Right geo-strategy could anchor Nam
‘Host of very valuable assets’
If Namibia is able to have some influence over the sea passages and ports and from that the transport hubs along the ground, the country will sit on "a hell of an asset", a leading political analyst and strategic advisor maintains.
The world’s super economies are fighting for dominance in the South Atlantic Ocean, and Namibia – with its small population of some 2.5 million people – lies right in the middle of the clash of powers, with disproportionate potential to influence the unfolding events.
From its coastline to its infrastructure and its free and safe society, Namibia boasts “very, very valuable assets”, Dr Frans Cronje recently told a breakfast meeting hosted by Cirrus Capital in Windhoek. And that’s not even taking into account the prospect of commercially viable oil along the coast, he said.
Cronje is a well-known political analyst, strategic advisor and scenario planner based in South Africa.
“Regardless of how these clashes for control in the South Atlantic are going to play out, the territory you control along your coastline is now one of the most high-valued pieces of geo-strategic real estate in the world,” Cronje said.
How Namibia leverages this, should secure “significant trade and other concessions from the world’s greatest powers”.
According to Cronje, China and the West will wrestle of over two assets over the next 20 years: the first, a diplomatic asset, and the second, an economic one. The latter, maintained Cronje, will be extremely useful to Namibia.
The countries immediate neighbours – South Africa, Malawi, Botswana, Zimbabwe, Zambia, Angola and the Democratic Republic of Congo (DRC) - is home to a collective population two-thirds the size of South America and one that is growing twice as fast, according to World Bank data.
If Namibia is able to have some influence over the sea passages and ports and from that the transport hubs along the ground, “you’ll have a hell of an asset” for the domestic manufacturing economy, Cronje said.
INFRASTRUCTURE
Namibia has great advantages it can effectively exploit regarding infrastructure, Cronje pointed out.
The first is that Namibia is “not a greenfield project where you have to hack your way through the jungle with machetes” – the country’s roads and air travel good and its data is absolutely amazing, he elaborated. “It just needs to be expanded a bit to meet demand.”
The infrastructure in South Africa, on the other hand, “is fading and the cost to repair it is going to become exorbitant”, Cronje said.
“That is obviously a great frustration for South African businesses on the one hand, but much more important, for any business that are trying to trade with the continent through South Africa,” he continued. Namibia’s opportunity here is “obvious”.
GEOGRAPHY
Namibia’s geography lends itself to the construction of ground transport infrastructure into Southern Africa to a greater extent than approaches from the east.
“It’s just easier to do it here. The potential gains are immense,” Cronje said.
The China-Africa Research Initiative at the Johns Hopkins University suggests that US dollar denominated trade volumes increased tenfold between China and Africa over past 20 years. The European Union (EU), on the other hand, claims it remains Africa’s most important trading partner.
“The fact that people argue about who is trading with Africa the most is a fantastic opportunity to exploit,” Cronje said, advising Namibia to play its “foreign affairs strategy correctly”.
Fading infrastructure in South Africa is symptomatic of a broader decline, he said.
The country’s global competitiveness ranking as an investment destination has fallen from 30 to over 60 over the past decade and its business confidence is at historic lows. Polling Cronje did recently with Social Research Foundation, of which he is the chairman, showed half of South Africa’s top skills are actively considering immigration at the moment.
A lot of things will have to change to turn South Africa around, he said.
‘DOING AFRICA A FAVOUR’
According to Cronje, South Africa can’t expand much beyond the investment it already holds.
This poses a dilemma for any major firms with interest in the sub-region, he said. “South Africa was the de facto place to go to domicile your company. You have no choice but to stick in the region given the consumer data alone; it remains an essential market.”
However, environmental, social and governance (ESG) concerns plague many African countries and a lot of them have fundamentally undemocratic societies. Plus more than 20 African states play host to internal armed conflict, Cronje pointed out.
“So where are you going to go if you want to be here?”
Namibia’s ability to domicile companies and attract them are great, Cronje said.
He dismissed the notion that countries “shouldn’t compete too harshly” with some of their regional partners. “If you don’t, the skills are going to be lost to the continent. You’d be doing the region and the continent a great favour by trying to draw some of these big groups in.”
SMALL LEAPS, BIG IMPACT
Namibia doesn’t need to lure a lot of companies to the country for the impact to be “immense”, Cronje said.
“Your budget is around N$70 billion, about 6% equivalent of South Africa’s annual receipts of corporate income tax and VAT [value-added tax]. If you take 10% - just on paper – of corporate activity out of South Africa and domicile it here with the skills, the effect will be that you’ll at least double your annual tax receipts; you’ll probably triple them. And you’ll trigger a construction and spending boom that will drive your unemployment rate down to near zero.”
