Monday 12 April 2021
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‘NEEEF not opportune for Namibia’

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…Cabinet urged to shelve controversial empowerment policy

An economic policy expert has warned that plans to enact the NEEEF Bill in its current format could have adverse effects on the country’s economy and subsequently place the economy on a lower growth trajectory. Former Namfisa CEO, Rainer Ritter – writing in his private capacity, said in a submission made to the Law Reform and Development Commission regarding the New Equitable Economic Empowerment Framework (NEEEF) policy that from a timing perspective, it [NEEEF] is not opportune for the Namibian economy in the next three years. “The introduction of NEEEF in its present form will achieve the opposite; it will put the Namibian economy on a lower growth trajectory, similar to the economic period 1978-89 before independence. It is recommended that the NEEEF policy is put on ice until Cabinet has more clarity on the pros and cons of the current NEEEF Bill,” Ritter said. Ritters’ remarks come as Government considers possible reforms to the black empowerment policy by introducing the contentious NEEEF policy.

Under NEEEF, at least 25 percent of all existing and new businesses must be owned by previously disadvantaged Namibians, management control and employment equity: A minimum of 50 percent of the board and management must be filled by previously disadvantaged Namibians and under human resources and skills development, a minimum of 0.5 percent of gross wages must go towards training on top of the current training levy of 1 percent. “The first two mandatory pillars of the NEEEF policy are probably the most controversial ones and will, in my view, have a profound impact on the Namibian economy,” he cautioned. “NEEEF, measured against good policy-making features, has failed already – from what could be gathered from documents available and  comments and submissions made by various stakeholders. Before the NEEEF policy is discussed based on the evidence-based feature, the Namibian economy is discussed, followed by a discussion of similar empowerment policies and their success or failure,” Ritter noted.

With Namibia currently facing drought and water challenges, Ritter underscored the need for fiscal consolidation, further cautioning that the negative current account poses a problem to Namibia’s international reserves. “The consumption-driven growth model is unlikely to be sustainable, we must focus on becoming more competitive and foreign direct investment must be attracted. Higher growth can only be the fruits of predictable sound policies, a vibrant SME sector and an attractive private local and foreign investment climate,” he said.The pre-condition for higher private investments is that entrepreneurs and investors identify profitable and less risky investment opportunities above the risk-free rate of investment, Ritter said. Namibia’s economy has been performing below expectation in recent years, with public debt levels skyrocketing by more than 400 percent since 2010.Since 2007, Namibia has had chronic budget deficits with an average of -4.5 percent of GDP. The Maastricht criteria for EU member countries are not to have a deficit higher than -3 percent of GDP.“We need fiscal consolidation and less government spending, but at the same time the economy has to grow more labour intensive at a rate of 5-6 percent. This means we have to attract foreign and domestic investment. The trade balance and the balance of the current account require fewer imports and more exports as well as an inflow of foreign funds,” he said.

Ritters further added that: “Private investors will only part with their money if they can expect a higher return than the current risk-free rate and also they expect consistent policies and not a policy drift or even harmful policies as NEEEF is.“The future of any country should be based on good policy-making. Policies, which are based on emotions or short-term populism, will put a country often on an unintended development path, which in hindsight could have been avoided if one had adhered to a good policy.”Ritter said South Africa and Namibia need fast and labour-absorbing economic growth to reduce unemployment and alleviate poverty.“The two main reasons for the underperformance of the South African economy are, firstly, the expenditure to redress the apartheid legacy that has reduced the resources available for investments in the knowledge economy through investments in research and development, infrastructure, vocational training and tertiary education,” he said.

He cited that the lack of investment in additional electricity supply posed a major growth constraint to the South African economy, a similar situation currently experienced in Namibia.
“The second reason is that many of the honourable and justifiable goals have been accompanied by large amounts of wastage of public resources, policy experimentation and cronyism, thus in a nutshell is a lack of leadership. Namibia should not emulate the South African development path,” he warned.“The proposed NEEEF pillars and scorecard are based on the existing South African BEE (BEE Act 2003), which was implemented in South Africa in 2004. In South Africa, the policy was implemented on an incentivised basis and the various pillars were not mandatory. In South Africa, the Revised Codes of Good Practice were changed in 2013 and apply from May 2015.”

The Law Reform and Development Commission (LRDC) in conjunction with the Office of the Prime Minister are currently in the process of translating NEEEF into law and implementing it.
The NEEEF policy aims to restructure the previously advantaged (white) private business through empowerment pillars that are aimed at addressing a variety of needs of the previously disadvantaged persons.

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