Namibia will seek to raise about US$5 billion in loans and bonds over the next decade to help diversify and industrialise its economy with any debt sales to take place in South Africa, President Hage Geingob told Bloomberg this week in an interview in New York.

The President said the government plans to issue rand-denominated bonds and get funding from countries including the US, China, India and Japan.

“We're looking at the South African bond market, and some concessional loans. Rand bonds would be much better than dollar-denominated Eurobonds,” he said.

Namibia pegs its currency to South Africa's rand on a one-to-one basis. While the rand has appreciated 12% against the dollar this year, since the start of 2015 it has been one of the worst-performing currencies among major emerging markets, weakening by 17%.

That's caused the Namibia dollar to drop in tandem, and made its debts in the US currency more expensive to pay off.

Namibia doesn't have any plans to sell another dollar Eurobond, said Geingob. Namibia has issued three rand bonds since 2012.

The President said the government would also seek German investment, including in wind farms, as a form of reparation for the Nama/Herero massacre in the early 20th century, when Namibia was a colony known as German South-West Africa.

Commenting on Geingob's comments, economist Rowland Brown said the objective of industrialising the country is good, but the approach pursued will be the determinant of whether such an activity will be successful in achieving the objective.

“Should these funds be used to address infrastructure constraints and provide for strategic public and social services as well as reduce bureaucracy and facilitate smooth-functioning private and public enterprise, I believe this can be viewed as broadly positive,” said Brown.

He said should these funds be used to try and develop a publicly owned manufacturing industry, supported by government contracts, subsidies and handouts, it would obviously be negative, and likely to be little different from the current commercial state-owned companies such as Namibia Wildlife Resorts.

“The question, however, is who is expected to buy the debt of government, and at what price? The value mentioned by the President is more or less in line with the value of debt issued by government over the past 20-odd years, which has mainly been used from operational expenditure and the construction of office buildings,” he said.

As a result of the use of the previous debt issuance, conventional borrowers are unlikely to be as willing to provide this funding to the government, going forward, and those who are willing to do so will do so at an ever higher price.

“This means that the approach taken to address the industrialisation challenge has to be more effective than those previously pursued, or it will not be possible to get a return on the invested debt that is commensurate with the returns that it generates,” explained Brown.

Given the massive growth in the debt stock over the past 18 months, investors are likely to be wary of lending further funds to the sovereign, unless the country gets its fiscal affairs in order.

“This means bringing operational expenditure under control, as well as containing the vast budget deficits that we have seen over the past few years. In short, investors will not be willing to lend Namibia additional money if Namibia is not spending her own money wisely,” he stated.