to the oil discoveries offshore, in addition to large scale Green Hydrogen project, with an approximate capital expenditure of N$180 billion.
While pointing at the potential benefits, the Governor was quick to warn the nation not to be swayed into focusing only on the oil and gas sectors, but must diversify the economic activities to avoid the economy collapsing if the fragile oil industry collapses.
“Don’t rely too much on oil and gas if it comes, that you will ignore your fishing sector which is the main economic activity of the town, including manufacturing. Instead, diversify the economy because commodities have cycles and the prices of commodities are very volatile,” he said.
“Furthermore, we need to be open to the transfer of skills and knowledge. Where we don’t have the skills, we shouldn’t be ashamed to open up our country to the rest of the world, for people to come. Certainly, we know who the citizens and residents are, so there will be no issues in dealing with that.”
He further pressed on that “we need to prepare the country, particularly for the new endowments, and plan it from the centre together with the local councillors and entire leadership because if we leave that only to Lüderitz it’s not going to work. Thus, sourcing from government development funding will be essential to ensure that adequate resources are availed [sic] for infrastructure development”.
!Gawaxab also advised that there is a need to monitor existing mining licences and EPL allocations, while also identifying priorities within the expansion plan.
“We need to be intentional about what are the priority areas for Lüderitz itself. Now if you just go and want to do everything it’s probably not going to work. So the focus should be we should have a laser-like focus. What is that that we need to start with? And the rest will follow later. We plan for rail, road, air and port facilities upgrade, but which do we start with?” he remarked.
While highlighting other prospective growth areas, !Gawaxab said the presence of the Neckartal Dam in //Kharas, should be utilised for irrigation green schemes, Hydroponic green feed and fodder as well as small stock feedlots. Other activities include aquaculture fishing, recreational activities, tourism and accommodation.
“Appropriate planning must ensure that these resources are integrated into the development plans of the region,” he reiterated.
He said BoN is currently conducting research on potential implications for the macroeconomy and the exchange rate and monetary policy, including the Management of the Welwitschia Sovereign Wealth Fund
“We are doing research about the oil and gas, the impact, the lessons, what happened in the other parts of the world, to understand the dynamics of the oil and gas industry,” he said.
“What are the potential implications for the economy of oil and gas and Green Hydrogen? What are the potential implications for a change rate and monetary policy? That’s what we are trying to understand. This is important because if unchecked, it could potentially also have implications for monetary policy going forward through increasing natural resource exports that can result in currency appreciation, that can encourage imports, and discourage exports in other sectors as they become less competitive.
“It could also affect the current account, for instance in 2023, Namibia’s (CA) deficit deteriorated as exploration and appraisal activities intensified – CA deficit worsened to 15% in 2023 from 12% in 2022, but is expected to recover to 12.6% in 2024, then deteriorate to 14.0% in 2025. Therefore, these issues, if left unchecked could potentially culminate into resource curse risks for Namibia or what is referred to as the Dutch Disease,” !Gawaxab added
