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Introduction

Namibia is an arid and sparsely populated country, about twice the size of California, located on Africa's southern Atlantic coast. Its 1997 population of approximately 1.8 million people includes a rich diversity of ethnic and cultural groups who speak 12 different major languages. The country has a rich resource base of minerals (diamonds, gold, copper, zinc, uranium, lead, and silver), large and well-controlled coastal fishing stocks, and an excellent transportation and infrastructure system. Its rich animal life and spectacular wilderness areas and game parks are regarded as prime tourist attractions. Developing these assets to their full potential remains the country's greatest challenge. In December 1999, Namibia successfully conducted its third Presidential elections.

Since its hard-won independence in 1990, Namibia remains one of the more politically stable countries on the continent. Namibia is uniquely positioned to serve as an example of political stability and to play a vital role in the economic development of the Southern African region. This stability has helped maintain a highly favorable business climate, which includes incentives and strong protection for foreign investors. Namibia has demonstrated its attractiveness and potential as a growing market for U.S. exports and investment.

Optimal usage of two highways, the Trans-Kalahari (linking Botswana and Namibia) and the Trans-Caprivi (through to Zimbabwe and Zambia), will increase the region's access to the port of Walvis Bay. The Walvis Bay port is a large first-class facility that could eventually compete with large regional ports like Durban and Cape Town. While considerable obstacles remain to realizing its full economic potential, Namibia clearly is on the way to becoming a pivotal trade and investment gateway for the nearly 200 million residents of Southern Africa.

The United States national interest in Namibia, reflected in the U.S. Embassy's Mission Performance Plan, focuses principally on the United States' desire to: 1) promote Namibia as an African success story; and 2) seek the country's support for U.S. policy while Namibia serves as an African representative on the United Nations Security Council. In line with these goals, specific objectives focus on promoting sustainable economic growth; U.S.-Namibia commerce; human resource development; natural resources management and equal opportunity; support for the consolidation of democracy and respect for human rights; and the further development of a foundation of trust and mutual respect between the peoples of Namibia and the United States.

The Development Challenge

Despite its status as a full-fledged, autonomous nation, Namibia is dealing with the legacy of more than 40 years of apartheid social and economic policies. Although the country's GDP per capita income of approximately $2,000 is almost four times higher than the rest of sub-Saharan Africa, income distribution is highly unequal. About 60% of the majority black population live in communal lands in rural areas, surviving on annual incomes of US$100 to $200, with limited access to social services.

Namibia is one of the world's most affected countries by HIV/AIDS. AIDS is the leading cause of death in the country, claiming more lives annually (23%) than tuberculosis and malaria combined. Over 60% of new HIV infections take place among young people aged 15-24. Life expectancy, estimated in 1991 at 59 years for males and 62 years for females, is expected to drop to 38 years for both sexes during the period 2005-2010. The social and economic effects of HIV infection and AIDS-related deaths will be devastating. Development achievements in a number of areas, including basic education and natural resource management (where USAID support has been highly successful) will be severely compromised unless programs are targeted toward alleviating this situation. Because of the HIV situation, USAID's strategy is being modified to include a comprehensive, integrated and replicable model to combat the spread of HIV/AIDS.

High unemployment and visible underemployment (60%) are other major development challenges. Namibia's 1998 National Human Resource Plan reveals severe deficits of higher and middle-level professionals and technically skilled personnel. More than 60% of the employed labor force has only a primary education or no schooling at all; fewer than 6% have completed some tertiary education.

Although Namibia may be considered one of the stronger economies on the continent and the Government of the Republic of Namibia (GRN) is aggressively pursuing other outside investors, it has been affected negatively by the competitive forces of globalization and by fluctuating world market prices for leading exports. Namibia's growth rate fell from 4.3% in 1997 to 0.8% in 1998, an insufficient basis for raising incomes or creating jobs. Mining remains the leading sector, accounting for 15.1% of GDP. A sharp downturn in the global diamond market was offset by an increase in production to 1.4 million carats of top-quality gem stones (rated among the best, world-wide). Diamond mining employment, however, is likely to contract sharply, due to the phasing out of the migratory labor system. Rössing Uranium has been hit by weakness in world uranium prices, affecting output and resulting in large-scale retrenchment of workers. The closure of the large Tsumeb Corporation Limited copper mine in the north of the country has severely reduced employment and secondary industries. The manufacturing base remains narrow, although the fish processing industry, the country's second largest GDP earner, is likely to receive a boost from increased total allowable catches, better stocks, and good export markets (including sales of hake and other fish to the US).

Agricultural activity remains highly dependent on seasonal rainfalls. Additional problems relate to access to South African and European markets for commercially-farmed beef, and the outstanding issue of land reform that affects the marginalized and most poor sections of the rural population who are eking out a living in the communal areas. In this regard, USAID's Community Based Natural Resource Management Program is viewed as a pivotal contribution toward empowering rural communities to earn income, counteracting the tendency toward urban drift.

The urgent demands by the mostly black, very poor majority to ameliorate the social and economic disparities created by apartheid place considerable constraints on the government's ability to curb expenditures--including for a huge civil service--and rein in the deficit (4.2% of GDP). Despite these imperatives, macroeconomic policy remains relatively conservative and realistic, e.g., this year's budget provided fiscal relief for companies and individuals, focused on outsourcing and privatization, shifted to indirect forms of taxation, and increased capital more than recurrent expenditure.

Other Donors

In 1998, USAID was the second largest bilateral donor, following Germany. Despite its relatively modest size, USAID's program is highly visible, strategic, and results-oriented. USAID generally leads donor efforts in its areas of focus, particularly in basic education and natural resource management. Donor coordination meetings are facilitated by the United Nations Development Program (UNDP), with U.N. agencies playing a particularly important role in catalyzing the response to the HIV/AIDS epidemic. In addition, USAID has initiated more frequent consultations with international donors in Namibia, particularly in the democracy and governance arena.

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