The Power To Empower Through Power

INVESTORS’ conferences are great. Great for the event industry, great for the hospitality industry, great for all those hungry officials at the end of the month and great for the informal nocturnal entertainment industry! I attended one some years ago.

As one outside investor then remarked to a colleague – “I counted 83 Mercedes in the car park – who needs money!” Such conferences are a get-together of the good and the great and a mix of the honest and honourable people seeking real opportunity that provides long-term benefits for all parties, the good guys. And then there is the plethora of financiers, salesmen, officials, consultants, charlatans and parasites seeking opportunities for largesse (rent seeking?) through their “contacts” and “inside information” and “miracle solutions”.Those seeking to sell their wares that only provide “value” when supported by a matrix of government guarantees, subsidies, credits, donor support and favoured access.We (Namibians) take the risks and ultimately pay while often the suppliers and their “fixers” walk off with the booty; and often the goods purchased fail to deliver.The smell of corruption and malfeasance pervades! One needs to look little further than the arms, telecommunications, textile and energy industries in our region to see how many major players have been caught with their pants down in recent years – or where governments have battened down the hatches on shady deals to prevent upsetting their corrupt business partners.Major European suppliers have been exposed in recent years and some have been taken to task but the rot is certainly much broader than this – on both sides of the equation.Perhaps it is significant that this “event” opens on October 29 – the anniversary of both the launch of the Public Service Charter, with its principles of honesty and accountability, and the 1929 Wall Street market crash! The latter the result of a fraudulent bank collapse, insider trading and irrational extension of credit to the un-creditworthy that fuelled a stock market bubble.What’s changed? Current shenanigans on world markets seem to suggest that “irrational exuberance” remains a problem – but governments and business have become clever at manipulating the financial system to preserve each other’s interests! The final shakeout is still in progress – watch that space.And who ends up paying the bill? Namibia is fortunate to be somewhat isolated from these problems due to a relatively conservative lending/money and credit creation regime by our Ministry of Finance, the Bank of Namibia and our commercial banks, a situation for which they receive much criticism but … This stability, while admirable, does result in a more risk-averse lending policy which means that, in order to maintain returns, much money is invested externally – Namibia exports money! So why do we need an Investors’ Conference? One answer lies within a quote from (the late) Robert E.Bartley, the once editor of the Wall Street Journal – “there is no such thing as shortage, just price”.What we really need is a shift away from the current “old” business model: where the entrepreneur and his business model attracts the investor, the equipment is then bought from the supplier and business starts – with nearly all the risk (current practice) being taken by the entrepreneur and none by the supplier (hence needs for subsidies, influence etc); to a model where the entrepreneur, supplier and customer are mutually dependent; the business opportunity is identified, the supplier provides (finances and retains ownership) the equipment, proves it works and the entrepreneur makes it happen – and receives the payment for goods delivered from the customer and then pays supplier an agreed rate – almost a franchise model.Now the risk is shared – they all want to succeed.This latter concept, I find out later even has a label – “Service and Flow”.But this is where PRICE comes in (and agreed volumes).Namibia’s policy is “pro-poor” focused – and the planks are “import substitution”, “job creation”, “add value to primary products” and to “maximise the benefits available natural resources for the benefit of ALL Namibians”- to provide the poor opportunity to hoist themselves out of their poverty.In this regard let’s look at realities.Mining is growing rapidly, produces few jobs, lots of money and exports a primary product.Agriculture, fishing and manufacturing remain stubbornly unchanging in their contribution to GDP.Tourism, while on an upswing, is both notorious sensitive to fashion and world events and Namibia’s capacity to absorb recreational tourism is finite.Our policy imperatives are stumbling – poverty, empowerment and the social evils of urban drift remain major hurdles; and it is not that good intent or financial input is absent.Silver bullets are rare but there are options for new activity.It is here that PRICE/VOLUME factor comes into play and