**5. Development of Namibia's economy**

Besides the *Triple Three* challenge, sustainable economic growth is an additional objective that wants to be achieved by the Namibian government [28].

*Humavindu* and *Stage* are describing the current domestic economy as the combination of a modern market sector industry with farming while mainly focusing on sectors that have been successful in the past, e.g., the mining sector [33, 34]. Furthermore, the level of industrial activities remains low which represent an obstacle for sustainable economic growth. As one possible solution, the economic diversification of Namibia has been announced by *Krugmann* [28].

Additional assistance to achieve sustainable growth is generally given by the implementation of economic favoring policies. However, Namibia, as well as other emerging markets, is often confronted with institutional voids, which result in a lack of the governmental implementation process. One example is monitored by the *government* dimension of *CDIS*, describing issues in the implementation of Namibia's tax policies [21]. *Multinational enterprises* (*MNEs*) are able to recognize the favorable situation as comparative advantages while the local content is remaining low. The *Institute for Public Policy Research* (*IPPR*) describes the situation as an exploitation of Namibia. To a great extent, these are fundamental obstacles in order to achieve sustainable development [41].

#### **5.1 Gross domestic product and trade**

In accordance with the low level of industrial activities, Namibia has a relatively small economy that gets reflected in the nation's *Gross Domestic Product* (*GDP*). *The World Bank* indicates an increasing *GDP* of 14,522 billion USD in 2018, which is projected as a minor steady growing one [2].

Namibians have a high level of consumption of foreign goods, services, and activities. This has developed a domestic economy that is highly dependent on imports and exports [2]. Hence, Namibia's economy has reached a high degree of openness, which is visualized in the domestic *GDP*. More than 90% of it stems from imports and exports [33, 34]. The main imported goods are to the greatest extent represented in consumer goods, e.g., petroleum products, pharmaceuticals, plastic products, rubber, spare parts, textiles, and timber [42].

On the other hand, there are exported goods largely consisting of raw materials and semifinished goods, for instance, copper, cut diamonds, gemstones, granite, lead products, marble, uranium, and zinc. A large proportion of exported goods are represented in beef, which is mostly transferred to South Africa and the European Union [42].

The steady increasing economic growth of African emerging markets is favoring the economic situation of Namibia. Primarily responsible are their neighboring countries, such as Angola, Botswana, and South Africa [2].

#### **5.2 Social accounting matrix**

Defining economic key sectors is essential for any domestic economic growth. Key sectors represent the largest amount of independence among the rest of the

economy. If investing in them, the probability of economic growth will be higher than investments into several non-key sectors [33, 34].

One possibility to highlight key sectors of any economy is the use of a *social accounting matrix* (*SAM*). The matrix merges data from all international and regional transactions, as well as transfers within the target economy. The most common sectors are resulting out of these data sets, defined as key sectors. In order to process a reliable output, a vast number of national data are needed [43]. Thus, the number of *SAMs* of emerging markets is slightly poor. Even if an emerging market succeeded in applying a *social accounting matrix*, their government often will not be able to encourage or invest in the defined key sectors.

Namibia achieved its first and last *SAM* in 2012, determining mining, mineral processing, and manufacturing as key sectors. According to the output, the nation is highly dependent on trade as already described in its domestic *GDP*. Such information is important for the improvement of Namibia's economy, in order to generate the highest possible output [33, 34].

Also relying on such information is the governmental policy-making process. Hence, the government is able to tailor policies to the needs of the domestic economy. Again, institutional voids may hinder such process, as described under Section 12.

#### **5.3 Economic sectors**

Apart from mining, other sectors of Namibia's economy are represented in mineral processing, governmental services, tourism, transport, logistics, agriculture, fishery, and manufacturing [33, 34].

The *High Commission of the Republic of Namibia* describes Namibia's mining sector as the fourth biggest nonfuel mining sector in Africa [42]. Accessing new technologies and including seabed operations enabled the sector to achieve an annual growth rate of 11% in 2018 [2]. Namibia's mineral resources include offshore oil, diamonds, lead, zinc, tin, silver, and tungsten. Additionally, the nation is globally known as the fifth biggest uranium producer [42].

