Affordable Electricity Will Boost Competitiveness

Considering the constant increase in energy consumption in the country, mainly attributed the general growth of the Namibian economy and the expansion of the energy-intensive mining and manufacturing industries, the Minister of Trade and Industry has expressed particular concern about the availability of reliable, affordable and accessible electricity to enhance industrialization and competitiveness.

Speaking at the official opening of the NCCI’s National Council Meeting on Friday, Minister Calle Schlettwein emphasized that as a key input in many production processes, along with other utilities such as water and transport, port fees, electricity and its prices no doubt matter for the general competitiveness of the Namibian economy.

“Besides the purchasing power and disposable income of households, they (electricity prices) affect the production costs of industries and services. As a result, the high costs of electricity (and other utilities) in Namibia have put a significant burden on all customer groups, but particularly the productive sector, which is responsible for driving the economic growth of the whole country,” said Schlettwein.

It has been projected that Namibia’s current peak demand will double to 1 100MW in the next fifteen years.

Under the Fourth National Development Plan, the country aims to expand energy production from around 400MW to 750MW by 2017 to meet the spiralling domestic demand.

And while the Kudu gas to power project has been hailed as the solution to Namibia’s electricity woes after 2018, this project was tainted recently when former NamPower Managing Director, Dr Leake Hangala, reportedly questioned the viability of Kudu gas to power.

According to recent estimates of the International Energy Agency, Namibia’s overall electrification rate stands at 34 percent (15 percent for rural locations), which is slightly above the Sub-Saharan African average, but well below the average across developing countries, Latin America and even Africa as a whole.

Schlettwein added that another crucial challenge is the cost of electricity, noting that Namibia has experienced a continuous growth in electricity price over the last years.

“Put into context, Namibia’s position relative to the SADC region is uncompetitive, as the country exhibits average electricity tariffs above the majority of the region. Namibia continues to have significantly higher electricity prices than in the region’s largest economy South Africa.

Despite a sharp decrease in electricity price differential from 70 percent in 2007, national residential tariffs in 2012 were still on average 25 percent higher than in South Africa. A similar picture emerges when we look at tariff levels amongst industrialized developed nations. Namibia’s average industrial tariff level is, amongst others, significantly above that of the European Union, Norway and the United States,” noted the trade minister.

Schlettwein continued that it is his ministry’s observation that most of the other enablers move on similar trajectories increasing the risk of spiralling Namibia’s utility costs out of competitive ranges.

Competitiveness Rankings

Competitiveness is broadly defined by the World Economic Forum as the set of institutions, policies and factors that determine the level of productivity of a country. Competitiveness has become an increasingly important benchmark in assessing and comparing relative economic performance of nations around the world. As a result a number of international competitiveness rankings have emerged, including the Ease of Doing Business by the World Bank Group, Global Competitiveness Report by the World Economic Forum, Ibrahim Index of African Governance as well as the Namibian Business and Investment Climate Survey.

Namibia’s Global Competitiveness Index by the World Economic Forum 2014-2015 improved by two points compared to the previous year, rising to 88th position out of 144 nations. The country also came 88th out of 189 countries in the World Bank Group’s Ease of Doing Business 2015, falling 8 places compared to last year’s 80th position.

“I would like to note here that one of the explanations given by the World Bank to our ranking this year was the introduction of the new training levy imposed on employers with an annual payroll of at least N$1 million at a rate of 1 per cent of their total annual payroll, payable to the Namibian Training Authority. The levy is meant to strengthen vocational education and training in Namibia as had been previously recommended by the World Bank itself as part of the

Education and Training Sector Improvement Programme (ETSIP),” said Schlettwein.

In the Global Competitiveness Index 2014-15, Namibia fared fifth amongst Sub-Saharan African nations, behind only Mauritius, South Africa, Rwanda and Botswana.

Meanwhile in World Bank’s Doing Business, Namibia came seventh this year amongst Sub-Saharan African countries and in the Ibrahim Index of African Governance in 2014, Namibia ranked sixth out of 54 African nations, being recognized particularly for good performance in Participation and Human Rights Safety and Rule of Law, and Overall Governance.

Source : New Era