Focusing On Namibia’s Economic Competitiveness

THE recent conference in Windhoek on the mobilisation of domestic savings to boost economic growth, as well as the Cabinet retreat in Swakopmund focusing on economic growth and sustainable development, deserve support and are worth applauding.

Namibia is enjoying a confluence of encouraging possibilities. We have relative political and macro-economic stability, managed a peaceful transition of power and generally maintain a functioning democracy.Both the fiscal policy stance and the monetary policy regime would seem to be appropriate and consistent with objectives being pursued by policymakers.The country, however, is characterised by challenges facing most developing countries: high unemployment, poverty, lack of skills, rigid labour regime and high cost of capital, to mention but a few.Yes, the country’s competitiveness has dropped recently; corruption poses challenges and productivity, service delivery and implementation of many a Government plan could be improved upon.The key economic challenge facing Namibia is growth.If we have to achieve Vision 2030 – the dream of becoming an industrialised/developed country by the year 2030 – we need to growth our economy by 10% a year.We, however, achieved an average growth of 3.97% a year since Independence and an average growth of just above 4% annually since 1995.The medium-term framework provides for growth of around 3.8%.We predict that gross domestic product will be around 3.9% this year.The 10% annual growth target to achieve our dreams, based on current fundamentals, is ambitious and almost impossible.Growth targets that are achievable, measurable and realistic would get us closer to realising the Vision 2030 dream.At the current run rate of 4 % economic output, our dream remains just that.Allow me to venture some suggestions, within the broad economic development framework, to stimulate the debate around economic growth and sustainable development.To create jobs, help alleviate poverty and propel economic growth require: Promotion of exports; Skills development and capacity building; Attracting foreign direct investments; Liberalisation of labour regime and boosting productivity; Mobilising domestic savings for economic growth; and Improving governance and accountability.Promotion of exports Intense focus on exports is almost a condition sine qua non for Namibia to double its gross domestic product.It is common knowledge that Namibia’s competitive advantage, as a country, revolves around tourism, mining, agriculture and fishing.These are the sectors we need to focus on to increase exports.Tourism in particular offers huge opportunities in the short-term.Why are we reluctant to exploit these? We may wish to support certain industries within the four sectors mentioned above.One of our regional neighbours has successfully established the motorcar industry through public and private partnership and through specific interventions.In promoting trade and exports, we need to be mindful of the barriers imposed by the developed world on developing countries.These, in my view, are politically antiquated, economically misplaced and ethically indefensible.The capacity to trade, particularly export, requires micro-economic interventions by the relevant line Ministry.Shouldn’t we improve the capacity within the Ministry of Trade to accelerate specific export interventions and also streamline the cost of doing business (company registrations)? The volatility in the exchange rate is being blamed for the misfortunes of the local expert sector, particularly the fishing sector.Although it is certainly a contributing factor, competitiveness, the oil price and diversification of markets also do play a role.The country probably needs the N$ to be around 7.50 and above level to the US$ to be competitive.Based on current fundamentals, one does not expect the local currency to collapse over the next 12 months as in the past.The sooner we accept this reality, the better the challenges the export sector faces with a volatile currency can be managed.Skills development Development starts with investing in people.Due to historic reasons, we are experiencing a severe skills shortage on the one hand and massive oversupply of labour (unemployment) on the other hand.Growing and sustaining the local economy require skilled labour, as well as entrepreneurs.Shouldn’t Namibia relax its work permit rules – obviously without taking jobs away from Namibians – to import much-needed skills? Clearly, it is not rocket science to strategise around expatriates who prolong their stay beyond what is needed.Let us import the skills the country requires.The country is crying out for skills and to produce our own skills is a process.There would seem to be an admission that the current education system has failed to deliver the desired results.Interventions being proposed to redress the situation are encouraging and should assist with skills development if correctly applied.Shouldn’t we fund our institutions of higher learning adequately and match our learning/training to the skills required by the country? Attracting foreign direct investment Money goes where it is safe, where it is welcome and where it attracts the best investment return given the risk taken.Capital (money) hates unpredictability, uncertainty and does not take kindly to artificial regulations.Attracting foreign direct investment requires that we respect these basic laws of finance and economics and create an enabling environment for investors.We could choose to ignore these at our own peril.Our pre-tax cost of capital of above 11% – assuming a 40/60 debt/equity capital structure – contributes to some extent to our mixed results in attracting foreign direct investment.We have a prime rate of 11.75%, an inflation rate of about 3% and investment projects need to generate at least 14.75% to be bankable on a pre-tax basis.We are competing with destinations where the cost of capital is around 5-7% and thus need to do more to welcome and attract investors.The promotion of an integrated market place amongst Africa’s 800 million people will mitigate against the risks of a small population.We need foreign direct investment to assist in growing our economy.Period.Liberalisation