Oil, gas, and green hydrogen present opportunity—but also repeat old mistakes.
Namibia is entering the most dangerous phase of a resource story: the period when discovery narratives outrun institutional reality. The economy is small (about 3.0 million people; roughly US$13.4 billion GDP in 2024), while social pressures are acute: unemployment is 36.9% and inequality remains extreme (Gini 59.1) [World Bank Macro Poverty Outlook: Namibia, October 2025]. New energy revenues could ease those constraints. They could also harden them—by reshaping incentives, raising expectations and overloading institutions before the revenue arrives.
The contrarian point is straightforward. Namibia’s greatest strategic risk is not that it will fail to commercialise oil, gas, or green hydrogen. It is that it will commercialise at least one of them without building the state capacity that turns rents into development. Development is not a geological event. It is a governance sequence.
For investors, the prize is not merely acreage or offtake; it is predictability: clear rules, disciplined public finance, and credible dispute resolution. For government, the prize is not a windfall but a stronger state.
Three energy narratives are running simultaneously.
Offshore, exploration success in the Orange Basin has attracted major international interest. TotalEnergies announced a significant light‑oil discovery at the Venus prospect in February 2022 [TotalEnergies press release, 24 February 2022]. Reuters has described a frontier exploration boom and reported expectations for first production around 2030, while noting Namibia has not yet started oil or gas production [Reuters, 21 June 2024]. In December 2025, TotalEnergies announced an asset swap to take an operating stake in a licence containing the Mopane discovery and for Galp to acquire minority interests in adjacent licences, including one covering Venus [TotalEnergies press release, 9 December 2025].
Onshore and along the southern corridor, Namibia is attempting export‑oriented green hydrogen and ammonia at macro scale. The OECD’s Hyphen case study describes a project in the Tsau//Khaeb area near Lüderitz combining around 5 GW of wind and solar with 3 GW of electrolysers, aiming to produce green hydrogen for conversion into ammonia for export, with a total project cost estimate around US$10 billion and significant “common user infrastructure” needs (desalination, pipelines, transmission, storage, export facilities) [OECD Hyphen Namibia case study, 2024].
The third narrative is market reality. The IEA’s Global Hydrogen Review 2025 finds that announced low‑emissions hydrogen production potential for 2030 has been revised down to 37 million tonnes per year (from 49 million a year earlier), with only 9% of the pipeline reaching final investment decision (FID) and projects operational or with FID totalling 4.2 Mtpa by 2030 [IEA Global Hydrogen Review 2025]. In September 2025, Reuters reported RWE’s withdrawal from its non‑binding Hyphen offtake, citing slower‑than‑expected demand growth in Europe [Reuters, 29 September 2025].
Why new resource finds do not guarantee development
Resource discoveries are conditional options on future cash flows. They are not a development strategy. Three structural reasons explain why discoveries often fail to translate into broad‑based prosperity.
Revenue is back‑loaded and uncertain. The state’s fiscal take depends on prices, costs, timing and fiscal terms. In offshore oil, early years can be dominated by cost recovery and capital allowances; government cash flow can lag production even when output rises. In export hydrogen, the revenue base is more contingent still: demand is policy‑shaped, project economics depend on electricity costs and infrastructure, and offtake is often secured through procurement mechanisms and regulation in importing regions.
Namibia’s baseline macro position is already strained. The World Bank notes large current account deficits financed by FDI inflows concentrated in energy and mining, reflecting import‑heavy investment [World Bank Macro Poverty Outlook: Namibia, October 2025]. That pattern is manageable while capital keeps arriving. It becomes destabilising if construction imports surge but export receipts and fiscal take arrive later than expected.
Fiscal space is constrained before any new revenue arrives. The World Bank expects SACU receipts to fall sharply (around 25% in FY2025/26), with the fiscal deficit widening and debt remaining elevated; it also notes high debt service and a large public wage bill continue to limit fiscal space [World Bank Macro Poverty Outlook: Namibia, October 2025]. That matters for sequencing. If the state treats prospective resource wealth as a reason to delay reform, it reaches production with weaker institutions, higher debt, and more fragile legitimacy.
The IMF’s 2025 Article IV makes the sequencing logic explicit: build a rigorous monitoring framework for transparent revenue projection and tracking (including the quantity, timeline and duration of potential production), and in the initial oil‑revenue phase prioritise reducing gross debt and avoiding premature asset accumulation—only increasing development spending gradually as capacity allows [IMF Country Report No. 25/132, 2025]. In plain terms: the state must be able to say “not yet” to spending demands.
Finally, resource rents shift incentives. Unlike broad taxation, which forces a reciprocal relationship between citizens and the state, rents can be captured through project allocations, procurement, discretionary exemptions, and opaque equity deals. The risk is not only corruption; it is institutional drift: policymaking becomes deal‑making, and budgeting becomes a distribution mechanism rather than a productivity mechanism. That shift can occur long before the first barrel or first tonne is sold.
