Cablegate: Namibia's Infrastructure: Usitc Response

VZCZCXRO7718
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHWD #0314/01 2770850
ZNR UUUUU ZZH
P 030850Z OCT 08
FM AMEMBASSY WINDHOEK
TO RUEHC/SECSTATE WASHDC PRIORITY 0096
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY

UNCLAS SECTION 01 OF 05 WINDHOEK 000314

SENSITIVE
SIPDIS

FOR AF/S
FOR USITC

E.O. 12958: N/A
TAGS: ETRD OTRA ASEC WA
SUBJECT: NAMIBIA'S INFRASTRUCTURE: USITC RESPONSE

REF: STATE 85109

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Summary
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1. (U) This cable is in response to reftel request from the
U.S. International Trade Commission for information on
infrastructure conditions that effect export competitiveness.

2. (SBU) Compared to other Sub-Saharan African countries,
Namibia has fairly well developed and maintained
infrastructure. The Namibian government (GRN) is trying to
capitalize on the port of Walvis Bay's strategic location to
make it a major transshipment point for its regional
neighbors. Many European and American products can reach
Southern African Development Community (SADC) region
countries faster and more efficiently via Walvis Bay. The
GRN is investing in the port's expansion so Walvis Bay can
live up to that potential. Namibia's road infrastructure is
generally good and can support current traffic ) much of
which emanates from Walvis Bay - but roads and rail will
increasingly become a bottleneck if improvements are not
made. Namibia's energy sector faces a 200 mW shortfall
during periods of peak demand, but NAMPOWER, the energy
producer, has a reasonable mid- to long-term strategy to meet
demand increases. Nevertheless, in the short-term (2009 and
possibly 2010) seasonal power cuts remain a possibility. The
telecommunications sector could benefit from a more modern
legal framework that promotes more competition, but the
infrastructure is relatively new. The aviation sector is
Namibia's Achilles heel. The International Civil Aviation
Organization (ICAO) rates Namibia as one of the un-safest
countries to fly in. With tourism increasingly a critical
part of the economy, the GRN finally appears to realize it
has to address the weakness in the aviation sector. End
Summary

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Maritime / Port Conditions
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3. (SBU) Namibia has two ports, Luderitz and Walvis Bay.
NAMPORT, Namibia's fully government-owned port authority,
operates both. Walvis Bay, which was returned to Namibia in
1994 from South Africa, is larger and can service container
and bulk cargo ships of up to 240 meters long with berths up
to 12.8 meters deep. The GRN and NAMPORT have a five year
plan to upgrade the Walvis Bay facility, to expand its
container and bulk storage facilities as well as deepen the
bay's channel and port berths. The plan is estimated to cost
N$1.5 billion (USD 200 million). Walvis Bay currently
processes about 150,000 containers annually, but is expanding
its facilities to accommodate 500,000. NAMPORT has recently
upgraded its ship refurbishment facilities, and it is now
equipped to refurbish oil rigs. Emboff was in Walvis Bay
September 19 and saw an Angolan oil rig being serviced.
Walvis Bay city is planning an ocean front complex and
passenger port facility to promote more cruise ship tourism.

4. (SBU) To promote Walvis Bay as a major regional hub, the
GRN has formed a public-private partnership called the Walvis
Bay Corridor Group (WBCG). (Note: The WBCG can provide
information on freight forwarders, port service providers,
and logistics companies operating in Namibia. End Note).
For landlocked countries like Botswana Zambia, and Zimbabwe,
Namibia is promoting Walvis Bay as a faster, more efficient
and professional alternative than other regional ports. The
WBCG actively markets the port and four overland transport
corridors (Trans-Kalahari, Trans-Caprivi, Trans-Oranje, and
Trans-Cunene) that link Walvis Bay to Angola, Botswana, South
Africa, Zambia, Zimbabwe and the DRC's Lumbumbashi via Zambia.

5. (SBU) According to the head of port operations Mussa
Mandia, Walvis Bay can offload most container ships in one to
two days, while the port of Luanda in Angola may have a
backlog of three weeks. For ships with European and American
cargo, Walvis Bay offers a port facility that is
approximately one week's sailing time closer than South
Africa's east coast port of Durban. According to the WBCG,
this week may be significant for companies in Johannesburg
that want time-sensitive cargo and are willing to pay a
premium. Overland travel time from Walvis Bay to
Johannesburg is two days. The GRN is working closely with
its Southern Africa Customs Union (SACU) and SADC partners to
reduce customs clearance times. For instance, the WBCG
boasts a 30 minute customs clearance time for transiting the
Namibia-Botswana border on the Trans-Kalahari highway.
Walvis Bay's ambitious plans to become a regional

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transshipment hub will falter if overland (road and rail)
capabilities do not match up with the port's projected
expansion. Until Walvis Bay completes its expansion, it will
still not be able to handle larger container and bulk ships
which prevent it from drawing in traffic that currently goes
to South Africa's deeper and larger port facilities.

