Foreign Direct Investment inflows decline

To N$1.2 billion in the first quarter of 2022
Mainly due to a fall in intercompany debt, retained earnings and the financing of exploration expenditure by entities in the mining sector.
Namibia’s direct investment inflows during the first quarter of 2022 stood at N$1.2 billion, a decline when compared to an inflow of N$2.1 billion registered during the corresponding quarter of 2021.
Similarly, when compared to N$3.7 billion recorded in the final quarter of 2021, direct investment inflows declined by N$2.5 billion, according to the Bank of Namibia (BoN) quarterly bulletin.
“The annual fall in foreign direct investment (FDI) inflows was due to lower intercompany loans granted to domestic subsidiaries in the mining sector worth N$381 million during the review period, compared to N$1.6 billion reported a year ago,” the central bank pointed out.
Nonetheless, some corporates in the mining sector retained higher profits on the back of a rise in export proceeds during the review period. Direct investment inflows declined when compared to the previous quarter, mainly due to a fall in intercompany debt, retained earnings and the financing of exploration expenditure by entities in the mining sector, BoN said.
Commenting on the importance of FDI, local analyst Josef Sheehama says in theory, FDI can be expected to benefit the host country by transferring resources, increasing employment opportunities, improving the balance of payments and transferring technology.
FDI is seen as an important source of capital formation particularly when the capital base is low. Capital inflow is seen as a way of creating a surplus in the capital account of the balance of payments or to make up for the deficit on the current account.
“It is important to understand that economic development in a nation is a slow process whereby the people’s standards of living are improved as a result of increase in income, leading to a shift from low income to a high-income economy,” he said.
To accomplish economic development, Namibia needs to ensure a favourable environment for investment especially allowing foreign capital movement in to the economy. The economy of a country is always linked to the world economy through external economic activities such as foreign investment and foreign trade. In an effort to attract FDI and spur economic growth, Namibia has established the Namibia Investment Promotion and Development Board (NIPDB) and have introduced policies that include fiscal and financial incentives. Foreign direct investment is a phenomenon resulting from globalization, which involves the integration of the domestic economic system with global markets. It is accomplished through opening up of the local economic sector as well as domestic capital for foreign investors to establish business, within the economy, he emphasised.
Therefore, sound macroeconomic policies, greater openness, and higher domestic investment would advance economic growth, Sheehama concluded.