The danger of enclave extraction
Even where revenues arrive, they do not automatically become capabilities. Modern extractive and energy‑export projects are structurally enclave‑prone.
An enclave is not only foreign ownership. It is a production structure: specialised inputs are imported, output is exported, profits are repatriated, and domestic linkages are thin. GDP can rise while employment, learning and productivity do not.
Namibia’s data already hint at enclave dynamics. FDI has been concentrated in energy and mining, and external deficits have been financed by those inflows [World Bank Macro Poverty Outlook: Namibia, October 2025]. Concentration can deepen a dual economy: internationally integrated projects with imported supply chains alongside a domestic economy of mass unemployment and weak firm capability.
Oil and gas are archetypal enclaves because they are capital‑intensive and technologically specialised. Deep‑water development relies on equipment and services that are scarce locally in the early years. Spillovers must be engineered, not assumed—through procurement design, supplier development, skills programmes, and infrastructure policy.
Green hydrogen is often assumed to be intrinsically developmental because it is “industrial”. Yet an export hydrogen project can replicate enclave patterns: imported electrolysers, foreign engineering and finance, and offtake anchored in foreign regulation. The OECD case study underlines the scale of required infrastructure—desalination, pipelines, transmission and export facilities [OECD Hyphen Namibia case study, 2024]. Without strong regulation, Namibia can export “clean molecules” while importing most value added.
Equity participation is not free money. The OECD notes the government targeted a 24% equity share in Hyphen, including via the Welwitschia sovereign fund [OECD Hyphen Namibia case study, 2024]. Equity can improve alignment and eventual returns, but it also creates funding requirements and contingent liabilities. The line between “strategic equity” and hidden debt is disclosure: valuation, risk limits and parliamentary oversight must be explicit.
This is where local content is frequently mishandled. Quotas that raise costs without building capability create rent‑seeking, not development. But abandoning local content entirely is also a mistake. The serious approach is capability‑building: target niches where Namibia can compete (marine and logistics services, civil works, environmental monitoring, renewables O&M, port services), and use transparent procurement and training to raise performance over time. If local content is not measurable in productivity terms—certifications, delivery performance, cost competitiveness—it becomes a political instrument, not an economic one.
Governance sequencing before monetisation
Sequencing is a bargaining fact. The state has maximum leverage before it signs long‑term contracts, grants stabilisation clauses, issues guarantees, or locks in tax concessions. After monetisation begins, renegotiation is constrained by sunk capital, investor protections and macro dependence.
Namibia’s institutional agenda points in the right direction. The IMF reports that Namibia is working, with Fund technical assistance, on a governance framework for a sovereign wealth fund and a broader natural resource management framework [IMF Country Report No. 25/132, 2025]. It notes the draft Welwitschia Fund Act was planned for parliamentary submission in 2025 and stresses the budget process remains critical: the fund is not a substitute for prudent fiscal management [IMF Country Report No. 25/132, 2025]. In other words: rules first, assets later.
A credible sequencing agenda has five elements.
First, adopt a macro‑fiscal anchor that treats resource revenues as volatile and exhaustible. A non‑resource fiscal target (for example, a non‑resource primary balance) prevents baseline spending from becoming structurally dependent on commodity prices.
Second, build transparent revenue forecasting and project monitoring. The IMF stresses transparent projection and tracking and the need for accurate data on potential production profiles [IMF Country Report No. 25/132, 2025]. Namibia should institutionalise a small macro‑fiscal unit with legal access to project data and the capability to interrogate costs, production plans and fiscal terms.
Third, make the fiscal regime both robust and administrable. For oil and gas, this implies clear ring‑fencing and cost‑recovery rules and transfer‑pricing capacity. For hydrogen, it implies transparent rules on land, water, grid access and any incentives—time‑bound, performance‑linked and published.
Fourth, integrate any sovereign fund into the budget framework. The IMF’s warning is direct: the budget process is central [IMF Country Report No. 25/132, 2025]. A fund should stabilise and save; it should not become an off‑budget spending channel or a vehicle for opaque equity risk. If the fund is used for equity participation, governance must include valuation policy, risk limits, public reporting, and parliamentary oversight.
Fifth, build “state capacity at the boundary”: contract management, procurement, environmental regulation, and dispute resolution. Frontier projects fail politically when the state cannot enforce standards, arbitrate conflicts, or manage claims. This is as true for a deep‑water development plan as it is for desalination intakes, pipelines, or port expansion.
Lessons from peers
The right peer lessons are institutional, not rhetorical.
Norway’s success is less about “having a fund” than about binding fiscal rules. Norges Bank Investment Management explains that the fiscal rule limits spending from the fund to the expected real return (around 3% per year), phasing oil revenue gradually into the economy and preserving capital [NBIM, About the Fund]. Norway’s government emphasises that petroleum cash flow is transferred to the fund and transfers to the budget require parliamentary decision [Government of Norway, The Norwegian Fiscal Policy Framework, 2022]. The point is not imitation; it is sequencing: the rule came early, and it bound discretion.