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Current Road Conditions
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6. (SBU) The Namibian road infrastructure and road
maintenance is generally good as compared to other
Sub-Saharan countries. Namibia's government-owned Roads
Authority reported that as of March 2007 the national road
network measured a total of 42,260 kilometers, comprising the
following:

Surfaced 5,821 km
Gravel 24,262 km
Earth 11,967 km
Salt 209 km (along the coast)

7. (SBU) The main roads from Windhoek to principal towns
are paved, as are roads linking Windhoek to South Africa,
Angola, Botswana, Zambia and Zimbabwe. Paved roads outside
cities and towns are generally narrower than in the United
States. Some paved roads were constructed in the 1960s and
today require rehabilitation as the effectiveness of routine
maintenance has been exhausted. Several stretches of the
paved road network are under rehabilitation, including a
segment from Okahandja to Karibi (on the Walvis Bay to
Windhoek route). Stretches under rehabilitation result in a
slower traffic. The first phase of the largest new road
construction project since Namibia's independence ) the
Rundu to Elundu road - is scheduled to begin in December
2008.

8. (SBU) Gravel roads are generally well graded and
maintained but can become rough or corrugated, especially
during the rainy season. The coast has a short network of
"salt" roads ) a foundation of gypsum, which is soaked with
brine and compacted to form a surface as hard and smooth as
tarmac. Salt roads can become very slippery when moistened
by the frequent fog.

9. (SBU) Fuel taxes fund road maintenance and road
rehabilitation, but do not cover all the related costs.
Government and donor funding makes up the difference, and
also pays for new road construction. By law, truck drivers
are supposed to pay additional charges based on the weight of
their vehicles to defray the additional damages trucks
inflict on roads. GRN insiders admit that many truck drivers
do not fully comply and enforcement to date has been
difficult.

10. (SBU) There are no toll roads in Namibia. To date, the
GRN has deemed toll roads would at best break even and not
generate enough additional revenue to make implementation of
such a system economically viable. That said, Roads Authority
CEO Erastus Ikela told emboff that the government recently
conducted a new feasibility study on the viability of toll
roads. The study will be presented to Parliament in the
coming months.

11. (SBU) As Namibia's Walvis Bay port facility increases
its capacity, the road and rail infrastructure could become a
bottleneck, although today's infrastructure is sufficient for
current levels of economic activity. According to the WBCG's
Business Development Executive, Johnny Smith, 40 percent of
trucks returning to South Africa's Gauteng province
(Namibia's largest trading partner) are empty. Therefore,
there is currently room for existing road haulers to absorb
greater cargo coming into the port of Walvis Bay destined for
other SADC countries without a major increase in road traffic.

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Rail Network
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12. (SBU) Namibia has a 2382 km-long narrow gauge rail
network. The network connects the port of Walvis Bay to the
capital Windhoek and on to South Africa. The
government-owned TransNamib rail company operates the trains,
while the GRN itself is responsible for rail maintenance and
construction. Construction of new track in the north to
connect the Namibian city of Tsumeb to Oshikango on the
Angolan border is ongoing. The first section, from Tsumeb to
Oshivelo, opened in 2005. The Ministry of Trade and Industry

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states that GRN is financing just under a third of the
project, while the African Development Bank (ADB) and other
sources are funding the difference.

13. (SBU) According to TransNamib insiders and other sources
the older portions of the network are deteriorating.
TransNamib Acting CEO Mike Kavekotora lamented to emboff that
the government has a 40-year plan for upgrading the rail
network. Forty years, Kavekotora declared, is not suitable
for TransNamib's business plans. Kavekotora remarked that
there are some stretches of track linking the north to Walvis
Bay that are so run down that they may not last more than two
more years. Transport over older (poorly maintained) tracks
dramatically reduces shipping times as trains cannot travel
as quickly over such tracks. Paul Smit, the Deputy Minister
for Transport and Works, told the DCM that the GRN is
planning to expand the rail sector by rehabilitating the
current system, extending a rail line from Gobabis to
Gaborone, Botswana and extending another rail line from
Grootfontein to Livingstone, Zambia. The Gobabis to Gaborone
line would extend TransNamib's reach from Walvis Bay into
Botswana.

