3

Namibia
Teopolina Shiwoomwenyo Amupolo

I. Introduction
Namibia, officially the Republic of Namibia. It is a country located in the south west of Africa. The
name Namibia is derived from the Namib Desert, one of the oldest deserts in the world and situatedalong the Atlantic Ocean. The Namib Desert stretches for more than 2000 kilometres (1.200 mi) along
the western coastal border reaching the town of Luderitz southwards and extending from the Atlantic
coastline to inland for about 80 to 200 kilometres. The name Namib basically means “Vast Place” andthe name Namibia was coined by one of the earlier revolutionaries of the Namibia struggle, Professor
Mburumba Kerina while studying at Indonesia between 1960 and 1962.
Namibia is bordering the South Atlantic Ocean between South Africa and Angola. It shares landborders with Zambia and Angola to the north, Botswana to the East, and South Africa to the South andeast.
I.1 Geography and Climate
At 824,292 km2 (318,261 sq mi), Namibia is the world's thirty-fourth largest country (afterVenezuela). After Mongolia, Namibia is the least densely populated country in the world (2.7
inhabitants per square kilometre (7.0/sq mi)).
Namibia has more than 300 days of sunshine per year. It is situated at the southern edge of thetropics; the Tropic of Capricorn cuts the country about in half. The winter (June–August) is generally
dry; both rainy seasons occur in summer, the small rainy season between September and November,the big one between February and April. Humidity is low, and average rainfall varies from almost zeroin the coastal desert to more than 600 mm in the Caprivi Strip. Rainfall is however highly variableand droughts are common. Due to the dry winters snowfall has a very rare occurrence and prompts
media coverage whenever it happens. The last snow was reported in June 2011. However, the weather
and climate in the coastal area are dominated by the cold, north-flowing Benguela Current of theAtlantic Ocean which accounts for very low precipitation (50 mm per year or less), frequent dense fog,
and overall lower temperatures than in the rest of the country. Increasing temperatures andinconsistent rainfall has impacted and placed further pressure on natural resources. Areas receiving
less rainfall are most likely suffer drought and fires, while other areas faces more frequent floods ofgreater magnitude. Such changes make agriculture difficult and reduce productivity. It also leads toincreased problems with wildlife as fewer resources mean animals push into human settlements.
Moreover Namibia is a dry country with no perennial river. The majority of the rivers are
ephemeral; flowing for a short time, sometimes only hours after period of rainfall. However the only
perennial rivers in Namibia are shared with its neighbours: they are the Orange River in the south,
Kunene River and Okavango River to the north and Chobe River in the northeast. Each of these vary
greatly in size and functions as a national frontier with limited irrigation potential. Furthermore, theirwater is capable of enriching only the extreme northern and southern Regions and Farmers in dry
regions use river water to irrigate their land.
The Namib Desert, one of the worlds wonders stretches along the coastline covering about one
tenth of Namibia, comprising of shifting sand dunes, gravel plains and rugged mountains. The desert isdry with rainfall as low as 2 mm per annum and dry riverbed in some parts. Devoid of surface water,
one of its known vegetation is the Welwitchia mirabilis, adapted to survive in the harsh environment
for many years with minimal moistures, other formidable ungulates that also adapted to the harsh
Namib Desert is the Oryx, roaming freely from the north to the south of the desert. However, various
kinds of other fauna and flora are found within the desert and have grown and adapted to thecontinuous geographic and climatic changes of the desert. The Namib Desert boasts with sand dunes
ranging in distance of 320 kilometers, about 120 kilometers wide and reaching height of 300metres.
The spectacular view of the Namib is enriched during summer when ephemeral rivers (Swakop River63

and Omaruru River) flow from inland to reach the ocean through the desert.
The weather andclimatic condition of the Indian Ocean and Benguela current of the Atlantic Ocean forms layers ofdense fog over the Namib, drifting inland to sustain the livelihood of fauna and flora of the Namib.
On the eastern and southern part is another desert - the Kalahari Desert. Though not a true desert
compared to the Namib. Characterized by its paucity of surfaced water due to its porous sandy soil
through which precipitation filters rapidly, the Kalahari receive annual rainfall varying from 100 to
500 millimeters. The Kalahari is covered with a relative abundance of herbs and grasses, shrubs,
deciduous trees and open woodlands consisting mainly of acacia (Camelthorn tree). Making it home toendemic and migratory wildlife. The Kalahari climate is subtropical and is semi-arid with the dry
season during the cold season. Windhoek the capital city of Namibia is located in the center of
Namibia within the high escarpment plain of the Central Plateau. Located between the Namib Desert
and the Kalahari Desert, the Central Plateau runs from the north to the south of the country. The
central plateau rises to 2,579 meters making it the highest point and extending over half of the country.
It is within this wide, flat Central Plateau were the majority of Namibia’s population and economic
activity takes place. Summer temperature in the area can reach 40 degree Celsius, and frost is common
in winter.
I.2 People and the Culture
About 2.2 million people share the vast spaces of Namibia; the country has one of the lowest
population densities in the world with 1.5 people per square kilometre. It is thought that only about aquarter of Namibians live in urban areas, although this figure is certainly increasing as growing
numbers of unemployed people leave their villages and farms.
Namibia is not only diverse in its landscapes; it displays the same characteristic in the manycolorful cultures that call the country home. Some cultures still strictly adhere to their traditional ways
and almost every region and habitat has a culture tied to it. Namibia is filled with beauty in terms of its
natural and cultural inheritance. Among Namibia’s 14 ethnic groups, 26 different languages are
spoken. Oshiwambo (the language of the Ovambo people) is the most widely-spoken local language.
Others include the Kavango languages, Otjiherero (the language of the Herero), and Khoekhoe (of theNama-Damara people).However, English is the official national language, and few Namibians speak it
as their mother-tongue.
The country is classified as a multi-ethnic country with native Bantu, Khoisan and other groups ofEuropean descendent. Germany was the biggest European influence on Namibia and many Germanspeaking Namibians are 3rd generation citizens while Afrikaans, English as well as a trickle ofPortuguese make up for the rest. The relations between the country’s different groups remain peaceful.
Lutheran missionaries came to Namibia in the 19th century from Germany (and also Finland).
Some of Namibia’s peoples held a belief in a superior being or deity. Therefore, conversion to
Christianity became widespread. While the vast majority of Namibians are Christian today, many
practice elements of their traditional religions, centering round the belief in the spirits of ancestors.
I.3 Conservation
The country is home to diverse wildlife, and its plankton-rich coastal waters support an
extraordinary array of marine life, including an increasing number of southern right whales. Further
inland, springbok, gemsbok and black-faced impala have all seen multifold increases in population.
Namibia boasts the largest free-roaming population of black rhino in Africa, and the largest cheetah
population in the world.
The country is also home to a unique population of elephants that have adapted to the arid climate.
Found mostly in the northwest part of the country and these "desert-adapted" elephants can go for days
without drinking water by surviving on moisture obtained from the vegetation they eat. Although not adifferent subspecies of savannah elephants, they have several adaptations to their desert environment,
including larger feet, which make it easier to walk through sand, and smaller herd sizes, which puts
less pressure on their food and water sources.
Namibia sometimes encounters conflicts between people and animal. Conflict with wildlife
remains a concern where agriculture shares land with wildlife. Namibia’s conservation efforts have64

helped increase wildlife populations—particularly large animals such as elephants and predators likecheetahs. As these populations grow and their ranges expand, they come into more frequent contact
with communities. Farmers see significant losses when elephants raid crops break down fences andwater tanks, or when predators kill livestock.
I.4. Natural Resources
Namibia is very rich in natural resources with some minerals occurring exclusively under
Namibian soil. Out of a great variety of minerals, mainly diamonds, uranium, gold, silver, zinc,copper, lead, tin, marble and granite as well as semi-precious stones are being mined. It is the world’s
fourth-largest producer of uranium but the highest-earning mining export is diamond. Namibia
supplies nearly a third of the world’s output of these gems. Many of the key mining operations are
owned or part-owned by foreign businesses (e.g. South African companies), so not all the revenue
goes to Namibia.
The coastal water of Namibia is rich in marine resources. One can find best fish, shellfish, deepsea red crab, Cape fur seal, guano, seaweeds, and salt at the cold Benguela current. In the past, illegal
fishing from the boats of other nations caused a huge drop-in fish number, but since 1990, the country
declared a 200-mile zone where only Namibians could fish and since then stock have begun
recovering. Many fishes are processed and canned at the coast, with export sent to countries such as
Spain and Japan.
Namibia has got other resources such as electricity. The national electricity grid supply
approximately 40 percent of Namibia electric consumption, with 60 percent imported fromneighboring countries. However, Namibian Government is busy with constructing a new power supply
system and upgrading the existing system. With the harsh climate, low fertile soil and sporadic
rainfall, Namibia has got small and large livestock farming and crop production to. Natural resources
are the basis of Nam-wealth, and without access to many of them Namibia will simply die.
I.5. History and Political Structure
I.5.1Early history
This (Namibia) part of Africa has long been inhabited. Nomadic peoples wandered widely acrossthe region to hunt and gather food. They became known as the San (or ‘Bushmen’). Over the last two
millennia, the San were forced into desert regions as other peoples began settling in the area. Groups
such as the Nama, Damara, Herero, Ovambo and Kavango moved onto land where livestock-rearingor farming was viable.
Some groups, such as the Nama and Damara, speak a Khoisan language similar to the San. Khoisan
languages are known for their clicking sounds as they were hunter’s gatherers. Other groups inNamibia are Bantu speakers, who were more pastoralists. The earlier period was relatively peacefulwith occasional skirmishes as not much history on the co-existence of the various groups is known or
documented until by the early 19th century when European missionaries and traders settled in the
country.
I.5.2 The Europeans arrived
The first Portuguese stopped off along Namibia’s coastline in the 1480s. But because the region
was so inhospitable, they showed little interest in settling (as they did in neighboring Angola, forexample). It wasn’t until the middle of the 19th century that European explorers, traders andmissionaries started to explore Namibia. The presence of German Rhenish missionaries at Windhoek
made it an important trading centre. With an increase in German missionaries, traders and settlers
during this century, the country became a Germany colony known as German South West Africa(Deutsch-Sudwest-Afrika) and it saw an increase of German influence and military activities at thistime. German traders and adventurers bought up more and more land from groups such as the Herero
and Nama. This began the process of impoverishing the local Namibian peoples which transpired into
the Herero/Nama – Germany war in 1904-1908.
Around this time, conflict arose between peoples in Namibia as new groups came into the region,
many forced from their land in other parts of Africa by European settlers. The Nama/Herero tried to65fight back their land and were unable to defeat the Germany. The European had all advanced weapon
and the Namas /Hereroes were unable to defeat the counterpart. With the advanced technologies andorganized force, Germany won the war and gained total control over the country leading to aremarkable and the beginning official colonization and implementation of German policies in
Namibia. The land and all the wealth of Herero and Nama were ceded to the German administration
reparation and Germany claimed the region as ‘South West Africa’ to protect its citizens and traders.
I.5.3 South Africa’s rule and independence
At the end of the 19th Century (During World War I), Germany forces were losing grounds. The
territory was captured from Germany by South Africa. At the end of the war, South Africa was
assigned to look after the region as a ‘trust territory’ but, it invaded German South West Africa andoutmaneuvered the Germans within days, and established their administration in Windhoek by 1915.
The white South African administration had managed to persuade the League of Nation and was
granted the mandate to in 1920 to administer Namibia / South West Africa on behalf of Great Britain.
Many white South African settled in the south while Namibian populations were confined to the northor ‘native areas’ of desert land.
This has caused another conflict and colonization of the black majority by the minority white South
African administration, characterized by the famous apartheid policies. The South Africans
administered their mandate until after the World War II, when it annexed the territory. Following theWorld War II, the League of Nation was dissolved in 1946 and its successors, the United Nation (UN)instituted a trusteeship system to bring all of the former Germany colonies in Africa under the UN
control. South Africa's position was challenged by the United Nation (UN) and refused to give up theterritory arguing that the majority of the territory’s people were content with the South African Rule.
Legal arguments ensued over the course of the next 20 years until October 1966, when the Marxist
South-West Africa People Organization (SWAPO) guerilla group was formed. In 1977, the Western
Contact Group (WCG) was also formed including Canada, France, West Germany, the United
Kingdom and the United States. Swapo military wing, the People’s Liberation Army of Namibia(PLAN) and the international groups launched a joint diplomatic effort. Together, they attacked theSouth African forces and launched a war of independence and bring an international transition of
independence to Namibia. South Africa at first refused to surrender. It continued fighting till they were
defeated in 1988, when they agreed to end its administration in accordance with the UN peace plan for
the entire region. On 21st March 1990, South Africa was totally defeated, a new nation was born andSouth West Africa finally renamed The Republic of Namibia.
Namibia has been governed by the South West Africa People Organization (SWAPO) party since
the country got independence. President Sam Nuyoma was sworn in as first president, and was
succeeded by President Hifikepunye Pohamba in 2005. Prime Minister, Hage Geingob was elected aspresident in November 2014, and he was sworn in on March 2015.
I.6. The Government
The Namibian government was established as a sovereign, secular, democratic and unitary State. In
accordance with the doctrine of separation of power, it is divided into three organs which consist of theexecutive, legislative and judicial.
I.6.1 Executive
The Cabinet is the executive organ of the government, implementing the laws of the country. It
consists of the president and the vice president. The executive power of Namibia vests with the
President and the Cabinet. The president is therefore the head of State and Government. He/she iselected by direct franchise in a national election every five years in which he/she must win more than
50% of the votes. The vice president (Dr Nickey Iyambo) is the primary adviser and confidant
regarding all state matters. He is required to provide ad-hoc leadership on unforeseen issues, which
require the intervention or assistance of the president. The executive also consist of the Prime
Minister and her deputy as well as other Ministers. Both the prime minister and the deputy are thechief advisors of the president and overall coordinators of the government offices, ministries andagencies. The prime minister on the other hands is the person to which the secretary to Cabinet is66

