Johannes !Gawaxab: Maximising economic growth from renewable
and non-renewable energy sources in Namibia
Remarks by Mr Johannes !Gawaxab, Governor of the Bank of Namibia, at the Bank of
Namibia's 23rd Annual symposium, Windhoek, 3 November 2022.
* * *
Director of Ceremonies
Honourable Tom Alweendo, Minister of Mines and Energy,
Honourable Ministers and Deputy Ministers Present,
Members of Parliament,
Members of the Diplomatic Corps,
Executive Directors of Government Offices/Ministries and Agencies,
Deputy Governors and Board Members of the Bank of Namibia,
Distinguished Speakers,
Distinguished Panelists,
Captains of Industry,
Members of the Media,
All invited guests,
Ladies and Gentlemen,
Good morning!
1.
It is my profound honour to welcome you to the Bank of Namibia's 23rd Annual
Symposium. I wish to express my gratitude and appreciation to our invited guests and
discussants for availing time to be with us on this occasion and share their views and
knowledge on this important topic, which is Maximising economic growth from
renewable and non-renewable energy sources in Namibia.
2. The Annual Symposium of the Bank of Namibia aims to contribute to Namibia's
development and economic policy discourse. Annually, the Bank identifies a vital
development and economic issue facing Namibia, to which this dialogue can contribute
evidence-based solutions. The Annual Symposium is, therefore, a forum designed to
bring together policy experts, academics, and economic development stakeholders to
discuss the economic and policy issues on the identified topic. And as such, the Bank
felt the need to get ahead of Namibia's recent discoveries (the oil and gas discoveries
and the green hydrogen initiatives) so that we can get the policy issues right from the
onset. My hope for this symposium is that we can contribute to the crafting of policies
and recommendations that will allow the country to exploit the benefits of renewable
and non-renewable energy and review possible options for the country to ensure
appropriate equitable participation of Namibians in these opportunities, now and beyond.
3. Through appropriate management and allocation of oil, gas, and green
hydrogen revenues, our country can promote economic diversification and thus
build the basis for higher and stable growth. The critical challenge for us is to
harness the oil, gas, and green hydrogen resources by making the right strategic
choices and synchronizing their implementation in a context that improves the lives of
the poor through increased investment in health, education, physical infrastructure, and
other non-oil sectors.
4. However, this will only be possible if the Government approaches the oil and
gas sector and the green hydrogen initiatives in a national, rational, and strategic
manner. We are fully aware that these sectors cannot only bring significant financial
resources and enormous transformational opportunities but also come with challenges.
There are many examples around the world where developing countries have obtained
windfalls from oil and gas but eventually ended up poorer than before. We must avoid
the resource curse at all costs. We must learn from the experiences of others.
5. In my message today, I would like to talk about the following three key issues;
first, how Namibia should position itself to maximize its gains from these discoveries;
second, briefly reflect on some critical measures to be put in place to avoid resource
mismanagement; and finally, speak to the head-start we have made as a country
through the establishment of the newly established sovereign wealth fund, the
Welwitschia Fund.
6. Regarding the gains maximization, I would like to highlight some critical
success factors that the country should embrace to ensure benefits for all
Namibians. The question in the mind of every citizen is how as a country, we should
expect to gain from these new discoveries. One of the most immediate ways should be
through additional direct and indirect employment. Exploration activities should also
generate new infrastructures such as roads, railway lines, electricity supplies, schools,
and hospitals that, although provided for the minerals industry and its workforce, can
also benefit the rest of the population. It should contribute to developing skills and local
businesses at the local level. Skills development should entail using the migration policy
to facilitate skills transfer and the acquisition of skills that are not locally available.
Meanwhile, the economy can be stimulated as mineral companies forge multiple
outward linkages - backwards to industries that supply goods and services or forwards
to industries that process mineral outputs.
7. The issue of ensuring optimal local content in the exploitation of resources
must remain prominent. The finalisation and adoption of the Local Content Policy is
therefore of paramount importance. Facilitating local content and participation in the oil
and gas value chains has the potential to ensure broad-based benefits from these
resources. To avoid and prevent the much dreaded "resource curse" that has plagued
many developing countries with newly discovered natural resources, the private sector
will need to capitalize on these opportunities.