without market and an adequate product price business will not happen.So where is there a “shortage” from which business can grow? And one that can contribute towards national policy and the planks of policy? It is quite evident that a planning gap has left Namibia with a 3 to 4 year hole in its ability to satisfy its energy needs – despite the sudden rush of new projects that popped up over the past week! This gap provides a couple of windows of opportunity for power producers to get their foot in the door (oh dear, mixing metaphors again!).The first is for additional power installation at Ruacana hydropower station using existing infrastructure together with the repair of the Gove Dam in Angola.A cool N$600 million but hydropower is the ultimate cash cow! The second is the conversion of woody biomass into various types of fuel – solid, liquid or gaseous.Namibia is blessed with a considerable mass of this renewable resource – covering about one third of the country.Successful harvesting techniques already exist and lower added value processes are already practiced; the conversion technology to add more value exists in several guises.Probably around N$40 million.This activity has the advantage it can be started small and, once tuned and ground truthed, can be rolled out to multiple sites.And it ties in very nicely with government policies! Wow, what’s stopping matters progressing? Simple – PRICE and maybe volume.The CENORED tariff document for 2006/7 (on the Net) explains the greater problem – it states a price of N$0.40 / kWh will be paid to any Independent Power Producer (I Pee Pee) – being the average price of recent NamPower supply – mainly from an (amortised) Ruacana and cheap SA imports, the latter of which is now under threat.Not the MARGINAL price of power – and is about a third (or less) than current coal fired costs of generation! No wonder there are no takers at present – such a price is a joke.N$1.40 / kWh might stir up interest (bit lower for bulk supply).A US$100 oil price will help.And of course there is yet another consultancy starting to look at the problem – after the horse has bolted.So considerable opportunity exists, consumers are about to suffer and we are stuck in a cleft stick of bureaucratic indecision.Is there any investor out there willing to have a go at cracking the ice? There will be plenty of delegates at the conference – but watch out for the bad guys! There is money to be made and a need to be satisfied.Or, being naughty, how about adding value to our large low-grade uranium product? The Land of the Brave? Maybe there is a brave bureaucrat out there who will apply some common sense and stop hiding behind piles of consultants’ reports.We can hope.Chris Smith csmith@mweb.com.naAnd then there is the plethora of financiers, salesmen, officials, consultants, charlatans and parasites seeking opportunities for largesse (rent seeking?) through their “contacts” and “inside information” and “miracle solutions”.Those seeking to sell their wares that only provide “value” when supported by a matrix of government guarantees, subsidies, credits, donor support and favoured access.We (Namibians) take the risks and ultimately pay while often the suppliers and their “fixers” walk off with the booty; and often the goods purchased fail to deliver.The smell of corruption and malfeasance pervades! One needs to look little further than the arms, telecommunications, textile and energy industries in our region to see how many major players have been caught with their pants down in recent years – or where governments have battened down the hatches on shady deals to prevent upsetting their corrupt business partners.Major European suppliers have been exposed in recent years and some have been taken to task but the rot is certainly much broader than this – on both sides of the equation.Perhaps it is significant that this “event” opens on October 29 – the anniversary of both the launch of the Public Service Charter, with its principles of honesty and accountability, and the 1929 Wall Street market crash! The latter the result of a fraudulent bank collapse, insider trading and irrational extension of credit to the un-creditworthy that fuelled a stock market bubble.What’s changed? Current shenanigans on world markets seem to suggest that “irrational exuberance” remains a problem – but governments and business have become clever at manipulating the financial system to preserve each other’s interests! The final shakeout is still in progress – watch that space.And who ends up paying the bill? Namibia is fortunate to be somewhat isolated from these problems due to a relatively conservative lending/money and credit creation regime by our Ministry of Finance, the Bank of Namibia and our commercial banks, a situation for which they receive much criticism but … This stability, while admirable, does result in a more risk-averse lending policy which means that, in order to maintain