The African Development Bank (AfDB) has urged Namibia to support informal sector operators in formalising their businesses to boost the economy and tax revenue.
Namibia’s informal sector, contributing 24.7% to the country’s GDP, amounts to about US$11 billion (N$23 billion) at gross domestic product based on purchasing power parity levels.
In its 2024 Country Focus Report for Namibia, the AfDB emphasised that formalising the informal sector could significantly increase tax revenue and stimulate economic growth.
“Namibia’s informal sector has been recorded to be the country’s largest employer and contributes about 24% to the country’s gross domestic product (GDP). Yet, it is not accounted for in formal statistics. Despite this huge contribution, the sector presents challenges in terms of labour rights, social protection, tax evasion, economic stability, and lack of access to finance,” said the AfDB.
The bank further outlined that the informal economy in Namibia is characterised by numerous undocumented and unregulated businesses and employment, akin to other developing countries.
“The absence of labour rights and lack of financing hinder their transition from the informal to the formal sector and a shift of resources from the traditional to modern sectors and from low productive to high productive sectors,” noted AfDB.
To address these challenges, AfDB recommended that the Namibian government facilitate access to financing and training for informal sector operators.
This move could enable these businesses to formalise, thus contributing more significantly to the economy.
In addition to formalisation efforts, the AfDB’s report outlined several other recommendations for Namibia’s economic development.
These include building strong institutions, implementing critical measures for structural transformation, creating a conducive environment for private sector growth, investing in human capital, and scaling up domestic resource mobilisation.
“By addressing these areas, Namibia could reduce its dependence on volatile external flows, enhance national ownership over development processes, and strengthen the bonds of accountability between the government and its citizens,” said AfDB.
Meanwhile, as Namibia continues to develop its natural resources, including diamonds and oil, the AfDB said integrating natural capital accounting and conservation into national accounts could further expand the economy.
The AfDB also suggested that the African Continental Free Trade Area offers Namibia a unique opportunity to expand its export markets and boost trade with the rest of the continent.
“Walvis Bay port, which is the country’s major port, can catalyse boosting Namibia’s trade with the rest of the continent. Namibia, as a producer of diamonds and oil, needs to invest in natural capital accounting beneficiation and conservation, and include it in the system of national accounts to expand the economy,” said AfDB.
