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Industrialisation review

2021-03-19  Staff Reporter

Industrialisation review
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Introduction

 

The importance of industrialisation across the world is well recognized. Industrialisation is seen as a catalyst and the engine for inclusive economic growth, mobilising investments, promoting economic diversification, building business linkages, promoting technology transfer and innovation, job creation and poverty alleviation. More importantly, industrialisation promotes domestic entrepreneurship, including women and youth entrepreneurs. 

Every country tries to stimulate its industrial growth and exports by strengthening its demand and supply-side capacities, mobilising investments, including Foreign Direct Investment (FDI), undertaking legal, regulatory and institutional reforms, reinforcing its economic diplomacy, and aggressive promotion in targeted markets.

Namibia’s industrial ambition as articulated in Vision 2030, aspires for the transformation of the country into “a prosperous and industrialised high-income country, developed by her human resources, enjoying peace, harmony and political stability”. 

This vision is further embellished within the National Industrial Policy of 2012 and its execution plan-the Growth at Home Strategy of 2015. An industrial sector specific programme, namely the Industrial Upgrading and Modernisation Programme (IUMP) also further supports the vision. At the core of all these policy frameworks and strategies are three key words, “industrialisation, manufacturing and value addition”. 

The Growth at Home Strategy emphasises the importance of commodity-based industrialisation by strengthening local and national value chains and creating more efficient linkages within the economy supported by improved logistics and infrastructure, improvements in the ease of doing business and ongoing dialogue and partnership between government and the private sector. This will in turn promote job creation through the growth of value-added manufacturing firms. 

The IUMP aims to facilitate upgrading and modernisation of the country’s production structure; enhance productivity, improve the business investment climate and export policies; and increase the size of the micro, small and medium enterprise (MSME) sector towards attaining economies of scale. These aims are in line with the Southern African Development Community (SADC) Industrialisation Strategy and Roadmap: 2015 – 2063 (SISR) particularly the two pillars of industrialisation and competitiveness. 

Namibia is committed to SADC regional integration and is at the forefront pushing for implementation of the SADC industrialisation agenda. The Revised Regional Indicative Strategic Development Plan (RISDP) (2015-2020) and the SISR (2015-2063) which are formulated in the context of existing national and regional policies set the pace and direction to achieving the SADC Vision and Mission by prioritising industrial development and market integration, and industrialization for the period 2015-2020. Recently the Ministry of Industrialisation and Trade (MIT) introduced in the Namibian Parliament the SADC Protocol on Industrialisaton for ratification. 

 

Manufacturers profile

 

Namibia’s manufacturing sector is dominated by fish processing, meat processing, other food and beverage and other manufacturing. Other manufacturing includes basic non-ferrous metals, fabricated metals, diamond processing, leather and related products, non-metallic mineral products. The main manufactured exports from Namibia are beer, carbonated soft drinks, dairy products, meat packaging, polished diamonds, salts, hand woven textiles and leather products. However, manufactured imports continue to be more than exports, thereby widening the country’s trade balance/or deficit. Excluding processed diamonds, manufactured exports have been declining. This is against the backdrop of intense competition from well-established South African companies, unavailability of finance and capital, lack of skilled manpower and high input costs. Input costs such as costs of electricity, transport and port charges are some of the notable constraints to the performance of the manufacturing sector.

 

Challenges of Industrialisation in Namibia

 

Several challenges mar the optimal development of productive development in Namibia. Namibia has a relatively developed infrastructure compared to many African countries but a shortage of skilled labour and inadequate infrastructure (water, electricity and roads) are affecting competitiveness and constraining industrialisation. The country’s vast size and thinly spread population make the provision of roads, electricity network and water supply expensive. Namibia’s dry climate and unpredictable and low rainfall pattern, insufficient water resources are a major challenge. Other challenges are a lack of shelf space for Namibian products in the local supermarkets, a low level of branding or marketing of Namibian products, limited economies of scale, suboptimal public and private procurement policies, access to raw materials/input into production; the limited sizes of business premises; the low demand for locally produced products; market accessibility of local products in local markets and accessibility and the cost of capital especially for MSME manufacturers. The recently released 2020 Private Sector Development Survey by the Ministry of Industrialisation and Trade revealed that access to and cost of finance remained the biggest hurdle for business people across all sizes of companies, except for large companies, and across almost all regions and economic sectors.

 

Opportunities for enhancing industrial competitiveness

 

To address the above constraints, Namibia’s industrial development policy follows both a holistic and targeted approach. The underlying principle of such a targeted approach is to identify and highlight priority areas. Instead of a one-size-fits-all approach, targeted support is designed and provided to such areas according to the specific needs of identified sectors within given time frames. 

 

Structural transformation requires developing products and processes that have high value in the global marketplace. By using a value-chain approach, the country will greatly increase its revenue by collecting taxes on income, production and gross operating surplus. This in turn, will produce both the resources and the impetus for enhanced investments in education and training. The involvement of MSMEs in the value-added chain will foster wealth creation on a broad scale within Namibia for Namibians. Moreover, MSMEs will create employment opportunities throughout the nation.

Therefore, on the policy and law side, the MIT has started pivoting towards ensuring a viable investment climate for both foreign and domestic investors by frontloading the conclusion of the Namibia Investment Promotion Act (NIPA). This piece of legislation is due in 2021 for parliamentary approval. The ministry is also replacing the Export Processing Zone regime with the Special Economic Zones (SEZ) to enable a broader scale in the application of economic zones for industrialisation. 

These policy and legislative developments are to be coupled with a few sectoral masterplans. Masterplans for the automotive, poultry and mineral beneficiation are to be developed over the next couple of years. These will tie in with recent work around a National Trade Policy and a National Policy in Trade in Services as well as a future National Export
Strategy. 

Major demand-side interventions will also be key beyond the 2021 period as outlined below (list not exhaustive):

On Public Procurement – Public procurement in Namibia attempts to mainstream micro, small and medium enterprises as well as local products in general. These can be harnessed more if we can pivot it towards productive capacity-driven public procurement. Public procurement is therefore not necessarily strategic (i.e. where government requests specific production technologies or services for delivery of public services) nor is it catalytic (where the state is involved in the procurement or initiates it, but private end users ultimately use purchased innovations).

On Standards – Standards are official documents laying out rules, practices, metrics or conventions used in technology, trade, and product development. They are key in creating a critical mass in the formative stages of a market. Standardisation reduces the time to market of inventions, research results and innovative technologies. The adoption of standards for the Growth at Home sectors and for IUMP targeted sectors will ensure that this demand-driven intervention is optimised. Industrial Rebates Envelopes - Industrial rebates and tax credits are found within key trade agreements such as the SACU Agreement. Namibia has not fully embraced and utilised existing SACU industrial and agricultural rebates and duty drawbacks. These are vital in developing alternative strategies to reduce the high cost of production in Namibia. 

Developing Lead Markets - Lead markets are those that take up innovations that eventually spread and are adopted in other markets. A lead market, driven through innovation or particular technology, can become leading versus existing lagging markets and thereby expand geographically and create-above average rents for businesses operating in it. There are several opportunities that Namibia can investigate to create leading markets in key sectors such as charcoal, game meat and biomass value chains. The examination and deploying of a Geographic Indicator for such sectors has not been investigated nor adopted in Namibia.

 

• Dr Michael Humavindu is the Deputy Executive Director in the Ministry of Industrialisation and Trade.


2021-03-19  Staff Reporter

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