IMF urges Namibia to balance local content goals with sound investment climate

WINDHOEK, July 17 (Xinhua) -- Namibia should implement its newly adopted local content policy for the oil and gas sector with caution to avoid deterring investment and missing job creation targets, the International Monetary Fund (IMF) has said.

In its Selected Issues Paper published in July, the IMF said that while oil and gas exploration presents a significant opportunity for economic growth in Namibia, poorly designed local content requirements could lead to supply bottlenecks and dampen investor interest.

It called for careful implementation to strike a balance between attracting foreign direct investment while ensuring tangible benefits for the local economy.

Namibia passed a local content policy bill earlier this year, aiming to increase local participation in the oil and gas value chain, as part of the government's broader plan to create 250,000 jobs over five years, particularly in sectors such as construction, agriculture, and energy.

The IMF report noted that the oil and gas sector is highly capital-intensive and employs relatively few people directly.

Without strong forward and backward linkages to the rest of the economy, the sector's contribution to employment and inclusive growth may remain limited, the report said.

To maximize benefits from the resource sector, the IMF recommended that Namibia strengthen vocational training and higher education systems to address skills mismatches.

It also suggested that Namibia build the capacity of local suppliers and monitor compliance with local content goals through transparent mechanisms.

The report cited examples from other resource-rich countries, such as Brazil, Kazakhstan, and Malaysia, where targeted policies and support measures helped build domestic capacity without discouraging investment.

Namibia's jobless rate stood at 36.9 percent in 2023, with youth unemployment reaching 54.8 percent, according to a national labor force survey.

The IMF report warned that unless local content policies are aligned with market realities and national capabilities, the oil boom may not significantly reduce unemployment or inequality.

"Ensuring that oil wealth is translated into meaningful job growth and reduction of inequality will require policies that allow the whole society to benefit," the report said.

Namibia has attracted growing interest from international oil companies following promising offshore discoveries in recent years.

Exploration activities are ongoing in the Erongo and Karas regions. ■