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Opinion - Manufacturers versus traders and the economic effects

2021-08-13  Staff Reporter

Opinion - Manufacturers versus traders and the economic effects
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The traditional “Ricardian” trade theory contends that all nations benefit from trade by specialising in the manufacture of products in which they have a comparative advantage. All in all, manufacturing of things step-by-step is way advantageous for developing nations like Namibia. Many economics experts have long-established that manufacturing helps the nation directly because of the multiplier effect that manufacturing brings to the table (job creation & more capital spent) in various other industries. Hence, manufacturing is an important ‘gamechanger’ to the economy in various ways. Inter alia, it provides decent salaries and outstanding benefits to a larger proportion of workers who do not have a college degree. 

Manufacturer versus trader

A manufacturer is a person or business who utilises raw materials and applies labour hours to generate finished goods; whereas a trader, sometimes known as a vendor, middleman or briefcase enterprise, acts as an intermediary between buyers and sellers, with no ownership or manufacturing of the goods offered. 

Amid the unemployment rate, which is skyrocketing, everyone is trying to make ends meet. The good news is that Namibian companies are finally bagging lucrative tenders, compared to a decade ago – but unfortunately/fortunately, depending on which side one is riding on, the tenders are mostly awarded to traders, rather than manufacturers, because their prices are more favourable, seemingly! As long as a company is registered in Namibia, it stands a good chance of winning the tender, regardless of its trader or manufacturer status. It is excellent somehow, since a Namibian company is granted the lucrative tender – and we expect the money to circulate inside the nation but this is not always the case!

One of the reasons there are more traders than manufacturers in Namibia is because a trader requires less start-up capital than a manufacturer – and the process of purchasing items is much more controllable and simpler than setting up a manufacturing unit. Trading appears to be less expensive and has less risk than manufacturing. Many buyers (procurers) do not care if they are working with a trader or a manufacturer – as long as the pricing and quality meet their expectations.

 

The implications 

The unfavourable scenario occurs when a trader is awarded a tender and then purchases products or services from outside Namibia. This means jobs are generated in places other than Namibia. Most earnings benefit only the company’s owner and a few workers, assuming the company even has a physical location. Whilst the favourable scenario occurs when a tender is granted to a manufacturer and the items are made locally, this means more economic activities are stimulated across the society as a result of this production. In most cases, raw materials are acquired locally or outsourced; labour is driven by our brothers and sisters, which is critical for the country’s job growth.

Manufacturing is more advantageous for the nation and its economy. If a company builds a manufacturing enterprise, smaller enterprises are developed in the communities and work opportunities are created in a whole value chain process. Every dollar of manufacturing production creates a certain degree of social economic activity. Manufacturing has so many important connections across the economy to so many other sectors; its performance promotes more social economic activity than any other industry. When produced items eventually reach customers, they possibly contain additional value from other industries.

As previously supposed, for every item produced, there will be a demand for employment to be established somewhere. People will not be able to buy products and services if there is no work – and if they cannot buy, it will be difficult for local manufacturers to exist. Of course, there should be an exemption for items that we do not manufacture as a country – that is a subject for another day. Nevertheless, we should advocate and support the products that we manufacture in Namibia by supporting initiatives like ‘Growth at Home’.

Our argument is to emphasise the significance of manufacturing to our country’s economy and to create an atmosphere that is favourable to existing and aspiring manufacturers. The time is ripe to reconsider the manufacturers’ support model, tax rate, retail charter and access to financing and land for our manufacturers. Those involved in the procurement of goods and services should also encourage local manufacturers; it is unclear whether there are regulated processes inside the Namibian organisations to identify manufacturers and traders, and who receives priority between the two. If a local company is required, a background check should be performed on the company that is given a tender.


2021-08-13  Staff Reporter

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