A call for economic revival by all stakeholders
06 November 2020 | Columns
The private sector in Namibia is in dire straits. The most recent report by the Namibia Statistics Agency (NSA), dated 11 September, indicates that 85% of businesses that had taken part in the second survey on the impact of the Covid pandemic had lost 91% to 100% of their income.
According to the NSA, the survey took place at the end of July and beginning of August, with 619 companies targeted in 16 sectors. Some 60% of the companies approached provided feedback.
The data supports the figures. According to Cirrus Capital, gross fixed capital formation has been on the decline since 2014, dropping from about N$48 billion to around N$27 billion.
And by far the bulk of it was created by the private sector. The private sector is responsible for the generation of all income in Namibia. Even the VAT paid by civil servants is generated by the private sector in the form of their wages. But policy uncertainty has negatively influenced the private sector's willingness to invest.
According to Robert McGregor of Cirrus, “the data shows that the large reason for continuous decline is reduced investment by the private sector.
This is an indictment of Namibia's economic and business climate. [We) cannot see sustainable, long-term growth without investment in fixed assets/productive capital.”
That the government's anti-investment policies (such as the proposed NEEEF, taxes, labour laws and corruption) in recent years has eroded trust is a given.
Investors are fearful of the government's policies and, more so, of government officials who are gatekeepers to any progressive investment ideas and what may happen in the next five years after an investment remains an uncertain.
As I stated in my previous article on the controversial NEEEF legislation, coupled with BIPA and others, the ease of doing business has drastically declined. Securing capital aside, BIPA in itself is a huge challenge. The redistribution of land has also brought no ease because even if it is, as the government says, with “fair compensation”, it looms on the horizon, limiting investment. There is a serious need for political will to resolve the land issue before it explodes in our faces.
Recently, the government said that pay cuts would not only be applied in the public sector but that the private sector should brace itself for the same.
My understanding is that the private sector has seen pay cuts and retrenchments since March 2020.
The matter went as far as being heard in the High Court.
Government made mention of salaries of a million Namibian dollars, saying that those earning that much would have to do with N$800 000. The Prime Minister spoke of the sacrifices that ministers have to make in terms of transport and moreover, “there was a reduction in two consecutive years in the purchasing power of the remuneration packages of civil servants and ministers and that is in recognition of the difficult economic situation we are faced with...”
In my view, a decisive approach towards the parasitic SOEs that are draining government resources is long overdue. We must address the huge and unsustainable salaries of SOE executives and board members' exorbitant sitting allowances.
According to the Namibia Employers Federation, the greatest challenge to private sector investment, to create jobs and wealth, is security of land ownership, which in my view requires urgent attention, strict labour laws and BIPA reform.
To further compound matters, trust has all but been eroded.
No one has any idea what the government will do tomorrow, or in two years or five, or a decade from now. Investors are waiting to see if investing in Namibia, as with most other African countries, will be safe in the long term; in other words, will their investment still belong to them or be redistributed. In the latter case, investors will rather look for alternative opportunities.
Foreign investment is like a scared animal in the bush, it will run away at first sign of aggression. The NEEEF in its current form drives away future jobs.
Every Namibian, no matter what demographic, wants jobs for them and their children. A business-friendly environment attracts investment; investment creates jobs. Thus, surely there could be no more important mission for all of Namibia to focus on than that important mission. Each decision should be focused on this.
A business-friendly environment is created through policy certainty, securing property and investment rights. We are competing with other nations to attract investment.
We live in a very complex time and complicated environment.
There are many problems which we all agree need to be acknowledged and attended to.
Government listens to different sides and tries to do what is best; unfortunately the pandemic has thrown us much quicker into a disaster and we need to act together as a nation now. Past mistakes should not block the future; we believe future economic collapse can be avoided by working together now - job creation and wealth is in all our hands. The private sector emphasises the need for the government to work much closer with us in safeguarding jobs, creating wealth and a prosperous economy.
Trust between the people, government and private sector must be strengthened to ensure all of our children will have a better life than we have.
After 30 years of independence, we must take responsibility of what we have created for our children.