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Opinion - Industrial, trade policies should be focused, flexible

2023-02-06  Josef Kefas Sheehama

Opinion - Industrial, trade policies should be focused, flexible

Namibia enjoys one of the most stable, peaceful political environments in Africa. The World Bank ranked Namibia 107th among 190 countries in its 2019 Doing Business Report. Therefore, a sustainable trajectory for the Namibian economy is one where reforms are implemented to raise Namibia’s potential growth rate.

The lack of financial and human capacity has been a key impediment to Namibia’s industrial development, in particular for small and medium-sized enterprises. 

Skills gaps and skills mismatches are recurrent in Namibia, in part because institutions are not providing enough skilled human resources to meet the market demands. 

Implementing flexible industrial and trade policies to promote competitiveness and facilitate long-run growth should continue to be a strategic policy focus area. Manufacturing is an engine of economic growth as industrial goods have a higher income elasticity of demand, especially in world markets. A successful industrial and trade policy should be  focused, flexible and premised on the notion of embedded autonomy. Focused industrial and trade policy requires the prioritisation and rationalisation of interventions, and flexibility comes from learning from experience. 

Focus and flexibility must be underpinned by embedded autonomy, which demands that the government elicits useful information from the private sector, which has the best knowledge of industrial and trade opportunities.

The government should urgently implement a reform that can boost Namibia’s export market in the short-term, while also creating the conditions for higher long-term sustainable growth. These growth reforms should promote economic transformation, support labour-intensive growth, and create a globally competitive economy. The current state of the Namibian economy is unsustainable. Low economic growth entrenches poverty and inequality. High-income inequality aggravates social fragmentation, and poses a risk to economic growth. Inequality contributes to extremely divergent views, which make compromises difficult. The resulting stalemate and policy uncertainty can contribute to economic weakness. A growth-oriented policy agenda must be accompanied by interventions that change how the benefits of growth are distributed, and fundamentally transform the systems and patterns of ownership. 

Initiatives that transform the economy must meet the dual tests of sustainability and intergenerational equity. In other words, economic transformation must be implemented in a manner that does not compromise long-term ability. This means that at the heart of our economic policy must be a concurrent emphasis on economic transformation, inclusive growth and competitiveness as this offers the most sensible strategy to address the challenges of unemployment, poverty and inequality.

Namibia’s industrial ambition is articulated in Vision 2030, which stipulates that the country should be an industrialised nation with a high income by the year 2030. 

To achieve V2030, factors that hinder greater participation by new firms in the economy, such as the existent regulations and policies that support incumbents or are ineffective in assisting rivals and new firms; competition legislation that favours large firms and incumbents; and access to finance challenges, need to be addressed. 

Change in economic relations must be the creation of opportunities for all Namibians to live productive, prosperous and dignified lives. 

Current trade and industrial policies have made some progress towards attaining economic and structural transformation, and contributing to inclusive growth. Namibia’s industrial policy is on the right track, but some important adjustments could significantly improve its effectiveness. 

Furthermore, accessing credit through formal financial institutions is a challenge for entrepreneurs who have little collateral or no proven creditworthiness and, therefore, a higher risk profile. The post-funding support that is necessary to ensure the successful growth of the business is often lacking, as either the mentors have little experience in running small businesses, or have little experience in the sector in which it operates. A failure to support early-stage entrepreneurs disadvantages those who do not have capital and collateral. This policy failure, in turn, inhibits the ability of the government to promote economic transformation, and the resultant gap presents an opportunity where public funds can be deployed more effectively.

Namibia suffers from stubbornly high levels of unemployment that are compounded by inefficient spatial patterns which make participation in the formal and informal economy costly and difficult for individuals. 

Agriculture makes it important in the pursuit of inclusive, labour-intensive economic growth, its rural linkages, ability to absorb less-skilled labour, large multipliers due to extensive links with the rest of the economy, competitive labour productivity, and the importance of export-led growth. A growing agricultural sector can, therefore, help address our challenges of unemployment and low growth, while countering rural poverty.

Our agricultural sector receives less government support than those of our peers, and it seems that we have not taken up all the potential policy space that exists to support the sector. Because the agriculture sector plays an important economic and social role, given its extensive links with the rest of the economy and the importance of food security, business continuity in the sector is critical. 

Many agricultural producers in Namibia are not insured against the negative impacts resulting from natural disasters, such as drought, mainly due to the high costs associated with agricultural insurance.

Tourism is one of the key sectors that can deliver inclusive growth through its labour absorption potential. Tourism is characterised by low barriers to entry, as most tourism businesses are small, providing services such as accommodation, tour guiding, day tours and taxi services. 

An important aspect of its contribution to inclusive growth and economic transformation is the fact that unlike mining, manufacturing and financial services, tourism is not clustered in specific development nodes. 

In conclusion, industrial and trade policy interventions cannot effectively achieve their desired outcomes if they are not complemented by an overall supportive business environment. 

For this reason, Namibia needs to shift its focus towards increasingly attractive regional growth opportunities which hold significant potential to increase intra-regional exports and foster growth and economic development in the region.

Therefore, the Namibia Investment Promotion and Development Board (NIPDB) should advise investors on procedures for entering the Namibian market, and establishing a business.

2023-02-06  Josef Kefas Sheehama

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