The Contribution of Minerals to Sustainable Economic Development: Mineral Resource Accounts in Namibia

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February 2003
Source: 
climate finance blending
This report addresses the issue of sustainable development in Namibia, an economy dependent on mineral resources. While mineral wealth can provide countries with an opportunity for economic development, resource abundance does not necessarily lead to economic prosperity. In Namibia, the mining sector is critical to the economy and mineral assets form a major source of national wealth. However, the national accounts give a distorted picture of economic health because they record the contribution of mining to GDP but not to the simultaneous depletion of mineral wealth. Environmental and natural resource accounts overcome this limitation by providing accounts for the value of mineral reserves and the cost of depletion. This enables policy makers to anticipate and plan for the eventual exhaustion of mineral assets. 
 
This report details the findings from conducting mineral accounts for Namibia, compares them to Botswana to provide an example of an alternative approach to resource management, and discusses the policy implications of the accounts. In Namibia, physical and monetary accounts were constructed for the country’s three major minerals—diamonds, uranium, and gold—based on the United Nation’s System for Integrated Environmental and Economic Accounts. The results show that Namibia has recovered, on average, 42 percent of diamond rents over the past 20 years. This is reasonable, though much lower than Botswana's rent recovery of 76 percent. However, where the two countries differ most is in the management of mineral revenues. Botswana has an explicit policy of reinvestment by government of all mineral revenues in public infrastructure, human capital, and foreign financial assets. However, although Namibia has carefully considered how mining may contribute to employment and the economy of specific regions of the country, it has yet to develop a policy for reinvestment of mineral revenues. 
 
The report concludes with three key recommendations for countries using minerals to build a sustainable economy:
  • Adopt policies that maximise resource rent generated by mining;
  • Recover resource rents, by an agency able and willing to reinvest the rents; and
  • Reinvest resource rents into other assets that are capable of generating income and employment once resources are exhausted, such as human capital, public infrastructure, and manufactured capital.
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Country: 
Namibia
Sectors: 
Metals and Minerals
Themes: 
Indicators and Measurement, Natural Capital
Key search terms: 
mineral accounting, mineral resources, natural capital accounting

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