It is common knowledge that domestic manufacturing is heavily dependent on inputs from the country’s natural resources’ endowments. This entails value-addition activities, namely diamond and semi-precious stones’ cutting and polishing; beneficiation of basic non-ferrous metals, focusing on the smelting of copper and zinc; production of table and fine salt; the processing of meat and grain mill products for the food sub-sector; production of beer and soft drinks (beverages); production of animal feed and other food products, and other simple manufacturing.
Despite the effects of Covid-19 on the global economy in general and the domestic economy in particular, as well as a tightened Fiscus envelope, the trade ministry has made headwinds into certain opportunities on the low- hangings fruits. As such, the ministry is confident that there are many opportunities in future to ensure that its Growth at Home strategy is a success.
New Era recently had an opportunity to interrogate the trade ministry’s chief information officer, Elijah Mukubonda, on the state of the nation’s manufacturing sector and its future ambitions.
Q: Is the ministry of the opinion that there is a need to amend the Investment Act? Is the ministry satisfied with the Act in its current form? Does the ministry believe the Act in its current form discourages investment in Namibia?
A: The Ministry is amending the Foreign Investment Act (FIA) on the following basis:
“At independence, the levels of domestic savings, capital formation and private sector investment were relative, and could not adequately serve as meaningful drivers of economic growth and development. In order to augment domestic savings and investment levels, the Government passed the FIA as a legal framework for attracting foreign direct investment (FDI) into the country.
The main provisions of the Act included the equal treatment of foreign investors with Namibians; openness of almost all the sectors to foreigners with few exceptions, such as the extractive mining and fishing sectors; freedom to repatriate profits after payment of due taxes; and no obligatory joint venture partnership with Namibians.
While Namibia has been performing relatively well in comparison to a number of other countries in the region in terms of FDI inflows, the country continued to decline in international and regional competitiveness rankings. Consequently, the Ministry of Trade and Industry at the time commissioned two studies to assess the relevance and effectiveness of the existing legal framework, incentives and institutions governing investment in the country. Both studies concluded that the “Foreign Investment Act is outdated” and is no longer serving as a useful tool for attracting FDI, and “needs to be replaced”. It was, therefore, recommended that the FIA be replaced with a new and more responsive overarching law on investment that embodies, amongst others, the following:
Defining a domestic and foreign investor, as well as investment;
Restriction of some economic subsectors to foreign investors;
Investor performance requirements;
Ensuring that admission procedures for foreign investors are transparent;
Establishment of a one-stop-shop for business facilitation
A clear mandate on investment promotion
Clear guidelines for investor dispute procedures.
Q: From a manufacturing standpoint, what lessons have been drawn from the Covid-19 pandemic as far as policy setting in Namibia is concerned?
A: The pandemic turned lives upside down in every sector – industrialisation and trade were not an exception. Despite the pandemic, the Ministry remained committed to deliver on its mandate and a number of developments to enhance a conducive working environment for business.
Many, too many are the lessons learnt:
It is very critical to be self-sufficient to offset shortages of imported products (in a situation imposed by the pandemic), and the Ministry engaged in overdrive gear to encourage the local production of goods and services. The Ministry launched the “Buy Local, Grow Namibia” national campaign to support the recovery of Namibia’s local businesses by calling on all Namibians to GoLocal and GrowNamibia by purchasing local products first. The campaign targeted to help Namibian businesses promote their products and services, and encourages Namibians to support their community by shopping locally. The buy local, grow Namibia campaign was conceived as the nation navigated the challenges and realities that were brought about by the pandemic. With lockdowns being introduced and restrictions hampering the flow of basic goods and services, the issue of national self-sufficiency took greater prominence.
The national campaign was introduced in two phases (I and II), whose clarion call was to help create an enabling environment for locally-produced goods to access the retail space as well as to sensitise all Namibians on the economic benefits of supporting local. Notable progress has been recorded since the conception of the initiatives through the implementation of the Retail Sector Charter that saw its genesis in the 4th National Development Plan. It was also one of the ministry’s desired outcomes under the Harambee Prosperity Plan, pillar of Economic Advancement, to significantly increase the volume of locally-produced goods supplied to the public and retail sectors. The Ministry of Industrialisation and Trade remained steadfast during the pandemic to ensure that there is indeed ‘Growth at Home’ to grow and prosper, and the sail-off point was to safeguard that Namibian- made products have market access, both locally and internationally. During the sailing period, the ministry launched Namibia’s own barcode, also known as a product identification code, intended to ease the access of local products in the local and global marketplace.
