Infant Industry Protection: A Policy Tool to Enhance Namibia’s Industrialisation

LAST week the Minister of Finance, Saara Kuugongelwa-Amadhila, announced that the Namibian cement manufacturing industry was afforded infant industry protection (IIP). The IIP will take effect as soon as it has been gazetted by the Government. This announcement coincides with the aims of the Namibian draft Industrial Policy to achieve the industrialisation objectives of Vision 2030.

Ohorongo Cement (Pty) Ltd is currently the only cement manufacturer in this industry. However, the announcement by the Minister opens the opportunity for other cement manufacturers to be established and also benefit from the same IIP. A similar situation occurred when IIP was afforded to the pasta manufacturing industry. Initially Namib Mills (Pty) Ltd was the only pasta manufacturer to utilise the IIP. Later Bokomo Namibia (Pty) Ltd established a pasta manufacturing plant and it also benefitted from the same IIP.The N$ 2,5 billion Ohorongo cement plant is the most technological advanced plant of its kind in Africa. It has been designed for the highest level of output with the least impact on the environment. The application of the latest technology inter alia allows for a 30 per cent reduction in electrical power consumption, a saving of up to 220 cubic metres of water per day and the maintenance of minimum air pollution levels as compared to traditional cement plants.Production at Ohorongo commenced in December 2010 and the first locally manufactured cement left the plant during January 2011. All raw materials required for the cement production process, namely limestone, shale, marl, iron ore and gypsum, are sourced locally. Namibia is currently a net importer of cement and with a production capacity of 700 000 tonnes of cement per annum, the Ohorongo plant will be able to supply about double the current demand of the local market. Hence, the country has the potential to become a net exporter of cement.However, despite the high quality of locally produced cement, Ohorongo Cement (Pty) Ltd is subjected to competition from more affordable imported cement, especially from China. This in turn jeopardises the N$2,5 billion investment in the Ohorongo plant. Despite the imported cement being cheaper at the moment, this is normally a temporary occurrence. Once an exporter has captured the majority market share in the importing country, it steadily increases the price of its product and the initial benefit of cheaper imports is lost. Other negative attributes of imports are the outflow of currency, little or no local value-addition and limited employment creation.The Ohorongo plant is situated in the Otjozondjupa region and the company already had a positive socio-economic impact on the development of Otavi through the establishment of a community trust. Apart from the donation of hospital equipment and the renovation of the Otavi Clinic, the company also supports local service providers and suppliers. Given a multiplier effect of between five and seven, Ohorongo’s presence in the area will result in the creation of a further 2 000 additional employment opportunities.How exactly will the IIP for the cement manufacturing industry be applied?According to Article 26 of the Southern African Customs Union (Sacu) Agreement of 2002, IIP will be afforded to an industry normally for a period of eight years (a temporary measure) by the levying of additional duties on all imports of the final product(s) manufactured by the industry. From the announcement by the Minister of Finance, such additional duties for the local cement manufacturing industry would gradually be phased out during the eight years.Hence, imports of cement from outside Namibia will not be banned. Such imports will only be subjected to an additional duty. During the IIP period the local cement manufacturing industry would still be faced with competition from imports, albeit with an initial advantage. However, during these eight years the industry will have to remain competitive against imports, given that the additional duties will be phased out over the same period. When the IIP eventually expires, the industry should have developed to such a level that it could compete on its own.* Wallie Roux is part of the management committee of the Namibia Manufacturers’ Association, charged with international affairs.

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