Investment in Namibia’s oil and gas sector has emerged as one of the main contributors to a surge in the country’s foreign direct investment (FDI) during the first two quarters of 2023, reaching a record N$19 billion.
The figure according to Catalyst Investment Managers, represents 16.83% of the country’s gross domestic product (GDP), surpassing any annual inflow recorded.
Cheryl Emvula, Head of Research at Catalyst Investment Managers, said that Namibia had achieved a historic milestone in the second quarter of 2023 with a record N$13 billion FDI inflow.
“The scale of investments in the sector is substantial, with major players like Shell and Total directing significant portions of their exploration budgets into Namibia. These investments, coupled with potential production well establishments, could herald a long-term economic upswing,” he said.
“The discovery of vast oil and gas reserves offshore played a pivotal role, sparking intense exploration activities. While the green hydrogen industry’s contribution to FDI at this stage, I believe, has remained modest.”
Emvula emphasized that the immediate benefits of the investments are visible in the strengthening of Namibia’s national reserves, which were previously facing challenges due to post-Covid difficulties and the outflows of FDI in 2019 and 2020.
“This strengthening upholds the country’s dedication to its currency peg, enabling the Bank of Namibia (BoN) to sustain a comparatively accommodative stance in contrast to its South African counterpart. Consequently, Namibia enjoys a lower repo rate (interest rates) than South Africa, fostering a favorable atmosphere for economic stability and expansion,” Emvula said.
Speaking on the long-term effects of the surge, Emvula said an increase in FDI is a sign that the economy is poised to grow steadily.
“The recent increase in investments, especially in the oil and gas industry, suggests that Namibia might be entering an important and positive period,” he said.
Emvula highlighted that the increase in FDI in Namibia is mainly focused on the oil and gas sector, despite no major changes in government policies.
“As Namibia navigates this transformative period, addressing uncertainties in policy direction becomes crucial. The FDI slump between 2018 and 2020, attributed to policy uncertainties, underscores the need for clarity and optimization in policies to unlock even greater and more diverse FDI inflows,” he said.
“It is important for Namibia to clarify and enhance its policies to attract a broader range of foreign investments, stating that although focusing on the oil industry is beneficial now, a comprehensive policy approach could lead to stronger and more lasting economic growth.”
In terms of job creation, Emvula mentioned that deep-sea mining, which attracts a lot of foreign investment, usually doesn’t create many jobs because it requires substantial investment.
“However, the positive effects of a successful oil and gas industry could lead to many job opportunities.”
