Governmentpolicy causes economic decline

What the government says will empower many is feared to be the last nail in the coffin of free enterprise.

17 May 2019 | Business

Local businesses burdened with a crushingly tough economic climate feel the government's policies have contributed to the current climate, particularly legislation aimed at empowerment and increased protectionism.

A survey gauging the private sector's feelings about the proposed National Equity Economic Empowerment Framework (NEEEF) indicates a general sense of hopelessness among Namibian-owned businesses that feel they have no say in the government policy-making.

The survey was conducted by the Economic Policy Research Association (EPRA), which is a voluntary association with a membership of about 600 Namibian companies, most of them concerned about the possible impact of the proposed NEEEF on their businesses and the country's economic future.

NEEEF, NIPA won't empower or improve investment climate

Most of the respondents (81.1%) are knowledgeable about NEEEF and feel it will result in “substantial economic decline”. More than 12% said it would result in “some economic decline”, and not a single respondent felt that it would bring about economic growth.

Most (75%) feel that even if a mandatory 25% previously disadvantaged ownership clause were to be removed from the proposed NEEEF, it would not result in broad-based empowerment of previously disadvantaged Namibians, as is propagated by the government.

Worrying is that the majority of respondents knew very little (51.1%) or nothing at all (19.44%) about the Namibia Investment Promotion Act (NIPA), a piece of legislation promulgated almost unnoticed in 2016.

While amendments to NIPA are still under review, most businesses (about 50%) say they do not know if it will promote investment in the country. None of the respondents felt it would increase investment here.

EPRA had earlier expressed concern that the NIPA would further damage Namibia's investment and economic environment because it would increase government control over private-sector investment.

The concern is that this will mean an increase in bureaucracy, create fertile ground for corruption and ultimately scare investors away by restricting repatriation of profits and entrench easy routes for expropriation of investors' property.

“While countries across the world are attracting skilled people and investors by opening their markets, providing excellent incentives to investors, by reducing bureaucracy, by increasing investor protection, and by allowing free repatriation of after-tax profits, Namibia does the opposite,” said EPRA's Eben de Klerk.

He said this contributes to Namibia's continuing slide down the global competitive rankings.

Government states that NIPA is to promote sustainable economic development and growth by attracting foreign and domestic investment.

It will also to provide for reservation of certain economic sectors and business activities to certain categories of investors.

EPRA had previously raised concerns over the fact that NIPA provides for an investment approval regime that gives the responsible minister sweeping discretionary powers in the regulation and decision-making on investment matters.

According to De Klerk, NIPA gives the minister the power to decide how much is to be invested here, how much investments are allowed to grow, and what profits can be repatriated from the country.

NIPA further makes provision for expropriation of land and property owned by investors “in the public interest”.

“What NIPA is saying to potential investors is that the government will be able to take a portion of your business when you come here, that you will have to pay bribes and arrange kickback deals because you have to influence one minister, and that we can expropriate your investment any time we want if we feel it is in the public interest. That is not an attractive environment for any investor,” De Klerk said.

He says confidence in the business climate in the country is on a dangerous and steady decline “and is not stopping”.

“You can only grow business if you incentivise businesses. Then you grow your tax revenue, which in turn grows your social safety nets, which provides a more secure environment for poor people.

“Instead, it would appear as if the government brings in policies to kill the private sector. We have already seen a substantial increase in retrenchments and a decline in expected tax revenue as a result thereof,” is De Klerk's damning conclusion.

No voice

Businesses feel they have no say or influence over government policy-making.

Ninety-three percent say they have no influence in government policy, while 82% said they do not belong to the Namibia Chamber of Commerce and Industry (NCCI). It appears that business do not trust the NCCI, with 54% stating that they don't know if the NCCI can adequately and effectively represent the interests of the Namibian business community, while 38% stated that NCCI can definitely not be trusted to do so.

Only 7% of businesses state that NCCI can do so.


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