Namibia’s savings-investment gap deteriorates

The more a country spends its national income on consumption, the less resources are available for investment and saving, and consequently for future production.

According to the Namibia Statistics Agency (NSA) Annual National Accounts, between 2013 to 2021, except for 2020, Gross Fixed Capital Formation (investment) has been consistently higher than gross savings.

Gross savings in 2021 stood at N$13.0 billion, while investment registered an amount of N$25.9 billion in 2021.

“This means investment is supported by inflows from the rest of the world,” NSA said.

According to Simonis Storm, for the most part of the last 16 years, growth in private sector debt has exceeded economic growth rates.

This implies that most of the private sector debt went towards consumption spending and not toward investments which enhance long run productivity in the economy. While consumption spending fuelled growth in the short run, long run economic sluggishness is likely to persist as the economy’s productive capacity is constrained, Simonis Storm pointed out.

According to local independent analyst Josef Sheehama, although investment and savings have proven pivotal to achieving economic growth, it has received little attention to date, with most of the focus tending towards socio-economic challenges.

“The economy does not grow because we are saving; the economic grows if we invest. Therefore, local savings should be used to fund Namibian enterprises. Reform industrial policy that would allow for investments by locals in any sector,” he added.

The causes of Namibia’s poor savings levels are deep and complex, but with the right approach, the ship can be turned around. Years of poor economic performance have led to lower levels of disposable income among individuals as well as lower growth in profits and retained earnings among corporates. This has meant little savings available to kick-start growth in the [email protected]