CHAPTER 3: NAMIBIA BREWERIES LIMITED: RESPONDING TO 21 sT
3.3 Country Profile
Namibia is located in Southern Africa, bordering the South Atlantic Ocean, between Angola and South Africa. The country is sparsely populated, with a population of 2,030,692 (growth rate: 0.7%). The land area is 825,418 sq km with the climate hot and dry (desert) with sparse and erratic rainfall.
The Narnibian economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 20% ofGDP. Rich alluvial diamond deposits make Namibia a primary source for gem-quality diamonds. Namibia is the fourth- largest exporter of non-fuel minerals in Africa, the world's fifth-largest producer of uranium, and the producer of large quantities of copper, salt, semi-precious stones, lithium, manganese, lead, zinc, tin, silver, gold, and tungsten, cadmium, vanadium.
The country's economy is highly vulnerable to external shocks because the sectoral mix, dominated by minerals, affords an unusually low degree of self-sufficiency.
More than 50 percent of Narnibian output is exported ($1.09 billion f.o.b. - 2004 est.), while about 60 percent of the goods consumed in the country are imported ($1.371 billion f.o.b. - 2004 est.). Major trading partners are the European Union, the United States and South Africa.
The economy is closely tied to that of South Africa, which supplies more than 80 percent of Namibian imports. As a result, the Namibian dollar is pegged to the South African Rand.
A two-tier dualistic society clearly reflects the social and economic inequalities. The country is characterized by one of the highest levels of income inequality in the world with a Gini index of 0.70 - the highest recorded anywhere. Poverty is delineated along functional groups and by the urban rural dualism. Wages and salaries received by urban employees are almost two-and-a-half times those in rural areas, reflecting the stark urban-rural inequalities.
84% of the total population aged 15 can read and write. Of this, 84.4 % is male and 83.7% is female. However, Namibia's development is hampered by a scarcity of skilled labour.
Namibia's 2004 per capita GDP of nearly $13.85 billion is very high by southern African standards, but poverty and unemployment still affect many Namibians and disparities of income are quite severe. Domestic growth is expected to pick up to 3.8% in 2004 from 3.1% in 2003.
The unemployment rate as in 1998 (latest available) was at 35%, and 50% of the population lives below the poverty line.
Total government debt was estimated to reach 30.3% of GDP at the end of 2003/04.
This represents a significant increase from the 25.17% of the 2002/03 financial year.
Regional Situation
In the context of regional economic developments, Namibia's economy, as part of the 14-nation Southern Africa Development Community (SADC) suffers from regional conflict, political instability in the Democratic Republic of Congo, a narrow production and export base and a general inability to effectively mobilize and deploy economic resources, both from within and outside the region. The SADC area is rich in natural resources, has a population of nearly 200 million and a combined GDP of some $180 billion, but its member economies have generally operated well below their potential. While the area has shown positive economic growth in recent years, those rates of growth have been insufficient to attain sustained reductions in poverty and improvements in human development.
Social Context
The first HIV 1 AIDS victim III Namibia was identified in 1986 and since then HIV/AIDS has become the most serious problem for Namibian society. The country has one of the highest rates of infection in the world with an estimated 19.5 percent of adults (defined as 15-49 year-olds) carrying the disease. The rate of HIV 1 AIDS infection among the country's population has gone from eight percent in 1998 to 21.3% in 2003. More than 25 percent of all deaths are now AIDS related and in 2003,
the country had an estimated 16,000 AIDS deaths. Aside from the human aspects, the economic and social costs of the epidemic are massive. Direct health expenditures on HIV/AIDS have risen from 1.8 percent of government spending in 1996 to 2.5 percent of GDP in 2000 accounting for 20 percent of the health budget. Unless the increase in the infection rate is contained shortly and begins to drop, Namibia can expect very profound social and demographic disruption, with a corresponding long-term shock to productivity. According to a recent World Bank study, HIV/AIDS will reduce real GDP growth by 1.1 % in the period 2002-2010 (from an average rate of growth of 4.1% without HIV/AIDS to an average rate of growth of3% with HIV/AIDS).
Structural Issues
The structure of Namibia's economy is still highly characterized by the legacy of colonial status of South Africa until the late 1980s. Indeed, Namibia displays developed basic and modern infrastructure with good transport and financial systems.
Telecommunications and general infrastructure are amongst the most advanced in sub-Saharan Africa.
Trade
Namibia is an open economy with trade accounting for more than 100 percent of gross domestic product. Namibia's trade is closely linked to South Africa. The share of imports from South Africa has increased in the last years from 80 per cent in 1993 to 85% in 2000. The share of exports to South Africa, accounting for 27% of total exports in 2000, is also remarkable. However, the main market for Namibian exports is the European Union, which accounted for 60% of total exports in 2000. The composition of exports, largely in raw materials, has not changed significantly in the last couple of years and Namibia is still highly vulnerable to external shocks such as terms of trade changes, external demand and climatic variations. Mineral products still represent the bulk of exports. Manufactured products, mainly processed fish and meat preparations, are the second main category of exports.
The main aim of trade policy in Namibia has been the diversification of the export base through various investment packages. The key government policy was the establishment in 1995 of the EPZ programme with generous tax incentives to attract investors.
Namibia follows a largely independent foreign policy and is developing trade and strengthening economic and political ties within the Southern African region. The country is a vocal advocate for greater regional integration and is a member of three regional economic groupings, the Southern African Development Community (SADC), the Southern African Customs Union (SACU) and the Common Market for Eastern and Southern Africa (COMESA).
The country became the 160th member of the United Nations on April 23, 1990, and the 50th member of the British Commonwealth upon independence.
Namibia is seeking to diversify its trading relationships away from its heavy dependence on South African goods and services. The Government of Namibia is actively taking advantage of AGOA (African Growth and Opportunity Act), which will provide preferential access to U. S. markets for a long list of products.
In 1993, Namibia became a General Agreement on Tariffs and Trade (GATT) signatory, and the Minister of Trade and Industry represented Namibia at the Marrakech signing of the Uruguay Round Agreement in April 1994. Namibia has been a member of the World Trade Organization since its creation in 1995 and is a strong proponent of the Doha Development Agenda announced at the Fourth Ministerial Conference in Doha, Qatar, in November 2001. Namibia also is a member of the International Monetary Fund and the World Bank, and participates in the European Union's Cotonou Agreement.