Botswana shows what good management can achieve—and what it cannot. The IMF notes diamonds account for around 80% of exports, one third of fiscal revenues and one quarter of GDP [IMF PFM Blog, 8 July 2024]. The World Bank’s work on the Sustainable Budget Index illustrates an asset‑preservation approach to spending sustainability [World Bank, Botswana Medium‑term Fiscal Sustainability, 2010]. Yet dependence remains; diamonds still drive fiscal cycles. Good governance buys time, not diversification.
Ghana illustrates the limits of rules without enforcement. Ghana’s Petroleum Revenue Management Act (Act 815, 2011) sets limits on revenues directed to the budget and to savings and provides oversight provisions [World Bank Working Paper, Oil Discovery and Macroeconomic Management, 2017]. The IMF described the PRMA as a strong legal basis [IMF Country Report 12/36, Ghana, 2012]. Yet Ghana later returned to IMF support amid macro‑fiscal stress [Reuters, 15 April 2025]. Laws matter, but only when embedded in budgeting practice.
Mozambique is the warning about resource expectations before revenues. The World Bank describes how hidden debts plunged Mozambique into a downturn, halving growth and triggering inflation and currency pressures [World Bank blog, 19 April 2022]. The IMF stated that previously undisclosed external borrowing by state‑owned entities amounted to about US$1.37 billion (around 10.6% of 2015 GDP) [IMF Press Release, 21 November 2016]. The lesson for Namibia is precise: do not allow SOEs or special vehicles to borrow or guarantee borrowing on the back of future resource flows without full disclosure, audit, and parliamentary approval.
Hydrogen adds a final peer lesson: the market is still being built. The IEA’s finding that announced plans have been revised down and only a small fraction is committed underlines that export projects are exposed to policy risk, infrastructure delays and demand uncertainty [IEA Global Hydrogen Review 2025]. Namibia should not treat hydrogen as a “green version of oil rent”. It is a competitive export sector that will reward disciplined costs and credible governance, and punish complacency.
How Namibia could still convert resources into state capacity
The decisive question is not “How much oil?” or “how many gigawatts?” It is “what does the state become in the process?” Namibia can use the frontier phase to build institutions that outlast any commodity. Five moves would materially improve the odds.
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Adopt a no‑pre‑spending doctrine. Do not borrow against expected oil or hydrogen revenues, and do not issue guarantees that create hidden liabilities. The IMF’s advice to prioritise debt reduction early and avoid premature asset accumulation aligns with this doctrine [IMF Country Report No. 25/132, 2025].
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Build one integrated macro‑fiscal framework for all energy revenues. Oil and gas receipts, dividends from equity participation, land rents, carbon‑credit revenues and any hydrogen‑related fees should be consolidated in the budget and reported consistently under a single fiscal anchor. Fragmentation is an invitation to off‑budget politics.
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Turn infrastructure into regulatory state‑building. If private developers build strategic corridors—ports, transmission, pipelines, desalination—embed open‑access and transparent tariff regulation in law, and publish governance and handback rules. The OECD’s emphasis on access, transparency and equal treatment in “common user infrastructure” is a useful starting point [OECD Hyphen Namibia case study, 2024].
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Redefine local content as productivity. Target realistic niches and fund training, certification and supplier development so Namibian firms can win contracts on performance. Use procurement transparency as the discipline that keeps local content developmental rather than extractive.
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Use early revenues to repair the social contract through measurable outcomes. With unemployment and inequality at current levels, resource projects become politically fragile when exports rise but living standards do not [World Bank Macro Poverty Outlook: Namibia, October 2025]. Convert any early revenues into visible improvements—especially education quality, vocational training and basic services—through the ordinary budget and with evaluation, rather than through discretionary funds.
Two final observations matter for both government and investors.
For government, restraint is a strategy. Hydrogen markets are still forming and announced project pipelines are being revised; only a small fraction is committed [IEA Global Hydrogen Review 2025]. Oil has long lead times, giving Namibia a window to build institutions before revenues arrive [Reuters, 21 June 2024]. Trading that window for premature deals would be the strategic error.
For investors, governance sequencing is stabilising. Predictable licensing, published fiscal terms, disciplined public finance and credible dispute resolution reduce sovereign risk and lower the cost of capital. In frontier settings, “good governance” is not branding; it is the price of finance.
Namibia’s new energy frontier is real. But the historical pattern is also real: countries often discover resources faster than they discover the institutions needed to manage them. The risk is not extraction; it is enclosure—export flows without a developmental state. The remedy is not grand rhetoric. It is the deliberate construction of rules, capacity and fiscal discipline before monetisation begins.
