Namibia – Country profile

Background

Namibia has  highly variable climatic conditions, ranging from dry to semi-humid. The prominence of its two major deserts, the Namib and the Kalahari , has led to a fragile ecosystem. As one of only two internationally recognized arid global biodiversity hotspots, the variety in vegetation has generated remarkable diversity of habitats and species. As of 2010, Namibia had a population of 2.2 million, a GDP of 12.2 billion USD and imports of fuel worth US$ 374 million. Also, 82% of its electricity is generated from renewables, as of 2009, while 19.2% of its total primary energy supply is also derived from the sector.

Overall Fiscal Profile

Namibia has outperformed other small middle- income countries in sub-Saharan Africa, with a growth rate of 5 per cent in 2012. None the less, challenges such as inequality and unemployment still persist within the country. The fiscal deficit, at only 0.3 per cent of GDP in 2012/13 was better than the 3.9 per cent that had been forecast, owing to savings in capital spending under the Targeted Intervention Program for Employment and Economic Growth and stronger than expected revenue performance. The 2013/2014 fiscal year is anticipated to include measures to boost the economy by reducing taxes for privates and corporations.

Policy and Legal Framework

Namibia’s Vision 2030, the overall development framework for the country, includes principles of environment, sustainable development and prosperity. The government has put a lot of effort into including environmental sustainability in the process of policy-making as it moves towards its Vision 2030. However, Vision 2030 does not have a chapter on energy, nor has it defined specific quantitative targets. None the less, indicators of progress on the green economy can be found in the most recent National Development Plan (NDP4). The NDP4 works to build high and sustained economic growth, with a strong focus on equality and job generation. Some important targets of the Plan include 4% growth per annum in agriculture;  increasing access to potable water from 85.5% to 100%, while maintaining sufficient reserves for industrialization, and decreasing the level of people living in poverty from 15.8% in 2009/2010 to below 10% by 2016. The NDP4 also has many projections for jobs, although green jobs are not at this time integrated or specifically identified. The government investment allocation for the NDP4, including from State-owned enterprises (SOEs), was N$19 billion, though allocation and budget specifications are not detailed. Other relevant strategies include the Environmental Management Act, introduced in 2007, which includes over 50 provisions with the goal to ensure 1) significant effects of activities on the environment are considered in planning/decision making  2) opportunity for participation in assessment processes and 3) ensuring findings of assessments are considered prior to decision making.

Fiscal Measures for a Green Economy

Namibia has introduced environmental fiscal instruments in various sectors. For instance, fees were successfully imposed on the fishing industry in 1991 to manage the sector ecologically and to increase the share of benefits for Namibians. The fees took the form of an increased cost of fishery licenses and an increase in the price paid for fish caught on a by-catch and fee per ton. The fiscal reform sought to rebuild fish stocks and strengthen the national fisheries industry, while generating new employment. By 2003, the contribution of the fisheries sector to GDP increased from US$ 38 million to US$ 462 million, while revenues from the fiscal instruments amounted to US $17.9 in 2002. The reform was successful at reducing overfishing and recovering fish stocks, while contributing to new employment amounting to 13,500 jobs. Secondly, after the country’s independence from South Africa, the new Water Resources Management Act introduced water tariffs to promote efficient use of water. However, there is scope to revise the current bulk water and end user tariffs, as well as water tariff subsidies. Regarding energy, levies are imposed on petrol, diesel and paraffin to  promote renewable energies. Currently there is a royalty fee of 5% of the market value of oil produced and saved; a petroleum income tax  of 35% of taxable income and an additional tax on petrol profits (after tax net cash flow on operations). Namibia is also exploring a renewable energy feed in tariff program, though it is in draft as of 2013. As a result of fiscal concerns, Namibia is seeking to broaden its revenue base. Namibia is planning to implement new environmental taxes and levies to help promote value-adding activities within the country.

Fossil Fuel Subsidy Reform

In 1996, the National Energy Council, chaired by the Minister of Mines and Energy, established the National Deregulation Task Force to examine fuel price deregulation, partly in response to the high fiscal burden amounting to N$170 million between 1990-1996. This was specifically on petroleum products, though some legislation exists to control strategic petroleum products including petrol and diesel. These are regulated through a slate account to smooth volatility through the National Energy Fund. In 1998, the White Paper on Energy Policy articulated the importance of keeping targeted subsidies to remote areas, gradual deregulation and the importance of tax revenue transparency. The National Energy Fund expenditures to cover subsidies only started to decline after 2001, highlighting that the process takes time. Since 2003, domestic fuel prices have increased steadily. Despite deregulation, the government has at times accommodated pressures from changing international prices. As a result of the fuel price shocks, the government granted a bailout package to the National Energy Fund and the existing fuel levy to the tune of N$260 million (USD$24.83). To support reform efforts, mitigation measures were adopted in 2008 to address poverty. These included a zero-rate value-added tax on selected food items, rebate facilities for food importers, and a food distribution program to feed the vulnerable. Finally, rural pump prices are subsidized through transportation costs to remote regions.  Related documents: Beukers, Rik. (n.d.)An overview of experiences with Environmental Fiscal Reform and revenue systems in forestry and fisheries sectors. Retrieved from: http://www.ibcperu.org/doc/isis/8505.pdf IMF (2013) Energy Subsidy Reform. http://www.imf.org/external/np/pp/eng/2013/012813a.pdf IMF (2013). Namibia 2013 Article IV Consultation – Staff Report; Press Release. Retrieved from: http://www.imf.org/external/pubs/ft/scr/2014/cr1440.pdf Ministry of Agriculture, Water and Forestry (2010). Integrated Water Resource Management Plan for Namibia. Retrieved from: http://www.mawf.gov.na/Documents/iwr/0)%20Integrated%20Water%20Resources%20Management%20Plan%20for%20Namibia%202010%2008%2031.pdf UNEP (2012). Green Economy Sectoral Study: Biotrade, A catalyst for transitioning to a green economy in Namibia. Download here.