As Namibia seeks to establish a comprehensive local content policy to govern its upstream sector – following a string of offshore hydrocarbon discoveries in the Orange Basin – emphasis has been placed on ensuring trickle-down effects on the local economy. This model has been used and replicated across African oil-producing countries and focuses on a series of standard metrics: stipulating a certain percentage of goods or services to be sourced from domestic companies, incentivizing knowledge and technology transfer, requiring the submission of local content plans, and so forth.
However, Namibia’s local content strategy should reflect its upcoming position as Africa’s newest producer, which can learn from existing policies and benefit from the decade ahead it has before first oil production. Rather than mandating the inclusion of Namibians in operations led by international energy companies, Namibian companies should be in the driver’s seat when it comes to leading exploration and development activities, as well as ensuring extractive sectors are used to create backward and forward linkages across diversified, value-added industries. For this, the country requires an upskilled workforce, specialized technology and a robust infrastructure base.
Fortunately, Namibia already has extractive sector experience with mining. The sector accounts for roughly 10% of GDP, with Namibia serving as a leading global producer of diamonds, uranium, zinc and iron ore and holding positive outlooks for lithium and cobalt. In a study on Namibia’s diversification strategy, Harvard Growth Lab advocates for the concept of “productive diversification” that focuses on developing sectors horizontally and that are “similar” in terms of skills and capabilities. In other words, Namibia should leverage existing capital-intensive industries like mining or oil and gas to lay the foundation for diversification towards other industries that can stimulate further job creation, skill development and economic growth.
Target industries selected as priority sectors by Namibia’s national development plan include agriculture and food production, manufacturing, construction and machinery, and transportation and logistics. Utilizing not only the products of resource extraction, but also the associated skill and technology development – and incorporating this into the local content policy – will kickstart the establishment of truly native industries in Namibia. This results in not only a traditional beneficiation strategy, which focuses on adding value downstream to raw materials, but also an entire business ecosystem from which new growth drivers can emerge.
In Namibia’s developing green hydrogen sector, for example, this means not only utilizing green hydrogen to produce value-added green ammonia and green steel for export, but parlaying ammonia into nitrogen fertilizer production and sustainable, large-scale farming. The World Food Program has already partnered with the Daures Green Hydrogen Village – the country’s green hydrogen pilot project – to boost production of green hydrogen and ammonia-based fertilizers, aiming to reduce reliance on imported fertilizers, support the domestic agricultural value chain and strengthen food security. In tandem, green hydrogen export revenues could be reinvested in upskilling Namibia’s agricultural workforce.
Namibia has also begun this process with mineral resources. Last October, Namibia announced that it will no longer export unprocessed mineral products, including lithium, graphite, cobalt, manganese and rare earth elements, as it seeks to encourage local mineral processing. Given these minerals represent critical inputs for lithium-ion batteries, renewable energy system components and the production of electric vehicles, they represent a key impetus for the development of a local manufacturing base.
As it drafts its local content upstream policy, Namibia must consider the big picture beyond raw and even value-added exports, and into the establishment of a circular and self-sustaining economy, setting the tone for investments for years to come.
