Geopolitical unrest and growth
Impact on Namibia
Josef Kefas SheehamaNamibia relies heavily on imports and rising geopolitical upheaval may limit the country’s economic growth.
Within this context, the growing geopolitical environment, including the war between Russia and Ukraine, unrest in the Middle East, and a series of sanctions aimed at preventing Russia’s military-industrial complex from obtaining critical goods such as sophisticated machinery and electronic components, can be attributed to inciting World War III.
It is worth noting that Namibia saw positive growth in the first quarter of 2024, despite expectations that real growth would slow to 3.7% in 2024. However, real economic growth is predicted to increase by more than a point to 4.1% in 2025.
World trade
World trade growth is expected to be 3.2% in 2024 and 3.3% in 2025, lower than its historical average of 4.9%, due to persistent geopolitical tensions and policy uncertainties.
The escalation of conflicts between Israel and Hamas, as well as between Russia and Ukraine, has hampered energy and food supplies and contributed to further destabilisation. Inflationary pressures have risen since 2022 as costs have increased.
Ukraine’s aggressive push towards the Kursk area on Russia’s border will aggravate tensions. Additional sanctions have been imposed on Russia, raising the possibility of a third global conflict.
Geopolitical conflicts increase uncertainty, lowering investment and economic growth. Conflicts and wars have the potential to reduce global supply capacity, which could lead to inflation.
However, if the Middle East conflict escalates, oil prices might jump by 30% beyond the baseline estimate of US$81 per barrel in 2024.
According to the World Bank’s most recent Commodity Markets Outlook, this could boost global inflation and reduce global growth by 0.2 percentage points.
Navigating geopolitics
As a result, Namibia and its businesses can better address geopolitical concerns while maintaining economic growth.
Namibia should prioritise institutional strengthening in agriculture, energy, transparency and good governance to attract international investment and maintain a stable economy.
How can Namibia and its businesses navigate geopolitics to sustain economic growth?
To address this, we must understand Namibia’s trade relationships with the Middle East, Asia, Europe and the United States, among other regions.
Any global trade developments will impact Namibia.
Therefore, Namibia should maximise the market’s role, create a more equitable and dynamic market environment, and allocate resources as efficiently and productively as possible.
This approach will help reduce Namibia’s dependency on imports, ensuring a smoother-running national economy while harnessing local talent and creativity.
Flexibility
Namibia must ensure that companies with various forms of ownership compete on an equal footing and are protected by law, allowing them to complement and grow together.
To maintain sustainable economic growth, it is crucial that economic policies remain flexible and up-to-date.
Since downstream operations are often more distant, developing new capabilities concurrently is essential for realising their potential.
Moreover, Namibia should utilise the Sixth National Development Plan (NDP6) to guide reform and lay the foundation for development.
It is important to deepen supply-side structural changes, enhance incentive and control strategies that promote high-quality development, and strive to create new growth drivers and strengths.
Namibia must improve its structures and processes for fostering quality productive forces in line with local conditions.
This includes stimulating the integration of real and digital economies, developing the delivery industry, improving infrastructure, establishing effective local content policies, and strengthening the resilience and safety of industrial and supply chains.
Good relationships
Namibia should also foster good relationships and build capacity in mining, green hydrogen, oil, and gas to support local content growth.
Investment in education, technology, and skill development is crucial.
A country that does not fully understand its economy and global trade is vulnerable.
Namibia should implement effective macroeconomic policies to boost domestic demand, create new international trade drivers, expand the blue economy and nuclear power, improve people’s well-being, and generate more jobs.
Additionally, the political and economic spread of conflict beyond geographic borders significantly impacts regional investment climates and can overshadow pro-growth policy priorities.
Food security
Namibia’s food supply is under pressure, highlighting the need for significant investment to ensure food security, as the country relies heavily on imports.
Investments should aim to boost the productivity and income of small-scale farmers, diversify their income through value chain development, and create more and better jobs for the rural poor.
Agriculture plays a critical role in transforming economies to achieve these goals, including ensuring food security and improving nutrition.
Therefore, agricultural transformation is essential for eradicating hunger and malnutrition while driving economic growth.
From traditional to contemporary technology, agriculture to industry and manufacturing, and finally to a high-income service economy, the agricultural sector must be modernised to ensure success.
Governments need to create conditions such as irrigation and improved market infrastructure to enable farmers to obtain necessary inputs and sell their products.
Namibia will also need to invest in human capital to develop a skilled workforce capable of mastering new technology, managing logistics, and enhancing each stage of the value chain.
New approach
Namibia has the opportunity to undertake crucial macroeconomic and structural improvements that will reduce vulnerabilities and increase growth, thereby raising income per capita and reducing poverty.
To avoid economic disaster amid geopolitical conflict, Namibia must adopt a new approach.
For sustained economic recovery and growth, substantial progress must be made towards innovation and competitiveness.
Namibia should focus on comprehensive reform to advance industrialisation, address domestic and international challenges, adapt to geopolitical shifts, and meet new expectations.
Geopolitical volatility has become a significant source of uncertainty and will likely continue to be so in the coming years.
The world will probably remain prone to conflict; however, the international community can help mitigate escalation by pursuing cease-fires rather than supplying weapons, while also considering the long-term effects of its policies. Josef Kefas Sheehama