Are SEZs Namibia’s investment panacea?

Understanding the taxonomy of special economic zones
The perceived benefits associated with Special Economic Zones include the relative ease of implementing business reforms, perceived low cost of establishing SEZs and increased competitive pressure.
Mathias Haufiku
Are SEZs Namibia’s investment panacea?



Namibia’s zeal to seal investment deals has not yielded the desired results over the years, but that has not stopped those entrusted with luring investors from ensuring that an adequate business environment exists.

With the stiff competition that exists between sub-Saharan countries when it comes to attracting big multinational firms to set up shop on the African continent, Namibia has over the years turned to the creation of economic zones.

Special economic zones (SEZs) are geographically designated areas of a country set aside for specifically targeted economic activities, supported through special arrangements (that may include laws) and systems that are often different from those that apply in the rest of the country.

There are currently over 5 000 SEZs worldwide, more than 200 of which are on the African continent.

Some of the perceived benefits associated with SEZs include the relative ease of implementing business reforms, perceived low cost of establishing SEZs and increased competitive pressure.

On the flipside of the economic coin, however, red flags are always raised over the long-term sustainability of dedicated economic zones, changing patterns of international production as well as the rapidly-changing industrial revolution and digital economies.

Given the pedestrian growth of Namibia’s manufacturing sector over the years, high regional inequality as well as the low sectoral productivity levels, much like the rest of the region, government realised the need for a SEZ policy.

According to government, such a policy would signal to both domestic and foreign investors Namibia’s readiness for doing business and building key strategic sectors while adhering to sustainability principles.

The SEZ policy would also pivot towards ensuring our laggard regions’ development, community sustainability and inclusion while maintaining fiscal credibility.



Enabling transformation

According to local economist Salomo Hei, SEZ can be an enabler towards transformation.

“Namibia’s economy has structural deficiencies that needs to be addressed through different interventions. SEZ could assist in that respect, provided it’s applied correctly.

“Investors don’t shy away from local conditions; they want certainty around local conditions. We cannot keep investors in mid-air,” he said.

With Namibia’s small population often touted as a stumbling block when it comes to investment attractiveness, Hei has another school of thought.

“Market size plays a role, but it’s not the only determinant. However, policy certainty is critical. Botswana has a deliberate localisation policy, but that doesn’t deter investors. We have multinationals in different sectors like fishing and mining, but we hope that the African Continental Free Trade Area (AfCFTA) can open up avenues for manufacturing and industrialisation.”



Poor performance

But despite concerted efforts to improve the business climate in the country, Namibia has consistently performed poorly on the Ease of Doing Business Index, which is released annually by the World Bank.

Between 2008 and 2020, Namibia’s aggregated average ranking stood at 91.7 on the index. Namibia reached an all-time low when it ranked 108th on the index in 2016, with its best performance at position 54 in 2008.

The latest 2020 rating placed Namibia in position 104 of 190 economies.



Timeline

June 2021: SEZ masterplan development strategy

November 2021: Policy development

April 2022: Legislation development

October 2022: SEZ financing strategy

December 2022: Develop SEZ one-stop shop

January 2023: Impact assessments



Incentives

Incentives on corporate income tax

Incentives on import duties/customs tariffs

Investment allowance and capital deductions allowance

Research and development incentive

Land premium such as subsidised rentals or serviced land

Establishment of one-stop shop

Competitive utility tariffs

Supportive and directed approach to the provision of visas for non-resident foreign investors

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Namibian Sun 2024-03-28

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Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 221.22/OZ UP +1.39% | Copper US$ 3.99/lb UP +0.14% | Zinc US$ 2 452.00/T DOWN -0.18% | Brent Crude Oil US$ 87.50/BBP UP +1.29% | Platinum US$ 907.52/OZ UP +1.41% Sport results: Weather: Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Economic Indicators: Currency: GBP to NAD 23.86 | EUR to NAD 20.43 | CNY to NAD 2.62 | USD to NAD 18.93 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.05 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 18.93 | USD to ZMW 25.01 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 74536 Up +0.85% | Namibian Stock Exchange (NSX) Overall Index 1528.69 Up +0.84% | Casablanca Stock Exchange (CSE) MASI 12986.94 Up +0.04% | Egyptian Exchange (EGX) 30 Index 27559.35 Down -2.36% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 221.22/OZ UP +1.39% | Copper US$ 3.99/lb UP +0.14% | Zinc US$ 2 452.00/T DOWN -0.18% | Brent Crude Oil US$ 87.50/BBP UP +1.29% | Platinum US$ 907.52/OZ UP +1.41%