The discovery of massive oil and gas reserves in Namibia’s Orange Basin in 2022 is the latest aspect of the country’s journey towards economic maturity. Even without the potential step change likely to be brought about by hydrocarbon riches, Namibia has made much progress in recent years after being dominated by its bigger neighbour SA for decades.

‘Namibia is quietly asserting itself as a compelling investment destination,’ says Casey Sprake, an economist at Anchor Capital. ‘Long considered to be politically stable and economically intertwined with South Africa, Namibia is now entering a new phase of strategic importance, anchored in promising oil discoveries, expanding infrastructure and a pivot toward green energy,’ she says.

Namibia has a small, open economy. It is one of the most sparsely populated countries in the world, with a total population of only 3 million occupying a mostly arid land nearly 50% larger than France. The extent to which SA has traditionally loomed over Namibia is shown by the fact that its much larger neighbour is the source of 66% of Namibia’s imports. These include virtually all motor vehicles, with delivery trucks being the single-biggest category.

Namibia remains intertwined with SA and the rest of the region. Its currency, the Namibian dollar, is pegged one-to-one with the SA rand. The country is also a member of the Southern African Customs Union (SACU) and the Southern African Development Community. Max Rix, head of investments at Namibian financial services company Simonis Storm, points out that customs union membership is expected to bring in N$21 billion in 2025 under the SACU revenue-sharing formula.

But Namiba’s revenue share is declining. ‘Adjustments in the SACU revenue-sharing formula have shifted the fiscal landscape in ways that magnify the impact on Namibia,’ says Rix. To address this vulnerability, he suggests the country needs to diversify its economy.

‘The government must invest in sectors that promise sustainable growth, whether through value addition in the mining sector, investment in renewable energy or the promotion of agri-business and tourism,’ says Rix.

Namibia achieved political independence from SA only in 1990. It had been run as an integral part of SA’s political and economic systems under a mandate imposed on the former German colony by the Treaty of Versailles in 1919. When SA imposed its apartheid policies on Namibia, the United Nations withdrew its mandate in 1966. But regional integration offers benefits through cross-border partnerships and joint ventures as well as access to SA capital and expertise.

Although some Namibian companies demonstrated impressive development before independence, including the Olthaver Group (now the largest local company listed on the Namibia Securities Exchange) and Namibian Breweries, SA firms dominated the economy. Even today, most high street brands would be recognised by a visitor from Johannesburg. Namibian politicians tend to talk up the local social benefits of these relationships while simultaneously seeking uniquely Namibian paths forwards.

Namibia is currently positioned to benefit from an energy boom in the renewables and hydrocarbon spaces.

Shell announced a major oil strike in the Graff-1 well off southern Namibia in January 2022, followed a few weeks later by a major TotalEnergies discovery in the Venus block. Portuguese company Galp has subsequently also announced a major strike in the Orange Basin. The discoveries have been compared to Guyana, across the Atlantic in South America. In that country, oil discoveries in 2015 have led to a GDP growth rate of above 20% for the past five years.

Namibia has become an oil exploration hotspot. However, the geology of its hydrocarbon resources is not straightforward. The discoveries are in deep water (up to 3 000 metres), more than 200 km offshore and have a very high gas content which, given its location, will be difficult to monetise. In January, Shell ‘wrote down’ its discovery – deeming it unviable for commercial development. However, TotalEnergies has continued exploration and says that it plans to make a final investment decision in the final quarter of next year.

Namibia’s hydrocarbon potential might be regarded as sitting a little awkwardly with the country’s commitment to developing its green energy sources. The World Bank ranks Namibia second in the world for solar energy potential. In August, the bank announced a US$138.5 million loan (to national energy utility, Nampower) to strengthen the grid and integrate more renewable energy. A 100 MW solar plant is already under construction in the south of the country and is expected to come on stream in the second quarter of next year.

Deputy Prime Minister Natangwe Ithete, who assumed responsibility for the Namibian government’s energy portfolio earlier this year, argues that ‘our country is committed to green growth’, pointing to Namibia’s accession to the Global Biofuels Alliance earlier this year. ‘We have positioned climate action and green investment, not as side pursuits, but as a central part of our national development agenda,’ he says.

The flagship project of this green agenda is the HyIron Oshivela plant, which successfully harnessed green hydrogen to produce zero-carbon iron for the first time in April this year. HyIron is an industrial-scale plant, which has 44 000 solar panels capable of producing 25 MW electricity as well as 13.4 MW of battery storage. It intends to scale up to produce 15 000 tons of carbon-free steel per year. The plant is the first zero-emissions iron production facility in Africa.

Namibia is best known for mining, especially alluvial diamonds and uranium. Sprake points out that diamond mining is in some trouble around the world given the surge in competition from lab-grown stones. The mostly offshore diamond industry has been a major earner for the Namibian economy for many years, accounting for about one-fifth of export earnings (valued at US$984 million in 2023). However, she argues that ‘exploration and production activity in Namibia has resumed across several commodities, helping offset continued softness in the diamond sector’.

The country is the third-biggest uranium producer in the world, with three mines in the Namib Desert, all of them under Chinese ownership.

Beyond diamonds and uranium, Namibia is known to have enormous mineral potential, and exploration companies are active in seeking out especially the critical minerals needed for the energy transition.

In 2024, mining exploration spending in Namibia surpassed that of the SA industry for the first time. Exploration companies spent US$1.49 billion in 2024, an increase of 66.7% over the 2023 figure.

The country is on the cusp of a critical minerals boom. Namibia Critical Minerals announced the completion of a production pilot project at its Lofdal rare earths mine in January. Prospect Resources is developing the Omaruru lithium project near Karibib. The Toronto-listed Northern Graphite intends to start production of battery-grade graphite at its Okanjande project in 2027, and the Canadian company calls Namibia ‘one of the most mining-friendly jurisdictions of the African continent’.

Companies argue that one of Namibia’s best features is easy shipping access to international markets via the deep-water harbour at Walvis Bay. The port was for many decades held by the SA government as a strategic enclave on the Namibian coast, surrendered only three months before SA’s first democratic election in 1994. Since then, the harbour has undergone massive development and has positioned itself as the gateway for not only Namibia but also the region more generally.

‘Plans to rehabilitate and extend railway lines have positioned Namibia as a logistics gateway for the region. Improved links from Walvis Bay to landlocked neighbours such as Botswana and Zambia are expected to enhance trade flow and reduce supply chain bottlenecks,’ says Sprake.

Walvis Bay’s container capacity was doubled in 2019 thanks to the construction of a new container terminal on reclaimed land. Walvis Bay also acts as the anchor for holiday and tourism development running northwards through Swakopmund and Henties Bay. Namibia, of course, is a popular holiday destination, given its combination of wildlife (especially the Etosha Pan), arid landscapes and coastal attractions. It has also become a favoured retirement location, especially for South Africans. The Africa Wealth Report suggests Namibia’s millionaire population will grow by 85% by 2033, second in Africa only to Mauritius.

Tourism in Namibia is growing strongly, although numbers have not recovered to pre-Covid-19 levels. The country attracted an all-time high of 1.5 million visitors in 2019. For 2023, the most recent year for which full figures are available, tourist numbers were 864 000, double the previous year.

Namibia might be a small market with a history of dependence on SA, but, with its impressive natural endowments in renewable energy, hydrocarbons and critical minerals, it is in the process of determining its own path ahead. A track record of macroeconomic prudence is evolving into a long-term growth story grounded in regional integration and global relevance.

By David Christianson