Windhoek
The inward looking nature of the proposed New Equitable Economic Empowerment Framework (NEEEF) will do little or nothing at all to make Namibia more globally competitive and grow the ‘economic cake’ of Namibia, says Standard Bank Namibia’s Economic and Marketing Research Manager Mally Likukela.
The reason is because the proposals in the NEEEF are so much focused on slicing up the already inadequate economic cake equitably, than growing it.
“The obsession with what percentage of the firms must be in the hands of the previously disadvantaged is clouding out the nation’s ability to focus on addressing issues that have and continue to prevent the previously disadvantaged group from growing businesses that can turn into the business empires of tomorrow,” said Likukela.
Unemployment, poverty, low economic growth and income inequalities can only be addressed by growing the economy, and to do that government would have to focus on dealing with obstacles that had thus far impended economic growth.“Just focusing on who gets what piece of which company – increasing ownership stakes of the wealthy is not enough, the emphasis should be on how to make NEEEF more broad-based (outward looking) to the extent that it can empower the (poor) masses,” Likukela said in a statement issued this week. Likukela also said that in its current form the NEEEF is at best seen as a form of tax, with only those who move early to comply receiving business advantages from NEEEF deals, although the returns will diminish rapidly as compliance becomes general.
“These costs associated with compliance will be greater than everyone thinks because compliance reaches far and deep into the economy, because the codes and charters call on businesses to jump through a number of hoops,” he said. “Businesses whose NEEEF scores are not high enough will not be allowed to supply goods or services to companies that comply with the codes or a charter; they will not qualify for government licenses; and they will not qualify to do business with government. They will also have to ensure that their suppliers comply with the codes or charter. All these measures are expected – and meant – to create a cascade of compliance throughout the economy and naturally these will eventually disturb business flow and the speed of growth of business will decrease.”
Likukela also says the other question is whether all benefits of NEEEF transactions will go to previously disadvantaged people. He says just as with black economic empowerment, the predecessor draft policy to NEEEF, transaction through the NEEEF will involve a medley of middlemen including predominantly previously advantaged financial institutions and legal firms, which are among major beneficiaries of these deals. Furthermore and similar to the predecessor initiatives, the NEEEF will be susceptible to “fronting”.
“If all these are not addressed, the economic transformation advocated by the NEEEF will be meaningless. The kind of economic transformation that Namibia needs should be the one that will transfer real power to previously disadvantaged people rather than just changing the face of management and share ownership, while real power remains vested with previously advantaged managers at operational level. This will definitely not be in the interest of meaningful equity or the long-term advancement of previously disadvantaged people that NEEEF is advocating,” he said.