The second-largest sector with the highest shares in *Namibia's gross domestic product* is tourism [42]. In 2015, it experienced a peak of 16.5% in domestic *GDP*, which decreased to a contribution of 13.8% in 2017 [35]. According to *Trading Economics*, the number of arrivals has reached almost 1.5 million in 2016 [32].

The agricultural sector of Namibia accomplished 6.85% of GDP in 2016, while more than 70% of their population is depending on farming [32–34]. Agriculture represents the main income of Namibia's population and includes, e.g., farming of cattle or crops. Nevertheless, there is still potential in the domestic agricultural sector which can be seen in the example of 2005 where Namibia still imported 50% of its cereals [42].

Due to Namibia's coastline of more than 1500 km, their fishery sector is also of high importance and represents one of the tenth largest globally. Main catches are hake and horse mackerel which are mostly exported to the neighboring countries, as well as the European Union [44].

#### **5.4 Population**

Namibia's economy is a rather small one compared to its dimensions. According to data from the *World Bank*, Namibia's population has increased to 2,448,255 million in 2018 [2]. It represents the second least populated country in the world directly after Mongolia—with a population density of 3.13 people/km<sup>2</sup> [29].

The number of inhabitants is still increasing and indicates a relatively young population with high unemployment rates, as already mentioned under Section

**55**

*Namibia's Triple Challenge and Its Economic Development*

14. The young population correlates with the national median age of 21.2 years, published by the *World Population Review* [29]. Complementarily to the described issues of unemployment and inequalities above is the fact that only 58.5% of women

In former times, the Namibian economy was not dependent on singular sectors. Missionaries that arrived in southern Africa during the nineteenth century, mostly due to the geographical and political importance of the trade network *Cape Colony*, described Namibian communities as multi-resource shepherds. Namibians in all its ethnics have been characterized as flexible and determined, with a wide range of

Thus, at the end of the nineteenth century, most of Namibia's ethnic groups became part in a cattle-based society in which the number of cattle was a crucial sign of wealth. Consequentially, not everyone was able to grow stock organically, and raiding cattle among residents occurred. Some become wealthier, while others changed back to hunting and gathering society or suffered from starvation [40]. Additionally, trade also took place between Namibians and foreign powers. They have been trading cattle for horses, guns, ammunition, and several consumer goods, e.g., tobacco. As a result, a gun society emerged among those inhabitants who had the possibility to take part in trade. Due to repetitive years of raiding, gun owners were better off. Raiding was simply the most effective and common way to

In the late nineteenth century, Namibia became known as a nation rich in natural resources, e.g., uranium, vanadium, lithium, and tungsten but especially diamonds. Initially, ethnic tribes were able to gain advantages out of the economic

The authors *Bollig*, *Schnegg*, and *Wotzka* are describing the phenomenon of ethnic groups establishing an intra- and inter-regional network of trade, where locals have been able to determine prices. At the beginning of the twentieth century, these golden economic ages were destroyed by colonial powers that occupied Namibia

The *League of Nations* in 1920 advocated for Namibia—at that time known as the protectorate of *South-West Africa*—by announcing South Africa as foreign administrator. Unfortunately, instead of administrating Namibia, South Africa made use of its power and exploited the nation. South Africa suppressed the Namibian economy, as well as their society until the national independence in the

After all of its tumultuous history, Namibia continues facing economic and social disadvantages, for instance, the minor industry and inequalities among

Besides the *Triple Three* challenge and the aim of sustainable development, the Namibian government is trying to transform the country into an economic gateway

One of them is dealing with stimulating economic growth and employment. Thus, the government is trying to reach a broader scope internationally. The processes of redesigning and promotion of policies are also included, for instance, the *Green Scheme* program introduced in 2005. Such program is supporting the

situation by renting ox wagons to foreign missionaries [45].

and forced its inhabitants to unfree labor and slavery [40].

**5.6 Governmental efforts and foreign participation**

agricultural sector, in order to create more employment [42].

of sub-Saharan Africa with several actions [46].

and 65.3% of man participated in the labor market in 2018 [33, 34].

