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Namibia: Horizon Scanning 2022

Africa Connected: Issue 7

By Jurie Badenhorst

What is the single biggest legislative change on the horizon in the next 18 months?

Although there is no certainty as to exactly when, at some point the already enacted (but not yet in force) Namibia Investment Promotion Act 9 of 2016 (Investment Act) will come into force. This is mainly because in 2021, the President of the Republic of Namibia launched a second version of his “Action Plan of the Namibian Government Towards Economic Recovery and Inclusive Growth.” Economic Advancement is one of the five pillars of the Harambee Prosperity Plan II (covering the period 2021-2025). Whether this will be good or bad for foreign investment is still up for debate, and those in the private sectors (such as banking, technology, mining, manufacturing and fishing, among others) have raised serious concerns about the Investment Act in its current form. The Investment Act not only deals with foreign investment, but also domestic investment and attempts to strike a balance between the two.

What impact, in terms of foreign investment (or doing business), will this legislative change have?

The purpose of the Investment Act is to:

  • provide a clear and transparent framework for investment in Namibia;
  • provide for an efficient dispute resolution mechanism involving investment;
  • provide a mechanism for interministerial coordination on regulatory provisions and incentives and support mechanisms for investments; and
  • promote sustainable economic development and growth through the mobilisation and attraction of domestic and foreign investments.1

The Investment Act aims to strike a balance between domestic and foreign investment and allow for greater certainty in relation to foreign investment and what, if any, economic sectors and business activities will be reserved for domestic investment only.

However, certain concerns raised by the private sector relate to: the reservation of sectors for investments by the state, Namibians or entities controlled by Namibians or joint venture partnerships between Namibian investors and foreign investors; the change of control in investments in the natural resources sector and other investments above a prescribed threshold where the consent of the applicable line minister will be required if the control is to be vested in a foreign investor; and that investment must be for “the net benefit to Namibia, taking into account the contribution of the investment to the implementation of programs and policies aimed at redressing social and economic imbalances in Namibia.” The private sector is concerned that these provisions and the Act in general will deter foreign investors who are weary of over-regulation and the losing of control of disinvestment.

Until the Investment Act comes into force, the current but somewhat archaic Foreign Investment Act 27 of 1990 (FIA) governs foreign investment in Namibia. The FIA calls for equal treatment of foreign and Namibian investors, including the possibility of fair compensation in the event of expropriation, international arbitration of disputes between investors and the government, the right to remit profits, and access to foreign exchange. Increasingly, the government is emphasising the need for investors to partner with Namibian-owned companies and/or have a majority of local employees to operate in the country.

Though not legislative, an initiative taken by the government to stimulate foreign direct investment is the creation of the Namibia Investment Promotion and Development Board (NIPDB).2

This initiative has been well received and is generally viewed as one that will stimulate and facilitate foreign direct investment. With the assistance of the NIPDB, the private sector will have an opportunity to work with government to implement policy through public private partnerships (PPPs), ultimately improving competitiveness in the economy. In turn, the private sector envisages growth, trade and employment opportunities in Namibia.

What is the current investment appetite in the region? Do you see this changing in 2022?

The investment climate in Namibia is positive, despite the global economic disruptions caused by the COVID-19 pandemic. This will further improve as the vaccination roll-out expands in Nambia and the rest of the world, relieving production bottlenecks and allowing the tourism sector to reopen. The country continues to provide “a strong foundation of stable, democratic governance and good infrastructure on which to build businesses. The Namibian government prioritises attracting more domestic and foreign investment to stimulate economic growth, combat unemployment, and diversify the economy.”3 But investment challenges remain: a relatively small domestic market, high transport costs and commodity prices and a largely unschooled and limited skilled labour pool all need to be addressed.

In which sectors do you expect to see increased investment and / or financial movement in the next 18 months and why?

The energy and more specifically the renewable energy sector is currently getting a lot of attention from government. There has been an intense focus on green hydrogen as a clean and renewable energy source, especially from the Office of the President and his economic advisor. Other sectors that seem to be favoured are agribusiness, tourism and mining (the mainstay of the Namibian economy) as commodity prices pick up.

Where do you see the key areas of growth or opportunity for businesses operating in your country?

Because of the special attention given to green hydrogen and green ammonia, it is considered a key area of growth and opportunity for business in Namibia, especially in the short to medium term. To support this view, the president’s Harambee Prosperity Plan II referred to above states that the development of complementary engines of growth through the accumulation of new productive capacities and knowhow, in the relevant sectors, is vital to ensure the growing complexity of Namibia’s economic structure. The development of complementary engines is necessary to protect the Namibian economy from unusual and external risk factors. To enable Namibia to compete in a global market for green ammonia, the government will lead the development of a sector that is designed to achieve globally competitive prices and sufficient infrastructure for maritime export.4

Which sectors have been most affected by COVID-19 and what have businesses in those sectors done to cope with these changes or potentially benefit from new opportunities?

In Namibia, the tourism sector was arguably hit the hardest, especially local tour operators. Businesses in this sector had to do an about turn in strategy and focus solely on local tourism, which meant introducing significant price cuts to survive. The benefit of this was that many Namibians got to enjoy areas of nature and scenery which in the past, due to the costs, were mainly reserved for international tourists.

In terms of the legal services market, what growth are you seeing on the horizon in the next 18 months?

Energy (more specifically renewable energy) and natural resources will lead the pack, followed by banking and finance as candidates for growth in the legal services market.The disastrous effects of COVID-19 on all sectors mean clients are seeking regular restructuring advice, which generates legal mandates in this area.

What do you expect the general business mood to be in your country in the next 18 months?

As things slowly return to normal, the general business mood is quitely optimistic. Businesses are getting more comfortable with day-to-day operations and are again working with expectation, rather than a constant fear of what is coming next.

1Government Gazette of the Republic of Namibia (download Footnote 1 PDF above)
2The Namibia Investment Promotion and Development Board
32021 Investment Climate Statements: Namibia
4Action Plan of the Namibian Government Towards Economic Recovery and Inclusive Growth (download Footnote 4 PDF above)