of labour regime and boosting productivity It is an accepted fact that our current labour regime is inflexible.It is also an accepted fact that we first need to create jobs before providing job security.Blaming one another on the state of our labour regime is guaranteed to bring us absolutely nowhere.There are three sides to this coin.Courageous leadership is needed to engage labour constructively, yet firmly in assisting with economic growth and sustainable development.Although care should be taken not to impose dogmas and values of developed countries as far as sustainable economic growth is concerned, examples like Ireland abound, where the government, organised labour and the private sector collectively are boosting economic growth.The stage on which we play requires us to be more flexible.Furthermore, productivity is a prerequisite for becoming a winning nation.To win, we need to inculcate a high-performance culture, reward excellence and deal firmly with mediocrity.The notion that being incompetent and inefficient is cool should be challenged head-on and not tolerated if it’s convenient to do so.Domestic savings It is common cause to mobilise domestic savings to boost economic growth without hurting savers.The financial service sector has accepted Government’s proposal to invest 5% of life and retirement funds in “unlisted investments” within the broad definition of unlisted investments.Why not implementing the 5% rule as proposed and supported by the industry? The finalisation of a comprehensive financial sector charter also stands to go a long way in assisting with economic growth and sustainable development.The charter, amongst others, attempts to address: Ownership of financial institutions; Access to financial services and products; Skills development and involvement in financing of infrastructure projects; Affirmative procurement; and Financing of infrastructure/empowerment projects.Improving governance and accountability The drop in Namibia’s competitiveness and incidents of mismanagement can be attributed to lack of governance.It is heartening to note than an agency has been established to assist in this regard.Ensuring governance and accountability would contribute to economic growth, attract foreign investment and ensure an equitable distribution of resources, as well as access to services by the poorest of the poor.The private sector has a key role to play in economic growth and sustainable development.If recent talks of private-public partnerships are translated into concrete plans, we are bound to make a serious dent in growing the economy.Business is undoubtedly the engine for social and economic change in this country.The private sector is ready to help if engaged.State-owned enterprises have a huge potential not only as vehicles to implement Government policy, but to propel economic growth in their own right through innovative interactions.No single company is inherently bad.People, business processes, systems and governance make companies succeed or fail.The time has come for us to create a winning nation.Let us seize this opportunity, maintain the momentum created and propel Namibia’s economic growth and sustainable development.* Johannes !Gawaxab is the MD of Old Mutual.He wrote this opinion piece in his personal capacity.We have relative political and macro-economic stability, managed a peaceful transition of power and generally maintain a functioning democracy.Both the fiscal policy stance and the monetary policy regime would seem to be appropriate and consistent with objectives being pursued by policymakers.The country, however, is characterised by challenges facing most developing countries: high unemployment, poverty, lack of skills, rigid labour regime and high cost of capital, to mention but a few.Yes, the country’s competitiveness has dropped recently; corruption poses challenges and productivity, service delivery and implementation of many a Government plan could be improved upon.The key economic challenge facing Namibia is growth.If we have to achieve Vision 2030 – the dream of becoming an industrialised/developed country by the year 2030 – we need to growth our economy by 10% a year.We, however, achieved an average growth of 3.97% a year since Independence and an average growth of just above 4% annually since 1995.The medium-term framework provides for growth of around 3.8%.We predict that gross domestic product will be around 3.9% this year.The 10% annual growth target to achieve our dreams, based on current fundamentals, is ambitious and almost impossible.Growth targets that are achievable, measurable and realistic would get us closer to realising the Vision 2030 dream.At the current run rate of 4 % economic output, our dream remains just that.Allow me to venture some suggestions, within the broad economic development framework, to stimulate the debate around economic growth and sustainable development.To create jobs, help alleviate poverty and propel economic growth require: Promotion of exports; Skills development and capacity building; Attracting foreign direct investments; Liberalisation of labour regime and boosting productivity; Mobilising domestic savings for economic growth; and Improving governance and accountability.Promotion of exports Intense focus on exports is almost a condition sine qua non for Namibia to double its gross domestic product.It is common knowledge that Namibia’s competitive advantage, as a country, revolves around tourism, mining, agriculture and fishing.These are the sectors we need to focus on to increase exports.Tourism in particular offers huge opportunities in the short-term.Why are we reluctant to exploit these? We may wish to support certain industries within the four sectors mentioned above.One of our regional neighbours has successfully established the motorcar industry through public and private partnership and through specific interventions.In promoting trade and exports, we need to be mindful of the barriers imposed by the developed world on developing countries.These, in my view, are politically antiquated, economically misplaced and ethically indefensible.The capacity to trade, particularly export, requires micro-economic interventions by the relevant line Ministry.Shouldn’t