reporting. As for the Deputy Prime Minister, she also leads the Ministry of International Relations andCooperation in order to advance Namibia in the International arena. Other Ministers supervise
different activities in their respective government Ministries and explain these actions to the National
Assembly as well as to the general public.
I.6.2 Legislative
The legislative branches of Namibian Government are the National Council and the National
Assembly. They are responsible for making laws of the country. The National Assembly is establishedin terms of Article 44 of the constitution as the highest law making body of Namibia. It is the 6th
National Assembly of Namibia after independence. Candidates were selected by their parties based on
the results of the 2014 parliamentary election. The current National Assembly was inaugurated on
Namibia's Independence Day on 21 March 2015. Like each of the previous National Assemblies, it isled by the South West Africa People's Organization (SWAPO) party. The 6th National Assembly has
104 seats, up from 72 seats in all previous assemblies. 96 candidates were elected according to party
lists. President Hage Geingob appointed eight additional members after taking office.
The National Council on the other hand is established in terms of Article 68 of the Constitution. It
is the second house of Parliament and is made up of representatives from all thirteen Regions ofNamibia. They are twenty six (26) in total. Each of the 13 regional councils chooses two of its
members to serve on the National Council. The last regional council elections were held on 26 and 27
November 2010.
I.6.3 Judicial
This organ is responsible for the interpretation of the laws, as well as decisions and behavior ofState and Government officials. The judicial powers are vested in the Courts of Namibia, which
consists of: The Supreme Court, High Court, and the Lowers Courts. The Courts are independent andsubject only to the Constitution and the law. No member of the Cabinet or Legislative or any otherperson shall interfere with Judges or Judicial Officers in the exercise of their judicial functions.
The Namibian Government is partly centralized and partly regional. In the executive branch,central government consists of ministries, offices and agencies, whereas regional government consistsof Regional Council and constituencies within these. The legislation is centralized in the lower house(National Assembly), and regional in the upper house (National Council). The judiciary is centralized
in the Supreme Court, whereas High Courts and Lower Courts are distributed all over the country.
I.7. International relations
Namibia is a constitutional multi-party democracy, and is a model of stability and peacefuldevelopment. The country follows a largely independent foreign policy, but has close relations withstates that aided its independence struggle. Namibia's Foreign Policy is based on the principles of
non-alignment, seeking the peaceful resolution of disputes between countries, under the banner of theUnited Nations, and a commitment to achieving African unity and increasing co-operation between
developing countries. Although a relatively small country, in terms of population, Namibia is proud of
the role it plays in international affairs. It is an active participant in a range of internationalorganizations and enjoys sound diplomatic relations with most countries in the world.
National interests constitute an overriding factor in its bilateral relations, allowing Namibia to
exercise its sovereign right when conducting business within the parameters of these relations.
Namibia has Bilateral and Regional relations with, Southern Africa Development Communities(SADC), Africa and the Middle East, Europe and North America, Asia, the Pacific, Latin America, andthe Caribbean.
With Multilateral Diplomacy, Namibia has joined the community of nations at a time when
multilateral tasks of diplomacy have proliferated considerably. As such, the country’s small team of
diplomatic personnel, which is already over-burdened by bilateral challenges, has found itself facedwith a variety of bewildering transnational tasks, such as, terrorism, organized crime, drug trafficking,the smuggling of immigrants, environmental abuse, human rights issues, etc. hence, Namibian
diplomats have to participate in the work of international organizations and conferences, negotiations
and conclusions of agreements, protocols, conventions and treaties.

67

Namibia is a member of the United Nations (UN), the Organisation of African Unity (OAU), theSouthern African Development Community (SADC), as well as the Commonwealth. Due to its
unifying role in the world, the UN and its agencies occupy the central place among internationalorganizations. The Bretton
Woods institutions, i.e., the World Bank and the International Monetary Fund (IMF), have also
gained in importance, as has the World Trade Organisation (WTO). As a small developing country,
Namibia is an active participant in the G-77 group and in all the programmes aimed at stronger SouthSouth co-operation and North-South dialogue as well. The Namibians sees themselves as bridgebuilders, and workers for stronger mutual understanding and fruitful co-operation among all nations.
Moreover, Namibia has also multilateral diplomacy in the areas of environment, marine resources,
treaties and conventions, and nuclear disarmament and security.
Since independence, Namibia’s policy regarding multilateral institutions has focused on effective
articulation of the country’s specific needs in areas like health, agriculture, metrology, maritime
affairs, education, science and technology, the environment and industrialization.

68II. Overview of Macroeconomic Activity and Fiscal Position
At independence in 1990, Namibian inherited an economy characterized by narrow industrial baseand heavy dependence on the production and export of primary commodities such as beef, fish andminerals. Most of the Namibian indigenous was strategically deprived of wealth generating resourcesat early independence and inhabitants were left to the periphery without the mean to generate wealth,
only ensuring a steady supply of unskilled labor to the minority white settler’s economic activities.
The country also faced a skew demographic development; with the northern region poorly developed
and the south-central region relatively developed. But due to good infrastructures and the wealth innatural resources left by colonizers, it gave Namibia a potential to develop and seek for economic
stability.
In 2004, Namibia adopted vision 2030 under the leadership of first president Dr Sam Nuuyoma.
Since then, Vision 2030 is being used as a yardstick to measure development. The main aim is that
Namibia wants to have a clear perception about the future, and decided to focus on the following
themes such as : Inequality and Social Welfare; Human Resources Development and Institutional
Capacity Building; Macro-economic issues; Population, Health and Development; Namibia’s Natural
Resources Sector; Knowledge, Information and Technology; and Factors of the External Environment,
to improve the quality of life of the people of Namibia to the level of their counterparts in thedeveloped world, by 2030. The main target is that, Namibian economy shall grow at a desire rate of 7
percent by the year 2030.With all this strategic vision, the country implemented and followed soundfiscal and monetary policies which allowed it to maintain macroeconomic stability over the last two
decades.
The country has also never been immune to the slow economic slowdown. It has encounteredfinancial crisis in 2008/9, the brutish reality of a rapidly falling life expectancy, unprecedented
epidemic crises, poverty, vast malnutrition, violence against woman and children’s, a ruined education
system, income inequality, and chronic mass unemployment, is inescapable. The country was heatedfurther by drought in 2013 combined with the low demand for primary commodities in the global
market.
Namibia's economy remains vulnerable to world commodity price fluctuations, and drought. The
rising cost of mining diamonds, increasingly from the sea, has reduced profit margins. Namibian
authorities recognize these issues and have emphasized the need to increase higher value raw
materials, manufacturing, and services, especially in the logistics and transportation sectors.
II.1. Trade Flows
Twenty five years of independence, Namibia still remains dependent on its most importanteconomic partner, the Republic of South Africa, with the Namibian dollar pegged one-to-one to theSouth African rand. The country is tied in many ways to South Africa through continued membershipof the Southern African Customs Union (SACU), and the Common Monetary Area (CMA). The
country Central Bank also has similar interest strategy with the South African Reserve Bank.
The SADC Region is Namibia’s most trading partner and this can be attributed to the fact that
South Africa is Namibia’s largest trading partner. Namibia over-dependent on South Africa for most of
its imports including foodstuffs, and South Africa’s imports from Namibia are mainly live animals andfish. Figure 1below shows Namibia’s heavily dependence on South Africa for most of its product ascompare to other countries.

69

Figure 1 Namibia 2013 Import Partner Share
21.83%

4.06%
3.43%
3.11%
5.79%

South Africa $ 4 677
869.88
Switzerland $ 438
794.41China $ 235 247.51
Unspecified $ 261
543.44
Marshall Island $ 307
61.76 %682.46
Other Partners (123) $ 1
653 410.44

