Namibia and the challenge of bucking the trend of Africa’s “Resource Curse”

Namibia is gradually emerging as a significant player in the oil and gas industry due to major discoveries in its offshore regions, particularly the Orange Basin.

In recent years, renowned oil companies like Shell, TotalEnergies, and Galp Energia have made substantial finds that could potentially revolutionize the country's economy.

According to the National Petroleum Company of Namibia (NAMCOR), light oil was discovered 270 kilometers off the coast of Namibia in 2023. Although Namibia has yet to commence oil production, energy giants such as TotalEnergies and Shell have estimated reserves of approximately 2.6 billion barrels. Chevron also has plans to make its own discoveries in the country by 2025.

One noteworthy discovery is TotalEnergies' Venus-1X well, which was found in 2022. It is estimated to potentially hold up to 3 billion barrels of oil, making it one of the largest discoveries in sub-Saharan Africa.

To capitalize on these discoveries, Namibia's government is in the process of establishing a sovereign wealth fund to manage the potential revenue. The aim of this fund is to ensure long-term economic benefits for a country with a population of less than 3 million people, which currently faces widespread poverty.

While this development appears promising on paper and has the potential to usher in a new era of prosperity for Namibia and its people, Africa's relationship with oil and other natural resources is complex. Despite the continent's vast reserves, the wealth generated has not always translated into widespread prosperity.

The "Resource Curse" holds true for most parts of the continent, especially where great reserves of resources lie in abundance.

It is widely acknowledged that Africa possesses a vast amount of valuable mineral resources beneath its surface. In 2019, the continent's mineral production reached nearly 1 billion tonnes, with a total worth of $406 billion.

According to the United Nations, Africa holds approximately 30 percent of the world's mineral reserves, 12 percent of the world's oil reserves, and 8 percent of the world's natural gas reserves.

Furthermore, Africa is responsible for 40 percent of the world's gold production and possesses significant amounts of chromium and platinum, both highly valuable metals.

Ironically, despite this abundance of resources, poverty remains a prevalent issue across the continent.

As of March 2024, around 429 million people in Africa were living below the extreme poverty line of $2.15 per day, according to Statista.

Considering Africa's population of approximately 1.4 billion, this means that roughly one-third of the continent's inhabitants are living in extreme poverty. Countries such as Mozambique, Malawi, the Central African Republic, and Niger have the highest rates of extreme poverty in Africa, based on the indicator of $2.15 per day (updated from $1.90 in September 2022).

Although there are predictions of a decrease in poverty levels in the coming years, Africa still remains the poorest region compared to the rest of the world.

Interestingly, it is perplexing that many areas with conflicts on the continent are also rich in mineral resources. From the Democratic Republic of Congo to Nigeria, Angola to Mozambique, the situation remains consistent.

This raises questions about the distribution of the benefits derived from these resources, as it appears that a few individuals profit greatly while the majority of the population sees little to no benefit.

To effectively address the resource curse, a comprehensive set of policy measures is required. These measures should encompass the establishment of strong institutions, transparent governance practices, the promotion of diversified economies, and investments in both human capital and infrastructure.

A prime example of a country that has successfully managed its diamond resources is Botswana.

By effectively utilizing its resource wealth, Botswana serves as a model for national development.

It is crucial to acknowledge that no external assistance can truly aid Africa unless we are willing to take initiative and help ourselves. While we all hope that the new discovery in Namibia will contribute to the country's prosperity and elevate it to the ranks of prosperous nations, it is important to approach this hope with caution, considering the prevailing "existing protocol" observed throughout the continent.

Can Namibia be among the limited “difference-makers”? Only time will tell.

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Credits: Statista, Al Jazeera