Nam has exhausted 75% of its drivers for growth
Capital will always go where it is welcome and stay where it is well treated. Capital can come in a form of talent and ideas.
25 January 2021 | Economics
We should remain cognizant of the bad examples and experience of exploitation of raw materials, wanting cheap labour and terrible labour conditions. Bruce Hansen, Managing Director: Simonis Storm
According to the World Bank’s 2020 Doing Business Report, Namibia’s ranking has deteriorated significantly in the last decade, falling from 66th place in 2010 to 104th in 2019. This indicates that it is becoming increasingly difficult for investors to operate businesses in Namibia.
Generally, consumption, investment, government spending and net exports are the key drivers of economic growth. Namibia has exhausted 75% of its key drivers with investment being the only hope to drive growth, according to Danie Van Wyk, research analyst at IJG.
“Foreign Direct Investment (FDI) is critical to a small, developing country such as Namibia. This is especially relevant in the present as we have exhausted other levers for driving growth,” he said.
Low revenue growth and fiscal consolidation means that government is not currently in a position to drive economic growth. It is thus only through foreign direct investment (FDI) that economic growth can be stimulated. Net exports are contingent on investment growing Namibia’s exports and shrinking the trade deficit, Van Wyk added.
According to Bruce Hansen, the managing director at Simonis Storm, FDI expands the skill base of the host economy, enabling the transfer of technology and knowledge to boost the competitiveness of domestic firms and facilitating their access to foreign market. FDI create decent and value-adding jobs.
‘To do list’
Capital will always go where it is welcome and stay where it is well treated. Firstly, Investors need clear signals that they can expect policies that will promote business. Policy uncertainty makes the return on investment for both prospective and existing businesses less certain and increases transaction costs. The policy environment is often difficult to navigate as even well intended policy with clear social objectives can have a counterproductive impact on investment, Van Wyk pointed out.
Secondly, competitive tax rates are another easy method of incentivising foreigners to invest in your country. Foreigners will always direct their investments to where their profitability is greatest.
Thirdly, ease of doing business is another crucial point that needs to be focused on. Small issues such as the ease of acquiring a visa quickly becomes large issues that deter foreign investors. The process of investing in Namibia should be simple and hassle free, Van Wyk added.
Investment Promotion Agency
Hansen stressed on the importance of establishing an Investment Promotion Agency to ensure that Namibia attracts the necessary investment.
Such an agency will be responsible for targeting suitable investors and act as a one-stop centre for the investor requirements from the host nation.
Importantly it should be involved in after-investment care, the potential for re-investments, and cluster developments, and the effects showed by satisfied investors, he emphasised.
“The agency will further be tasked to identify potential untapped sectors we want to development and set up the necessary infrastructure for investors. This include dependable supply of energy and water, provision of nearby transport facilities, supply of an adequately skilled workforce in conjunction with the investor’s requirements,” he pointed out.
Furthermore, the agency will ensure that Namibia provide access to credit by reforming the domestic financial markets establishing business friendly financial system that helps local firms respond to challenges of the foreign companies.
Lastly, there is a need to consider a vendor development program to support the match-making process between the foreign client and local supplier. In helping to strengthen the capacity of the domestic economy, Namibia may offer financing opportunities to local suppliers for required investment on the basis of purchase contract from foreign buyers, he said.
“We should remain cognizant of the bad examples and experience of exploitation of raw materials, wanting cheap labour and terrible labour conditions,” he concluded. - [email protected]