Source: World Integrated trade solution 2013

Namibia has abundant natural resources, good infrastructure and access to markets, but contrary tothis potential, the economy is not well diversified. Economic activities are concentrated in primarysector activities namely the extraction and processing of minerals for export, large scale commercial
livestock farming, fisheries and tourisms.
In recognition of the importance of international trade and foreign direct investment in promoting
economic growth, the government has opted to pursue an export-oriented strategy for economic
growth and development, in which export push and investment promotion are central elements to thecountry’s trade policy and development strategy. Regional integration arrangements are also seen asvital in addressing critical demand-side constraints faced by Namibia due to its limited domestic
market. Namibia implemented free-market liberal policies such as enacting a Foreign Investment Act
and Export Processing Zone (EPZ) regime as well as employing favorable incentives for exporters andmanufacturers with a view to attracting foreign direct investment.
II.2 Economic by Industry
The Namibian economy is still dependent on external influence such as, world market sizes,
climate conditions, commodities, regional economic development and the South African economy.
The economy still rest on four pillars: Agriculture, Mining, Fisheries and Tourism. Namibia has one of
the biggest GDP per capita in Africa. Yet, due to an uneven distribution of income, half of the
population lives below the poverty line. Agriculture is the main source of income for 50% of
Namibians.
Mining: This sector remains the mainstay of Namibia economy, being the largest contributor to theGDP. The country is the fourth largest exporter of non-fuel minerals in Africa and the world’s fifthlargest producer of Uranium. Rich alluvial diamond makes Namibia a primary source for gem-quality
diamonds. Namibia also produces large quantities of lead, zinc, tin, silver, tungsten, copper, lead, gold,
silver, tin, marble and granite. Many of the key mining operations are owned or part-owned by foreignbusinesses (e.g. South African companies), so not all the revenue goes to Namibia.
Agriculture: Subsistence agriculture is the main source of income for 50% of Namibia. Farming
remained the second most important industry and many Namibians work in this sector. Some havejobs on ranches where cattle and sheep are raised. In the centre and north of the country, farming
generally takes place on a smaller scale. In these regions, most are subsistence farmers, producing
enough for their own needs and selling any surplus crops or animals for cash. The agricultural sector
main sources of income are: (i) livestock, beef and mutton production, which accounts for about 7080% of the gross agricultural income; and (ii) agronomic production which accounts for the remaining
20-30% gross agricultural income. About 80% of Namibia's beef and mutton is exported to South
Africa and the European Union. Namibia's climate is mainly suitable for dry-land crop production,with the exception of areas in the north, north-eastern, and southern parts of the country where
irrigation is possible in areas bordering perennial rivers and where dams feed irrigations.
Fishing: In 1990, the country declared a 200-mile zone where only Namibians could fish because
illegal fishing from the boats of other nations caused a huge loss in fish number in the past. Since then,stocks have begun recovering and Namibia’s fishing industry ranks among the world’s top 10 in theinternational fishing industry. This is due to the cold Benguela current which creates an especially70beneficial eco-system, with year-round temperate conditions. Namibia’s 1500 kilometer-long coastline
has a marine produce harvested by a flourishing fishing and fish-processing industry. Some of themore common fish available in quantity for export are horse mackerel and hake. Namibian horsemackerel contains only three to eight percent body fat, making it both healthy and highly nutritional aswell as a vital staple food source for many nations. Namibia’s Hake products are of superb quality andin great demand for the catering and retail markets. Other marine exports include rock lobster; crab;
oysters; kabeljou; monk; tuna; pilchards and seaweed.
Tourism: The number of tourists to Namibia is growing. A third of visitors come from South Africa
and many come from Europe, particularly from Germany. Tourists to Namibia are increasingly
attracted by the country’s unique mix of peace, political stability, cultural diversity, and geographic
beauty. Namibia tourism has had a positive impact on resource conservation and rural development;
and to ensure the tourism economy develops in the right way, many community-development schemes
have been set up to ensure locals benefit from the presence of tourists. In the decade leading up to2016, income from the tourist sector is expected to grow nearly 7% annually.
Moreover, Namibia’s main export commodities include copper, cut diamonds, gemstones, granite,lead products, marble, uranium and zinc. The main import commodities include petroleum products,
pharmaceuticals, plastic products, rubber, spare parts, textiles and knitwear and timber.
In addition to the membership in the Southern African Development Community (SADC), andSouth African Customs Union (SACU), a customs union comprising Botswana, Lesotho, Swaziland
and South Africa. Namibia has been also a member of the World Trade Organization since its
inception in 1995 and has been a strong advocate of the Doha Development Agenda. Namibia also is amember of the International Monetary Fund and the World Bank. Furthermore, Namibia is currently
engaged in negotiations aimed at concluding the EU-ACP Economic Partnership Agreement.
II.3 Macroeconomic Indicators
II.3.1 Economic growthNamibia held off the global economic slowdown, posting growth rates above 5% since 2010.
Recovery remains on course despite the winding down of official fiscal stimulus measures. Grossdomestic product (GDP) growth accelerated to 5.3% in 2014 from 5.1% in 2013 with robust
construction activity and high consumer demand. Growth is expected to improve to 5.6% in 2015 and6.4% in 2016 as external demand improves and new mines start production and exporting. Tight
monetary policy has kept consumer price index (CPI) inflation within the target range of 3% to 6%.
The Bank of Namibia in August 2014 implemented a second increase in the repo rate by 25 basis
points to 6% to stabilise rising inflation caused by escalating food and transport prices. Consequently,
the CPI inflation rate moderated from 6.1% in June to 4.7% in December.
Table 1: Macroeconomic Indicators 2013-2016
Macroeconomic Indicators
20132014 (e)2015(p)2016(p)Real GDP Growth
5.1
5.3
5.6
6.4
Real GDP per Capita Growth
3.2
3.4
3.7
4.6
CPI Inflation
6
5.3
4.1
5
Budget balance % of GDP
-1.1
5
6.2
4.8
Current Account balance % GDP
-5.1
-4
-1.7
-1.4
Source: Data from domestic authorities; estimates (e) and projections (p) based on African Economic Outlook Authors.

Political stability and prudent fiscal management have helped anchor Namibia’s high growth rates andpoverty reduction efforts. With strong ties to South Africa, the region’s second biggest economy,
Namibia has stronger competitiveness and investment attraction than average sub-Saharan countries.
However to accelerate convergence with high income countries in line with its current National
Development Plan, the authorities need to address remaining structural bottlenecks. Work on a new
Public Procurement and Public Finance Management law need to be speed up to reinforce economic
governance and public sector management. Namibia also needs better regulatory capacity for publicprivate partnerships to help public sector investment programmes. Fiscal consolidation, including
rationalizing public sector wages, should continue to achieve efficiency gains and help attain a moresustainable current account balance. Efforts to enhance education and training quality must be stepped71up and anti-corruption efforts redoubled to recapture public confidence and strengthen the country’s
strong governance record.
II.3.2 Gross Domestic Product
Namibia’s robust macroeconomic performance following the global financial crisis wasastonishing, but a continued commitment to sound policies and structural reforms to build adequate
policy buffers, preserve financial sector stability, and reduce unemployment and inequality is stillneeded. While medium-term growth prospects remain good, the IMF noted that risks were increasing.
“The recent expansionary fiscal policy – while contributing to job creation – has increased pressure on
external balances and put downward pressure on international reserves,” IMF noted. The country
continues its commitment to pursue growth-friendly fiscal consolidation, noting that a sustained effort
will be needed with the aim to build international reserves. It is of important, for Namibia to outline
the government wage bill and reducing subsidies and transfers to state-owned enterprises, as well as
strengthening revenue administration and public financial management, while safeguarding criticalsocial and development needs.
“Namibia’s growth outlook is clouded with downside risks, while facing significant policy
challenges,” the IMF pointed out, indicating that the main near-term risks are associated with highly
volatile SACU revenues, rapid growth of house prices, and external environment. Its main policy
challenges are therefore (Placeholder1)72Table 2: Namibia: Selected Economic Indicators, 2011-2010(Baseline Scenario)

National account and prices
GDP at constant prices 1/
GDP deflator
GDP at Market prices (N$ billions)
GDP at market prices (US$ billions)
GDP per capita (US$, constant ex.rate)
Consumer prices (end of period)
External sector
Export (US$)
Import (US$)
Terms of trade (deterioration= -)Real effective exchange rate (period average)
Exchange rate (N$/US$, end of period)
Money and credit
Domestic credit to the private sector
Base money
M2
Interest rate (percent)Investment and Saving
Gross investment
publicPrivateGross domestic savings
Gross national savings
Central Government budget 2/
Revenue and grants
Of which : SACU receipts
Expenditure and net lending
Primary balance (deficit = -)Overall balance
Overall balance : Non-SACU
Public debt/GDP
Gross PPG debt /GDP
External sector
Current account balance(including official grants)
external public debts (including IMF)
Gross official reserves
US$ millions
Percent of GDP
Months of Imports of goods and services
External debt /GDP 3/
Memorandum item:
Population (in millions)

2011

2012

2013

2014

2015
Est

2016
Proj

2017
Proj

2018
Proj

2019
Proj

2020
Proj

5.1
3.8
90.1
12.4
6,150
7.4

5.1
12.6
106.7
13
7,184
6.4

5.1
11.3
124.9
12.9
8,287
4.9

4.5
11.7
145.7
13.6
9,539
4.6

4.8
6.1
162
12.9
10,519
5.2

5.0
6.0
180.4
13.7
11,615
5.5

6.2
6.0
203.1
14.9
12,966
5.8

5.8
6.0
227.1
16.2
14,416
5.8

4.5
5.8
251.5
17.4
15,796
5.7

4.4
5.8
277.6
18.7
17,289
5.7

9.8
7.9
6.5
-1.6
8.1

-0.4
17.9
-9.0
-3.9
8.5

6.0
1.6
-4.0
-8.7
10.5

-0.4
11
-2.9
-5.9
11.6

-6.7
-5.9
-1.4

6.8
7.3
-5.6

15.4
0.3
-2.3

9.6
3.2
-2.1

2.4
1.6
-2.0

2.3
3.6
-1.9

9.3
69.9
19.8
6.0

16.9
-9.5
5.3
5.5

14.5
22.7
8.6
5.5

16.5
16.7
7.7
6.0

9.5
7.7
9.8

9.0
8.2
9.7

10.4
9.3
10.9

11.4
9.4
11

10.3
9.5
10.5

10.0
9.4
10.4

22.7
8.2
14.4
13.0
17.5

25.9
7.2
18.7
13.1
16.7

26.1
6.7
19.4
9.4
17.8

28
4.3
23.7
6.9
14.1

29.6
4.6
25
8.4
15.4

32.7
4.7
28
11.2
15.7

22.4
4.4
18
7.6
9.6

19.1
4.1
15
7.7
8.5

19
4.0
15
9.3
9.6

18.9
3.9
15
9.7
9.8

31.7
7.6
40.3
-7.3
-8.5
-16.1
26.2
28.1

32.9
12.4
34.5
-0.1
-1.6
-14.0
24.0
25.9

32.2
11.3
36.4
-2.9
-4.2
-15.6
22.7
26.8

35.1
12.1
38.9
-2.4
-3.8
-15.8
24
27.2

33
10.3
39.7
-5.2
-6.7
-17
28.3
34.7

29.7
6.8
37.6
-5.9
-7.8
-14.7
33.3
41.5

30.7
7.6
35.9
-2.8
-5.2
-12.8
34.9
45.6

31.1
7.9
35
-1.4
-4.0
-11.9
35.3
45.3

30.7
7.7
34.7
-1.4
-4.0
-11.7
36.1
46.1

30.4
7.5
34.6
-1.4
-4.1
-11.6
36.9
46.9

-2.9
6.4

-5.6
7.8

-3.9
6.9

-9.9
7.2

-12.1
8.9

-16.3
10.8

-10.7
11.7

-7.8
11.8

-6.9
11.6

-7.1
10.9

1,800
14.5
3.0
41.4

1,774
13.6
2.8
35.6

1,526
11.8
2.2
38.4

1,220
8.95
1.8
40.4

1,079
8.4
1.5
47.2

1,045
7.6
1.5
48.6

1,106
7.4
1.5
49

1,233
7.6
1.6
49.5

1,355
7.8
1.7
50.6

1,397
7.5
1.7
51.4

2.1

2.1

2.2

2.2

2.2

2.2

2.3

2.3

2.3

2.3

1/ Figures include public enterprise and central government investment
2/ figures are for fiscal year, which begins April 1
3/ public and private external debt
Sources: Namibian authorities and Fund staff estimates and projection

II.3.3 Demand and inflation
The history of Namibia inflation data dates back to 1970, where the CPI was constructed as a sub
national index of the South African CPI. During this period, Namibia CPI items and weight werebased on the Household and Income Expenditure Survey (HIES) of 1975 which was conducted by theCentral Statistical Service (CSS) of South Africa, and only cover most regions of South Africa andWindhoek, Namibia’s capital city. The household expenditure patterns became relevant and changing
overtime, attracting the interest of independent Namibia to establish its own HIES central statistic
system. In 1993 following independence, the Central Statistical Office (CSO) in Namibia introduced
an interim CPI, using the South African HIES weights though covering only Windhoek, the capitalcity. Since then, efforts have been undergoing and today the Central Statistical Office is able toconduct Namibian HIES and provide national representative consumer price index (CPI) for the entire
country.
A high proportion of consumer expenditure in Namibia is accounted for by the purchase of73

consumer goods from its neighbor, and the largest and most sophisticated economy in the region,
South Africa (SA). Such a situation leads to the expectation that imports from South Africa play asignificant role in determining inflation in Namibia, and that there should be similar movements ofinflation rates in the two countries.
Namibia’s domestic economy signs of satisfactory performance constitute increased production indiamonds, zinc concentrate and gold; robust construction activities and an increase in wholesale andretail sustained the positive momentum. Growth in credit extended to the private sector rose as
demand for credit from both the business and household sector increased. However, the value of
Namibian dollar weakened against all major trading currencies both on an annual and quarterly basis.
And the poor performance is endorsed by decline in commodity prices. It’s believed that cheaper
petrol can bring a bit of relief in the short-term. The currency volatility poses significant risks, to the
inflation outlook and continuing drought conditions also pushes up food prices.
Looming fear is bearing that the slowdown in economic growth would negatively affect export
earnings from metal such as copper and zinc. The South African rand had also weakened, resulting inincreased prices of imported goods and services. The weaker South African Rand will fuel inflationand poses significant upside risks to the inflation in both Namibia and South Africa, putting pressure
on both central banks to raise interest rate further. The Namibian Dollar is pegged one-to-one to theSouth African Rand, and the weakening of Rand will negatively affect the Namibian Dollar as it will
also depreciate against major trading currencies which will result in higher prices of imported goods.
Figure 2: Annual Inflation rate 2010 to 201530

percent (%)

