By Tio Nakasole
In the bigger picture, developed countries are tailored and structured through a diverse multisectoral economy that fulfils all checkpoints of micro- and macroeconomic goals.
Good macroeconomic policies, particularly fiscal discipline and private ownership, have been necessary but not sufficient conditions for strong economic performance.
Now that most developing countries have made significant progress on macroeconomic stabilisation, poor micro policy issues affecting product market competition are collectively the most significant impediments to faster economic growth.
Sector policies restricting competition and investment, such as high import tariffs and duties, non-tariff trade barriers, restrictions to Foreign Direct Investment (FDI), licensing, pricing, subsidies and poor regulation of the social sector and policy uncertainty.
These policy frictions, though seldom central in reform debates, materially affect the pace and scale of capital deployment in strategic industries in the country.
Then, the question of correlation is whether investment decisions and the industry’s growth potential are driven by macroeconomic conditions, such as economic expansion and sector incentives, or by the firm’s specific factors, such as market cost efficiency and productivity.
The answer to this question has important implications for future investment growth and economic sustainability. The focus should be placed on productivity and investment because they are the key engines to economic growth.
The productivity level at which the labour and capital inputs are put to work is the primary driver of Gross Domestic Product (GDP) per capita. In effect, every time a company increases its productivity, it generates an economic surplus, which can then be redistributed to consumers in the form of better products and/or lower prices, to employees in the form of higher salaries and/or to investors in the form of higher profits to be reinvested by the most productive companies.
Furthermore, most of the work is conducted at the economic sector level because the relative importance of factors can only be firmly established at the microeconomic level, where causality links can be conclusively determined.
It is also only at the sector level that deeply buried micro policy issues can be identified and analysed.
In many developing countries, in the pursuit of propelling their economic growth, two main industry-specific policy issues are associated with developing countries concomitantly: industry policies restricting competition and investment and unequal enforcement of microeconomic policies.
Furthermore, unequal enforcement of microeconomic policies carries factors such as non-payment of government liabilities; unfair access to government bank loans, procurements, land and key infrastructure; high cost of becoming formal; and lastly, lack of independent legal resources.
Using Namibia as a test site, it is equally important to determine whether government policies diminish or amplify the potential appropriability of future investments and industries’ growth in the country. At first glance, Namibia’s macroeconomic stability is partially not in question due to its political stability, an independent judiciary, solid infrastructure, stable prices and sustainable growth.
From the standpoint of economic growth, real GDP growth after COVID-19 expanded from 2.7% in 2021, 4.6% in 2022, 4.4% in 2023, 3.7% in 2024, 3.0% in 2025 and the projected 3.9% for the year 2026. Conversely, the NSA’s Labour Force report of 2023 demonstrated that the national unemployment rate climbed to 36.9%, up from 33.4% in 2018, leaving roughly 320 000 Namibians out of work.
Despite the heralded GDP growth, the persistent socioeconomic challenges, such as inequality, poverty, marginalisation and unemployment, consistently reel in the opposite direction, threatening economic stability and social cohesion.
From a tax regime perspective, government interventions such as tax reform have been observed over the past years, such as a tax reduction to 30%, effective 1 January 2025, and scheduled to further drop to 28% for the 2026/27 fiscal year.
The rate has declined progressively from 32% in 2023 to 31% in 2024. For context, Namibia has a very strong track record as an investment destination and for property rights. Unlike many regional peers and the developing world, Namibia does not have a track record for expropriating large private investments nor systematically engaging in practices that amount to de facto expropriations, like changes to tax policy after large investments have been made.
However, with the multi-million-dollar investment projected, tax stabilisation arrangements are critical. Currently, there are no specific tax stabilisation arrangements.
Hence, it infringes investors’ confidence, especially in capital-intensive sectors like green hydrogen, mining, oil and gas, hospitality infrastructure and large-scale manufacturing. All of which are the top priority sectors as outlined in the SWAPO party manifesto implementation plan and National Development Six (NDP6), hence highly relevant to Namibia’s structural transformation agenda.
The lower corporate tax rate and tax regime certainty for non-mining sectors should help to improve investment prospects in key sectors such as manufacturing, tourism and finance.