*DOI: http://dx.doi.org/10.5772/intechopen.88638*

**5.5 Historical impact on Namibia's economy**

interrelated economic activities [40].

prosperity in former times [40].

late twentieth century [27].

ethnicities.

*Perspectives on Economic Development - Public Policy, Culture, and Economic Development*

than investments into several non-key sectors [33, 34].

able to encourage or invest in the defined key sectors.

ally known as the fifth biggest uranium producer [42].

ate the highest possible output [33, 34].

fishery, and manufacturing [33, 34].

**5.3 Economic sectors**

of its cereals [42].

**5.4 Population**

as well as the European Union [44].

economy. If investing in them, the probability of economic growth will be higher

One possibility to highlight key sectors of any economy is the use of a *social accounting matrix* (*SAM*). The matrix merges data from all international and regional transactions, as well as transfers within the target economy. The most common sectors are resulting out of these data sets, defined as key sectors. In order to process a reliable output, a vast number of national data are needed [43]. Thus, the number of *SAMs* of emerging markets is slightly poor. Even if an emerging market succeeded in applying a *social accounting matrix*, their government often will not be

Namibia achieved its first and last *SAM* in 2012, determining mining, mineral processing, and manufacturing as key sectors. According to the output, the nation is highly dependent on trade as already described in its domestic *GDP*. Such information is important for the improvement of Namibia's economy, in order to gener-

Also relying on such information is the governmental policy-making process. Hence, the government is able to tailor policies to the needs of the domestic economy. Again, institutional voids may hinder such process, as described under Section 12.

Apart from mining, other sectors of Namibia's economy are represented in mineral processing, governmental services, tourism, transport, logistics, agriculture,

The *High Commission of the Republic of Namibia* describes Namibia's mining sector as the fourth biggest nonfuel mining sector in Africa [42]. Accessing new technologies and including seabed operations enabled the sector to achieve an annual growth rate of 11% in 2018 [2]. Namibia's mineral resources include offshore oil, diamonds, lead, zinc, tin, silver, and tungsten. Additionally, the nation is glob-

The second-largest sector with the highest shares in *Namibia's gross domestic product* is tourism [42]. In 2015, it experienced a peak of 16.5% in domestic *GDP*, which decreased to a contribution of 13.8% in 2017 [35]. According to *Trading Economics*, the number of arrivals has reached almost 1.5 million in 2016 [32].

The agricultural sector of Namibia accomplished 6.85% of GDP in 2016, while more than 70% of their population is depending on farming [32–34]. Agriculture represents the main income of Namibia's population and includes, e.g., farming of cattle or crops. Nevertheless, there is still potential in the domestic agricultural sector which can be seen in the example of 2005 where Namibia still imported 50%

Due to Namibia's coastline of more than 1500 km, their fishery sector is also of high importance and represents one of the tenth largest globally. Main catches are hake and horse mackerel which are mostly exported to the neighboring countries,

Namibia's economy is a rather small one compared to its dimensions. According

The number of inhabitants is still increasing and indicates a relatively young population with high unemployment rates, as already mentioned under Section

[29].

to data from the *World Bank*, Namibia's population has increased to 2,448,255 million in 2018 [2]. It represents the second least populated country in the world—

directly after Mongolia—with a population density of 3.13 people/km<sup>2</sup>

**54**

14. The young population correlates with the national median age of 21.2 years, published by the *World Population Review* [29]. Complementarily to the described issues of unemployment and inequalities above is the fact that only 58.5% of women and 65.3% of man participated in the labor market in 2018 [33, 34].

## **5.5 Historical impact on Namibia's economy**

In former times, the Namibian economy was not dependent on singular sectors. Missionaries that arrived in southern Africa during the nineteenth century, mostly due to the geographical and political importance of the trade network *Cape Colony*, described Namibian communities as multi-resource shepherds. Namibians in all its ethnics have been characterized as flexible and determined, with a wide range of interrelated economic activities [40].

Thus, at the end of the nineteenth century, most of Namibia's ethnic groups became part in a cattle-based society in which the number of cattle was a crucial sign of wealth. Consequentially, not everyone was able to grow stock organically, and raiding cattle among residents occurred. Some become wealthier, while others changed back to hunting and gathering society or suffered from starvation [40].

