Investment bill ‘will deter capital’

The Economic Policy Research Association (EPRA) has warned that the proposed Namibia Investment Promotion Bill, currently available for public consultation, risks diluting Namibia’s already weak competitive position while concentrating excessive power over investment decisions in the hands of the minister of international relations and trade.

The think tank’s concerns are set out in a paper titled ‘The Permission-Based Economy: Why Namibia’s Investment Bill Fails Foreign and Local Investors’, released in January.

According to the EPRA, the bill, as drafted, is unlikely to promote investment and will instead deter capital, suppress entrepreneurship and entrench long-term economic stagnation.

“The investment bill is regressive. It dilutes Namibia’s already wafer-thin competitive advantage when it comes to attracting foreign direct investment (FDI) and investment in general,” the association warns.

“The investment bill subjects Namibians to sector reservations, ministerial approvals, change-of-control approvals, monitoring, inspections and sanctions, performance agreements and compliance reporting,” the report reads.

The composition of the bill, EPRA added, amounts to a significant government overreach.

“It is a command economy [with] central planning in all but name. It is a profound violation of Namibians’ economic freedom.”

Ministerial discretion

EPRA also raised concerns about the scope of authority granted to the trade minister under the proposed legislation, arguing that these powers would effectively be unlimited.

“Ministerial discretion is structurally virtually unlimited. The minister may set policy, introduce incentives, designate sectors, require approvals, impose conditions, add approval criteria by regulation, exempt or restrict investors, and issue binding directives,” the report states.

By contrast, the think tank noted that in many jurisdictions such powers are vested in parliament rather than concentrated in a single executive office.

“Top FDI jurisdictions, by contrast, use parliamentary negative lists, have narrow national security tests, use independent regulators and use competition law, not political discretion, to regulate investment. Namibia now effectively replaces administrative law with executive (political) preference,” EPRA pointed out.

“This makes foreign and domestic capital equally insecure. Change of control is effectively nationalised for both Namibian and foreign investors. Any change of control in a designated sector (by way of mergers, acquisitions, offshore transactions affecting Namibia, licence transfers) requires ministerial approval beforehand,” it added.

EPRA warned that the bill, in its current form, would attract only a narrow class of investors.

“The bottom line is that the investment bill, as currently drafted, will only attract extractive majors with political risk pricing, state-to-state investments, firms dependent on concessions, and politically connected capital. It will not facilitate investment.”