we improve the capacity within the Ministry of Trade to accelerate specific export interventions and also streamline the cost of doing business (company registrations)? The volatility in the exchange rate is being blamed for the misfortunes of the local expert sector, particularly the fishing sector.Although it is certainly a contributing factor, competitiveness, the oil price and diversification of markets also do play a role.The country probably needs the N$ to be around 7.50 and above level to the US$ to be competitive.Based on current fundamentals, one does not expect the local currency to collapse over the next 12 months as in the past.The sooner we accept this reality, the better the challenges the export sector faces with a volatile currency can be managed.Skills development Development starts with investing in people.Due to historic reasons, we are experiencing a severe skills shortage on the one hand and massive oversupply of labour (unemployment) on the other hand.Growing and sustaining the local economy require skilled labour, as well as entrepreneurs.Shouldn’t Namibia relax its work permit rules – obviously without taking jobs away from Namibians – to import much-needed skills? Clearly, it is not rocket science to strategise around expatriates who prolong their stay beyond what is needed.Let us import the skills the country requires.The country is crying out for skills and to produce our own skills is a process.There would seem to be an admission that the current education system has failed to deliver the desired results.Interventions being proposed to redress the situation are encouraging and should assist with skills development if correctly applied.Shouldn’t we fund our institutions of higher learning adequately and match our learning/training to the skills required by the country? Attracting foreign direct investment Money goes where it is safe, where it is welcome and where it attracts the best investment return given the risk taken.Capital (money) hates unpredictability, uncertainty and does not take kindly to artificial regulations.Attracting foreign direct investment requires that we respect these basic laws of finance and economics and create an enabling environment for investors.We could choose to ignore these at our own peril.Our pre-tax cost of capital of above 11% – assuming a 40/60 debt/equity capital structure – contributes to some extent to our mixed results in attracting foreign direct investment.We have a prime rate of 11.75%, an inflation rate of about 3% and investment projects need to generate at least 14.75% to be bankable on a pre-tax basis.We are competing with destinations where the cost of capital is around 5-7% and thus need to do more to welcome and attract investors.The promotion of an integrated market place amongst Africa’s 800 million people will mitigate against the risks of a small population.We need foreign direct investment to assist in growing our economy.Period.Liberalisation of labour regime and boosting productivity It is an accepted fact that our current labour regime is inflexible.It is also an accepted fact that we first need to create jobs before providing job security.Blaming one another on the state of our labour regime is guaranteed to bring us absolutely nowhere.There are three sides to this coin.Courageous leadership is needed to engage labour constructively, yet firmly in assisting with economic growth and sustainable development.Although care should be taken not to impose dogmas and values of developed countries as far as sustainable economic growth is concerned, examples like Ireland abound, where the government, organised labour and the private sector collectively are boosting economic growth.The stage on which we play requires us to be more flexible.Furthermore, productivity is a prerequisite for becoming a winning nation.To win, we need to inculcate a high-performance culture, reward excellence and deal firmly with mediocrity.The notion that being incompetent and inefficient is cool should be challenged head-on and not tolerated if it’s convenient to do so.Domestic savings It is common cause to mobilise domestic savings to boost economic growth without hurting savers.The financial service sector has accepted Government’s proposal to invest 5% of life and retirement funds in “unlisted investments” within the broad definition of unlisted investments.Why not implementing the 5% rule as proposed and supported by the industry? The finalisation of a comprehensive financial sector charter also stands to go a long way in assisting with economic growth and sustainable development.The charter, amongst others, attempts to address: Ownership of financial institutions; Access to financial services and products; Skills development and involvement in financing of infrastructure projects; Affirmative procurement; and Financing of infrastructure/empowerment projects.Improving governance and accountability The drop in Namibia’s competitiveness and incidents of mismanagement can be attributed to lack of governance.It is heartening to note than an agency has been established to assist in this regard.Ensuring governance and accountability would contribute to economic growth, attract foreign investment and ensure an equitable distribution of resources, as well as access to services by the poorest of the poor.The private sector has a key role to play in economic growth and sustainable development.If recent talks of private-public partnerships are translated into concrete plans, we are bound to make a serious dent in growing the economy.Business is undoubtedly the engine for social and economic change in this country.The private sector is ready to help if engaged.State-owned enterprises have a huge potential not only as vehicles to implement Government policy, but to propel economic growth in their own right through innovative interactions.No single company is inherently bad.People, business processes, systems and governance make companies succeed or fail.The time has come for us to create a winning nation.Let us seize this opportunity, maintain the momentum created and propel Namibia’s economic growth and sustainable development.* Johannes !Gawaxab is the MD of Old Mutual.He wrote this opinion piece in his personal capacity.