25
20
15
10
5
0
2010

2011

2012

2013

2014

year
Source: Worldbank.org

Over the past few years, inflation rate in Namibia has been increasing. Figure 2 illustrate aconsistent climb in annual inflation, with an increase of approximately 5.4 percent yearly for thefinancial year 2012 to 2014. This increase resulted mostly from consumer goods imported and sold atmarket rates. The items prices tend to be driven by global factors and the local exchange rate. The
value of Namibian dollar weakened against all major trading currencies both on an annual andquarterly basis. The currency volatility poses significant risks, to the inflation outlook and continuing
drought conditions also pushes up food prices.
On the other hand, Namibia depends so heavily to it trading partner South Africa. The Namibian
Dollar is pegged one-to-one to the South African Rand, and the weakening of Rand negatively affect
the Namibian Dollar depreciate it against major trading currencies which will result in higher prices ofimported goods. The weaker South African Rand, results in high inflation and poses significant upsiderisks to the inflation in both Namibia and South Africa, putting pressure on both central banks to raiseinterest rate further.
Moreover, many of the local services prices are determined by domestic demand and supply, and as
demand increases, so do prices. This is particularly notable in the housing market (although local
house price indices, anecdotal evidence and formal rental inflation figures indicate divergent
situations), municipal utilities, electricity, schooling and transport costs, many of which are leading
overall inflation in the country. This inflation is, however, at present hidden by falling global food andfuel prices, but is classic of an overheating economy where demand for services grows fast than the74

supply thereof. Table 3, shows annual and average monthly inflation for selected services
Table 3: Namibia Selected services inflation levels
July 2015 (YOY)
Inflation
10.8%
0.3%
6.7%
5.7%
4.8%
3.0%
1.5%

Housing, Water supply, sewage services and refuse collection
Public transportation services
Pre-primary education (ages 2 to 6 years)
Electricity gas and other fuels
Tertiary education
NCPI
Rental payments for dwellings (both owners and renters)

12 Months Average
Inflation
11.6%
8.5%
7.6%
7.6%
7.3%
4.3%
1.8%

Figure 3: Namibian and South African Inflation

At present, and somewhat peculiarly, Namibia’s overall inflation has fallen well below that of South
Africa. This is strange given the fact that most of our cost-push inflation is imported directly fromSouth Africa, while Namibia’s demand side inflation is abnormally high. Nevertheless, much of thedecline in Namibia’s inflation was driven by the oil collapse, which we believe is now fully priced-inwhen it comes to first-round effects. Should oil stabilize (looks likely) or rebound, inflation is likely topick up again, and may reverse aggressively, notwithstanding second round effects of low oil prices onfood production.
II.4 Fiscal Position
II.4.1 Fiscal Balance
Economic growth and poverty reduction are the main goals that the Namibian Government is trying
to achieve through its public spending. Namibia’s fiscal policy remains expansionary, to promote
growth and employment. Twenty five years of independent Namibia, the economy still suffers fromthe highest income inequality, poverty, unemployment and other macroeconomic instability. This isdue to the legacies of colonization and apartheid, which made education, labour, resources and capital
exclusive to the white minority of the population. The fiscal authorities have tried their utmost best to
solve these problems by implementing supply side policies, expecting that the attraction of
investments would finally lead to growth, job creation, and poverty eradication.
The 2015/16 budget and government furthers spending plans over the three-years medium term
expenditure framework (MTEF) period, are aimed at tackling the structural challenges that affect thedevelopment potential of Namibia’s economy, unlocking opportunities for jobs and wealth creation,and improving the welfare of Namibians in an inclusive and sustainable manner. In 2014/15 income
and expenditure plan, supported by relatively high Southern Africa Customs Union (SACU) revenues
and further efforts in domestic revenues collection (e.g., enhanced collection of tax arrears and higher
compliance), the government increased its expenditure (e.g., wages, goods and services, and capitalspending), resulting in an overall fiscal deficit of 3.75 percent of GDP. For 2015/16, the budget

75

envisages a large deficit, with increases in subsidies and transfers, and capital expenditures and lower
SACU revenues (declined by 1.75 percent of GDP from 2014/15. The government is further exploring
the scope for tapping international capital market.
Table 4: Fiscal Balance (in percent of GDP)
2012/132013/142014/15
Act
Act
Est
Total revenue and grants
32.9
32.2
35.1
Domestic revenue
20.3
20.7
22.9
SACU revenue
12.4
11.3
12.1
Grant
0.2
0.2
0.1
Expenditure
34.5
36.4
38.9
Current expenditure
27.7
29.7
30.9
Personnel
12.5
13.8
14.4
Goods and services
4.8
5.0
5.5
Interest payment
1.5
1.4
1.3
Subsidies and transfer
8.9
9.5
9.7
Capital expenditure
6.2
6.8
7.9
Net lending
0.6
0.0
0.0
Overall balance
-1.6
-4.2
-3.8
Overall balance (excl. SACU revenue)
-14.0
-15.6
-15.8
*Including externally financial capital projects that are not channeled through the state accountSources: Namibia Authorities

2015/16
Budget
35.5
25.1
10.3
0.0
40.6
32.4
14.0
5.6
2.3
10.6
8.2
0.0
-5.1
-17.0

Figure 4: Revenue and Expenditure Comparison 2014-2016
50%

40.8%
35.5%

41.8%
40%

32%

37.3%

35%

30%
20%
10%
0%
-10%

2014
-5.8%

INCOME
Source: Pricewatercoopers.org

2015
-6.8%
EXPENDITURE

2016

-5.3%

DEFICITAt the fiscal front, Figure 4 shows that Namibia revenue balance stood at 32 % percent of GDP withexpenditure of 37.3percent resulting in fiscal deficit of 5.8 percent in 2013/14 financial year. The
revenue is estimated at 35 percent of GDP in 2014/15 financial year with an expenditure of 41.8
percent resulting in 1 percent increase in fiscal deficit from the previous year. For 2015/16 financial
year, the revenue is budgeted at 35% with total expenditure of 40.8 percent and fiscal deficit reductionof 1.5 percent from 2014/15 financial year.

76

Figure 5: Government expenditure by department for 2015/16

other
24%

urban &
rural
development
5%

poverty
eradication& social
welfareHigher4%
Financeeducation ,6% Traningandinnovation
6%

Transport
7%

defence12%
Education,
Art &Culture18%

Police8%

Health andSocialServices
10%Source: Ministry of Finance

Figure 5 illustrate that Education receive the largest share of the national budget. About 18 percent
shares, goes to education, art and culture and 6 percent go to higher education, training and innovation
because the government is trying to improve skills and employability. It became useful to equip theyouth with marketable skills and enhance skills development and vocational training for thoseunemployed. Government has decided to provide both primary and secondary education for free, andaccess to tertiary education is further expanded through a formula based funding and enhanced
financial assistance to students. Health sector, also receives the second largest share of 10 percent for
the national budget, to expand and improve the quality of health services delivery. Government spends
4 percent on poverty eradication and social welfares, to strengthen the social grant of old pensioners
and improve the social wellbeing of the citizens. 8 percent is allocated to police for safety and security,
while 7 percent is being spend on transportation to stimulate growth and enhance the competitivenessof the Namibian economy through developing a robust transport and logistics sector.
II.4.2 The deficit, debt and funding the gap
Namibian Government plans to run another expansive budget through the current three year
medium term expenditure framework (MTEF) period, which comes on the back of a prolonged policyof expansive spending for the past five years. Because of the expansive budget pursued over the past
five years, the country’s debt-to-GDP ratio has increased somewhat, from around 16% of GDP in
2010, to approximately 25% of GDP in 2014. Further to this, continued deficits in the current budget
mean that this is expected to increase further over the next three years, approaching 35% of GDP by
2017. While deficits are not a problem per se, persistent or structural deficits, as well as sizable
deficits, can be. In this vein, we are of the belief that current debt levels are not a problem, however
should more debt be raised to fund recurrent expenditure; sustainability will fast become an issue(2015, Budget Review).
Figure 6: Government Debt and Debt to GDP

77

Namibians are concerned about the ability of Government to fund the deficit this year, due to anumber of factors. “It is viewed that the size of the domestic borrowing requirement as a big hurdle for
the Government to overcome. The sheer size of N$8.9bn to be raised is a challenge in an environment
where local investors’ demand for fixed income securities is becoming saturated. The start of aninterest rate hiking cycle also does not bode well for the successful issuance of N$8.9bn worth of debt
securities [into the domestic market].” It is further noted that “…a number of state owned enterprises(SOEs), like NamPower, NamWater and NamPort might be looking at coming to the market with debt
paper, further competing with government for funds.” Both of these expectations have played out orare currently playing. With regards to the former, demand for Government debt at recent auctions has
been extremely low, with bid-to-cover ratios falling to some of the lowest levels seen in many years.
This, coupled with Government’s policy to draw down on cash-reserves with the Central Bank has
resulted in the Government being temporarily overdrawn with the Central Bank for the first time inmany years. Moreover, the liquidity position of the local commercial banks has resulted in abnormallyweak demand for government securities, particularly at the short end of the curve, where these banks
are usually most active (2015, Budget Review).
It’s further noted that “It is expected that Namibia will see spreads of government bond yields
increasing over the South African benchmarks due to sheer volume of supply. It is also expected thatthe corporate sector will start to pay up for listed debt as corporate paper is benchmarked off thegovernment yield curve. Therefore funding in general in Namibia is set to become more expensive andliquidity will slowly start drying up in our economy.” Once again, Namibians see this playing out as
expected, with much of the corporate debt currently being placed seeing weak demand and being
pushed on pricing, in a classic “crowding-out” type move.
Household debt
Over the past few years, and through the bottom of the interest rate cycle, household debt levels
increased quite significantly, taking overall household debt relative to disposable income well above
the levels seen in neighbouring South Africa, whose levels have often been perceived to be concerning
high. However, In Namibia, strong growth in disposable income has kept this ratio relatively morefavourable from a forward perspective. Recent indicators of household income growth, however, havestarted to show a changing picture, and it appears that the household disposable income position,
which had improved massively over the past 5 years, may be topping out, at least from a disposable
income growth perspective. Logically, this makes sense, as the delta of new stimulus has also flattenedout, and even started to reverse as the Central Bank tightens interest rates. Given current high levels ofhousehold debt, it is possible that some duress may be witnessed should interest rates continue toincrease and disposable income growth slow or contract. However, at the present point in time thislooks fairly unlikely, unless Government reduces spending in a significant manner, interest rates climb
aggressively or unemployment spikes up for whatever reason. However, it seems most likely thatcurrent liquidity challenges in the banking sector may result in a slowdown of new credit issued to theprivate sector, which should help to protect against households becoming unsustainably indebted.

78

Figure 7: Household Income

Figure 8: Household Debt Issuance

In most economies, these imbalances would be addressed through the tightening of monetary (andat times, fiscal) policy, however in this regard, Namibia is somewhat hampered by the fixed exchange
rate regime it shares with South Africa, Lesotho and Swaziland. Due to this, Namibia is unable toimplement completely independent monetary policy, and is required to remain fairly close to the rates
seen in the common monetary area in order to ensure that unstable capital flows between the countries
do not occur. As such, despite the clear need for tighter monetary policy in the country, interest rateincreases have been fairly slow. Nevertheless, the Bank of Namibia is in an interest rate hiking cycle,
having increased rates by 75 basis points, in the form of three 25 basis point hikes, over the past 12
months.
II.4.3 International reserves and financial sector liquidity
Strong growth in PSCE to households, along with large imports for various Government and private
sector projects have resulted in abnormally high import volumes for Namibia, which imports have notbeen matched by equally strong exports, resulting in a trade deficit. Moreover, the capital and financial
account has remained fairly weak, and unable to offset the deficit in the current account. As such, theexternal position of the country remains fragile, with international reserve levels falling well below
prudential levels to their lowest since mid-2012 in Namibia Dollar terms, and to 2008 levels in US
Dollar terms as illustrated in Figure 9.

