Straightening a skewed economy.

• Position: Adapted from World Bank's report 'Namibia Preliminary Economic Review'

Straightening a skewed economy

The post-independence Namibian Government has inherited an economy of sharp contrasts. From some viewpoints, Namibia can be seen as a prosperous middle-income country. Per capita income is about $1,200 annually--one of the highest in sub-Saharan Africa. The country's physical infrastructure is among the best in the region; its telecommunications system, one of the most efficient; its public administration, highly developed.

At the same time, Namibia has a severely skewed income-distribution pattern. A tiny minority enjoys incomes and health and education services at levels comparable to those in Western Europe, while the vast majority lives in conditions barely above subsistence, with highly inadequate public services.

Although per capita gross domestic product (GDP) in 1988 was about $1,200, the white population--5 per cent of the total population--had an estimated per capita GDP of $16,500. The figure for non-whites within the modern economic activities--about 40 per cent of total--was estimated at $750. As for the rest--a non-white population dependent upon agriculture and informal work activity--it was estimated at $85.

In addition to this, the Government has inherited a stagnating economy, with its unemployment rate estimated at 30 per cent.

Three main challenges

The Namibian Government faces three main economic challenges: reactivate the economy, reduce income disparities, and restrain and redirect public expenditures.

For the past 20 years, the Namibian economy has performed in a lacklustre way. After expanding rapidly at 9 per cent per year during the 1960s, the economy's growth rate fell to zero during the 1970s.

Owing to continued population growth, per capita GDP declined without interruption during the past decade. At independence, it was 23 per cent lower than in 1980.

The second challenge facing the Government is closely related to the first. The extreme disparities in income distribution and the provision of social services are in good part, if not solely, the results of apartheid. With independence, apartheid policies disappeared. The heretofore disenfranchised and neglected majority will rightfully expect to partake in greater inreasure of the country's income and wealth.

Addressing the country's equity problem at an acceptable pace without jeopardizing growth is a closely-related matter. The equity issue should be resolved while avoiding the type of too-quick and too-expensive solutions that...