Windhoek:Oil and gas sectors in Namibia have attracted approximately N$74.4 billion in foreign direct investment between 2021 and 2025. However, the country faces potential legal and financial challenges if key legislative measures are not finalized before the final investment decision (FID) for the Venus project.
According to Namibia Press Agency , Emma Haiyambo, the Director of Research and Financial Sector Development at the Bank of Namibia, highlighted these concerns at the BoN's annual symposium in Windhoek. The symposium, themed 'Namibia's Pre-Oil Production Phase Assessing Choices That Unlock Long-Term Economic Value,' focused on the economic implications of the oil sector.
The significant inflow of FDI, constituting roughly 56% of total investment, has been directed mostly towards exploration, infrastructure, logistics, and support services. Despite exploration accounting for about 30% of gross fixed capital formation between 2022 and 2025, the sector's contribution to GDP remains low due to much of the spending occurring outside Namibia.
Haiyambo noted that oil and gas service imports amounted to N$60.3 billion since 2021, representing 36% of services imports. In comparison, goods imports were valued at N$7.7 billion, or 1.4%, likely indicating domestic capacity limitations.
She emphasized the urgency of enacting the Petroleum (Exploration and Production) Amendment Bill, along with fiscal terms and the Sovereign Wealth Fund Bill, to clarify institutional mandates during the pre-production phase, which offers the most flexibility for shaping rules and institutions.
The anticipated production timelines remain uncertain, with the FID target initially set for July this year still pending. Although a local content policy was recently approved by the Cabinet, Haiyambo stressed that enforceability is challenging without accompanying legislation. She also called for an immediate skills gap study, referring to a 2024 Deloitte survey that identified skills mismatches and shortages in the industry.
Haiyambo assured that the financial sector is robust and well-capitalized, projecting non-bank assets to reach N$552.8 billion by 2025, an increase of 16.6%, which could facilitate local industry participation. However, she cautioned against the risk of government and private sector staff being drawn away by higher-paying positions in the oil industry.
She noted that public debt stands at 64.0% of GDP, with petroleum revenue projections being overestimated by 37% on average. Without a public communication strategy, she warned, unmet expectations could lead to social unrest, as seen in other countries.
The Bank of Namibia recommends developing a communication strategy, a skills retention framework, and a petroleum business support center to mitigate these risks, Haiyambo concluded.