79Figure 9: International Reserves

On the back of this large net outflow of funds, a multi-faceted situation of liquidity tightening isdeveloping, with liquidity growth slowing (and may yet contract) as funds are withdrawn from thecountry and financial system as illustrated in figure 10.
Figure 10: Money Supply

The effect of the liquidity withdrawal is a drying up of banking sector liquidity, as illustrated by theclose to 100% aggregate loan to deposit ratio now being seen across the sector, as well as the liquidity
position, reported on by the Bank of Namibia. Of course, the banks remain adequately funded;however some are becoming increasingly reliant on debt securities to fund their loan book growth.
This is illustrated in figure 11.
Figure 11: Banking sector loan-to-deposit ratio

The decline in banking sector liquidity has two main impacts on the local economy. Firstly, the80banks have become more cautious when lending, and while PSCE (Private Sector Credit Extension)
growth remains relatively strong, the bulk of new extension is being granted to businesses rather thanhouseholds; and secondly, demand for Government securities by the banks has slowed notably. Givencurrent liquidity trends, it further appears that the situation may deteriorate further over coming
months, resulting in a notable slowdown in future credit extension, which will act as a much-needed
break on the local economy.
Figure 12: PSCE and PSCE Growth

Despite the aforementioned imbalances, the Namibian economy continues to perform well, and is
expected to continue to do so through 2015 and beyond. However, this strong, above trend, growthseen in the local economy signifies that the time for counter cyclical policy is behind us, and that thepreviously countercyclical policy is no longer such, but procyclical. Thus, the process of interest ratenormalization too needs to continue, and more reticence from the fiscus is required to ensure that thecurrent economic imbalances do not become exacerbated. Nevertheless, the outlook remains rosy forthe country, and despite a number of the high frequency indicators suggesting that economic growth
II.5 Political stability
Political stability and prudent fiscal management have helped anchor Namibia’s high growth rates
and poverty reduction efforts. With strong ties to South Africa, the region’s second biggest economy,
Namibia has stronger competitiveness and investment attraction than average sub Saharan countries.
However to accelerate convergence with high income countries in line with its current National
Development Plan, the Namibian authorities need to address remaining structural bottlenecks. There isa great need to speed up and on a new Public Procurement and Public Finance Management law toreinforce economic governance and public sector management. Namibia also needs better regulatory
capacity for public-private partnerships to help public sector investment programmes.
Fiscal consolidation, including rationalizing public sector wages, need to continue and achieve
efficiency gains and help attain a more sustainable current account balance. Efforts to enhance
education and training quality need to be stepped up and anti-corruption efforts redoubled to recapture
public confidence and strengthen the country’s strong governance record.
II.6 Labour Market
The first full-scale Labour Force Survey (LFS) in Namibia was carried out in 1997 under the
National Household Survey Programme launched after the Government endorsed the five years planof development of statistics in Namibia in 1993. Since then, five labour force surveys have been
conducted in the country at more or less regular intervals of every four years. Namibia Statistics
Agency has decided to conduct labour force survey every year in the current years, and the statistics
below are based on the survey conducted in 2014.

81

Figure 13: Namibia Population by Activity Status
Population under 15 years
813 751 (36.2%)

Economically Inactive
population
441,500 (30.7%)

Total population(2 247 021)
Population 15 years & above
1 433 270 (63.8%)

Economically Active
Population
990,998 (69.1%)

Employed Population
712,752 (71.9%)

Unemployed Population
278,245 (28.1%)

Source: National Statistic Agency

According to the Labour Force Survey conducted in 2014, 990,998 of the estimated population aged
15 years and above in Namibia are in the economically active group, which forms the labour force,
while 441,500 of the estimated population is outside the labour force. The survey recorded that712,752 of persons aged 15 and above were employed in 2014 as illustrated by Figure 13 and Table 5.
Furthermore, the LFS 2014 produces an unemployment rate of 28.1 percent, which is 1.5 points higher
than the rate of 29.6 percent reported in 2013 labour force survey.
Table 5: Basic labour force indicators for Namibia in 2014
Basic indicators
Working age population 15 + years
Economically active population
Employed Population
Unemployed Population – broad
Labour force population
Labour force participation rate – broad
Unemployment rate broad
Source: National Statistics Agency

2014
1,433,270
712,752
278,245
990,99869.1
28.1

Figures 14 present the corresponding labour force participation rates (LFPR) by age group ingraphical form for Namibia as well as urban and rural areas. The graphs show similar trends for males
and females for all age groups where male LFPR is generally higher than that of female with relatively
bigger gap at the end of the tail. The graph indicates that the labour force participation increases withage from 15 years, peaking in the age group 35 to 39 years and begins to taper from the age group of
45 to 49 years.
Figure 14: Labour force participation rate by age and sex
100
80
60
female
male

40
20
0
15-19 20-24 25-29 30-34 35-39 40-44 45-59 50-54 55-59 60-64 65+
Source: National Statistic Agency

82

II.6.1 Employment
Employment is one of the key indicators to analyze economic performances and labor force
participation, which are drivers for countries to attain full potential growth. On account of the fifthlabor survey contacted by Namibia Statistic Agency (NSA) in 2012, Namibia unemployment rate
stood at 28.1 percent as shown in the Table above.
NSA regard a person as employed if the person worked for one hour of pay, profit or family gain
during that period, had a job or business or other economic or farming activities to return to.
Following this definition of employment coupled with improved data capturing methodology andanalysis, the unemployment rate decline from the previous high rate of 51.2 percent to 28.1 percent.
The employment structure is distributed between the private and public sectors with agriculture sector
being the largest employer for about 27 percent of all employees followed by wholesale and retailsector with 12 percent. Private household accounted for 11 percent of employees mainly as domestic
workers. Below Figure shows employment population by industry. One major challenge facing
Namibia is the shortage of skilled labor force in science and technical field.
Figure 15: Employment Population by Industry

Others, 22%

Wholesale &Retail Trade ,12%
PrivateHouseholds,
11% Construction,
7%

Agriculture,
Forestry &Fishing, 27%

Transport
storage, 3%
Public Admin &Defence, 5%
Accomodation& food services,7%

83

Education, 6%III. Tax Structure
There is no empirical evidence, on the exact time of when taxation was introduced in Namibia. But
it’s believed that it came during the 19th century when Namibia was colonized by Germany. However,promulgation of taxation laws and regulations were initiated by South Africa in the early 20th century
and Namibia established its tax system based on South Africa laws and guidelines. In 1990, when
Namibia got independence, many laws and regulations of the South Africa regime were kept. Most of
the inherited laws and regulations (including tax legislations) were repealed and amended accordingly
to meet the requirements and the structure of a newly independent country. With regard to taxation, it
is only the income tax law (Income Tax Act No.24 of 1981) was inherited from the South Africancolonial regime and continued to be administered until today. All other tax law administered today was
all enacted after independence.
Tax administration is carried out primarily by two departments, the Inland Revenue and Customs
and Excise which operates under the Ministry of Finance. Inland Revenue department administer the
local taxes while Customs and Excise is responsible for import taxes. Both departments has got aheterogeneous tax system and managed by separate commissioners appointed by the Minister. The
mission of the Inland Revenue department is to administer the tax laws in an efficient and effective
manner and maximize state revenue and the following are its objectives:
i.
ii.
iii.
iv.
v.
vi.
vii.

viii.
ix.
x.

Encourage and achieve the highest possible of voluntary compliance in accordance with the
tax laws and regulations.
Advice taxpayers on their tax rights and obligations.
Determine the extent of compliance and the causes of non-complianceDo all things required for the proper administration and enforcement of tax laws
Broaden and expand the tax base in all areas of taxation, especially in the area of indirect taxes
Strengthen the compliance function through enforcement and decentralization
Introduce and develop tax policies and legislation which are conducive to revenue
optimization and which takes cognizance of tax impacts on national savings, investment andsustainable growth
To improve taxpayers knowledge on the tax system and procedures
To foster a culture of voluntary tax compliance
To improve public awareness of revenue administration and benefits

Inland Revenue department, function in a hierarchical manner across the country, with the head ofthe department and the head office located in Windhoek and various regional offices under thesupervision of the Deputy Directors across the country. The structure of the department does notfollow the political regional dissemination of the fourteen regions. But has combined some of theregions together under one tax office, and the department currently operates in seven regional offices.
The mission of Customs and Excise department is to protect the society with respect to theinternational movement of good and people, to collect control and secure revenue, and facilitate tradewhilst exercising appropriate control, and to advance Namibia’s interests regionally and internationallyin these areas. The role of this department plays a crucial and complex role in revenue management,
since it encompasses the control of international movement of goods, people and conveyances. This isbecause it requires: participation in national, regional and international dialogue involving
international trade. Implementation of policies, regulations and procedures arising from these
dialogues. It also requires detection and interdiction of illicit activities, including cross border
movement of undeclared or under-declared goods and contraband such as the controlled substancesand drugs; facilitating smooth movement and clearance of legitimate trade.
The following are the legislations Administered by the Revenue Management Departments (Inland
Revenue (IRD) and Customs and Excise (CED)). However, not all the legislations are administered bythis revenue management departments, there are some Ministries engaged in administering some Acts,
such as Ministry of Mines and Energy which is responsible for part of the Petroleum Taxation Act,
some mining taxes, under the Diamond Act and Mineral (Prospecting and Mining) Act as amended.
The Land Tax Act is administered by Ministry of Lands and Resettlements and land tax remittance arecollected by Ministry of Finance under the department of Inland Revenue.

84

i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.

The Income Tax Act No. 24 of 1981(IRD)The Petroleum Taxation Act No. 3 of 1991 (IRD)
The Value Added Tax Act No. 10 of 2000 (IRD)The Stamp Duty Act No. 14 of 1993 (IRD)The Transfer Duty Act No. 14 of 1993 (IRD)
The Land Tax Act
Minerals Amendment Act No 8 of 2008
Diamond Act No 13 of 1999
Export Processing Zone Act No 9 of 1995

Namibia has been operating a modern tax system after independence, which is reasonablycompetitive by international standards and is modified and updated on a regular basis usually. The
basic system has remained fairly simple but has been complicated somewhat through the introductionof several special and rather discretionary incentives schemes over the years. Namibia has a welldeveloped accounting, auditing and tax advisory industry which includes both local and international
companies including the big four: Deloitte & Touche, Ernst & Young, KPMG and PriceWaterCoopers.
III.1 Tax Administration
In recent years, there appears to have been a trend among developing countries toward the creationof semi-autonomous revenue authorities, to replace existing traditional tax collection system. It is also
believed that tax administration work better in an autonomous department which is more fashionable,
and effective to achieve a well-defined national objective through a well structures independent tax
system, other than a traditional tax system that is reliant and sometimes politically affiliated. Namibia
is one of the countries without some form of semi-autonomous revenue authority yet; tax
administration is carried out in a traditional fashion by a line department within the Ministry of
Finance. However recently, the Minister of Finance has commissioned some members to oversee theestablishment of a semi-autonomous Revenue Agency that will take over the operations of thedepartment of Inland Revenue by the financial year 2017.
Figure 16, shows the current organ-gram of Inland Revenue Department, the Minister andPermanent Secretary both has Deputy Minister and Deputy Permanent Secretary respectively.
Figure 16 Ministry of Finance – Inland Revenue Organ-gram
Director.
Directorate
Tax
Adminisration

Deputy Director: Div legislation, Tax Policy & internal Matters
Deputy Director: Division Tax Admin, Support & Operations
Deputy Director: Division Central Region
Deputy Director: Division Western Region

Inland Revenue
Department:
Commissioner &DeputyDirector,
Directorate
Small andMediumEnterprise

Deputy Director: Division Northern Region
Deputy Director: Division far North Eastern Region
Deputy Director: Division Southern Region
Deputy Director: Division North Central Region

Ministryof Finance

MinisterandDeputyPermanent
Secretary &DeputyDeputy Director: Division North Eastern Region

