Namibia recorded a surge in foreign direct investment (FDI) during the first two quarters of 2023, reaching a record N$19 billion, a development attributed to mainly oil and gas investments and the acquisition of Namibia Breweries by Heineken.
The figure accounts for 16.83% of the country’s gross domestic product (GDP), surpassing any annual inflow on record according to Catalyst Investment Managers.
“The surge in FDI is attributed to two pivotal developments–the acquisition of Namibia Breweries by global brewing powerhouse Heineken and the ongoing oil and gas explorations along the Namibian coastline,” said Head of Research at Catalyst Investment Managers, Cheryl Emvula.
“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.”
According to Emvula, the second quarter of 2023 marked a historic milestone with a record N$13 billion FDI inflow recorded.
“The discovery of vast oil and gas reserves offshore played a pivotal role, sparking intense exploration activities. Heineken’s investment in Nam breweries also injected considerable capital into our manufacturing sector. While the green hydrogen industry’s contribution to FDI at this stage, I believe, has remained modest,” he said.
He said the immediate benefits of the investments are visible in the strengthening of Namibia’s national reserves, which were previously facing challenges stemming from 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 favourable 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 going 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 optimisation 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 said deep-sea mining, which attracts a lot of foreign investment, usually doesn’t create many jobs because it requires a lot of investment.
“However, the positive effects of a successful oil and gas industry could lead to many job opportunities.”