Namibia has a large labour participation rate – 65% of people of working age are employed or are looking for a job. That is on par with the global average, Cronje said. The net number of jobless – more than 300 000 – is “very low”.
“At an [economic] growth rate of 4% or 5% for the next 15 years, you should knock your unemployment rate down to sub-10%.”
Looking at Namibia’s long-term future, Cronje doesn’t think the country’s labour market problem is an unemployment problem.
“If you tap even some of the great opportunities that are available to you, you are going to run into a labour supply problem, which is going to take very deft migration policy to alleviate.”
BIG PLUSSES
Namibia’s standing in Africa as a fundamentally safe, democratic, free and open society is unique and an important factor in the geo-strategic clash between the super powers, Cronje said.
The World Press Freedom Index ranks Namibia as the 80th freest country globally. Freedom House views Namibia as a free society - one of only four in Africa and one of less than 20 with that ranking outside Western Europe and North America.
“This makes you a particularly attractive option in the region for firms out of the free world. Namibia’s partnership surely now presents an exceptionally rare and desperately needed opportunity,” Cronje said.
Namibia is well insulated against the threat of war and terrorism, particularly sweeping jihadism across much of Africa, he added. The country scored zero on the Global Terrorism Index.
“This is a very important, distinguishing feature on the continent and it is an increasingly rare one.”
BLACK GOLD
“Namibia’s outlook is very good, and we haven’t yet said ‘oil’,” Cronje went on.
According to Cirrus Capital’s projections, a minimum viable find of 250 million barrels at a low price of US$60 a barrel will see total project revenue of US$15 billion over the life of the project. This is bigger than Namibia’s gross domestic product (GDP) last year.
“We all know that the find could be much bigger than that,” Cronje added.
A really big find of about three billion barrels at a price at US$60 per barrel, extraction costs of US$40 per barrel and at a corporate tax rate of 35% could generate tax revenue of N$300 billion over life of the project of about 20 years, according to Cirrus’ calculations.
“Those revenues will raise annual tax revenues by 25%. If we take an oil price of US$100 per barrel, it will lift annual revenues with well over 50% - and that’s before even attracting a little bit of the services industry domicile that would previously have gone to South Africa,” Cronje said.
Economic growth rates of China, India and the Asian Tiger economies - Hong Kong, Singapore, South Korea and Taiwan – are now “easily” in reach for Namibia – “by a whole number of different routes”, Cronje said.
“You can even leave some of these things on the side and you’ll do it. It shouldn’t be that difficult to within a generation put Namibia on a comparable GDP per capita of Malaysia today.”
From its coastline to its infrastructure and its free and safe society, Namibia boasts “very, very valuable assets”, Dr Frans Cronje recently told a breakfast meeting hosted by Cirrus Capital in Windhoek. And that’s not even taking into account the prospect of commercially viable oil along the coast, he said.
Cronje is a well-known political analyst, strategic advisor and scenario planner based in South Africa.
“Regardless of how these clashes for control in the South Atlantic are going to play out, the territory you control along your coastline is now one of the most high-valued pieces of geo-strategic real estate in the world,” Cronje said.
How Namibia leverages this, should secure “significant trade and other concessions from the world’s greatest powers”.
According to Cronje, China and the West will wrestle of over two assets over the next 20 years: the first, a diplomatic asset, and the second, an economic one. The latter, maintained Cronje, will be extremely useful to Namibia.
The countries immediate neighbours – South Africa, Malawi, Botswana, Zimbabwe, Zambia, Angola and the Democratic Republic of Congo (DRC) - is home to a collective population two-thirds the size of South America and one that is growing twice as fast, according to World Bank data.
If Namibia is able to have some influence over the sea passages and ports and from that the transport hubs along the ground, “you’ll have a hell of an asset” for the domestic manufacturing economy, Cronje said.
INFRASTRUCTURE
Namibia has great advantages it can effectively exploit regarding infrastructure, Cronje pointed out.
The first is that Namibia is “not a greenfield project where you have to hack your way through the jungle with machetes” – the country’s roads and air travel good and its data is absolutely amazing, he elaborated. “It just needs to be expanded a bit to meet demand.”
The infrastructure in South Africa, on the other hand, “is fading and the cost to repair it is going to become exorbitant”, Cronje said.
“That is obviously a great frustration for South African businesses on the one hand, but much more important, for any business that are trying to trade with the continent through South Africa,” he continued. Namibia’s opportunity here is “obvious”.
GEOGRAPHY
Namibia’s geography lends itself to the construction of ground transport infrastructure into Southern Africa to a greater extent than approaches from the east.
“It’s just easier to do it here. The potential gains are immense,” Cronje said.