14. (SBU) While TransNamib is a multi-modal (road and rail)
transport company, the bulk of its business is rail.
Kavekotora told emboff that TransNamib offers highly
competitive (cheaper) prices for transport of heavy
equipment/products to the mining sector, which is a major
customer. While TransNamib is 100 percent government owned,
Kavekotora noted that there are foreign investors (German,
South African, some U.S. and others) that have expressed
interest in TransNamib. However, the GRN to date has chosen
not to court foreign investment for the expansion/development
of TransNamib and the country's rail infrastructure.

15. (SBU) A recent rail workers strike at TransNamib
highlighted Namibia's dependence on its rail infrastructure.
The GRN estimates the strike cost the country N$180 million
(USD 22.5 million) in lost revenue. The strike was primarily
an internal squabble within the ruling South West African
Peoples Organization (SWAPO) party and not related to working
conditions or wages.

16. (SBU) Until approximately 2003, TransNamib operated
only General Electric (GE) locomotives. Since then it has
purchased 21 Chinese locomotives in two tranches, four in
2003 (or 2004) and another 17 in 2006. The Chinese
locomotives have been a headache for TransNamib. Replacement
parts are taking 8-12 months to reach Namibia, and several
Chinese locomotives are currently off-line awaiting parts.
This has not been a problem with the GE locomotives according
to TransNamib sources. The company still maintains 22 GE
locomotives, although many require servicing in South Africa
because of their age. According to Kavekotora the
refurbishment will extend the GE locomotives "useful life"
another 20 years. (Comment: While TransNamib may be suffering
from buyer's remorse over its purchase of Chinese
locomotives, Kavekotora noted that TransNamib did not have
the funds to buy additional GE locomotives at this time. End
Comment).

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Electrical Infrastructure
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17. (SBU) NAMPOWER is Nambia's government-owned power
generator and transmitter. NAMPOWER also provides power
distribution in some parts of the country, although it has
turned over (or is in the process of turning over)
distribution to regional electrical distributors (REDs).
NAMPOWER is a minority shareholder in most of the REDs,
except for one in which it owns 50.02 percent. NAMPOWER also
engages in energy trading with regional power generators.
The Electricity Control Board (ECB) serves as Namibia's
electricity regulator. Most power generation in Namibia is
either thermal or hydro-power. Some hydropower is
river-based (not reservoir-fed), which makes the source of
electricity generation more seasonal (during the December to
February rains). Namibia produces approximately 59 percent
of its own power, and imports the remaining 41 percent.

18. (SBU) NAMPOWER Managing Director Paulinus Shilamba told
emboff that Namibia faces a 200 megawatt (mW) power supply
shortage during periods of peak demand. The mining
(commodities) sector boom and general population usage
increases have contributed to the shortfall. Furthermore,
South Africa's Eskom, Namibia's primary external power
supplier has drastically reduced power exports to the region
because of increases in South African demand. South Africa

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has historically been responsible for 80 percent of power
generation in the SADC region.

19. (SBU) Due to South Africa's challenges, Namibia is
looking for other power generation solutions. According to
Shilamba, Namibia is addressing its power supply shortfall in
several ways. In the near term Shilamba anticipates that
load-shedding may be necessary. Shilamba is most concerned
with May to August 2009, the dry season when hydro-power
generation diminishes.

20. (SBU) To solve Namibia's shortage in the longer term,
NAMPOWER has negotiated (or is in the process of negotiating)
new Power Purchase Agreements (PPAs) with regional suppliers.
For example, NAMPOWER has entered into a five year agreement
with Zimbabwe's ZESA. As part of the deal Namibia loaned USD
$50 million to help ZESA upgrade its Hwange power plant in
western Zimbabwe. Hwange in return is obligated to supply
Namibia with up to 150 mW. To date, the Hwange plant is only
providing a maximum of 120 mW. To take full advantage of
Hwange, NAMPOWER and the GRN have embarked on the
construction of a 350 kV DC HVDC Caprivi Link
inter-connector. This link will eventually allow NAMPOWER to
transmit power across the Caprivi strip and down to the
capital Windhoek. Phase one of the project is due to be
completed by January 2010.

21. (SBU) Namibia can rely on some standby power generation
stations, but this option is costly, inefficient, and poses
pollution control issues. Namibia is also instituting demand
management program. The GRN and NAMPOWER have given away
(nationwide) free compact fluorescent bulbs to encourage more
efficient home energy usage. The GRN and NAMPOWER also
encourage the use of solar water heaters, and are
investigating the wider implementation of remote demand
control measures (shutting off power remotely to customers
according to negotiated agreements).