Additionally, trade also took place between Namibians and foreign powers. They have been trading cattle for horses, guns, ammunition, and several consumer goods, e.g., tobacco. As a result, a gun society emerged among those inhabitants who had the possibility to take part in trade. Due to repetitive years of raiding, gun owners were better off. Raiding was simply the most effective and common way to prosperity in former times [40].

In the late nineteenth century, Namibia became known as a nation rich in natural resources, e.g., uranium, vanadium, lithium, and tungsten but especially diamonds. Initially, ethnic tribes were able to gain advantages out of the economic situation by renting ox wagons to foreign missionaries [45].

The authors *Bollig*, *Schnegg*, and *Wotzka* are describing the phenomenon of ethnic groups establishing an intra- and inter-regional network of trade, where locals have been able to determine prices. At the beginning of the twentieth century, these golden economic ages were destroyed by colonial powers that occupied Namibia and forced its inhabitants to unfree labor and slavery [40].

The *League of Nations* in 1920 advocated for Namibia—at that time known as the protectorate of *South-West Africa*—by announcing South Africa as foreign administrator. Unfortunately, instead of administrating Namibia, South Africa made use of its power and exploited the nation. South Africa suppressed the Namibian economy, as well as their society until the national independence in the late twentieth century [27].

After all of its tumultuous history, Namibia continues facing economic and social disadvantages, for instance, the minor industry and inequalities among ethnicities.

#### **5.6 Governmental efforts and foreign participation**

Besides the *Triple Three* challenge and the aim of sustainable development, the Namibian government is trying to transform the country into an economic gateway of sub-Saharan Africa with several actions [46].

One of them is dealing with stimulating economic growth and employment. Thus, the government is trying to reach a broader scope internationally. The processes of redesigning and promotion of policies are also included, for instance, the *Green Scheme* program introduced in 2005. Such program is supporting the agricultural sector, in order to create more employment [42].

Additional economic weaknesses of Namibia are also pointed out by *CDIS*. According to *Culture for Development Indicator Suite*, the Namibian government should further work on the domestic level of education. Such results in higher gender equality and will lead to economic growth [21].

In order to achieve further development, *CDIS* also suggest investments to infrastructure, transportation, and *information and communication technology* (*ICT*). These suggestions have already been recognized and were part of Namibia's fourth *National Development Plan* during 2012/2013 and 2016/2017 [1, 21].

*Foreign direct investments* (*FDIs*) are another crucial component for the development of any economy [47, 48]. *The Global Economy* indicates significant economic success with a continuously annual *FDI* of approximately 5–6% of GDP [49].

Between the years of 1986 and 2017, Namibia achieved an average *FDI* rate of 4.21% in *GDP* [49]. According to latest data from the World Bank, the nation accomplished an amount of almost 220 million USD in *FDI* in 2018 [2].

The Namibian government tries to increase these numbers by several incentives which favor *MNEs* to invest. For instance, a no-tax policy for certain machinery and special amortization plans have been introduced [46].

Furthermore, Namibia joined several programs, institutions, and trade zones: *World Trade Organization* (*WTO*)*, World Bank, International Monetary Fund* (*IMF*)*, Foreign Investment Act, Doha Development Agenda, Export Processing Zone*, and *South African Customs Union* (*SACU*).

This should lead to higher profits from trade, an increasing number of *FDIs*, and a greater awareness of the country [42].

Namibia's *Ministry of Industrialization, Trade and SME Development* introduces further incentives. These incentives give Namibia access into the manufacturing markets of the USA, the EU, and other nations. They also promote foreign investments by allowing manufacturers to locate their operations wherever they want [46].

#### **5.7 Sustainable development and economic diversification**

On the one hand, the Namibian government tries to raise its reputation on the global trade market. *MNEs* should invest in the nation and stimulate the domestic industry toward sustainable development. This needs to be done carefully because the current degree of industrial action is low. *MNEs* have high influence and could also harm their economy or even worse exploit them [28].

