Lessons from Namibia to the World

The signing of the Feasibility and Implementation Agreement (FIA) between the Namibian Government and Hyphen to produce green hydrogen and its derivatives is an important milestone that deserves to call the attention of many countries around the world.

It is an important example of how countries can play the cards they are dealt in a smart way.

While the road ahead, as always, is full of technological and market uncertainties regarding the evolution of global green energy markets, the current step puts Namibia at the forefront of the energy transition.

If completed, the project will represent an investment of US$10 billion, over 80% of the country’s gross domestic product.

True, the country’s collocated sun and wind resources makes it particularly propitious for green hydrogen production, because it allows the use of the infrastructure for more hours of the day, thus reducing costs vis-a-vis places with just good sun.

Moreover, its location near the sea reduces transportation costs.

But natural advantages are squandered by most developing countries.

Since 2013, my own country – Venezuela – has managed to create the biggest collapse in economic activity outside of war that the world has ever known although it sits on the largest proven oil reserves in the world.

Bolivia has managed to extract none of its lithium resources, the world’s largest, while neighbouring Chile has become the world’s second largest lithium producer, despite its narrower resource base.

South Africa’s mineral production is falling, despite attractive international prices, because of collapsing capacity in state-owned rail and port services.

Transforming natural possibilities into prosperity requires a capable state that knows how to advance the national interest while at the same time leveraging the capabilities that it needs and does not have.

So, what should the world learn from Namibia? First, natural resources do not have per se intrinsic economic value. They only become valuable in the context of a technology that can use them.

Oil became very valuable after the world invented the internal combustion engine, creating a market for its refined products.

Deserts used to be seen as useless because of their low productivity when used for agriculture or livestock. But the advent of solar energy and the development of green hydrogen and ammonia that can transport that energy, makes them potentially valuable.

A successful producer needs to be able to master all the requisite technologies, which include solar, wind, hydrogen electrolysis, the Haber-Bosch ammonia production process, and many others, as well as develop a workforce capable of implementing these production processes.

That is why Namibia’s green hydrogen strategy contemplates the creation of the Green Hydrogen Research Institute as well as ambitious training programmes.

Second, creating value out of a country’s natural resources requires a legal framework that allocates property rights on the resources needed to make investment feasible and assigns the economic gains fairly, so as to capture value for the nation.

The signing of the FIA with Hyphen completes the most difficult part of this requirement. Useful in this respect is Namibia’s reputation of being respectful of signed contracts.

One of the causes of Venezuela’s collapse and of Bolivia’s inability to produce lithium is that these countries have repeatedly violated contractual obligations and expropriated investors.

Third, deciding which tracks of land to offer for development, coordinating the necessary production and logistical infrastructure, assuring the development of attractive urban habitats that can house the green hydrogen workforce and provide it with the services, the amenities, and the infrastructure they will need requires an all-government effort.

Without these efforts, private investment cannot do its part. In such a new area such as green hydrogen, where markets are being nurtured by European, North American, and East Asian governments, the diplomatic capacity of the state to secure market access, off-take agreements and funding becomes crucial.

A capable state is a sine qua non requirement for success in all of these endeavours.

The reason why Australia is the world’s largest lithium producer despite its limited reserves is precisely the capacity of its state, which makes production efficient and investment attractive.

Finally, it is critical to recognise that the development of activities that are new to the country requires access to the managerial, commercial, financial and technological capacity of the world, as well as the missing skills and know-how.

Openness to investment is key to success. That is why it is great to have chosen to partner with a global player such as Hyphen that can bring to Namibia the capabilities and funding that the country does not yet have, but soon will.

Openness to migration will also be key: such a large project can easily overwhelm today’s skill capacity of the country, but can accelerate the building of tomorrow’s capacity. Here it is useful to remember that 54% of the science, technology, engineering and mathematics (Stem) workers of Silicon Valley in California are foreigners.

The other 46% are not all Californians, even though that state has a population of almost 40 million. Only 18% of those workers were born in California.

While it is key to maximise the creation of local talent, complementing that talent with external reinforcements is central to accelerated success.

The world is taking notice of the fact that Namibia is a leader in the race to develop the nascent green hydrogen industry.

But that is not all: Namdeb, a joint venture between the Namibian government and De Beers has successfully moved its diamond mining industry offshore through the use of innovative vessels.

Namcor, in partnership with Shell, QatarEnergy and others, has made three major oil and gas finds offshore. Lithium and rare earth reserves have been identified and are being prepared for development.

These resources have been there for millions of years. There have been previous booms in global appetite for natural resources and the current boom could potentially benefit many countries in the world, but most will probably miss out.

Why? Because they lack the capable state that Namibia is striving to create and the leadership to focus and see it through.

The world will keep watching to learn more from the Namibian experience.

• Ricardo Hausmann is a professor of economic development at the Harvard Kennedy School and the founding director of the Harvard Growth Lab. He is a former minister of planning of Venezuela and former chief economist of the Inter-American Development Bank