returns, much money is invested externally – Namibia exports money! So why do we need an Investors’ Conference? One answer lies within a quote from (the late) Robert E.Bartley, the once editor of the Wall Street Journal – “there is no such thing as shortage, just price”.What we really need is a shift away from the current “old” business model: where the entrepreneur and his business model attracts the investor, the equipment is then bought from the supplier and business starts – with nearly all the risk (current practice) being taken by the entrepreneur and none by the supplier (hence needs for subsidies, influence etc); to a model where the entrepreneur, supplier and customer are mutually dependent; the business opportunity is identified, the supplier provides (finances and retains ownership) the equipment, proves it works and the entrepreneur makes it happen – and receives the payment for goods delivered from the customer and then pays supplier an agreed rate – almost a franchise model.Now the risk is shared – they all want to succeed.This latter concept, I find out later even has a label – “Service and Flow”.But this is where PRICE comes in (and agreed volumes).Namibia’s policy is “pro-poor” focused – and the planks are “import substitution”, “job creation”, “add value to primary products” and to “maximise the benefits available natural resources for the benefit of ALL Namibians”- to provide the poor opportunity to hoist themselves out of their poverty.In this regard let’s look at realities.Mining is growing rapidly, produces few jobs, lots of money and exports a primary product.Agriculture, fishing and manufacturing remain stubbornly unchanging in their contribution to GDP.Tourism, while on an upswing, is both notorious sensitive to fashion and world events and Namibia’s capacity to absorb recreational tourism is finite.Our policy imperatives are stumbling – poverty, empowerment and the social evils of urban drift remain major hurdles; and it is not that good intent or financial input is absent.Silver bullets are rare but there are options for new activity.It is here that PRICE/VOLUME factor comes into play and without market and an adequate product price business will not happen.So where is there a “shortage” from which business can grow? And one that can contribute towards national policy and the planks of policy? It is quite evident that a planning gap has left Namibia with a 3 to 4 year hole in its ability to satisfy its energy needs – despite the sudden rush of new projects that popped up over the past week! This gap provides a couple of windows of opportunity for power producers to get their foot in the door (oh dear, mixing metaphors again!).The first is for additional power installation at Ruacana hydropower station using existing infrastructure together with the repair of the Gove Dam in Angola.A cool N$600 million but hydropower is the ultimate cash cow! The second is the conversion of woody biomass into various types of fuel – solid, liquid or gaseous.Namibia is blessed with a considerable mass of this renewable resource – covering about one third of the country.Successful harvesting techniques already exist and lower added value processes are already practiced; the conversion technology to add more value exists in several guises.Probably around N$40 million.This activity has the advantage it can be started small and, once tuned and ground truthed, can be rolled out to multiple sites.And it ties in very nicely with government policies! Wow, what’s stopping matters progressing? Simple – PRICE and maybe volume.The CENORED tariff document for 2006/7 (on the Net) explains the greater problem – it states a price of N$0.40 / kWh will be paid to any Independent Power Producer (I Pee Pee) – being the average price of recent NamPower supply – mainly from an (amortised) Ruacana and cheap SA imports, the latter of which is now under threat.Not the MARGINAL price of power – and is about a third (or less) than current coal fired costs of generation! No wonder there are no takers at present – such a price is a joke.N$1.40 / kWh might stir up interest (bit lower for bulk supply).A US$100 oil price will help.And of course there is yet another consultancy starting to look at the problem – after the horse has bolted.So considerable opportunity exists, consumers are about to suffer and we are stuck in a cleft stick of bureaucratic indecision.Is there any investor out there willing to have a go at cracking the ice? There will be plenty of delegates at the conference – but watch out for the bad guys! There is money to be made and a need to be satisfied.Or, being naughty, how about adding value to our large low-grade uranium product? The Land of the Brave? Maybe there is a brave bureaucrat out there who will apply some common sense and stop hiding behind piles of consultants’ reports.We can hope.Chris Smith csmith@mweb.com.na

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