Director ,Directorate
Large
Taxpayers
Customs & Excise
Department
Commissioner

Deputy Director: Forensic Tax Investigation
Deputy Director: Large Taxpayers

Director : Directorate
Customs & Excise

9 × Deputy Directors

Source: Ministry of Finance

The new expanded structure was approved and implemented in the year 2010 and prior to the85current structure, there was only one director heading the department of Inland Revenue assisted byeight deputies as compared to current two directors and eleven deputies. The Ministry always
acknowledges the need to fill managerial positions for effective management and policy
implementations and continuously strive to fill position as they arise. Prior to the new structure, alltaxpayers were not segregated but handled through their respective regional offices under one roof,
irrespective of their nature and trading. However as the economy continue to grow with technologies
advancement and know how, there is a need for the tax authority to develop certain technical skills andbe able to attend to large taxpayers. The large taxpayer directorate was established in the year 2013
and became fully functional in 2014 with the aim of improve and providing effective and efficient tax
services. The directorate is expected to develop human and technical skills in international taxation
matters amongst the various tax areas.
III.2. Tax policies
Namibia does not have a dual tax collection system (whereby tax is being collected by central
government and at local government as in countries such as Japan). Taxes administered by the revenue
management departments are remitted exclusively to the national account of the central government
for national budget distribution. Taxes collected by local authorities on urban properties and services
remains with the respective local authority for their expenditures and are not remitted to central
government. Similarly, taxes or similar charges paid to state owned enterprises (SOE) are not remitted
to the central government but remains for the execution of their duties and functions, with the
exception of dividends payment to government. However, through the different Ministries andagencies, the government provides funding to local authorities and struggling SOE through thenational budget redistribution. Table 6, Below shows some of the taxes paid in Namibia and offices
responsible for their administration. With the exception of land tax, which is administered by the land
ministry and collected by the ministry of finance, all other taxes collected by other agencies are also
administered separately from the Ministry of Finance.
Table 6: Tax Categories

Good and Service Taxes

Property Taxes

Other Taxes

Tax by type
Individual Income Tax
Business Profit Tax
Withholding Tax
Value Added Tax
Value Import tax
Custom Duty
Ad-varolem Duty
Excise Duty
Transfer Duty on Real EstateLand Tax
Urban Rates and Taxes
Annual Circulation Tax on Motor Vehicle
Vehicle Tonnage Charges
Stamp Duty Tax
Mining Royalty
Fuel Levy
Fishing Rights/Quotas
Licenses

Collecting Agency
Ministry Of Finance (IRD)
Ministry Of Finance (IRD)
Ministry Of Finance (IRD)
Ministry Of Finance (IRD)
Ministry Of Finance (IRD)
Ministry Of Finance (CED)
Ministry Of Finance (CED)
Ministry Of Finance (CED)
Ministry Of Finance (IRD)
Ministry Of Lands and Resettlement
Local Authority
Road Authority
Road Authority
Ministry Of Finance (IRD)
Ministry of Mines and Energy
Ministry of Mines and Energy
Ministries of Fisheries and Marine Resources
Various Agencies

Source: Ministry of FinanceTax administration in Namibia is guided by the rule of law uses applicable taxation legislations. In
the absence of clear guidance or clarity from the Acts, the tax department issues Practice Notes toprovide clarity and guidance to the general public. The practice notes are gazette and form part of thetaxation laws. Should taxpayer’s require specific guidance or clarity related to their specific trade andcases, taxpayers can apply for Tax Ruling from the department at no additional costs.
Namibia uses a computerized self-assessment system, even though the system is not fully
automated. The desirability and implementation of the automated tax system in Namibia will becovered in the later part of this paper (Success of tax reform).

86III.3 Overview of tax type in Namibia
A. Income taxes
The Namibian tax system is based on the source principle and not on residence and is administeredwith the guidance of the Income Tax Act No 24 of 1981 as amended. Resident and Non-Residents aretaxed on exactly the same basis in respect of income received from a Namibian source (Section 1 ofthe Income Tax Act 24 of 1981 as amended. Section 15 of the above mentioned act also madeprovision for income to be taxed as Deemed source. This means that all non-resident taxpayers(individuals and companies) have to submit a tax return in respect of their Namibian source income.
The Namibian tax year (financial year) runs from 1st March of the current year to the 28th / 29th ofFebruary the next year. All taxpayers, especially individuals including sole traders and farmers are
required to submit their tax returns of income to their respective nearest tax offices or Magistrate court
offices after the last day of the tax year or financial year. However due to administrative procedures,dues dates are set for returns to be rendered.
The Namibian Income Tax Act expanded some definition of source, to include certain income
deemed to have derived from Namibian sources. Sketchily deemed income transactions are:i.
Contracts made within Namibia for the sale of goods within or outside Namibia;
ii.
The use or right or grant of permission to use in Namibia – Patent, trademarks, copyright,
model, pattern, plan, process, formula, motion picture or right of similar nature;iii.
The imparting of or the undertaking to impart any scientific, technical, industrial orcommercial knowledge or information for use in Namibia;
iv.
Business carried by ordinarily resident or domestic company, as owner or charterer of any shipor aircraft;v.
Any service rendered or work or labor done by a person in Namibia, irrespective of source of
remuneration;vi.
Any service rendered or work or labor done by a person during temporary absence from
Namibia for the same employer;vii.
Any service rendered or work or labor done by a person for or on behalf of government,
regional council or any local authority, notwithstanding that such services are rendered outside
Namibia;viii.
Any service rendered or work or labor done by a person who is ordinarily resident in Namibia
to foreign going ship or aircraft;ix.
Pension and annuity accruing from services rendered in Namibia;x.
Any interest in respect of loan, deposit, advance, participation bond, debenture or interest
bearing security, or any dividend by building society shall be deemed to be from Namibiansources;xi.
Interest accruing to ordinarily resident or domestic company;xii.
Any annuity in respect of purchased annuity received or accruing to ordinarily resident ordomestic company;
xiii.
Amount to ordinarily resident or domestic company from pension fund, preservation fund,provident fund or retirement annuity upon maturity, surrender or disposable irrespective of thesource of such payment;
xiv.
Alienation of mineral licenses or right to mine in Namibia.
Furthermore, Namibia does not have Capital Gains Tax (CGT), Estate Duty, Inheritance Tax or Gift
Tax. Income of capital nature is excluded in principle, provided that it is not included by anotherprovision. Section 1 of the Income Tax Act, definition of gross income lists a number of circumstances
when income deemed to be of capital nature is included in taxpayer’s taxable income. The ministrycontinues to study and analyze the viability of introducing a fully fledge capital gains tax in Namibia
and similar other taxes. For a country faced with a skewed economy like Namibia, CGT is highly
recommended to tax wealth and redistribute to the poor to curb inequality. Studies done recommend
the introduction of CGT tax and the minister had announced on various occasion for CGT introduction
B.Taxation of Personal Income
Personal Income Tax (PIT) is the anchor of tax revenue in Namibia as can be seen in table 7.

87Income tax is imposed on the balance of individual taxpayers’ taxable income after allowing fordeductible deductions as provided for in the Income Tax Act. Namibia PIT system is applied toindividuals, Trust and estate of deceased person as they all fall within the definition of a person.
Registered enterprises are subject to company taxation system under the Income Tax Act, whereas
partnership income is subject to individual partner’s taxation on their share of income, as partnershipentities are not recognized as separate entities under the domestic laws.
Looking at tax rates, as a country faced with high level of inequality with a Gini-coefficient of 0.639
percent (UNDP), the government continues to use taxation as one of the tool for wealth redistribution.
The Income Tax Act has been amended on a number of occasions to align it to economic situation
prevailing to meet the government fiscal policies and world best practices. The latest amendment to
the Act was in 2013 when government as part of its fiscal expansionary measures increases the tax
threshold from N$40 000 to N$50 000 and reduced tax rates to stimulate economic growth.
Nonetheless, the 2013 amendment saw PIT rates diverting from the usual norm of having the top
marginal rate equated to the Corporate Income Tax (CIT) rate. Table 12 shows the current tax rates
following 2013 Income Tax Act amendments.
Table 7: Rates of Normal Tax
Taxable Amount (N$)
Where a taxable amount – Does not exceed N$ 50 000
Exceeds N$ 50 000 but does not exceed N$100 000
Exceeds N$100 000 but does not exceed N$300 000
Exceeds N$ 300 000 but does not exceed N$500 000
Exceeds N$500 000 but does not exceed N$800 000
Exceeds N$800 000 but does not Exceed N$1 500 000
Exceeds N$1 500 000

Rates of tax
No Tax Payable
18 percent of the amount by which the taxable amount exceed
N$ 50 000
N$ 9000 plus 25 percent of the amount by which taxable
amount exceeds N$ 100 000
N$ 59 000 plus 28 percent of the amount by which taxable
amount exceeds N$300 000
N$115 000 plus 30 percent of the amount by which the taxable
amount exceeds N$500 000
N$ 205 000 plus32 percent of the amount by which the taxable
amount exceeds N$800 000
N$429 000 plus 37 percent of the amount by which taxable
amount exceeds N$ 1 500 000

Source: Income Tax Act

The amended tax rates increased the threshold to N$50 000 and the minimal tax rate reduced from27 percent to 18 percent. The high earner threshold was split into two, whereas previously, taxpayer
earning N$750 000 and above paid the highest tax rate of 37 percent. With the new amendment, thetax band was increased to N$800 000 and split in two bands, with the lower band of N$800 000 to
N$1 500 000 at a tax rate of 32 percent and the top band of those earning above N$1 500 000 at 37
percent. Furthermore, taxpayers are given generous concession for tax purposes. This includes onethird tax free of housing subsidy amount received, expenditure and losses incurred in the production ofincome for traders, contribution to pension fund or provident fund and contribution for education
policy amongst others. The above PIT rates are also applicable to sole proprietors and farmers.
Taxpayers are categorized in three groups each group using a different colored form with different
details requires for completion of the form.
C. Registration and Payment of Personal Income Tax
Personal Income Tax registration in Namibia can be classified in two categories, taxpayers who aresalary earners or receiving remuneration (employee) and subject to employees withholding tax (pay as
you earn - PAYE) and the second group of taxpayers referred to as provisional taxpayer’. Provisional
taxpayer’ are:i.
Person earning income that does not constitute remuneration (in terms of remuneration
definition);
ii.
Directors of private company, Namibia; andiii.
Any company
All taxpayers eligible for tax payment and required to submit return in terms of section 56 of the
Income Tax Act are registered and issued with tax identification number (TIN). Due date for88submission of return and final payment is 30 June for all individuals other than for person who deriveincome partially from business, any profession or farming, whose due date for return submission andfinal payment is 30 September. Provisional taxpayers’ with the exception of those whose income iswholly or partially derived from farming are expected to make bi-annual payment with the firstpayment due within the period of six month from the start of the assessment year and the second
payment due not later than the last day of the year of assessment in question. Those who derived
income wholly or mainly from farming, their payment due date is on or before the last day of the yearof assessment.
Employers are required to register with Inland Revenue and deduct employee tax liability from theiremployees’ remuneration as provided for under the tax law on a monthly basis and to remit such tax
withheld to Inland Revenue on or before the 20th of the following month. Employers’ are also required
to issue employees’ whose tax liability was withheld or to whom remuneration was paid with a tax
certificate.
D. Corporate Income Tax
Namibia does not have a specific tax law that deals separately with corporate taxation other than the
Income Tax Act. The Income Tax Act No.24 of 1981 broadly covers all type of taxation for individuals
and corporations. All companies are subject to tax as per the above stated Act, and include not only
companies registered in Namibia, but also branches in Namibia of foreign companies deriving income
from Namibia. Other associations registered or incorporated outside Namibia, eg certain limited
partnerships under the United States of America law, which carry business on business or have anoffice in Namibia, are taxed as companies. Partnerships generally have no separate taxable identityand each partner (company or individual) is taxed on his share of partnership profit.
For period of assessment, a company is subject to assessment for its normal financial accounting
period (usually a year) which, for tax purposes, is known as a year of assessment. Financial statements
are prepared to the last day of February each year, unless agreement of the taxing authority is obtained
to use some other dates.
A company carrying on business or having an office in Namibia is required to appoint an individual(known as a Public Officer) resident in Namibia, to represent the company for tax purposes. A
company’s auditors may not hold office as its Public Officer. In addition, a company must have anaddress in Namibia at which any tax official tax notices or documents may be delivered.
For groups of companies, e.g. holding and subsidiary companies, is not taxed as a single entities in
Namibia. Each company is separately assessed to tax and an assessed to tax and assessed loss of one
company cannot be off-set against the taxable income of another company in the group. An assessed
loss of a branch of a foreign company may be transferred to a Namibian company under certain
circumstances.
Dividend income exempt; dividend received by a company which is registered as a taxpayer in
Namibia is exempt from normal tax. Expenses incurred in the production of such dividend income, forexample interest paid on money borrowed to purchase shares, is therefore not allowed as deduction in
the determination of normal taxable income of the company.
Provisional tax payment, a company is required to make two provisional payments and a final
payment within seven months after the end of the financial year on account of its liability for tax ineach year of assessment. The first payment is payable six months after the start of the year and thesecond at the end of the year.
Furthermore, a company having employees is required to register with the taxing authorities under
the PAYE (pay as you earn) system of collecting tax. Deductions on the basis of the tables laid downby the taxing authorities are required to be made from the salaries of the employees and regularly paid
to the tax authority. Failure to deduct results in personal liability for the company plus a penalty of 10
percent per month or part of a month that the amount remains unpaid, limited to the amount of
employees’ tax payable. The table below shows summary of corporate tax rates in Namibia as at 2015.

