Economics of the Potato

POTATOES HAVE ALWAYS received accolades for their importance globally, for food security, jobs and impetus to spur economic growth through agriculture.

My musings on this subject are inspired chiefly by the recent harvest of potatoes in the Ondonga Traditional Authority under the leadership of King Fillemon Nangolo. This effort, which aims to reduce reliance on imported food and boost local production and food security within the country, must be lauded.

This much-publicised initiative has seen the first potato harvest at Okashana village, with over 100 farmers participating and creating new jobs. To maximise its impact, we need nationwide replicability, amplified by foreign investment and deliberate government policy.

This potato story took me back to one of my first economics classes in the United Kingdom (UK) in 1994, shortly after arriving for my studies as a bright-eyed 16-year-old from Martin Luther High School near Omaruru. The subject of that economics lecture was examining the 1840s Highland Potato Famine in Scotland in relation to the theories of Scottish economist Adam Smith.

Smith is best known as the father of modern economics. His most famous work, ‘An Inquiry into the Nature and Causes of the Wealth of Nations’, is regarded as the foundation text for the study of the relationship between society, politics, commerce and prosperity.

While Smith’s theories on free markets and the role of government in preventing famine were influential, they don’t directly address the specific circumstances of the potato famine. The famine was part of a wider food crisis affecting northern Europe, including Ireland, and was caused by potato blight.

The famine highlighted the vulnerability of communities that relied heavily on a single crop.

While less extensive than the Irish famine, it was a crisis for the Scottish Highlands. The British government’s response was considered slow and inadequate by some, leading to criticism.

Smith argued that famines were often caused by government interventions, such as price controls, which disrupt the natural market mechanisms that ration food supplies during shortages. He believed that in a free market, rising prices would encourage the supply of food and discourage excessive consumption, thus preventing widespread starvation.

However, Smith’s theories primarily focused on grain and did not specifically address potatoes, a crucial food source in Ireland and parts of Scotland.

In my doctoral thesis, ‘Impact of Foreign Direct Investment (FDI) Inflows on Namibia’s Growth at Home Strategy for Economic Recovery’, I explored the causal link between FDI in all Namibian economic sectors, economic growth, and job creation. Of particular interest is the agriculture, tourism and value creation sectors crucial for large scale job creation and economic growth.

The ‘Growth at Home Strategy’, introduced in 2015 by the then trade and industrialisation ministry, emphasises value addition, industrialisation and import substitution with the goal of establishing Namibia as a competitive regional economic hub.

Within this context, FDI becomes pivotal as it brings the capital, technology and expertise necessary to boost local production capacity and promote sustainable growth.

The study confirms that FDI remains crucial in Namibia’s macroeconomic structure, providing significant capital inflows that are often beyond the mobilisation capacity of domestic investors or the government. It serves as both a financial injection and an indicator of investor confidence. FDI has been essential in funding large-scale projects that would otherwise stall. FDI introduces modern equipment, software and practices, contributing to technology transfer.

FDI flows in Namibia are highly concentrated in specific sectors. The mining and quarrying sector is the dominant recipient of FDI, attracting investments in diamonds, uranium, gold and lithium. This is attributed to Namibia’s rich mineral wealth, the capital-intensive nature of mining operations, and a relatively well-established legal framework providing predictability.

But, is this enough?

More recently, the renewable energy sector has emerged as a significant FDI beneficiary. Namibia’s solar and wind resources, coupled with energy security needs and supportive regulatory models, have made it an attractive destination for investments in related projects, like the Diaz Wind Power Station, Kokerboom Solar Power Station, and the Hyphen Hydrogen Energy projects.

The logistics sector has also attracted foreign firms viewing Namibia as a regional transit hub.

Of concern is its impact on the agriculture and livestock sector. This sector remains significantly under-supported by FDI. Challenges in this sector include perceived low returns, infrastructural deficiencies, policy uncertainty, small market size and weak enforcement of trade protections for local producers.

Alignment between FDI and the ‘Growth at Home Strategy’ is currently partial at best. While the strategy aims for industrialisation, value addition, and import substitution, much of the incoming FDI focuses on the extraction and export of raw materials with limited local beneficiation or domestic value chain development.

There is a recognised need to direct FDI towards sectors that align with the ‘Growth at Home’ logic, but this requires putting specific mechanisms in place – much like Smith espoused ineffective government intervention during the potato famine.

Several challenges in aligning FDI with the strategy include:

• Institutional fragmentation and lack of coordination.
• Capacity gaps.
• Regulatory uncertainty and bottlenecks.
• Outdated and broad incentive frameworks.
• Weak enforcement of local content policies.
• Lack of investor targeting and sector-specific strategies.

Given a proper supportive framework, domestication of the potato will gradually result in greater food production and food security, which in turn will ignite wider agricultural production, stimulate economic growth, and create employment and technological innovation in Namibia.

As in the words of King Nangolo: “This is a call to action, a message to all local farmers, businesspeople and community leaders that the Oshikoto region has the potential to become a national food basket”.

The blueprint has been laid – this is his challenge to the whole of Namibia.

– Harry !Gonteb is a FDI thought-leader. He is a seasoned FDI practitioner working with United States and UK investment and trade promotion agencies. These are his opinions.

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