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Home / Our Micro-Economic Climate Suffocates Growth
Our Micro-Economic Climate Suffocates Growth
2008-04-11Staff Report 2 By Kazenambo Kazenambo Part II - Budget Analysis: Micro-economic Perspective How do Namibian firms benefit from budget allocations? I'm raising these issues, because in my view, Namibian companies are being crowded out of the Namibian market by foreign companies who are awash with money, and some of them which are alleged to be enjoying some subsidies from their parent companies and governments of their country of origin. And while I'm on this point, let me state that I'm not advancing this point from an influence of xenophobia or protectionism, but I'm voicing the concern shared by many struggling Namibian small and medium business men and women, and many workers of Namibia who are feeling the pinch - who are being suffocated by the domination of the Namibian market by foreign multi-nationals and other foreign firms which are taking bread from their mouths, and pushing them (Namibian firms) out of the market. Some Namibian small and medium companies are increasingly feeling like orphans in the cutthroat competitive global business environment. Our business people are facing tough and unfair competition - on an almost daily basis in all sectors of the economy, therefore we need to start addressing the complex micro-economic bottlenecks and impediments that negatively impact on the expansion and diversification of our economy with the seriousness it deserves. Not Know Where to Turn Some business men and women, especially some owners of small and medium companies from across the 13 political regions of Namibia, are expressing concern that they are not receiving a friendly or welcoming reception from some of our public institutions, therefore they do not know where to turn to in order to raise their concerns. In some cases they are seen as troublemakers or complaining for the sake of complaining. One knows and understands our passion and fixation on trying to attract foreign investors to invest in our market. One is also aware of many generous incentives which in many cases are offered to foreign investors, in some cases which are somewhat ruinous to our emerging economy, other than contributing to its reconstruction. The Ramatex disaster, the Pidico saga, the Offshore Development Company (ODC) and Social Security financial scandals are some of the recent cases in point, and the list goes on. The Green Scheme is another money-making (honeymoon scheme) in which some consultants are alleged to be milking (sucking and bleeding) empty our state coffers without showing any concrete results that make an equilibrium or break-even on the invested hundreds of millions of Namibian dollars of taxpayers' money that have been pumped into this project so far. While one supports our efforts of promoting food security through projects such as the Green Scheme, one only cautions that well intended projects such as the Green Scheme should not turn into holed drums through which our limited financial resources are pumped or drained into wastage, such as the Ramatex case turned out to be to the shock and dismay of the entire nation. The micro-economic environment in Namibia is increasingly getting harder and harder for the Namibian-owned small and medium businesses on the one hand, and for the workers on the other hand across the various sectors of our economy - from construction, retail, farming, etc. It is a fact that in many cases, foreign firms which have entered the Namibian market, so-called big investors like Ramatex and Pidico, established themselves in the Namibian market primarily aided by lucrative incentives tantamount to seed capital which are rarely available for native Namibian companies. Ramatex was given lots of incentives that ran into millions if not billions of Namibia dollars. Perhaps with the exception of companies exploiting business opportunities in finite extractive and sucking industries such as mining, fishing, etc. many companies such as those operating in sectors such as banking, insurance, law, information technology, pharmaceutical, real estate, car dealers, construction, retailing, etc. are principally dependant on Namibia's limited/scarce resources. Many of these companies hardly bring money here, bringing rather their management cadres. All said and done, what many of these companies do (with the exception of a few) - they harvest and export money to their parent companies in their countries of origin. Many of them do not invest in Namibia in terms of infrastructure development and expansion of their business operations in the rural areas and depressed parts of our urban centres. Many of them do not contribute to any research and development (R&D) critical for the diversification of the Namibian economy. To add insult to injury, only a few of these foreign firms are meaningfully contributing to transfer of skills in real terms. Many of the foreign and local family-owned firms benefiting from Namibian taxpayers' money are not interested in the economic empowerment of the Namibian people. They are not opening up their shareholding structure for participation of local Namibians (particularly to blacks and women) as they are doing in countries like South Africa. Their business operations (organizational behaviour) here in Namibia are conducted as if they are operating in a neo-colonial or satellite banana republic. If you can take a random snapshot survey, you will find that the top management structure, let alone the shareholding structure of foreign and local family-owned companies benefiting from huge lucrative government tenders, are run and dominated in the top and middle management structure mainly by foreign white men. Majority local Namibians are only found at the bottom end of the company structure of these companies with no paths and hope for them to ever reach the middle or top end. This scenario is seen across all the sectors of our economy and calls for immediate remedial action from all stakeholders. Insult is aggravated by what some of these foreign companies such as those in the banking and insurance sectors are now doing - creating hollow shells that are falsely packaged and presented to the Namibian public as this or that holding company, so-called this Namibia Bank Africa or that Namibia Insurance Africa. This treasonable business nonsensical practice undermines the economic empowerment of Namibians - be it in terms of management skill transfer, etc - therefore one wonders why the Bank of Namibia condones it, more particularly in the financial sector? What Africa, and who is fooling who? How can subsidiaries or branches of South African financial companies based in Namibia all of sudden become holding companies of the operations of their South African parent companies in running the business operations of those companies for the entire continent? This scandal needs to be explained as many of us are neither convinced nor happy with this practice which appears to be designed to disempower Namibians from the real management of these private foreign firms operating in Namibia. The present situation of free market entry and exit, and unregulated, ineffectively monitored or unevaluated behaviour and activities of some companies in this country are not in the best interest of our economic development. We need to have some