The Walvis Bay White Elephant

In Namibia we love our elephants but as with so many things, and the white ones seem greatly favored above other colors. The Walvis Bay port expansion is amongst the newest addition to the species and will cost Namibia N$4.2 billion. The project was was initiated by Namport and funded by the African Development Bank. The Chinese built port, when the expansion is completed will in effect increase the size of the port to carry 1.05 million TEU (twenty foot equivalent containers) per year. The current capacity is about 350,000 TEU  and there now seems that the expansion and the resulting debt will probably result in a further deepening of Namibia’s economic morass because Namport, which should be able to carry the debt for the expansion from revenues, may not be able to do so and the government of course has had to provide loan guarantees to the lenders.

            The problem is that container shipping at Walvis Bay is not growing but is in rapid decline. Most importantly the trans-Kalahari railway from Botswana has not and probably will not progress and container traffic in transit through the port is in decline. The transshipment to Angola was supposed to be the economic basis for the expansion of Walvis Bay port but to assume that Angola would not develop its own ports in the wake of the civil war and that Walvis Bay would continue to act as its major transshipment centre was economic folly. New ports are being constructed all over Angola by the Chinese at Cabinda with a US $600 (N$7.2 billion)  loan from China and there has been an expansion of the container port at Lobito the end of the Chinese reconstructed the US$1.8 billion (N$20 billion) Benguela Raliway to DRC and Zambia. The first shipments of manganese from DRC arrived at the port of Lobito in Angola earlier this year.

The question that Namibians must ask is how did the nation get into this mess and how do we stop the development of yet more multi-billion dollar white elephants? There are many white elephants in Namibia, this deadly species is not in any imminent danger of extinction  and we will almost certainly continue to build more.  The market section of the feasibility study for the Walvis Bay port expansion was done by Namport in 2011 when TEU through Walvis Bay peaked at 334,000 containers. Since then it has decreased to 203,000 in 2017 but according to the AfDB projections it was supposed to be 561,000 TEU by 2017. Most of the decline was because of the collapse of transshipment. This will mean that, based on current throughput, the new 1.1 million TEU port will operate at 20% capacity and that the expansion was simply an unnecessary investment that Namport will now struggle to repay. The N$3 billion borrowed from AfDB will have to be repaid by government and people of Namibia if Namport cannot. The growth of shipping in 2011 made it look possible to believe that a 1.1 million  TEU port might make sense one day in the very distant future but only so long as the transshipment traffic to Angola continued. No-one, especially the AfDB, should have assumed such a thing, which should have done its own assessment when it finally agreed to the $N3 billion loan in mid-2013 by which time shipping was already in decline. This white elephant is not just a case of unfortunate future projections on shipping demand as this could have been foreseen by 2013 if there was a proper review by AfDB just  prior to disbursement.

The only way to stop this sort of economic folly from continuing and ultimately bankrupting Namibia, which no-one should doubt will be the end result,  is for the President and National Assembly to protect the people from some of their ministers. Some, but not all ministers build white elephants out of pure vanity and hubris and the hope that it will be a ‘pyramid’ in the their name. Others have even less noble objectives such as getting kick-backs which are common in such large infrastructure projects. In theory the Ministry of Planning should be mandated to conduct an independent review of all infrastructure projects using proper economic cost-benefit analysis. But the ministry cannot be trusted not to be leaned on by one or other powerful ministers to give a favourable outcome. What the country needs is to resurrect the now defunct NEPRU (Namibian Economic Policy Research Unit) directly under the control of the National Assembly. It should change into an independent economic watchdog, based on the US Congressional Budget Office model,  that would publish an independent analysis of any proposed infrastructure project in the country. The IMF has earlier this year warned Namibia that one of  the nation’s greatest financial risks lies amongst our state owned enterprises and their penchant for such sub-economic projects. It is time for parliament and the President to protect the people and insist that proper facts based cost-benefit analysis be done by an independent parliamentary body before any large infrastructure project is approved. If we do not then the herd of white elephants we are building will destroy our economy and further impoverish the people of Namibia.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.