89

Table 8: Corporate Tax Rates
Corporate Income Source
Tax Rates
Other than mining
32 percent
Mining other than diamond
37.5%
Diamond mining
55%
Petroleum activities
35%
Registered Manufacturer
18% for a period of 10 years/ afterwards normal rate of corporate tax applies (32%)
Unit Trust Scheme
Nil - Exempt
Export Processing Zone
Nil - Exempt
Source: Income Tax Act/Petroleum Taxation Act

Companies are also allowed to deduct standardized expenditures incurred in the production ofincome. Among the deductible expenditure receiving special treatments are capital expenditures
incurred for movable and machinery, which are deductible over a period of three years. Building
allowance, which are deductible over a period of 20 years for building used in trade and 10 years forbuilding used for manufacturing purposes. Furthermore, the act makes provision for mining companies
and new mine to deduct development expenditure, development operations, exploration expendituresand exploration operations accordingly. Development expenditure is specifically not allowed to be
deducted fully in one year but spread over three years.
Assessed loss for both individual and companies are allowed to be carried forward. However, with2011 amendments to the law, new provisions were inserted limiting the period of assess loss carriedforward by natural person in different eight identified trade (suspect trade). The suspect trades are:i.
Any sport practice by the person;ii.
Any dealing in collectibles by the person;iii.
The rental of residential accommodation unless 80 percent of residential used by persons who
are not relative for at least half of the year of assessment;iv.
The rental of vehicles, aircraft or boats, same condition as above applies in iii;
v.
Animal showing by the person;vi.
Part-time farming or animal breeding;vii.
Any form of performing or creative arts practiced by the person; orviii.
Any form of gambling or betting practiced by the person;
Company’s self-assessment return is due within 7 months after the end of the year of assessment.
Companies are also subject to provisional tax payment.
E. Withholding Taxes
Namibia imposes withholding taxes on certain income earned by non-resident from Namibian
resident, sources or deemed sources. Table 9, below shows withholding taxes rates. Tax treaty
partner’s rates might differ from the one shown in the table. Withholding tax is a final charge to tax
and does not form part of the assessable income.
Table 9: Withholding tax rates
Category
Operator/Owner of ship and aircraft (Sec.34)
Interest
Royalties
Services
Non-resident Shareholders Tax

Tax Rates
32 percent of 5 percent of income earned from such services
10 percent of any amount of interest, excluding interest from stock or
securities and treasury bill
9.6 percent
25 percent
10 percent – company holding at least 25 percent and 20 percent in allother cases

Source: Income Tax Act

Withholding tax on operator or owner of ship and aircraft does not apply to person who renders
satisfactory account; the rate of 5 percent is calculated as N$1 for every N$200 of gross receivablefrom passengers, goods and services. The rate of royalties is calculated as 30 percent of the grossearning multiplied by the normal corporate rate.
Withholding tax on service was introduce as section 35A effective from March 2012, and charges a
tax on management fee, consultancy fee, director’s fee or entertainment fee to non-resident. A
pertinent issue on withholding tax on services is its applicability to treaty partners. The ministry90

sought guidance from Attorney General Office as the law is interpreted differently between thestakeholders. We remain optimistic that the matter will be solved duly and provide clear guidance on
its applicability. A non-resident is defined asi.
A person, other than a company, not ordinarily resident or carrying on business in Namibiaii.
A company neither managed nor controlled in Namibia
F. Tax Exemption and Incentives
The country taxation law provides standardize tax exemption and incentives to different taxpayers
as per their categories. Added to taxation law’s is the Export Processing Zone (EPZ) Act, providing fortax exemption status.
G. International Taxation
G.1 Tax Treaties
Namibia has 11 treaties, of which 10 were entered into after the country attain its independence andthe only pre-independent treaty is between Namibia and the United Kingdom which was extended to
Namibia through the South African government in 1967. Since the end of 2010, the government had amoratorium on treaty negotiation and signing. This was done to accord the country an opportunity toreview the existing treaties and envisage new treaties in line with the country national tax policy ontreaty negotiation to ensure that Namibian tax base and revenue is protected whilst promoting foreign
investments. Since many of the existing treaties have inconsistent rates and taxing right granted totreaty partners, warranted the need for policy document on treaty negotiations. The policy document
aims for uniformity and consistency and will become the official national policy on treaty negotiationin future and guide the re-negotiation process of older treaties. The policy expects to be finalized soon;
however, the ministry has set no date when the moratorium will be lifted yet. Table 10 shows Namibia
treaty network with some major withholding rates and provision.
Table 10: Namibia Treaty Partner and Major Withholding Rates
Country

Date

Botswana
France2004
1998

Germany

1998

India
Malaysia

1998
2004

Mauritius

1998

Romania

1998

Russianfederation

1998

South Africa

1998

Sweden1998

Divided%Interest%

Royalties%

Technical
services %

10
10
15
10
5 – Min 10% holding Exemption provided
15 Nil – Excess over arms
10 – Min 10% holding
length terms taxable
10
10
10
10
5 – Min 25% holding

10
10

10
5 – Min 25% holding
15

10
Exemption provided
10

5

10
5 – Min 25% holding and≥US$100k
15
5 - Min 25% holding15
5 – Min 10% holding

10

5

10

10

10
Exemption provided

15
5 for patentand certain other items
5,or ½ prevailing rate if less
Nil – Copyrights

United1967
15
Kingdom
5-50% Min voting power
Source: Ministry of Finance

20

10
10
5

5

10
Not mentioned
183 days ruleNot mentioned
183 days rule105
183 days stay or
US$10 000/year
Not mentioned
183 days ruleNot mentioned
183 days ruleNot mentioned
183 days ruleNot mentioned
183 days ruleNot mentioned
183 days ruleNot mentioned
183 days rule

As can be seen from table 10, inconsistencies in rates ranging from nil to higher rates led to themoratorium on treaty negotiation as alluded to earlier. With the new policy document, Namibia hopeto enter into new treaty with favorable terms and fair rates to all parties involved. Furthermore, SADC
member states developed and adopted Double Taxation Agreement (DTA) model in 2010 to be used91

by member country in their future negotiations. The model is a composite of both the UN model andOECD model with certain provision left to the contracting parties to adopt. Nonetheless, alongside thedevelopment of its national policy on tax treaties, Namibia is expected to develop its own DTA model
to be used in future negotiations. Thus, both the SADC and Namibian model have not been tested in
Namibia and expect to be used in the near future.
G.2 Transfer Pricing and Thin Capitalization
Namibia adopted transfer pricing and thin capitalization regulations in 2005 and incorporated theregulation in the taxation laws (section 95A). The provision gives the Minister the power to adjust
international transactions between connected parties (resident and non-resident) to reflect an arm’s
length price for the goods or services. In 2006, the department issued Practice Note based on OECD
guidelines on transfer pricing. Another consideration in international taxation is the Advance pricing
agreements (APAs), Namibia does not have APA legislation and documentation procedures in place;
APA regime is still under review. Similarly on thin capitalization rules, excessive interest, financecharge or other consideration payable in transaction arising from those considered by the Minister as‘disproportional financial assistance’ from non-resident to a resident connected person shall bedisallowed for tax deduction.
H. Value Added Tax
Value added Tax (VAT), was introduced in Namibia in 2000, by VAT Act No. 10 of 2000. The tax ischarge on goods and services. Since inception, VAT had been a major source of revenue collection forthe country and remains as such. In terms of the VAT Act, a registered person must charge and pay to
the State, VAT charge on taxable supplies and on imports of goods and services. Namibia has astandardized VAT rate of 15 percent on goods and services. However, certain goods and services can
be classified as zero-rated supplies, exempt supplies or exempt imports. Currently, there are 33 items
listed as zero-rated supplies, 10 exempt supplies items and 15 exempt imports items with a number of
Rebate items included.
I. VAT Administration
The Department of Inland Revenue is task with the administration of VAT alongside all other taxes
administered by the department. All inland VAT administration and collection are handle by thedepartment, whereas, the Directorate of Customs & Excise administers VAT collection and control ofgoods at point of entry into Namibia. Import VAT is paid at point of entry through Customs & Excise,or deferred incase of importers’ who are registered for Import VAT. Deferred import VAT is to be paidon or before the 20th of the following month.
i.
VAT Registration
Taxpayers carrying on taxable activity in Namibia are required to be registered and charge VAT interms of the VAT Act. The VAT Act allows for two type of registration:
1. Compulsory Registration - Taxpayers’ who’s turnover from all taxable activities exceed
N$200 000, at the end of any twelve month period, or where reasonable ground exist at the
beginning of any 12 month period that turnover will exceed N$200 000.
2. Voluntary Registration – Taxpayers’, who intend to make taxable supplies but do not meet thecompulsory registration criteria, may apply to the Commissioner for registration.
ii.
VAT Period and Return
Tax period for all registered taxpayers is for two calendar month period with the exception of
farmers. Farmers have the option to elect between periods of two, four, six or twelve calendar month.
VAT return is due for submission on or before the 25 of the month following the last month of the VAT
period.
J. Penalties and Interest
Both the Income Tax Act and the VAT Act include provision for punitive penalties and interest in theevent of failure to pay tax when due, submit return and various other offences against the requirementof both taxes. Failure to adhere to taxation law risk being charge with; interest, penalty, imprisonment
or multiple of punishment.

