Namibia, a nation historically reliant on diamond mining, stands on the precipice of an economic transformation. With significant offshore oil and gas finds luring global energy giants like TotalEnergies, Shell, Chevron, ExxonMobil, and Galp, Namibia is poised to double its GDP growth to 8% within a decade. According to Tom Alweendo, the country’s mining and energy minister, these resources have the potential to drastically reshape the nation’s economic trajectory while reducing its dependence on diamonds.

However, the discoveries arrive at a critical juncture. With elections scheduled for November 27, the ruling SWAPO party is under pressure to demonstrate its ability to leverage these resources for inclusive growth. The stakes are high as Namibia grapples with economic dissatisfaction among its 3 million citizens.

A Resource Windfall and Political Stakes

Namibia’s offshore oil discoveries have sparked hope for economic revitalization. Early estimates from energy data group Wood Mackenzie suggest the reserves could total 8.9 billion barrels of oil equivalent. Analysts, such as Paul Eardley-Taylor of Standard Bank, compare the discoveries to Guyana’s 2015 oil find, which has driven meteoric GDP growth in the South American nation. Guyana’s GDP expanded by 62% in 2022, 38% in 2023, and is projected to grow by 42% in 2024.

Alweendo and SWAPO hope to emulate Guyana’s success by fast-tracking production to 2027. This accelerated timeline, though ambitious, is not unattainable, especially if legislative frameworks and technical conditions align. Such rapid development could provide much-needed fiscal relief for Namibia, particularly as revenue from diamonds—historically a cornerstone of the economy—declines due to falling demand and competition from lab-grown alternatives.

Addressing Inequality and Economic Discontent

Namibia’s economic structure has long been marred by inequality, second only to South Africa in the region. Despite its wealth in diamonds and uranium, the benefits have not been equitably distributed. Approximately 20% of the population remains unemployed, and dissatisfaction with the slow pace of progress has grown.

According to Teresia Kaukuhowa, a professor at Namibia’s University of Science and Technology, the government must focus on creating labour-intensive jobs to ensure that oil revenues are distributed equitably. Policies promoting inclusive growth could be pivotal in maintaining public trust, particularly as SWAPO faces declining support.

In the 2019 general election, SWAPO lost its two-thirds majority for the first time, and support for the late President Hage Geingob dropped from 87% in 2014 to 56%. The party’s challenges were compounded in the 2020 local elections, where it faced further losses. This year, SWAPO has nominated Nandi-Ndaitwah Netumbo as its presidential candidate. If elected, she would become Namibia’s first female head of state, a move that may galvanize support but is far from guaranteed to secure a decisive victory.

Balancing Growth and Environmental Concerns

As Namibia positions itself as a burgeoning oil and gas hub, it also faces mounting scrutiny from environmental activists. The country’s vast renewable energy potential, particularly in solar and wind, has led to debates about balancing fossil fuel development with sustainable practices.

While acknowledging the need for climate justice, Alweendo defended the country’s right to develop its resources, arguing that Africa’s total fossil fuel emissions would account for less than 5% of global emissions even if fully monetized. “Is there any justice in saying to Namibia, don’t develop this find, when other countries have benefited from this [oil and gas] for decades?” he asked.

Namibia’s plans also include a focus on green hydrogen production, which could complement its oil and gas ventures. In 2021, Namibia signed agreements to establish a $9.4 billion green hydrogen project, one of the largest in Africa. This dual-track approach may bolster Namibia’s reputation as a responsible energy player while addressing global calls for sustainable development.

Challenges in Governance and Infrastructure

Fast-tracking oil production to 2027 will require significant improvements in Namibia’s infrastructure and governance. The country must ensure robust policies to prevent the so-called “resource curse,” which has plagued other oil-rich nations such as Nigeria and Angola.

In Nigeria, decades of oil production have failed to eradicate poverty due to corruption and mismanagement. Angola, despite being one of Africa’s top oil producers, continues to face high levels of inequality. Learning from these examples, Namibia aims to establish strong governance structures to manage its resource wealth effectively.

This will include revising tax frameworks, strengthening regulatory oversight, and ensuring that oil revenues are directed towards public services and job creation. Alweendo emphasized that transparency and accountability would be central to these efforts, stating, “We plan to use these discoveries to create other economic opportunities and insist on strong governance.”

The Role of International Investors

The involvement of global energy companies underscores Namibia’s growing appeal as an investment destination. TotalEnergies and Shell have already announced plans to increase exploration activities, while ExxonMobil has expanded its offshore holdings.

However, international investments also come with risks. Namibia must negotiate agreements that ensure a fair share of revenues while safeguarding its environmental and social interests. This balance will be crucial to maintaining public support and avoiding the pitfalls experienced by other resource-rich nations.

Looking Ahead

Namibia’s oil and gas discoveries mark a turning point for the nation, with the potential to reshape its economy and address longstanding issues of inequality and unemployment. However, the path to prosperity is fraught with challenges, from political pressures and governance concerns to environmental sustainability.

For SWAPO, the stakes are particularly high. The November 27 election will not only determine the party’s political future but also set the course for Namibia’s economic strategy in the years to come. Whether the country can leverage its resource wealth to deliver inclusive growth will depend on its ability to navigate these complex dynamics.

As Namibia embarks on this transformative journey, its success will serve as a test case for other African nations seeking to harness their natural resources responsibly and equitably. If managed well, the oil boom could provide a blueprint for sustainable development in resource-rich economies across the continent.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

18th November