8. This brings me to the second critical success factor, transparency and
accountability in allocating resources. This would ensure that access to these
resources is granted in such a way that it prevents mismanagement and other abuses
and that the benefits trickle down. How do we do this, you may wonder? Firstly, we
need to ensure that Namibians and firms seize opportunities to provide services to
these industries. Secondly, the allocation of these resources should be in a transparent
manner; it should be done through an auction or open market bidding. Well-designed
auctions can promote the efficient allocation of resources without requiring
governments to have full prior knowledge of resource values or costs. Compared with
administrative allocations, auctions are more transparent, less dependent on officials'
subjective judgment, and can yield more significant revenues or cost savings for
governments.
Director of ceremonies, ladies and gentlemen,
9. In a 1995 study, the economists Jeffrey Sachs and Andrew Warner
demonstrated that resource-rich countries generally do not become wealthier.
This brings me to the third point. Natural resource wealth is not necessarily a
blessing. Spending this newfound wealth in terms of oil crowds out industries that are
exposed to international competition, thereby reducing growth capacity - the so-called
Dutch disease. Other leading economists find that the relationship between economic
development and natural resources is more complex; many countries become poorer
after discovering abundant natural resources, while others become wealthier. Sachs
and Warner conclude that the quality of the institutional framework is decisive.
To escape the resource curse, there are examples of countries that have successfully
established Sovereign Wealth Funds, such as the Norwegian Government Pension
Fund Global, which you will hear about later.
10. Early this year, Namibia launched its own Welwitschia Fund, managed by the
Bank of Namibia under the auspices of the Ministry of Finance - before
announcements of significant windfalls were realized. With the Fund, we are better
positioned to institute long-term oil and other natural wealth management. The
Stabilization Account of the Fund will aim to insulate the budget and economy from
commodity price volatility and external shocks to the Namibian economy. The
Stabilization Account closely resembles "normal foreign reserve" assets to protect
domestic economies against economic shocks through countercyclical positioning. The
Stabilization Account is premised on the regular setting aside of the portion of specific
categories of public revenue to build the Fund while applying strict withdrawal rules. As
a result, the withdrawals will mainly be during exceptional circumstances. On the other
hand, the Intergenerational Savings Fund facilitates the investment of defined proceeds
from the present utilization of natural resources and from divestiture in state assets.
Intergenerational Savings Fund aims to promote long-term prosperity and ensure
intergenerational equity in the distribution of net economic benefits from the
intertemporal utilization of the country's natural resources.
Ladies and gentlemen,
11. Scaling up renewable energy is no easy task and calls for mobilising massive
Renewables bring
savings and investing them productively in a risky environment.
far-reaching benefits in terms of human health, energy access, environmental
protection, and the response to climate change, along with the potential to create new
jobs around the world. Sustainable energy finance is essential in the energy transition
and innovation. Meeting a future global increase in energy demand in a sustainable way
while reducing emissions from existing infrastructure will require billions of dollars of
investment. However, there is currently a gap of many hundreds of billions of dollars
between existing investments and what is required. This means that, as a country, we
will need to ensure that the investment climate is conducive to attracting such
investments, in addition to mobilizing local resources.
12. Ladies and gentlemen, my remarks are not aimed at preempting the
discussions and ideas that we will have during the course of this symposium.
They are not to create an impression that we know and have all the solutions. The
symposium, therefore, offers us the opportunity to collectively reflect and deliberate on
this important topic, particularly around a few things which I believe are crucial to
transforming the Namibian economy and converting challenges into opportunities. In
this regard, I would like you to ponder on these few questions for the consideration of
the experts on this subject, those of us who are policymakers, practitioners in this
sector, and all participants in this symposium.
How to ensure that the discovered minerals/natural resources (oil - onshore and
offshore) and green hydrogen development benefits and contributes to
broadbased development that results in employment creation and reduction of poverty
and inequality?
How to prevent the Dutch disease/resource curse?
What should the regulatory landscape be so that Namibia optimally benefits from
these discoveries, including ownership? Is the current regulatory landscape
adequate to ensure the country gets a fair share of the discovered resources and
also competitive to attract FDI?
How can synergies between new investments and existing policies, such as local
participation and local procurement and value addition, be enhanced?
Director of ceremonies, ladies and gentlemen,
future is not a
13. Allow me to end my remarks with a quote by John H Schaar, "The
place we go to, it is a place we create. The paths are not to be found, but made.",
therefore let us create the future we want as a nation, by doing all that we can do, as far
as humanly possible.
I thank you.