The China-Africa Research Initiative at the Johns Hopkins University suggests that US dollar denominated trade volumes increased tenfold between China and Africa over past 20 years. The European Union (EU), on the other hand, claims it remains Africa’s most important trading partner.
“The fact that people argue about who is trading with Africa the most is a fantastic opportunity to exploit,” Cronje said, advising Namibia to play its “foreign affairs strategy correctly”.
Fading infrastructure in South Africa is symptomatic of a broader decline, he said.
The country’s global competitiveness ranking as an investment destination has fallen from 30 to over 60 over the past decade and its business confidence is at historic lows. Polling Cronje did recently with Social Research Foundation, of which he is the chairman, showed half of South Africa’s top skills are actively considering immigration at the moment.
A lot of things will have to change to turn South Africa around, he said.
‘DOING AFRICA A FAVOUR’
According to Cronje, South Africa can’t expand much beyond the investment it already holds.
This poses a dilemma for any major firms with interest in the sub-region, he said. “South Africa was the de facto place to go to domicile your company. You have no choice but to stick in the region given the consumer data alone; it remains an essential market.”
However, environmental, social and governance (ESG) concerns plague many African countries and a lot of them have fundamentally undemocratic societies. Plus more than 20 African states play host to internal armed conflict, Cronje pointed out.
“So where are you going to go if you want to be here?”
Namibia’s ability to domicile companies and attract them are great, Cronje said.
He dismissed the notion that countries “shouldn’t compete too harshly” with some of their regional partners. “If you don’t, the skills are going to be lost to the continent. You’d be doing the region and the continent a great favour by trying to draw some of these big groups in.”
SMALL LEAPS, BIG IMPACT
Namibia doesn’t need to lure a lot of companies to the country for the impact to be “immense”, Cronje said.
“Your budget is around N$70 billion, about 6% equivalent of South Africa’s annual receipts of corporate income tax and VAT [value-added tax]. If you take 10% - just on paper – of corporate activity out of South Africa and domicile it here with the skills, the effect will be that you’ll at least double your annual tax receipts; you’ll probably triple them. And you’ll trigger a construction and spending boom that will drive your unemployment rate down to near zero.”
Namibia has a large labour participation rate – 65% of people of working age are employed or are looking for a job. That is on par with the global average, Cronje said. The net number of jobless – more than 300 000 – is “very low”.
“At an [economic] growth rate of 4% or 5% for the next 15 years, you should knock your unemployment rate down to sub-10%.”
Looking at Namibia’s long-term future, Cronje doesn’t think the country’s labour market problem is an unemployment problem.
“If you tap even some of the great opportunities that are available to you, you are going to run into a labour supply problem, which is going to take very deft migration policy to alleviate.”
BIG PLUSSES
Namibia’s standing in Africa as a fundamentally safe, democratic, free and open society is unique and an important factor in the geo-strategic clash between the super powers, Cronje said.
The World Press Freedom Index ranks Namibia as the 80th freest country globally. Freedom House views Namibia as a free society - one of only four in Africa and one of less than 20 with that ranking outside Western Europe and North America.
“This makes you a particularly attractive option in the region for firms out of the free world. Namibia’s partnership surely now presents an exceptionally rare and desperately needed opportunity,” Cronje said.
Namibia is well insulated against the threat of war and terrorism, particularly sweeping jihadism across much of Africa, he added. The country scored zero on the Global Terrorism Index.
“This is a very important, distinguishing feature on the continent and it is an increasingly rare one.”
BLACK GOLD
“Namibia’s outlook is very good, and we haven’t yet said ‘oil’,” Cronje went on.
According to Cirrus Capital’s projections, a minimum viable find of 250 million barrels at a low price of US$60 a barrel will see total project revenue of US$15 billion over the life of the project. This is bigger than Namibia’s gross domestic product (GDP) last year.
“We all know that the find could be much bigger than that,” Cronje added.
A really big find of about three billion barrels at a price at US$60 per barrel, extraction costs of US$40 per barrel and at a corporate tax rate of 35% could generate tax revenue of N$300 billion over life of the project of about 20 years, according to Cirrus’ calculations.
“Those revenues will raise annual tax revenues by 25%. If we take an oil price of US$100 per barrel, it will lift annual revenues with well over 50% - and that’s before even attracting a little bit of the services industry domicile that would previously have gone to South Africa,” Cronje said.
Economic growth rates of China, India and the Asian Tiger economies - Hong Kong, Singapore, South Korea and Taiwan – are now “easily” in reach for Namibia – “by a whole number of different routes”, Cronje said.
“You can even leave some of these things on the side and you’ll do it. It shouldn’t be that difficult to within a generation put Namibia on a comparable GDP per capita of Malaysia today.”
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