On the other hand, the government of Namibia needs to pay attention to its already limited natural resources. According to *Krugmann*, those are land, water, and fish stock. Higher rates in *FDI* are often attached to an increasing consumption of resources. This especially holds true for investments in already high resourceconsuming sectors, e.g., fishery [28].

Therefore, the Namibian government has to diversify its economy, in order to achieve sustainable development. *Krugmann* mentions that it is necessary to find the balance between economic, environmental, and social objectives [28].

Hence, plenty of challenges are arising. For instance, almost all of these factors are interlinked with each other. Isolating and influencing single ones are almost impossible.

The increasing number of Namibian citizens, which is equivalent to higher participation in their economy, is resulting in an upward trend in air and water pollution. This is leading to either exploitation of scarce resources or land contamination [28].

*Krugmann* emphasizes that access to limited resources should be efficient, as well as restricted. In terms of water, it would result in higher import rates of water-intensive goods, e.g., tomatoes. Regarding efficient usage, recycling, reusing,

**57**

*Namibia's Triple Challenge and Its Economic Development*

and waste reduction are viable solutions to tackle this issue. Namibia is in need of a

Unemployment and inequalities, as indicated above under Section 8*,* are also obstacles for sustainable development. *Sylvain* describes that white settlers owned 65% of Namibia's land during colonial rule, while they have been only 8% of the

Even though governmental resettlement took place in post-independent times, the *UNESCO* describes that currently the unequal distribution of land still holds true to a certain degree [50]. The difficulty arising from such is the necessity of owning land in order to have access to resources and participate in agriculture.

As *Krugmann* states, achieving economic diversity and sustainable development

Historic events are large-scale contributors in shaping the fragmented society and the slightly growing economy that Namibian is currently facing. Poor conditions majorly emerged out of former occurrences, as, e.g., colonization, genocide, apartheid, and foreign administration. Domestic residents have to deal with tremendous trust issues among different cultures and societies as well as with one

The Namibian government evolved effective ways in order to tackle the appearing social and economic objectives. One of them is the repetitive process of designing a *National Development Plan* that gets replaced every 4–6 years. Thus, it is able

According to the economic situation of Namibia, the country exhibits a minor degree of industrialization that leads to huge opportunities for *multinational enterprises* to stimulate the domestic economy. Simultaneously it causes threats in terms

Special attention needs to be paid toward the nation's already scarce natural resources, which are mainly represented in land, water, and fish stock. Finding the balance between the sustainable economic growth and the right degree of using

Furthermore, Namibia is supposed to develop its own socioeconomic actions on a regional and international basis, in order to strengthen their self-esteem and the

to ensure performing flexible in their combat of occurring challenges.

in Namibia is possible if directly supporting the poor population. This includes the promotion of education, the entrepreneurial drive, the nation's employment options, and the agricultural sector. Additional governmental efforts in renewable resources and the creation of a dynamic industry and service sectors would boost

governmental strategy toward reinvesting into natural resources [28].

*DOI: http://dx.doi.org/10.5772/intechopen.88638*

nation's total population [30].

this process [28].

**6. Conclusion**

Namibian identity.

of the highest inequalities worldwide.

of exploitation through external interests.

natural resources will remain as a national objective.

#### *Namibia's Triple Challenge and Its Economic Development DOI: http://dx.doi.org/10.5772/intechopen.88638*

and waste reduction are viable solutions to tackle this issue. Namibia is in need of a governmental strategy toward reinvesting into natural resources [28].

Unemployment and inequalities, as indicated above under Section 8*,* are also obstacles for sustainable development. *Sylvain* describes that white settlers owned 65% of Namibia's land during colonial rule, while they have been only 8% of the nation's total population [30].

Even though governmental resettlement took place in post-independent times, the *UNESCO* describes that currently the unequal distribution of land still holds true to a certain degree [50]. The difficulty arising from such is the necessity of owning land in order to have access to resources and participate in agriculture.

As *Krugmann* states, achieving economic diversity and sustainable development in Namibia is possible if directly supporting the poor population. This includes the promotion of education, the entrepreneurial drive, the nation's employment options, and the agricultural sector. Additional governmental efforts in renewable resources and the creation of a dynamic industry and service sectors would boost this process [28].
