Final thesis

ii

THE IMPACT OF FISHERIES SOCIO-ECONOMIC CONTRIBUTION ON POVERTY

REDUCTION IN NAMIBIA

BY

RAUNA MUKUMANGENI

12293438

A DISSERTATION SUBMITTED TO THE WESTMINSTER BUSINESS SCHOOL,

UNIVERSITY OF WESTMINSTER

FOR THE DEGREE OF

MA IN INTERNATIONAL ECONOMIC POLICY AND ANALYSIS

SUPERVISOR: DR. SHEIKH SELIM

AUGUST 2013

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ACKNOWLEDGEMENTS

My most sincere gratitude goes to the Almighty Father for none of this would be possible

without his guidance and protection.

Other thanks extend to & to whom I say remain blessed:

My supervisor Dr. Sheikh Selim for his absolute guidance, assistance, prompt responses

and valuable expert advice on economic growth.

Mr. S. I. Savva, I shall forever remain indebted to you.

Panduleni Kadhila-Amoomo, for being the brother I never had. No words I can say shall

ever fit to describe.

My beloved twosome, husband Luis Miguel and daughter Maria for the love and

understanding. A year away is too long.

My dear parents, you did not only give life to me, even at this mature age you still ensure

I persevere through it with ease. You are truly amazing.

The rest of my family especially the Kashaka family, for all that matters.

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ABSTRACT

Poverty is a problem facing Namibia. Economic growth might be the solution. Given the

importance of economic growth, it is necessary to analyse its determining factors. The fisheries

sector is one of the most important sectors in Namibia and so is its economic growth. The

purpose of the study is to investigate if economic growth, with particular emphasis of the

fisheries sector, has impacted on poverty reduction during the period of 1990-2011. A

neoclassical model framework as an important tool in economic growth analysis is used to

analyse the determinants of Namibias fisheries economic growth and its effect on the countrys

economic growth. Additionally, the countrys economic growth is analysed. Estimated factors

are initial GDP, gross fixed capital formation, fisheries growth, general government expenditure

and unemployment. Conditional convergence is found for the fisheries sector and for the

economy. Namibias economic growth in 1990-2011 is mostly explained by initial GDP and

unemployment. The study finds that the fisheries sector growth is negatively correlated with the

countrys economic growth. Results of the fisheries sector imply that there is a negative

relationship between initial GDP and the sectors growth. Additionally, the sectors

unemployment is positively correlated with its economic growth. Furthermore the results do not

find enough evidence to suggest that the fisheries sector impacts on poverty reduction. The

results are important for policy formulation; that employment is created and initial GDP is

lowered to ensure enhancement of Namibias economic growth. An enhanced economic growth

presents great potential for poverty reduction.

Key words: Namibia, economic growth, per capita GDP, neoclassical model, poverty, resource

rent, conditional convergence

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ABBREVIATIONS

BON BANK OF NAMIBIA

GDP GROSS DOMESTIC PRODUCT

HDI HUMAN DEVELOPMENT INDEX

MFMR MINISTRY OF FISHERIES AND MARINE RESOURCES

MOF MINISTRY OF FINANCE

NPC NATIONAL PLANNING COMMISSION

NSA NATIONAL STATISTICS AGENCY

R&D RESEARCH AND DEVELOPMENT

TAC TOTAL ALLOWABLE CATCH

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Table of Contents

ACKNOWLEDGEMENTS ......................................................................................................................... iii

ABSTRACT ................................................................................................................................................. iv

ABBREVIATIONS ...................................................................................................................................... v

CHAPTER 1 ................................................................................................................................................. 1

INTRODUCTION ........................................................................................................................................ 1

CHAPTER 2 ................................................................................................................................................. 3

CONTEXT & RATIONALE ........................................................................................................................ 3

CHAPTER 3 ............................................................................................................................................... 11

LITERATURE REVIEW ........................................................................................................................... 11

CHAPTER 4 ............................................................................................................................................... 16

METHODOLOGY ..................................................................................................................................... 16

4.1 MODEL SPECIFICATION .............................................................................................................. 16

4.2 DATA ............................................................................................................................................... 17

4.3 METHODS ....................................................................................................................................... 22

CHAPTER 5 ............................................................................................................................................... 23

RESULTS AND ANALYSIS ..................................................................................................................... 23

CHAPTER 6 ............................................................................................................................................... 37

CONCLUSIONS AND RECOMMENDATIONS ..................................................................................... 37

REFERENCES ........................................................................................................................................... 43

APPENDICES ............................................................................................................................................ 51

1

CHAPTER 1

INTRODUCTION

1. INTRODUCTION

Poverty is a major problem facing Namibia. This study attempts to investigate the impact of

economic growth on poverty reduction in Namibia during 1990-2011. Similarly, the study

attempts to find empirical evidence on the determinants of economic growth in Namibia during

the period 1990-2011 using the neoclassical framework borrowed from the pioneer work of

Barro and Sala-i-Martin (2004). In view of the country being natural resources endowed, in

particular the fisheries sector as one of the main pillars of the Namibian economy, the sectors

economic growth is investigated. The purpose of the study is to investigate if economic growth,

with particular emphasis of the fisheries sector, impacts on poverty reduction. In order to

effectively investigate the fisheries sector impact on poverty, the sectors economic growth and

the countrys economic growth are investigated to find the relationship, if any, between the

respective economic growth and initial per capita GDP, gross fixed capital formation, fisheries

per capita GDP, general government expenditure and unemployment. The study tests three

hypotheses that correlate gross fixed capital formation, unemployment and initial per capita GDP

on economic growth.

The country is involved in efforts to increase economic growth and fight against poverty

(MOF, 2012). The issue of economic growth is important because it is a major factor in reducing

poverty. Barro and Sala-i-Martin (2004) underlined economic growth as possibly the one single

factor that influences income levels of individuals and advocate for the understanding of its

determining factors to solve economic related problems such as poverty.

Poverty is a phenomenon that faces many third world countries and Namibia is no exception.

According to NSA (2012), approximately 20% of the population in Namibia is poor and 14% is

severely poor and 19% of households are poor. Globally however, the total number of poor

people, as a result of economic growth, has reduced during the past three decades (World Bank,

2008).

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Combating poverty is high on the agenda of many governments including the Namibian

government and the international community. Its eradication is the number one goal on the list

of Millennium Development Goals of the Millennium Declaration adopted by the United Nations

General Assembly on September 8, 2000 (Cypher and Dietz, 2009). The government has

outlined how it is to address poverty, job creation and economic growth in its Fourth National

Development Plan and Vision 2030 (NPC, 2012). Despite the governments attempt to deal with

poverty, the problem persists (UNDP, 2007) and aggressive policy interventions are therefore

needed. Economic growth can be the engine to reduce poverty, and s