Pieter van Niekerk
Foreign direct investment brings new industries and creates jobs but would FDIs come if we cannot guarantee long-term protection? Foreign investors do not want to invest money into an economy where their investment could be redistributed – do you blame them?
If an investment climate refers to the economic, financial, and socio-political conditions in a country that influences whether others are willing to put their money into a country or not, Namibia needs climate change.
Namibia is now correctly seeking to use FDI to enhance its development objectives, of which the most important, is skilled job creation.
This is not a new approach, especially for developing countries, but to lure investors, and the right kind of investors, there are many things, which need to be in place.
The first and most important is consistency. Namibia has seesawed since the 1990 Foreign Investment Act. First, the New Equitable Economic Empowerment Framework (NEEEF) was brought to the table in 2008 and was eventually withdrawn more than a decade later, for consultations. Then came the 2016 Namibia Investment Promotion Act, which although signed, was withdrawn too, again, for consultations. And then, the Investment Promotion and Facilitation Bill which was tabled in parliament in November last year, and withdrawn on the same day.
Namibia needs investment, particularly following the poor showing in FDIs since the start of the pandemic and the local economic woes because of it. According to the UN’s conference on trade and development, FDI flows to Africa fell by 16% to US$40 billion in 2021– a level last seen 15 years ago. Greenfield project announcements, the key to industrialisation prospects in the region, fell by 62% and commodity-exporting economies, like Namibia, were the worst affected.
In December, the Bank of Namibia predicted growth of 3.3% in 2022, coming off a contraction of 8.5% in 2020 thus; we are still in negative growth. So, how do we stimulate our economy and ensure that we maximise opportunities for FDI and the accompanying economic growth?
The consensus for a favourable investment climate includes guaranteed property rights, which concepts like NEEEB will remove. Jobs or shares? What will change your life and your children’s lives for the better?
Do we have enough jobs or economic activity to redistribute the shareholding of businesses?
If we welcome and accept foreign investors while guaranteeing them future protection for setting up industries, others will see that and bring more industries with more jobs, but if it is perceived like Zimbabwe or Venezuela, then there will be less for Namibia. Foreign investors scare easily and we do not even know how many we have already scared away by just talking about the redistribution of assets.
Research performed by Maliwa and Nyambe on FDI and its impact on economic growth in Zambia concluded that rather than aggressively seeking out FDI, nations should rather focus on “implementing policies that create a stable economic and political environment to instil confidence in foreign [and local] investors. Such policies could be implemented through good governance with fiscal and monetary accountability as well as transparency and reducing corruption”.
We are all failing to recognise the critical importance of the private sector. Research performed by the Australian government’s department of foreign affairs and trade in die Indo-Pacific region looked at the role of the private sector in promoting economic growth and reducing poverty. The researchers found that the private sector is the engine of growth.
Successful businesses drive growth, create jobs and pay the taxes that finance services and investment. In developing countries in that region, the private sector generates 90% of jobs, funds 60% of all investments, and provides more than 80% of taxes. In Namibia, the public sector is seen as the provider of jobs, this could be why Namibia, as a developing country, is not.
There are two outcomes for our nation:
A centrally controlled socialist-Marxist economic and authority model which smothers entrepreneurial spirit and limits rewards, and deters investors because of the centralised control – or, an open economy where foreigners and locals can create successful industries without limiting sectors, which enhances the entrepreneurial spirit with exponential growth.
It is a given that not all FDI is all good and jobs that are created through investments must be good, and sustainable jobs.
Local participation is also important but there are ways and means of achieving this while still keeping the economic liberal and open.
Most of the time, having jobs in a company is worth more to a country than controlling the shares in a company.
Let’s say you get shares in a company worth N$50 000. Great stuff, your N$5 000 annual dividends (if the company performs well) is good to have, but it’s not going to sustain your family, is it? You can sell them, but that is a once-off.
Shares don’t pay bills. But if you get a job paying N$50 000 a year, and you have a chance to upskill and advance, you can take care of your family, every year. Shares vs jobs… you decide.
* Pieter van Niekerk
Entrepreneur: Windhoek