Another important lesson was the critical need to support Micro, Small and Medium Enterprises (MSEMs) during the pandemic. We witnessed the devastation caused by the pandemic both at individual, group and more so to our businesses, which ultimately resulted in weakened economic activities and loss of jobs and income.
The pandemic unlocked opportunities and presented outlooks in particular around domestic production capacities in various areas, optimised economic dynamism, and translated them into innovative ventures for economic sustainability. The ministry as the custodian for business development and support in general made considerable efforts to assist entrepreneurs in several ways, especially during the early stages of the pandemic, and continued to work with strategic partners in order to provide the much-needed support to entrepreneurs. Government adopted various policies geared towards supporting especially the private sector to play its role in setting the economy on a better growth trajectory. MIT continued to use relevant policies in a quest to enhance industrial capacity, and to optimise market access for locally-made products. Overall, government provided support to promote SMEs’ development and economic inclusiveness.
Many lessons were learnt in critical areas of interventions made by MIT to encourage a conducive working environment for businesses trading in the country. These were specifically programmes designed to assist MSMEs to withstand the worst of the Covid 19 pandemic (StartUp Survival Grant, SDG Impact Facility, SADC Trade-Related Facility, etc).
Q: What are the current incentives for manufacturers in Namibia? If there are no incentives, does the ministry intend on creating these incentives, and what are some of the incentives that are being mulled by government for manufacturers and the manufacturing sector to thrive?
A: Incentives come in both fiscal and non-fiscal forms. On fiscal incentives, there is a reduction in corporate tax rates, depreciation allowances as well as at times variations on VAT refunds. Non-fiscal incentives encompass a whole range of certain enhancements such as industrial land availability, variations on power pricing and business visa or research and development incentives to bolster innovation. Namibia has since December 2020 been revisiting these incentives’ regime to ensure a much more comprehensive and elaborate approach, as previously most attention was on the fiscal incentives’ regime. Thus, new initiatives such as the incentives’ regime under the Special Economic Zones will represent this new approach to bring about successful industrialisation.
Q: Do you believe the lack of incentives places Namibia in an unfavourable position to lock in investment in the country?
A: The lack of appropriate incentives is what ensures an unfavourable position. Therefore, to engage a process of ensuring a comprehensive approach towards an incentive regime (both fiscal and non-fiscal) would ensure a country’s sustainable path towards attracting growth-enhancing investment.
Q: What is the status of the ‘Growth at Home’ strategy? Do you believe as a ministry manufacturers have derived benefit from the strategy? Do you believe the strategy has helped uplift the status of manufacturing in Namibia?
A: The Growth at Home strategy is the execution strategy for Namibia’s Industrial Policy that provides a roadmap for the execution of Namibia’s Industrial Policy, to be deemed in the context of Vision 2030, the Industrial Policy and the current National Development Plan (NDP). The strategic key features include local value-addition; targeted and phased approach; regional value chains, African approach and bilateral cooperation; infant industry protection and safeguarding of policy space; continuous reform to promote competitiveness; and increased value-added support.
The ministry created 11 sectoral growth strategies, and currently have four associations carrying out extensive work in four sectors, namely Jewellery and Gemstones, Charcoal, Metal Fabrication and Cosmetics. The Biomass sector is also at an advanced stage of implementation. The launching and gazzetting of the National Automotive Assembly and Development Policy launched in 2019 and a Namibian version of the Automotive Production and Development Programme recently boosted the automotive sector. A Minerals Beneficiation Strategy by the MME and MIT is coming, with additional work that will lead to a policy to be finalised at the end of 2022.
Regional value chains’ development that are heading for a need and movement towards an effective agglomorisation strategy such as the SADC Industrialisation Protocol that Namibia recently ratified and current work on SACU Sector Strategies, continue.
Namibia’s ratification of the Kigali Amendment to the Montreal Protocol also heralds our resolve to move towards greener and low carbon industrialisation pathways. The MIT has a National Ozone Unit with the explicit aim not only to manage the imports and exports of hazardous gases, but also to start supporting the development of our key industrial capabilities in the heating, ventilation and cooling sectors (HVAC).
Currently, we are moving into the Green Hydrogen and Critical Raw Materials opportunities.
Also, the local manufacturing of coffins to better serve the public during the pandemic and beyond.