Lukas Kumonika
The current economic calamity intensified by Covid-19 has resulted in many resorting to informal business activities.
This is caused by the fact that formal businesses in some, if not all, of the industries were severely affected in terms of financial performance, hence, laying off some workers.
The apparent retrenchment due to Covid-19 has worsened the already existing catastrophe of youth unemployment in Namibia.
It is with this drawback that the majority of the unemployed youths started selling goods like clothes and smuggled fuel in order to make ends meet. However, this can potentially kill the formal economy as those goods are substituted with cheaper ones sold on the black market.
This situation may lead to the closure of a business due to a lack of customers, triggering further job and tax revenue losses. Thus, justifying the actions by law-enforcement agents to deter the sale of smuggled fuel (also known as ngungula) and clothes (AKA order with me).
The measures taken by law-enforcers have created winners and losers.
To begin with, formal businesses (registered clothing and fuel retailers) are the winners in this case since they are protected from the possible loss of customers and ceasing of operations.
Moreover, workers in those retailers are sheltered against probable job losses.
Hence, they are among the winners and beneficiaries of the actions that daunt the selling of smuggled fuel and ‘’order with me” clothes. Equally important, the fiscal authority (NAMRA/government) is protected against a possible loss of tax revenue that is likely to happen after the closure of establishments.
On the other hand, similar actions have disadvantaged some individuals.
Firstly, although the products being confiscated were illegally brought into the country, owners have lost irrecoverable income when they bought those goods.
Additionally, the fact that the income generated from the sale of those goods is used to maintain the livelihood of individuals, particularly the poor and unemployed members of the public, cannot be trivialised.
Therefore, those are the losers in that way. On top of that, the majority of the buyers in these black markets are low-income earners who may not afford to buy in formalised markets.
Hence, they are denied access to what they can afford.
In the final analysis, a compensation approach to welfare should be employed for the benefit of both possible winners and losers when such actions are taken.
Otherwise, speaking winners should compensate losers. To be specific, the protected formal businesses and employees should ensure compliance with tax policies to ensure government revenue.
Likewise, businesses should assist poor households through corporate social responsibility (CSR).
Lastly, the fiscal authority should spend collected tax on much-needed public goods and transfer payments.
Lukas Kumonika is a public economist. These are his own views, and not those of any organisation he is affiliated to.