Customer Is The Queen

In releasing the latest figures on the economy last week, the Statistician-General revealed that our economy grew by five percent last year. While this is a solid and respectable performance, it is still lower than 5.7% recorded the year before. But more critically, NDP4 projects growth in excess of six percent – i.e. 6.1% (2013/14); 6.4% (2014.15); 6.3%(2015/16) and 6.5%(2016/17) in real terms for its objectives to be realised in order to set the nation on the road where 80% of our income is derived from manufacturing and service sectors.

From the macro-economic statistics presented last week, it was clear that we continue to be a net importer of goods and services not only because we are a low-skill, underdeveloped economy but also an “open” one, owing to our membership of a number of bilateral and multi-lateral trade agreements, monetary, and investment treaties.

This, in part, is a reflection of what we already know, namely that we have very little charge of exogenous factors which have a disproportionate bearing on our economy’s fortunes despite our rich natural resources.

To be sure, the arguments for autarchic development models have a dwindling following in the age of the World Trade Organisation (WTO). In any event, we are better off inside the WTO tent than outside, whistling in the dark. A rule-based trading system serves our interest and that of all smaller countries better than other way round.

The release of the report by the National Statistics Agency last week, coincided with the visit of Karel de Gucht, EU Trade Commissioner, to hear Namibia out on outstanding issues before the conclusion of an Economic Partnership Agreement (EPA) between ourselves and the EU.

The EPA agreement is a successor to the Lome Convention and is a necessity under the strictures of WTO in order to safeguard the market access concessions of Lome. Whereas EU remains the prime destination for our exports, SACU (read South Africa) is the source of most of our imports.

Regional agreements, such as SACU are permissible, even under the Most Favoured Nations (MFN) principle of WTO. So the policy objective here surely must be one which leads to optimum welfare for Namibians.

Clearly, domestic production would help to achieve the growth projections of NDP4 but also create jobs and keep the taxman smiling. But it is also self-evident, in a small open economy, that those producing exclusively for the local market will always play second fiddle to foreign, larger producers benefitting from economies of scale. And it is here where policy makers are faced with the unenviable task of having to weigh the gains of lower prices of imports for consumers against domestic production, job creation and tax income.

In a hierarchy of priorities, which policy decision is superior to the other and why? That is to say, is the consumption of local chicken or milk or the ban on the importation of second hand Japanese cars a higher welfare good than throwing the borders open for competition? If not, why not? Also, are the policies of ‘growth at home’ and provision of competitive products for the consumer from the rest of the world mutually exclusive?

Our goose is already roosted by the multi-lateral dictates of WTO and more immediately by our commitments under both SACU and the Common Monetary Area (CMA). Save for a few exceptions, essentially those relating to quotas in agricultural produce and phyto-sanitary ones, goods and services move unhindered in the SACU area. In the absence of a Sacu-wide industrial policy, ‘growth at home’ may thus be a non-sequitur.

Further, the manner of our integration in CMA has meant that we were unable to employ monetary policy to offset the most recent effects of exogenous financial and economic crises. But all may not be lost, as our contiguity to a relatively larger and more dynamic economy may in fact engender development locally.

This is the experience from elsewhere. Of the four priority areas of NDP4, tourism and logistics clearly stand to gain from this association both in the short and long run. As SACU and SADC, going forward, make business and economic sense, our economic prosperity and welfare may largely be a function of deeper regional integration.

If that be the case, the five percent rate at which the economy grew last year or the six percent-plus growth expectations and projections of NDP4 are all about welfare of the citizens. But it is firms and enterprises/ investors who risk their capital to help create this wealth.

These investors too, expect and are entitled to fair returns on their investments and risks taken. It is in crafting policies that are alive to the needs of all these constituencies that we can emulate growth of the more successful countries in the world.