Oil and gas will pose challenges for Namibia - IPPR
The discovery of commercially significant quantities of oil and gas will have major consequences for Namibia and many aspects of its economic policy.
These can include taxation, revenue and expenditure, currency, economic diversification, local ownership, corruption and membership of important international organisations.
The Institute for Public Policy Research (IPPR)’s latest quarterly economic review points out that there is a huge range of experiences — within Africa and further afield — upon which policymakers and politicians can draw to ensure the country avoids the curse and makes the most of this resource before the global energy transition renders it a stranded asset.
According to the IPPR, perhaps the greatest danger is that the presence of substantial revenues leads to higher levels of corruption.
“The presence of a huge pot of money makes it easy for politicians and those connected to them to syphon off rents.”
It pointed out that Namibia scores better on Transparency International’s Corruption Perceptions Index than other African oil and gas producers, but its anti-corruption institutions — both public and non-governmental — will need to be strengthened if greater levels of corruption are to be avoided.
“Joining the Extractive Industries Transparency Initiative (EITI) would send a clear signal of positive intentions and allow Namibia greater access to international best practice when it comes to avoiding many of the dangers associated with oil and gas, but so far Namibia has not been keen to join.”
Skill-intensive sector
The IPPR further noted that only greater diversification will generate employment for the majority as the oil and gas sector is highly capital and skills-intensive. “Namibia’s track record on economic diversification is already poor and special efforts will have to be made on currency management, public investment and skills if the strong forces that act against economic diversification are to be countered.”
It said there is a danger that, with oil and gas, government will conclude it does not need other outside investors and consciously or unconsciously throw in the towel on export diversification.
A key question, it added, is also whether the offshore find can lead to economic linkages that bring further economic benefits to Namibia or whether the industry remains an isolated offshore island generating revenue but little else for the domestic economy.
No strong incentives
IPPR further pointed out that Namibia had sought to present itself to the world at the United Nations Climate Change Conference in Glasgow (COP26) in November 2021 as a model green economy when oil was discovered shortly afterwards. The country has always been fully signed up to global action to address climate change through United Nations Framework Convention on Climate Change (UNFCCC), it added.
CoP26 recognised the need to halve greenhouse gas emissions by 2030, achieve net zero carbon dioxide by 2050 and limit the global temperature rise to 1.5 degrees or “well below two degrees”.
However, there are no strong incentives for individual countries, especially developing countries, to forgo exploitation of fossil fuel resources.
These can include taxation, revenue and expenditure, currency, economic diversification, local ownership, corruption and membership of important international organisations.
The Institute for Public Policy Research (IPPR)’s latest quarterly economic review points out that there is a huge range of experiences — within Africa and further afield — upon which policymakers and politicians can draw to ensure the country avoids the curse and makes the most of this resource before the global energy transition renders it a stranded asset.
According to the IPPR, perhaps the greatest danger is that the presence of substantial revenues leads to higher levels of corruption.
“The presence of a huge pot of money makes it easy for politicians and those connected to them to syphon off rents.”
It pointed out that Namibia scores better on Transparency International’s Corruption Perceptions Index than other African oil and gas producers, but its anti-corruption institutions — both public and non-governmental — will need to be strengthened if greater levels of corruption are to be avoided.
“Joining the Extractive Industries Transparency Initiative (EITI) would send a clear signal of positive intentions and allow Namibia greater access to international best practice when it comes to avoiding many of the dangers associated with oil and gas, but so far Namibia has not been keen to join.”
Skill-intensive sector
The IPPR further noted that only greater diversification will generate employment for the majority as the oil and gas sector is highly capital and skills-intensive. “Namibia’s track record on economic diversification is already poor and special efforts will have to be made on currency management, public investment and skills if the strong forces that act against economic diversification are to be countered.”
It said there is a danger that, with oil and gas, government will conclude it does not need other outside investors and consciously or unconsciously throw in the towel on export diversification.
A key question, it added, is also whether the offshore find can lead to economic linkages that bring further economic benefits to Namibia or whether the industry remains an isolated offshore island generating revenue but little else for the domestic economy.
No strong incentives
IPPR further pointed out that Namibia had sought to present itself to the world at the United Nations Climate Change Conference in Glasgow (COP26) in November 2021 as a model green economy when oil was discovered shortly afterwards. The country has always been fully signed up to global action to address climate change through United Nations Framework Convention on Climate Change (UNFCCC), it added.
CoP26 recognised the need to halve greenhouse gas emissions by 2030, achieve net zero carbon dioxide by 2050 and limit the global temperature rise to 1.5 degrees or “well below two degrees”.
However, there are no strong incentives for individual countries, especially developing countries, to forgo exploitation of fossil fuel resources.
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