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K. Taxation of Natural Resources
Corporate income tax rates as illustrated in table 13 applies to taxation of income from alltransaction carried in Namibia irrespective of the nature of commodities with the exception to taxes
imposed under the Petroleum Income Tax Act. The Petroleum Income Tax is applicable to income
derived from a license area in connection with exploration operation, development operations or
production operations carried out in any tax year in such license area. Additionally, mining of natural
resources is subject to payment of royalty to the government of Namibia through the Ministry ofMines and Energy.
L. Trade Taxes
Revenue from trade is the leading tax revenue per category in Namibia. These are revenue collectedby Customs & Excise on goods as custom duty, excise and similar charges. As a member of one of theoldest customs union, SACU, Namibia share of income on international trade is distributed from the
SACU pool. During 2009 to 2012, SACU revenue decline significantly due to SACU institutional
reform on revenue sharing formula. However, revenue from SACU have picked up and anticipated toincrease favorable with Namibian trade. Traders importing goods into Namibia from area/ country
outside SACU pays custom duties and similar charges, whereas, trade within SACU applies the rule oforigin.
III.3 Tax Reform
Since 2010, the country took reform measures to transform the tax department business operation.
Measures were taken for the department to re-organize and strengthen the organizational structure of
the department as part of tax reform. The department embarks on fact-finding mission to learn about
automated tax system and the viability for the country to introduce such system. The following werearea reviewed or considered for tax reform:i.
The department organizational structure;ii.
The introduction of a large taxpayer division;iii.
Business process re-engineering;iv.
Improvement of the self-assessment system for income tax with an automated tax system;v.
Review of small and medium taxpayers regime;vi.
Improvement and strengthening of audit, filing, collection and enforcement; andvii.
Review of taxation legislation and study of new taxation area as a source of revenue collection
and protection of the society
III.4 The Success of Tax Reform
Namibia is one of the countries without some form of semi-autonomous revenue authority yet; tax
administration is carried out in a traditional fashion by a line department within the Ministry of
Finance. However recently, the Minister of Finance has commissioned some members to oversee theestablishment of a semi-autonomous Revenue Agency that will take over the operations of thedepartment of Inland Revenue by the financial year 2017. The department was able to successfully
attain and implement some of the reform measures. The department successfully underwent
organizational restructuring and increases its staff compliments in order to meet the expected output.
Here thereto, the department was able to arrest administrative backlog in the system and updated tax
assessment efficiently
The department undertook to replace the current self-assessment system with an upgraded tax
system. Following successful tender biding, the tender was awarded to a joint venture of a Namibianand Chinese company for the development and implementation of the new tax system in June 2013.
The development and implementation of the new integrated tax administration system (ITAS) expect
to be completed within three (3) year period ending 2016. The ITAS expect to use the latest
technology and innovation in tax administration.
In pursuing to meet reform targets, the ministry sought the need for a project manager to ensuresmooth implementation of tax reform whilst the department continues to operate normally. This saw

93the appointment of a consultant as the project manager early 2013. This enables the department
management to continue implementing their specific programs while tax reform agenda run paralleland effectively. The success of the initiative was seen, as tasks were coordinated executed effectively
following the consultants’ appointment. Similarly, after a long protracted period without the top
executive position being filled, the department appointed Mr Justus Mwafongwe as Commissioner andthe two appointments help transform the department and changes were inevitable. Even though figures
were not available at the time of this paper, compliance level increases significantly and trust was
restored in taxpayers.
III.4.1 Tax policy proposal for the year 2015/16.
In the coming financial year and medium term expenditure , Government willing to implement andundertake specific policy interventions and reforms in the areas of tax policy, public financemanagement and financial sector reforms.
It’s noted that Namibia tax system rests on a narrow base and displays varying levels of skewness,in terms of the taxpayer community and the relative contribution to the treasury. This is especially inregard to the relative high tax burden on individuals’ vis-à-vis corporations. The aim is to make iteasier for SMEs to meet their tax obligations, and curb tax evasion especially by entities which
conduct their activities as corporations but they are registered as charity organizations, trusts and Nongovernmental organizations which are exempted from tax.
The Minister plans to commission an investigation into the equity and effectiveness of the tax
system, with the view to broaden and deepen the tax base, improve the fairness of sharing the tax
burden, while keeping in check the efficiency and competitiveness of the system and the taxpayer’s
ability to pay.
The following tax policy proposals are to be implemented upon favorable consideration of theAppropriation Bill 2015/16:i.
Reduction of the withholding tax on services rendered by Non-residents from 25 percent to10 percent,ii.
Implementation of the reduction of the non-mining corporate income tax from 33 percent to32 percent as announced in the year 2014,
iii.
Introduction of the first phase of environmental taxes on carbon dioxide emission tax on motor
vehicles, incandescent light bulbs and motor vehicle tyres as considered and announced last
year,
iv.
Lifting of the Value-Added Tax (VAT) threshold for registration from N$200,000 to
N$500,000 as announced last year, following a lengthy consultation process,v.
Introduction of criteria for voluntary VAT registration and VAT import accounts,
vi.
Introduction of mandatory security requirement for the deferral of VAT goods,
vii.
Introduction of electronic communication rules, which enable online filing of tax returns andonline payment of taxes,
viii.
Introducing taxation of restraint of trade payments, as well as proceeds from the sale of apetroleum license or right to explore, develop and produce petroleum,ix.
Introducing transfer duty on the sale of shares in companies and membership interest in close
corporations owning residential property, commercial property, land and mineral licenses, as
announced previously,x.
Tabling of the Customs and Excise Bill, following regional harmonization and modernizationof customs and excise procedures,xi.
Strengthening the provisions for recovery of tax debts, andxii.
Introduction of taxes to promote domestic value-addition in the primary commodity andnatural resources sectors.
In line with the SACU common excise policy, the excise duty rates (sin taxes) on alcoholic
beverages and tobacco products will increase as follows:i.
the tax on a quart of beer goes up by 15½ cents,ii.
a bottle of wine will cost 15 cents more,iii.
a bottle of sparkling wine goes up by 48 cents,iv.
a bottle of whisky will go up by N$3.77; and94

v.
a pack of 20 cigarettes goes up by 82 cents
By 2016 tax returns and tax payments are envisage to be on line, heralding the full implementationof the e-filing system.
The department has further looked at the amendment of taxation laws to align them withgovernment policy and introduction of new taxation. Among the amendments; were the tax rates andthreshold amended to new rates and threshold as shown in table 7, the introduction of withholding tax
on services and many others. However, the process was not all rosy to the government as consultations
with stakeholders were carried and certain provision saw greater resistance from the private sectors.
Nevertheless, consultation continues on those amendments that could not be passed and for those thatwere still under review by the government. Significant tax amendments on the horizon amongst othersare:i.
Amendment to the VAT Act to increase the VAT registration threshold and abolishment ofzero-rated supply of livestock;ii.
Amendment to the Transfer Duty Act on transfer of membership interest of shares in close
corporations and companies holding immovable property;iii.
Introduction of the Securities Transfer Tax Act;
iv.
Introduction of the Export Levy Act;v.
Introduction of the Environmental Tax Act.
Finally, in 2014, the Directorate of large taxpayers’ was finally established and became operational.
The department will be in charge of tax administration of all major big companies in the economy,
including those in the mining sectors. The directorate will also be dealing with taxation ofinternational transaction and transfer-pricing matters among other task. The new directorate marks the
beginning of a new era in tax administration and international transactions, as the directorate is
expected to build skills and capacity in the area and ensure protection of the country tax base andrevenue from harmful tax practices.

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IV. Current Issues
IV.1 National budget 2015/16
The National budget and the Medium-term Expenditure Framework tabled May 2015 is aimed attackling the structural challenges that affect the development potential of our economy, unlocking
opportunities for jobs and wealth creation and improving the welfare of Namibians in an inclusive andsustainable manner. It is a pro-poor, pro-growth budget, with deliberate scaled-up resource allocations
to the targeted programmes for broad-based economic growth, job creation and poverty eradication
over time.
To bring about better results in the focal areas of social and economic transformation, Namibia
need to depart from a business as usual mindset, and make measurable efforts to hold Offices,
Ministries and Agencies entrusted with programme execution accountable for their action or inaction.
It’s emphasized that Namibian has to move in the top gear of the journey to Vision 2030. Particularly,
the citizens need to make bold decisions and commence with targeted policies to transform anddiversify the economy, alongside a package of strategic interventions to amplify the policy impacts inthe targeted areas.
IV.2 Main priority by Government
By and large, Namibia’s economic growth so far has been positive and moderately high, but it
largely remained jobless, with unemployment perpetually high, and now standing at 28.1 percent. A
key challenge that the country face, is the narrow production base with growth being concentrated
largely on the production and export of raw materials and commodities on one hand, and a high importbill on the other hand. This state of affairs limits the job creation potential, continually drives
Namibian trade balance deeper into deficit, exerts pressure on the stock of international reserves andrenders the economy highly vulnerable to external shocks.
Thus, the first priority in the 2015/16 budget and medium term expenditure framework is to bringabout an inclusive growth agenda for Namibia by:i.
ii.
iii.
iv.
v.
vi.

Diversifying and industrializing the economy, through targeted budgetary allocations to thepriority economic sectors with high economic growth and job creation potential,
Continuous development of functional and technical skills through increased access to tertiary
education and vocational training,
Developing and supporting domestic and regional value chains in the areas of comparativeand competitive advantage,
Crowding-in the much needed investment through private sector and SME support
programmes as well as harnessing PPPs,
Enhancing greater access to development finance through the operations of domestic
Development Finance Institutions and tailor-made commercial credit offerings, andLeveraging PPPs for infrastructure development and public service delivery.

Although Namibia has undoubtedly, made a remarkable dent in poverty, deep pockets of poverty
and vulnerabilities still remain. The government had prioritized to reduce poverty and improve social
welfare. A sustainable and long-term strategy to address poverty is the provision of opportunities forincome generation as well as promoting the creation of decent jobs. This will be achieved through:i.
ii.
iii.
iv.
v.

Strengthening social safety nets in coverage and quantum as the first line of defence against
poverty for the vulnerable members of our society,Supporting the creation of decent jobs and self-employment opportunities in the private sector,
Implementing policies that promote local access to, and ownership of the resources, andnurturing the capacity to exploit the resources profitably,
Developing social security networks that are sustainable and meaningful, andDesigning and implementing redistributive tax policies that are pro-poor and pro-growth96The interconnectedness across the skills deficit, joblessness, poverty, income inequalities and skewed
ownership levels, pose an unyielding barrier to wealth creation for the majority of Namibians. It’s
recognized that there is no silver bullet to address these challenges. A package of policies andinstruments is needed to break this barrier over time. Hence, the third priority for the budget and
MTEF is, therefore, the achievement of prosperity and wealth creation through:i.
ii.
iii.
iv.
v.
vi.

Empowering Namibians in a manner that creates sustainable and broad-based wealth creation,
Promoting affordable and sustainable access to finance and means of production, while
maintaining responsible lending,
Developing facilities to support SME access to finance and mentorship programmes,
Increasing the share of local ownership and value share in the value chains across various
industrial and service-oriented activities,
Encouraging wealth accumulation and prudent management, andExpanding the provision of basic amenities to all Namibians.

Lastly, a performance-oriented and results-based work culture needs to be strengthened in the realmof public service delivery to ensure accelerated service delivery, accountability and value for money.
Hence, the fourth priority is to:i.
Improve service delivery by strengthen internal efficiency of the public service sector throughperformance measures and accountability;ii.
Continuous skills development, andiii.
Reform of public enterprises to ensure affordable, competitive, reliable and sustainable service
delivery.
However, the extent to which the above priorities will be address depends on the multiplicity ofinternal and external factors impacting on our growth potential, the revenue generation capacity of oureconomy and the measures that we can deploy to address the constraints.

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V. Conclusion
In conclusion “macroeconomic policy can never be devoid of politics: it involves fundamental
trade-offs and affects different groups differently” Joseph Stiglitz. Namibia is experiencing such tradeoffs vividly, hence the struggle continue for free and prosperous Namibia.
Therefore the government has taken the following route:- Achieving greater inclusiveness and prosperity for all. Its well known that, this requires highand sustainable economic growth, grounded on strong macroeconomic fundamentals.
- Scale-up allocations to the economic and social sectors to spur growth, job-creation and longterm productivity gains.
- Increased Old Age Pension grants and made a commitment to future adjustments in line withresource availability and regional best practices. Anti-poverty policy packages and instruments
are being streamlined through the deliberate intervention to create a dedicated Government
Ministry.
- Government is taking measures to improve internal efficiency and accelerate service delivery
to all Namibians.
- Government extended free education to the secondary education phase, increased the support
to tertiary and vocational education, land reform programme and the provision of basic
services so that no Namibian must feel left out.
- Investing in the youth through continuous skills development and empowerment
opportunities.
- Keeping fiscal operations within sustainable levels, and working collaboratively withorganized labour and the private sector for the common good of our country.
Finally Namibia is committed to pursue sound macroeconomic policies and implementing structuralreforms to ensure more inclusive economic growth, address the high level of unemployment andreduce vulnerabilities while locking in the progress they have made so far to promote inclusion andaccelerate convergence with SADC (Southern Africa Developed Communities) targets. Namibia willcontinue to pursue a fiscal consolidation path that will restore and preserve medium to long-term fiscal
sustainability.

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