2009 Index of Economic Freedom

Quick Facts

Population:

• 2.0 million

GDP (PPP):

• $9.9 billion
• 4.1% growth
• 5.1% 5-year compound annual growth
• $4820 per capita

Unemployment:

• 5.2%

Inflation (CPI):

• 6.7%

FDI Inflow:

• $327.2 million

Nambia's economic freedom score is 62.4, making its economy the 71st freest in the 2009 Index. Its score increased by 1 point since last year, reflecting improvements in four of the 10 economic freedoms. Namibia is ranked 5th out of 46 countries in the Sub-Saharan Africa region, and its overall score is above the world average.

Namibia scores above the world average in business freedom, trade freedom, and labor freedom. The overall regulatory environment is efficient and relatively straightforward. Namibia's tariff rates are average, but non-tariff barriers still infringe on overall trade freedom.

With an average inflation rate close to 6 percent over the most recent three years, prices have been relatively unstable, and government measures distort domestic prices. Foreign and domestic investors are treated equally under the law, but foreign investors are encouraged to form partnerships with local companies. The financial sector is not equally developed across the country. Scarce access to credit and banking services prevents people in rural areas from reaching their full economic potential. Property rights are at risk from the country's racially oriented land reform policy.

Background Back to the top

Namibia, a large and sparsely populated country in southwestern Africa, is rich in minerals, including uranium, diamonds, copper, gold, lead, and zinc. Parts of the economy are modern and well developed, but a majority of Namibians are engaged in subsistence agriculture and herding. Namibia's economy is closely linked with that of South Africa, its major trading partner and former administering power. Namibia became officially independent from South Africa in 1990 after years of fighting between South African troops and the South West Africa People's Organization (SWAPO). Sam Nujoma, leader of SWAPO, was president from 1990 until 2005, when he was succeeded by Hifikepunye Pohamba.

Business Freedom 74.4 Back to the top

The overall freedom to start, operate, and close a business is relatively well protected under Namibia's regulatory environment. Starting a business takes an average of 66 days, compared to the world average of 38 days. Obtaining a business license takes less than the world average of 18 procedures and 225 days. Closing a business is relatively easy and not costly.

Trade Freedom 88.4 Back to the top

Namibia's weighted average tariff rate was 8 percent in 2006. The trade regime is relatively open, but import bans and restrictions, some services market access barriers, import licensing regulations, domestic preference in government procurement, corruption, and weak enforcement of intellectual property rights add to the cost of trade. Ten points were deducted from Namibia's trade freedom score to account for non-tariff barriers.

Fiscal Freedom 67.2 Back to the top

Namibia has burdensome tax rates. Both the top income tax rate and the top corporate tax rate are 35 percent. Gas and oil extraction companies are subject to a special 42 percent income tax. Other taxes include a value-added tax (VAT) and an excise tax. In the most recent year, overall tax revenue as a percentage of GDP was 28.8 percent. In June 2008, authorities exempted some basic food products from the standard VAT in response to high global food prices.

Government Size 69.7 Back to the top

Total government expenditures, including consumption and transfer payments, are moderate. In the most recent year, government spending equaled 31.8 percent of GDP. Better spending management has helped to continue reduction of the budget deficit.

Monetary Freedom74.6 Back to the top

Inflation is moderately high, averaging 5.9 percent between 2005 and 2007. The government sets the prices of fuel products; influences prices through state-owned enterprises and utilities, including electricity, telecommunications, water, and transportation services; determines guideline prices for maize; and subsidizes agricultural production. Ten points were deducted from Namibia's monetary freedom score to account for policies that distort domestic prices.

Investment Freedom40.0 Back to the top

Namibia’s Foreign Investment Act of 1990 provides for equal treatment of domestic and foreign investors and provides nondiscriminatory access to all sectors. There is no legal requirement for local participation in foreign investments, but the government actively encourages partnerships with historically disadvantaged Namibians. In certain industries, such as fishing, investors complain of a concerted campaign to “Namibianize” existing investments. Bureaucracy can be burdensome and prone to corruption. Residents may hold foreign exchange accounts subject to prior approval and some restrictions. Non-residents may hold foreign currency accounts in certain areas. Capital transactions, transfers, and payments are subject to various restrictions. The country is currently undergoing land reform.

Financial Freedom50.0 Back to the top

Namibia's financial sector is not fully developed. Financial intermediation remains very uneven across the country, and scarce access to credit and banking services discourages more vibrant entrepreneurial activity. The government owns the Agricultural Bank of Namibia, the Development Bank of Namibia, and the National Housing Enterprise and offers subsidized credits for subsistence farmers. Namibia's commercial banks are all at least partly foreign-owned. The Namibian Stock Exchange has achieved little expansion in its trading. The number of companies listed on the exchange has declined to less than 30 in recent years due to delistings and mergers.

Property Rights30.0 Back to the top

Expropriating white-owned land and offering it to landless blacks for resettlement is official policy. Namibia’s land reform program started in 2005 with about 200 commercial farms acquired through the “willing seller, willing buyer” process. Three farms were expropriated, and their owners were paid compensation. The government has voiced concerns about the slow pace of land reform, accusing the country’s more than 4,500 commercial farmers of not offering their farms for sale, raising fears of Zimbabwe-style land grabs. The lack of qualified magistrates, other court officials, and private attorneys causes a serious backlog of cases. Namibia lacks adequate mechanisms to address piracy and copyright violations.

Freedom From Corruption45.0 Back to the top

Corruption is perceived as significant. Namibia ranks 57th out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. Despite efforts by the Anti-Corruption Commission, Office of the Ombudsman, and Office of the Auditor General, public corruption remains a problem.

Labor Freedom85.0 Back to the top

Namibia's flexible labor regulations facilitate employment and productivity growth. The non-salary cost of employing a worker is very low, and dismissing a redundant employee is costless. Restrictions on the number of work hours are moderately flexible.