effective strategic public policy regulatory framework to deal with unfair competition in order to ensure fair competition in all sectors of our economy. We also need to have these in place to ensure that consumers are well protected and that the Namibian market is not littered or dumped with hazardous and poor quality goods and services such as it is now the case in many of our economic sectors. It is the duty of the authority to ensure that the citizens are not being disadvantaged by foreign firms entering or operating in the Namibian market. We have to strictly monitor and evaluate the behaviour of companies with regard to their impact on the environment, their shareholding structure as to how they involve or empower local Namibians and their social responsibility in general. The situation whereby the Namibian market is a free for all type of market place whereby Namibian small and medium firms are relegated into nothing and whereby market entry into the mainstream of the economy is almost zero for small and medium established companies owned by local Namibians should no longer be tolerated. Namibia needs to introduce a public policy regulatory framework and mechanisms which will ensure and protect the interests of Namibia's local business men and women, especially the vulnerable owners of small and medium firms and the workers. Namibia needs to empower and deliberately build the capacity and capabilities of its fourth factor of production (thus its local enterprise across all sectors of the economy from real estate, construction, retail, transport, telecommunication, insurance and banking, to information technology, education, health, agriculture, law, tourism, etc). It is about time that Namibia makes sure through our government budget allocation that local Namibian businesses are also financially benefiting from budget allocations through procurement of their goods and services by the Namibian government. Foreign or local big companies that benefit from lucrative huge government tenders must be compelled to procure some locally produced products from small and medium Namibian companies. Some provisions must be made that big companies working on huge capital projects contracted by government must involve participation of local Namibian companies in their business activities as partners across all sectors of the economy. Namibia must put-up strict measures that will eradicate huge capital flight being done by unscrupulous business people. While I respect free repatriation of profit as provided for in our trade or investment public policy instruments, I also strongly believe that there is a need for firms to spend some portion of their profits in reinvesting in Namibia in order to contribute to the diversification, expansion and growth of our economy. For instance, major SA companies invest substantially in the infrastructure of SA but hardly do the same in our country. Let us put in place measures and mechanisms to reduce capital flight. It is a fact that prosperous and dynamic economies such as that of the United States and those of the newly industrialized countries such as the city economies of Singapore and Hong Kong are anchored on the participation of many small firms in the mainstream of the economy. These economies are dependant on the activities of many small and medium firms which some of them working in close corporation with bigger firms. I trust that we can achieve the diversification of our economy if we can encourage participation of many small firms owned by local Namibians to enter into the mainstream of our economy. I believe that it is about time that we identify and help to build capacities and capabilities of small and medium firms from across all the 13 regions of our country in various economic fields. We must encourage various ministries to have micro-lending schemes targeted at small businesses owned by the youth in the urban and rural areas to assist in the building of the capacity of small and medium firms which are rendering services and selling products in the rural areas. In future, we must have special funds in various ministries which may help to assist the business people in the rural areas, and to assist business operations in the depressed section of our urban areas in order to expand or enhance their capacities and capabilities to provide goods and services to the rural residents, and the poorest of the poor in the urban areas. In general, I think it will be interesting to see a list of the number of small entrepreneurs from all the 13 regions of Namibia whose small or medium projects have been financed by our financial institutions including our Development Bank on an annual basis. We must award tenders to firms that are investing and promoting social responsibility/activities in the rural areas and helping the urban poor across the 13 regions of Namibia. We must start to apply positive discrimination by awarding lucrative tenders to firms that are heavily re-investing in the Namibian economy, firms that are giving substantial shares to workers, women, the youth and people with disability, etc. We must start making sure that money flowing from the budget should also support those private companies which are investing in the rural areas of our 13 regions in order to help reduction of rural-urban migration. We must also start protecting our local businesses by making sure that foreign companies that are involved in sectors which can be pursued by our local business people are compelled to involve locals in areas such as construction, consultancy, etc. in order to build the capacity of our local business players. This business strategy will also contribute to the reduction of capital flight from Namibia to foreign countries. In the final analysis, all the issues discussed above can only be addressed satisfactorily and successfully by our SWAPO Party Government. However, it must not mean that ministries/agencies/offices should rely on the services of foreign consultants to advise on modalities of implementation - on the contrary, the solutions should be home-grown! Our Parliament must enact the relevant laws that are responsive to the plight of SMEs, in our country. Our ministries should create developmental funds to assist our people in rural areas. We must embark upon measures of transforming the Development Bank of Namibia, small credit guarantee schemes and Agribank into a reliable financial institution to cater for the socio-economic needs of our people. The Ministry of Trade and Industry should speed up the implementation of the Competitor Agency as well as the Price Regulatory Authority to protect Namibian consumers. We must restructure the tendering process to ensure that any foreign company awarded a tender must have a significant component of locals especially the youth, women, people with disability and from the rural areas in particular. We must, through the Ministry of Education, institute the measures of capacity building without discrimination on the basis of tribe or economic status. Corporate companies, local and foreign owned operating in Namibia, must employ Namibians in their top management structure as real managing directors/chief executive officers, but not the charade of staged authenticity where some are appointed managing directors/chief executive officers of so-called holding companies of mostly foreign South African firms. 2008-04-11Staff Report 2
