I recently visited Kakamas. Traveling from Cape Town, Kakamas is the next town one arrives at after passing through Pofadder. Kakamas and Pofadder are in the Kalahari Desert, a landscape that looks much like the Namib desert. While visiting the Augrabies Falls National Park we came across a mobile blood donation clinic. I decided to opt in and while lying with a needle in my arm, the nurse and I got talking about Namibia and beer.
She explained that Namibia has a pint for a pint system. In South Africa a pint of blood gets one a biscuit and a fruit juice, while in Namibia one gets a pint of beer. She further explained Windhoek Beer (Namibia Breweries flagship brand) was good for managing of kidney stone. The Old Mutual African Frontiers Fund’s only exposure to Namibia is its holding in Namibia Breweries. This newfound knowledge certainly adds some support to Namibia Breweries investment case.
Now while the Namibia Breweries remains listed, it has undergone massive change this year. First, it sold its 25% stake in Heineken South Africa, second Heineken bought control of the business from the local holding company Ohlthaver & List, and finally it got into the spirits sector through the acquisition of Distell Namibia. Largescale change often has a material impact on the financials, so a catch-up with management was in order.
The Namibian Stock Exchange has around 40 listed companies and includes dual listings. While it is a relatively small exchange, there has been one new listing in each of the last three years. Osino Resources, a start-up gold mining company (the founder and CEO is an old colleague from Old Mutual) listed this year. AfriTin Mining, a tin mining company, looking to expand into lithium mining, listed in 2022 and the dominant mobile telecom operator, MTC Namibia, joining the market in 2021.
Namibia is a vast country, about one and a half times the size of France and ten times larger than Austria. Yet it has a population of just two and a half million people. This desert country is one of the least densely populated places on earth, ranking just behind Greenland and Mongolia. It might be a small population, but it has tripled in the last 50 years.
A small population can be helpful. Namibia is currently favoured by mining companies. Given the low density of the population, relocating the locals is often easier to address than in many other countries. Furthermore, the government is eager to issue mining licenses to qualifying applicants. While mining has been an important industry, oil is the new potential game changer. TotalEnergies and Shell announced the discovery of offshore oil in 2022. The size of the find could make it the biggest-ever deep-water oil discovery. The expectation is that the first oil could come online around 2030. Offshore oil has less community issues to deal with, but it certainly has many technical hurdles to overcome, such as cold rough seas. While most political and economic commentators are excited, some financial analysts say they have seen this excitement before, only for the projects to never get off the ground. Still, according to reports the discovery is huge, with an estimation of 11 billion barrels in reserve, which is just short of Angola’s reserves, and could be a game changer for Namibia in the future. You can’t for love or money get a hotel room in the coastal towns of Swakopmund and Lüderitz.
Given the excitement, it is little surprise that the stock market has been a strong performer in 2023. The index is up 35% year-to-date.
Interesting facts
- Namibia has highest population of free roaming cheetahs
- Some of the highest sand dunes in the world
- World largest underground lake, discovered in 1986 in the Dragon's Breath Cave, home to the world’s rarest fish (estimated at 200)
- Least densely populated country after Mongolia
- First country to include protection of the environment in its constitution