Philips Ndunda
Namibia has over the years pursued aggressive but very ambitious efforts towards achieving equitable economic development, through a vehicle, nationally referred to as Vision 2030.
The drive to realise the vision has been supported by accelerated infrastructure development, notably state funded projects in improved road networks, ports improvement, rural water supplies, and rural electrification, with some of the infrastructure capitalisation realised through multilateral partners such as the African Development Bank.
While the country has established development support conduits in the likes of National Development Plans, (NDP 1, 2, 3, 4 and 5), it is inconceivable for the nation not to realise unprecedented economic growth and the attainment of the vision.
In 2021, Vision 2030 is only nine years away and around the corner, creating anxiety as to whether Namibia’s development momentum is sustained to reach the vision in abundance of resources, reduced unemployment and ultimately an industrialised self-sustaining nation, with productive capacity, ingenuity to reduce reliance on other nations for imports of basic household commodities.
Despite Namibia ranking among the best countries on the African continent in infrastructure, the country struggles to attract notable investments to actualise Vision 2030.
A pre-Covid-19 blanket relief has not only inclined the policymakers to a perception that the country’s economic growth is hampered by external factors such as the sluggish global economy, internal factors attributable to persistent drought as main cause factors for the poor performance of the economy, but also the ordinary man on the street.
The prohibitive factor to Namibia’s realisation of substantive economic growth and the attainment of Vision 2030 is technically attributed to the presence of interposed investment regimes that are crippling the economy.
While primary sectors such as the agriculture sector have been vulnerable to the effects of drought in recent years and hence suffocating growth in the sector, it does not warrant attracting a negative investment rating of the country to junk status.
Equally, the sluggish performance of the world economy is far from being the driving factor for the rating of the economy to junk status.
The primary indicators for a jurisdiction to attract a negative investment rating or junk status is the presence of interposed regimes that are tax driven.
In the case of Namibia, the jurisdiction has interposed regimes that have resulted in the country’s economy being transformed from an ordinary open economy to a hybrid open target entity economy.
This transformation and characterisation of the economy is extremely harmful to the extent that any potential investor will seek the opinion of their finance and investment experts as to whether investing in a jurisdiction with such characterisation will yield any positive returns on their investments.
Investors may promise huge investments to the politicians, but once they get to the decision boardroom, the investment language changes and is dominated by numbers, effectively turning everything upside down.
No show to actualise the investments and all is simply shelved or suspended.
Interposed regimes are the most dangerous economic viruses that have stalled the realisation of sustained economic growth and the near attainment of Vision 2030.
In endeavouring to offset the lost development pace in the realisation of Vision 2030, government is embarking on a presumably fast-tracked industrialisation agenda through the formation of the Namibia Industrial Development Agency (NIDA).
The presence of interposed regimes has not only exposed the economy to the attraction of a negative investment rating with a classification of a junk status economy but will,
in a similar manner subdue the efforts of the Agency in realising the industrialisation agenda.
Namibia’s industrialisation agenda is achievable, albeit with interpretive procedures on how the interposed regimes will be outmanoeuvred.
If those in the governance system choose to look into the other direction of self-importance, Namibia’s industrialisation agenda will become an endeavour leading to a white elephant effigy.
Interposed regimes have the effects of transforming and crippling economies if they are not interpreted thoroughly to attract inward investments that can contribute to effective industrialisation.
In the absence of this capacity and these measures, the industrialization agenda will simply be equivalent to; the right seed, planted at the right season, but on the wrong ground with poor soil to sustain the growth.
Interposed regimes have their own cause of existence or primary reason why they are loaded into the economy, some of which include the administration of Bilateral Tax Treaties without regular interpretation of the treaties, the administration of Bilateral Tax Treaties with a scope which is skewed, the administration of such treaties using a taxing instrument which does not have safety net provisions, i.e. a pure Hybrid Income Tax Act and the plain adoption of investment regimes without providing effective Investment Instrument Administration Interpretation Protocols.
The absence of Instrument Administration Interpretation Protocols is the fundamental reason why the interposed regimes were loaded into the economy and if this trend continues, the prospects for the realization of effective industrialisation and economic recovery is sadly very bleak.
Treasury will carry infinite budget deficits, which will have to be shouldered onto the next generation and the country becomes vulnerable to external borrowing terms, which even risk sovereignty of the country.
When an economy attracts a junk status or negative investment rating it is a clear signal of the existence of highly concealed interposed regimes that are sophisticated to detect but distorting both the revenue and tax base of the country, hence crippling the economy and repelling serious potential inward investments.