22. (SBU) NAMPOWER is also looking to invest in alternative
energy solutions (wind and solar). Due to Namibia's climate
(well over 300 sunny days a year) solar is quite feasible,
but it remains costly for large scale implementation. Solar
is more common for rural electrification, where access to the
main grid is difficult and energy demands are generally
lower. With its significant uranium deposits, the GRN is
also considering nuclear power. Alternative energy will not,
however, solve Namibia's near-term energy needs.

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Telecommunications
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23. (SBU) Namibia's telecommunications sector is dominated
by government-owned Telecom which stills hold a monopoly on
fixed-line service. Two other providers MTC and CellOne
operate mobile phone and data networks, but rely on Telecom's
backbone for interconnection services. Telecom entered the
mobile-market in 2006 with a CDMA (not GSM) service. But, the
government restricts Telecom from providing roaming services
so that Telecom only has coverage in cities. MTC and CellOne
provide roaming services throughout the country, which leads
customers to prefer them for mobile phone and data. Telecom
provides the only gateways linking Namibia to the outside
world (a satellite link and a fiber link via South Africa).
Telecom is also responsible for providing rural Namibians
access to communications via fixed-line service, which its
private mobile service competitors are not.

24. (SBU) Namibia's telecommunications sector is regulated
by 1992 (pre-Internet) legislation. A new telecommunications
act ) which could liberalize the sector ) remains stalled
in Parliament. Nevertheless, the Namibian communications
infrastructure is relatively new, with fiber running
throughout the country. New services such as WiMax and 3G
GSM are emerging and available. The 1992 legislation
prohibits services like Voice Over Internet (VOIP), but there
is no enforcement at the individual level. Sources in
Telecom acknowledge that VOIP is pervasive. The company does
not go after individual customers; it only targets businesses
that try to provide (resell) VOIP services. The current
telecommunications regulator has little authority, although
it is expected that it will become more influential if/when
the new telecommunications act goes into effect.

25. (SBU) High-speed Internet service (ADSL, and more
recently 3G and WiMax) is available in most cities, but costs
are high. Internet cafes/shops provide access to less
affluent Namibians who do not have access to the Internet at
home or at work. Cable companies and NAMPOWER are currently

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prohibited from providing high speed Internet services.
NAMPOWER has laid fiber optic cable along its main power
transmission trunks to provide for monitoring of its
electrical network. In theory, NAMPOWER's fiber link could
be used to offer Internet services should Parliament allow
companies outside the traditional communications sector enter
the market.

26. (SBU) Due to Namibia's vast size and small population
(2.2 million), telecommunications services are relatively
expensive. However the demand for services appears strong.
MTC recently boasted it had achieved its one millionth
subscriber. MTC's claim does not reflect individual
subscribers, as many people buy pre-paid services that lapse.
According to sources within Telecom, the company has 140,000
fixed-line customers and 30,000 wireless customers. With a
dry climate and low probability for large-scale natural
disasters, Namibia could serve as good location for
data-centering services. As in many other sectors, the
country lacks sufficient skilled communications and
information technology engineers.

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Aviation Sector
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27. (SBU) The aviation sector is Namibia's weakest link.
The International Civil Aviation Organization (ICAO) ranks
Namibia among some of the worst countries in the world in
terms of safety. A spate of recent small aircraft accidents
at Windhoek's Eros Airport (which handles domestic traffic)
has served to highlight the problem. Aviation safety and
security are critical to the viability of foreign tourism
which is a major contributor to the Namibian economy.

28. (SBU) In the past, the U.S. Department of
Transportation (via the FAA) have offered technical
assistance Namibia via the Safe Skies Over Africa program,
but the GRN showed little political will in addressing the
problem. That appears to be changing. The Minister of
Transport and Works, Helmut Angula, told Parliament, "The
lack of comprehensive and effective aviation primary and
secondary legislation consistent with the environment and
complexity of civil aviation related activities since
independence is compromising Namibia's membership to ICAO."

29. (SBU) Labor issues and skills are part of the problem,
including insufficient numbers of trained safety inspectors.
Human error seems to have caused a number of the recent
accidents. A plastic bag left in the engine compartment of
Cessna was the likely cause of a September crash that killed
one and injured four Swiss tourists. A pilots strike at Air
Namibia (the government-owned carrier) was recently averted,
after the company agreed to increase salaries by 12 percent.
Air Namibia loses money, but the GRN has been willing to fund
its short-fall because of the airlines' contribution to the
tourism sector.
HARRINGTON

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