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Despite optimistic forecasts for moderate economic growth, Namibia’s financial outlook remains clouded by the persistent downturn in the diamond market. Finance Minister Ericah Shafudah, in her recent budget speech, painted a picture of cautious optimism, projecting a 4.5% growth for this year and 4.7% for 2026. However, these figures fall short of the more ambitious 5.4% growth target previously envisioned for 2025.
The crux of the matter lies in the diamond sector’s ongoing struggles. “The continued weaknesses in the diamond sector and the subsequent adverse impact on domestic activities remain a key source of vulnerability,” Shafudah acknowledged. This vulnerability poses a significant challenge to Namibia’s economic stability, even as the country strives for diversification.
Namibia’s recent economic growth, fuelled by investments in oil, gas, and green hydrogen, offers a glimmer of hope. However, the nation grapples with stark socioeconomic challenges, including high-income inequality and unemployment. The diamond sector’s woes exacerbate these issues.
The diamond industry endured a brutal 20% drop in average rough diamond prices last year, sending shockwaves through major mining players, including De Beers. The Anglo-American subsidiary was forced to take an R2.9 billion write-down and drastically cut its production forecast for 2025.
While there are faint signs of demand stabilization, particularly in the US market, analysts warn that the industry’s fundamental problems require a more profound restructuring. Ben Davis, an analyst at RBC Capital Markets, succinctly captured the sentiment: “There’s not an obvious solution right now. The whole market needs to recalibrate.”
Namibia, heavily reliant on diamond exports, faces a delicate balancing act. The country must navigate the choppy waters of the diamond market while simultaneously pursuing economic diversification to mitigate future risks. The government’s ability to weather this storm will be crucial in ensuring sustained economic growth and addressing the persistent socioeconomic challenges that plague the nation.
