WINDHOEK – Policy instrument choice is a political decision, the availability of state resources are critical and Namibia needs to ensure that investment of government resources will generate a socio-economic return for the country.
Professor Johann Kirsten, the Head of the Agricultural Economics, Extension and Rural Development Department of the University of Pretoria says these are some of the prerequisites which are vital to identify industries that can contribute to significant growth in employment such as the agricultural sector. Prof Kirsten was one of the key-note speakers at the recently-held 2014 Agricultural Outlook Conference in Windhoek under the theme, The Contribution of Industrialisation and Technology to Agricultural Development.
He told Farmers Forum it is important to know if there is a political will to invest in infrastructure; to support private investment in value-added, and what is the incentive structure in the economy to encourage private investment.
“Also important is to know which political and socio-economic factors prevent potential investment. Comparative advantage is compromised by either natural or political and socio-economic factors. Which is the critical one in Namibia?” He says the availability of state resources is critical and Namibia needs to ensure that investment of government resources will generate a socio-economic return for the country. He cites three approaches to ensuring growth in the sector as: Large export industries with high labour requirements, high volume imports that can be substituted with locally produced goods and growing small industries with high labour requirements. Other points of value in the situation is Namibia’s negative trade balance with South Africa, the “Growth at Home” campaign to stimulate economic growth but stresses that Namibia needs to create jobs in agriculture that could provide socio-economic benefits.
Prof Kirsten says the question is often asked why focus on intensive commodities like dairy, broilers, eggs, pork, vegetables and fruits? “The answer is that output of these commodities per unit are higher and they are more employment intensive:
Poultry = 2.2 jobs / 100 tons
Eggs = 4 jobs / 100 tons
Dairy = 2.86 jobs / 100 tons
Tomatoes = 3.5 jobs / ha
Flowers = 13 jobs / ha
Carrots = 3 jobs / ha
Pecan nuts = 1.3 jobs / ha
Regarding policy options, he cites the options allowed under Southern African Customs Union (SACU), the Southern African Development Community (SADC) and the World Trade Organisation (WTO), cost and benefits of policy options, and Namibia’s political economy as well as quantitative import restrictions linked to local procurement rules. He further cites import tariffs, the development of levy on imports; State investment in infrastructure such as irrigation schemes; incentives (subsidies, tax exemption, adjusted fees for energy and fuel, etc.); various other support mechanisms such as surge in imports (volume trigger), or fall of the import price below a specified reference price (price trigger) as other factors influencing agricultural produces.
Prof Kirsten says Special Differential Treatment (SDT), can be argued on the basis of: a right to maintain trade barriers to deal with balance of payments problems, protecting “infant” domestic industries, right to offer governmental support to their domestic industries using various industrial and trade policy measures. He adds that Namibia is still on the WTO’s list of net-food importers, and as such experiences negative effects in terms of the availability of adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions, and short-term difficulties in financing normal levels of commercial imports of basic foodstuffs. Subsidies for agriculture is allowed under Green box, using arguments of: Safety-nets, Protection of environment, plant or animal welfare, Income insurance,
Food security
Article 3 of SADC (Trade in goods) allows member states to apply for the re-introduction of tariffs and other protection measures.
Article 9 has general exceptions, almost similar to those covered in the WTO, that is, protection of human beings, food safety, animal and plant health, and prevention of critical shortages of foodstuffs. Article 20 deals with safeguard measures in the same way as the WTO does. Article 26 deals with protection of Infant Industry. Namibia is already allowed to use a temporary levy up to eight years under this provision. Article 18 of SACU (on free movement of goods in the customs territory) paragraph two gives member states the right to impose restrictions on imports for : Health reasons (humans, animals and plants),
environment and intellectual property.
Other reasons that Namibia can consider are covered under industrial policy (Article 38), agricultural and competition policies (Articles 39 and 40, respectively).
“Quantitative restrictions / import tariffs increase domestic price and producers benefit but consumers loose. Other support measures (incentives, tax breaks, subsidies) produce lower marginal costs that could increase supply and benefits producers as well as consumers but potentially at the expense of the fiscus. Quantitative restrictions (quotas) usually considered more distortive than subsidies or tariffs,” he notes.
“But will this bring socio-economic benefits? What is the evidence? Any policy option will always have winners and losers and it is important to understand the different interest groups / stakeholders like consumers, farmers, agribusiness firms and political parties / bureaucrats,” he concludes.