Namibia catches up with South Africa and Botswana

Namibia has witnessed a turnaround in its overall risk profile during the past decade. This is reflected by a substantial improvement in its overall ECR score, which has boosted its position on ECR’s rankings.

In September 2007, Namibia’s overall ECR score was 15.2 points lower than its current level, leaving it ranked only 151 on ECR’s rankings.

Since then, Namibia’s overall ECR score at 46.9 has converged with the region’s two strongest economies, bringing it up to 73 on ECR’s rankings. The improvement puts Namibia’s ECR score 18 points ahead of the sub-Saharan African average.

(Source: euromoneycountryrisk.com)

Additionally, Namibia’s ECR score for economic risk is the second strongest in the region at 5.4 and has more than doubled since September 2007. This strong score falls on the back of “large stimulus measures implemented by the government since 2009 and the high commodity prices arising from improved global demand for mineral products”, according to an African Economic Outlook report, published by the Organization for Economic Cooperation and Development.

These conditions are keeping the country’s GNP outlook in a favourable position. GDP growth is set to grow to 4.2% for 2012 and 2013, according to the African Development Bank. These growth forecasts compare well with the global average of 3.25% and accounts for Namibia’s strong GNP outlook score, which remains at 5.1 points from January 2012.

Economic activity is led by a strong mineral sector in the diamond and uranium industries, which accounts for 25% of GDP. However, this makes Namibia’s economy vulnerable to shifting global commodity prices.

As a report compiled by the Institute for Security Studies states: “The economy is highly vulnerable to world-market price fluctuations of diamonds and uranium – prices and demand remaining crucial to the country’s economic prospects.”

Yet Namibia’s political risk of 61.1 remains substantially higher than its economic and structural assessment scores. The country ranks the highest in the sub-Saharan African region and 45^th globally for political risk, putting it ahead of Italy and Hungary.

The country’s ruling party, the South West Africa People’s Organization, has set out initiatives to strengthen Namibia’s pro-business environment through cutting red tape and strengthening the country’s public institutions.

As an International Monetary Fund report notes: “The authorities are taking steps to lower the cost of doing business, while seeking to support private investment growth, job creation and export diversification.”

This accounts for Namibia’s strong institutional risk score of 6.3, which is the second highest in the region.

ECR’s institutional risk indicator measures the overall independence and efficiency of state institutions.

This article was originally published by Euromoney Country Risk.