In addition, new research from Fitch Solutions’ Business Monitor International (BMI) affirmed that the investment climate in Namibia is positive.
Given Namibia’s FDI flows trend, investment contracted by US$178 million in 2019 and US$74.6 million in 2020 primarily due to the COVID-19 pandemic and later reversed earlier inflows of US$280 million (2017) and US$209 million (2018).
Subsequently, the inward FDI stock improved to US$6.3 billion (53.4% of GDP) in 2021, although it remained far behind in the Southern Africa region, below Mozambique’s US$50.1 billion (295% of GDP) and even behind Angola’s US$13.2 billion (15.1% of GDP) in scale and dynamism.
Thereafter, FDI rose significantly between 2021 and 2024, to a cumulative US$6.6 billion, buoyed by renewed investor interest in mining, energy and infrastructure. The positive trend has continued in 2025, with FDI rising to US$822 million.
In 2024 UNCTAD indicated that comparing FDI as a percentage of nominal GDP, Namibia leads in Africa with 18.9%, followed by Mozambique at 12.2% and Senegal at 8.5%. With landmark project commitments including Deep Yellow’s US$475 million Tumas uranium mine, Bannerman Energy’s US$374 million Etango project, and Hyphen Energy’s proposed US$10 billion green hydrogen development, signal potential for a significant uplift in foreign capital.
Indubitably, finding ways to attract investors through a sound macroeconomic policy is one thing, but creating a competitive environment that can enhance total factor productivity from the same investor in a given industry to generate a surplus to be reinvested and redistributed is another thing.
Of course, the constraint lies at the micro level: regulatory uncertainty in certain sectors which may hinder investment decisions and concentrated FDI in extractive industries rather than diversified sectors.
High tax rates and levels of bureaucratic red tape further act as deterrents to foreign investment and even worse for small and medium enterprises (SMEs) that want to expand.
Even more worrisome is the structure of competition. China and South Africa account for over 75% of Namibia’s total FDI stock, reflecting concentration rather than broad-based participation. Attached to each market distortion, there is inevitably a strong vested interest that may lobby hard for the status quo.
In addition, a concentrated participation is also observable in the public sector, of which some fail to deliver. State-Owned Enterprises (SOEs) in Namibia dominate energy, rail, ports and water infrastructure. In December 2025, the Electricity Control Board reported that NamPower is owed N$912 million by its customers, the public sector and various local authorities.
The same goes for NamWater and some critical SOEs in the country. This reflects weak oversight in an attempt at policing well some of these quasi-natural monopolies, as these unsettled utilities will eventually delay the needed fund operational expenses and investment in new infrastructure.
Even an attempt to open up for new entrants to provide subsidised power, water and telecommunication will discourage private investors due to a lack of confidence in the government’s capacity, as they may face higher operating costs and non-economic pricing regulations.
These are not macroeconomic failures; they are microeconomic gaps as driven by barriers to entry, high compliance costs, and limited competitive neutrality. Fiscal discipline and private ownership create stability, but without strong product-market competition and a predictable stimulating package, growth remains narrow and investment shallow.
Therefore, to ensure the macroeconomic stability has adequate spillover effect in the country, it is thus very important to take into account a general equilibrium effects with microeconomic policies.
First, identifying viable economic sectors with high potential that could be credibly developed by redeploying existing capabilities. Secondly, safeguarding investor confidence with regard to the policy outlook and the transparency of the regulatory framework.
Lastly, systematically overcoming the significant specialized skills shortage which is currently constraining and posing threats to stability due to inadequate access to opportunity for Namibians in the nascent industries and that is likely preventing the further development of prospective diversification opportunities.
Apart from an evidence-based studies that may corroborate these findings, there are convincing reasons and realities enough to suggest that progress on macro reform cannot deliver inclusive growth unless microeconomic policy reform advances in parallel.
Therefore, to find a better way to crack through these micro-level inefficiencies is not solved by thumb sucking but requires disentangling unobservable sector-place-specific constraints to productivity, investment upscaling and competition, thereby collaboratively pursuing SMART policy responses that yield inclusive growth.
*Tio Nakasole, Analyst at Monasa Advisory and Associates. His insights draw from his experience in economic and policy analysis. The views expressed do not represent those of his employer. – theoerastus@gmail.com
