Namibia – a small but attractive market

In a nutshell:

Namibia has good potential when it comes to renewable energy projects. The planned expansion of the national electricity generation capacities is to be aided by renewable energies. Especially German investors can reap the advantages offered by the Namibian market due to the historical ties between Germany and Namibia.

​Namibia’s installed electricity generation capacity is 498 MW. The country's electricity demand significantly exceeds this generation capacity while the Namibian Integrated Resource Plan assumes that electricity consumption will grow by 4.25 percent p.a. between 2011 and 2031. Therefore, Namibia heavily relies on energy imports. The Namibian administration, however, plans to eliminate the dependence on imports by increasing the country’s electricity generation capacities.
The Ruacana hydropower plant, built on the Kunene River, is Namibia’s main power producer. The hydropower plant relies on the constant flow of water, which is particularly problematic in the time of drought currently plaguing the country. The situation should be remedied, among others, by large-scale projects such as the Kudu Gas project. But the completion of this project has been delayed for years now. 
This situation creates opportunities also for German renewable energy investors.

There is enormous potential for PV solar projects. Namibia enjoys a very high number of annual sunshine hours and offers one of the highest solar energy yields in the world. As the first independent power producer, InnoSun Energy Holdings opened in mid-2015 the Omburu Solar PV Park with an installed capacity of 4.5 MWp. The Otjozondjupa Solar Park, developed by HopSol Africa, was opened in 2016 as the largest solar park in Namibia (5 MWp).

In terms of the surface area, Namibia is twice as big as Germany, but has an underdeveloped electricity distribution network. Therefore, private and commercial prosumer power plants are badly needed, especially in rural areas. To enable a large part of the Namibian population to use solar energy, the Namibian Ministry of Energy established the Solar Revolving Fund. The Solar Revolving Fund is a credit facility under which loans for purchasing renewable energy technologies, e.g. solar water pumps and solar water heaters, are granted on favourable conditions.

The coastal regions of Namibia have good wind resources. Currently, Namibia’s first wind farm is being built in the Lüderitz region. The wind farm will have a capacity of 5 MW and is planned to be commenced in early 2017.

Namibia has set itself a goal of eliminating the problem of bush encroachment affecting agricultural areas through the production of biomass. A feasibility study has confirmed the potential of producing biomass from thornbush. The first facility (4MW) has been already implemented in form of a public-private partnership.

Under the legislative framework for renewable energy projects in Namibia, power plants of over 5 MW must be subject to a public auction procedure handled by the Ministry of Energy. In the case of such power plants, a power purchase agreement must be signed with NamPower, the national utility, or with one of the regional electricity distributors (”REDs”).

Grid-connected renewable energy installations of up to 5 MW are funded with feed-in tariffs paid as part of the Renewable Energy Feed in Tariff programme (REFIT). Under the REFIT programme, the volume of produced renewable electricity to be fed into the grid is currently capped at 70 MW.  Projects implemented under the REFIT programme require holding a power production licence and signing a power purchase agreement with NamPower.

Net metering is possible in Namibia for prosumer power plants of up to 500 kW. No power production licence is required.

The investment climate in Namibia can be assessed as positive compared to other African countries. This applies in particular to German companies. Germany and the German products and services are highly esteemed in Namibia. About 20,000 German native speakers still live in Namibia today and the German culture is very widespread. German is still a widely spoken language and many companies or entrepreneurs have German roots. This facilitates business contacts for German investors.

Foreign investors should not be deterred by the currently planned introduction of the obligation where a certain portion of company shares should be held by previously disadvantaged population groups in the case of newly established companies. Importantly, it is recommended that investors looking to invest in Africa should basically work with a local partner who will bring in their expertise in the local market and important contacts. Often it is reasonable to select a joint venture as the business structure; thus, certain shareholder structures can be planned already at the outset of the investment project. The process of forming a company takes 6-8 weeks to complete. Those who do not want to form their own company can operate through a local sales agent in Namibia. Sales agency law is based on English common law and thus enjoys a high degree of freedom of contract. Contract drafting is thus of special importance. Due to the Southern African Customs Union and the close economic ties between Namibia and South Africa, you can easily combine entering the markets of both countries at the same time and from there explore further economic opportunities to be seized in the rest of the continent.