SPECIAL ANALYSIS - NAMIBIA: ECONOMIC, POLITICAL HURDLES TO INDEPENDENCE - ECONO

Created: 9/7/1988

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Political Hurdles to Independence

S-brokomd talks between South Africa. Angola, and Cuba produce an agreementuban troop withdrawal from Angola, Pretoria It to begin Implementing the UN plan lor Namiblan Independenceovember. Inransition, Namibia will face many political and economic hurdles, and Insurgent* ol the South'West Africa People's Organization (SWAPO) who are likely to win power will lace pressures to come to terms with the local white community and with South Africa. |

Namibia is virtually an appendage of South Africa, dependent on South African financial and commercial ties, transportation links, and budget subsidies. Its economyubsistence sector that existsodern Industrialized one run by whites. Namibia's white community numberslmost hall of whom are South African Afrikaners and other expatriates. Its total population is about rntulon.|

Namibia has been administered5 by the multiracial Transitional Government of National Unity, but Pretoria calls the political shots on the territory's future. South African President Botha nonetheless faces difficulties in keeping Namlbian politicians in line and in selling Namlbian Independence to rightwing critics at home.

Economic and Political Questions

It is not clear who will support an independent Namibia economically. Pretoria has said that it expects the West or the UN to prop up the NamibianNamibia's external debt of at0 million, owed mostly to South African banks. Pretoria has asked for foreign guarantees that an independent Namibia will not default on these loans raised to finance budget deficits. Pretoria also expects the international community to bear the cost of implementing UN, which it estimates will run close0 million-

The composition of Namibia's independence government is another major uncertainty. Most observers, including senior South African officials, believe SWAPO would win UN-sponsored elections, primarily because it enjoys majority support among the Ovambos, the largest ethnic group In Namibia. The fractious interim government installed by South Africa has waged an upfnil battle for legitimacy since its inception and wouldard time seriously challenging SWAPO.

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One official of the Interim government asked the US recently to arrange bilateral talks with SWAPO. probably to acquire Information on the group's economic and political goals before the independence

process begins.']

Pressures for Accommodation

Both SWAPO and Namlblan politicians undoubtedly hope to avoid losing vital economic, technical, and human resourcesass exodus of whites and white-owned businesses. As prospectsWAPO-leddomestic business confidence will diminish. When UNas passedourth of the white community left Namibia, taking with them capital resources and essential skills.

Some wealthy whites reportedly are already selling their homes and liquidating other assets. SWAPO President Nujoma. in an effort to allay fears, haa said that SWAPO would be willing to cooperate economically with Pretoria, and another official has suggested that it would be naive for an Independent Namibian government to cut ties tot South Africa

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South Africa's Economic Stranglehold

Namibia's economy is based almost exclusively on mining, livestock (arming, and fishing. Exports account forercent of GDP, and Namibia has little manufacturing base to process its raw materials. Profits are easily transferred to South Africa because the rand Is Namibia's legal currency and exchange controls are lax.

Namibia's rail network connects only to South Africa, and its roads offer few links to neighboring Botswana. Zambia, or Angola. Pretoria manages all of Namibia's rail. road, and harbor facilities, although In July It transferred responsibility for providing services to the government In Windhoek. South Africa providesercent of Namibia's imports, and two-thirds of Namibia's exports go through South AfricanWalvls Bay. Namibia's only deepwater port, which Pretoria claims Is South African territory and Is unlikely to relinquish at independence.

An upturn in commodity prices, particularly diamonds, and an endix-year drought have revived the economy. Real GDPercent7 and may match that growth this year. Nonetheless, prospects for sustained economic growth remain fragile and depend on generally unfavorable external factors, including volatile international commodity prices and declining export markets.

South Africa provides morehird of Namibia's budget, either directly through appropriations by the South African parliament or Indirectly through revenues generated by the South African Customs Union and loans raised through South African banks. The total of direct and indirect South African subsidies has run0 million0 million annually, but during the past two years Pretoria has cut Its funding5 million to punish the interim government for attempting to introduce racial reforms.

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Original document.

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