Hage’s high-level panel disappoints

‘Ducks politically-sensitive issue’

28 July 2020 | Economics

It is rather like a doctor not mentioning smoking to a patient with lung cancer. - IPPR

Jo-Maré Duddy – The fact that president Hage Geingob’s economic think tank ignored proposed empowerment legislation as a key impediment to investment in Namibia is a “clear dereliction of duty for anyone whose duty it is to present an honest view of the challenges facing policymakers”, the Institute of Public Policy Reseach (IPPR) says.

“It is rather like a doctor not mentioning smoking to a patient with lung cancer,” the IPPR says in its latest quarterly economic review, which includes an in-depth look at the recommendations of High-Level Panel on the Namibian Economy (HLPNE).

The panel, inaugurated in March 2019, had to advise Geingob for the remainder of his first term in office. It consisted of 22 people from inside and outside government, as well as three international experts and was chaired by Johannes !Gawaxab, who has since been appointed as the governor of the Bank of Namibia (BoN).

The HLPNE submitted its final report on the state of the economy and evidence-based recommendations that would result in its revival in February, just weeks before a state of emergency was declared and Namibia went into lockdown.

According to the IPPR, the report “implicitly recognises the need to attract FDI [foreign direct investment] and identifies policy uncertainty as a major barrier”. Despite this, the report “shrinks” from making the link with the National Equitable Economic Empowerment Bill (NEEEB) and the Namibia Investment Promotion Act (NIPA) – “the greatest barriers of all”, the IPPR says.

“Surprisingly, despite their centrality to the investment environment in Namibia, they are not mentioned once,” the IPPR says.

“The report ducks this politically-sensitive issue completely and glaringly ignores the fact that there will be significant costs in reforming the economy to create a private sector export-led economy that creates jobs for the masses,” it elaborates.

According to the IPPR, the HLPNE report also does not go far enough to emphasise policymakers’ “appalling track record on creating an investment environment that fosters job creation”.

‘Strategic bets’

The HLPNE report however, is “spot on” when it says “growth must come from exports and investment activities that promotes exports”, that “export structure hasn’t changed much”, that “Namibia needs to increase the complexity of its product space” and that formal sector employment growth can only be achieved by targeting industries that lead to export diversification.

The IPPR also agrees with the panel that the current Namibia Investment Centre is “re-invigorated, refreshed and re-energised into an Export Promotion Centre with a mandate focused on export promotion and the promotion of investments focused on the export markets as well as the local market”.

However, the HLPNE is on “more questionable ground” when it says this diversification will come about by government making “strategic bets and choosing sectors”.

The HLPNE report also states that “a key factor to be considered within the attractiveness of potential industrial opportunities shall be their potential to insert themselves within global value chains where Namibia has and or will have a comparative advantage. Such value chains can ultimately brand Namibia as the hub for certain products.”

According to the IPPR, the HLPNE “sensibly” goes on to recommend that “ultimately, policymakers should use an iterative and dynamic process to target investment promotion and export diversification efforts, and should interact with many stakeholders – especially with the private sector – to incorporate a variety of perspectives and to implement shared strategies”.

‘Passing the buck’

The HLPNE report fails to recognise that a “bloated and overpaid public sector draws resources and talent away from the rest of the economy”. It also does not compare the “resources devoted to keeping ailing established SOEs alive (such as the billions squandered on keeping Air Namibia flying) to those targeted at new industries”, the IPPR says.

“It then somewhat passes the buck, rather surprisingly to the National Planning Commission which since Independence has hardly demonstrated an ability to conduct sophisticated policy of making ‘strategic bets and choosing sectors’,” the IPPR says.

The report has little to offer other than more committees, the IPPR comments on the following stance of the HLPNE: “Following that guidance, we recommend the creation of public-private taskforces – productivity taskforces – an institutional device for exploring interventions that increase the productivity of sectors with export potential of already existing sectors.”

According to the IPPR: “While it cannot be wrong to say ‘it is essential that the government establishes and maintains a broader permanent public-private dialogue forum, incorporating senior government officials and representatives of the private sector’, it fails to make the point that in so many cases, government action has been premature and misconceived and does an enormous about of damage.”

Jobs

The HLPNE’s recommendations on employment creation are “weak’, the IPPR says.

The panel correctly asserts that “creating economic policy certainty and removing bottlenecks will result in an improved economic and investment climate, which is paramount for job creation”. However, it fails to pinpoint policy uncertainties or bottlenecks or indeed any real analysis of the incentives or disincentives to employ labour (especially unskilled labour), the IPPR continues.

The panel’s recommendations focus on tertiary and higher education (Industry 4.0 Workers) and industry-university collaboration and internships, national programmes for innovation ecosystems, and a country strategy for the fourth industrial revolution IR 4.0.

“These are initiatives which, even if things go well, will take years or possibly decades to bear fruit,” the IPPR says.

“The more pressing need for the economy to absorb large numbers of unskilled workers currently unemployed or underemployed in the informal sector is left to an export-promotion strategy for grapes, meat processing and charcoal manufacturing.

“Certainly, grapes and charcoal manufacturing are industries which have already enjoyed a certain amount of growth and may have further potential but the report does not make clear what policy can do to accelerate this and it is all rather vague,” the IPPR says.