The initial proposed NEEEF is not a good policy and is unconstitutional and unethical, from a moral point, a local economist has remarked.
Namibia has one of the most unequal societies in the world, and like other SADC states, apartheid is always the scapegoat for the unequal distribution of income. Just over a week ago, the provision in the New Equitable Economic Empowerment Framework draft bill which was meant to compel white businesses to sell a mandatory 25% shares to previously-disadvantaged persons has been revoked.
That provision has been criticised and caused fear amongst most white-owned businesses in the country.
President Hage Geingob, who defended the clause at all costs in the past, was convinced that the clause will play a major role in the fight against rampant inequality in Namibia.
According to Ritter, some countries who also have a skewed income distribution don’t focus on lowering the Gini coefficient but rather on economic growth and competitiveness and they are extremely successful in that.
From an economic point of view, argued economist Rainer Ritter, NEEEF will not encourage new foreign direct investment and many white businesses in Namibia adopted a wait and see attitude since August 2016.
“The NEEEF policy is also from a timing perspective not opportune for the Namibian economy in the next three years. 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%. This means we have to attract foreign and domestic investment. Government has painted itself in a corner given the current fiscal imbalances and is dependent on a partnership with the private sector,” he said.
Ritter said this in a document compiled in July 2017 on foreign direct investment which he submitted for consideration by the Head of State.
He continued by saying that private investors will only part with their money if they can expect a higher return than the current risk free rate and they expect consistent policies and not a policy drift or even harmful policies such as NEEEF.
“Fiscal consolidation is required and the negative current account poses a problem to our international reserves. The current consumption-driven growth model is unlikely to be sustainable, we must focus to become 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. 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,” he said.
The outspoken critic further cautioned that 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.
He also feels more research should be done to devise better policies or a watered down version of NEEEF.
“Good public policy is evidence based, well considered and deliberated in public before it is implemented. The new policy should have an ethical orientation,” he opined.
Government currently owns 58% of the net worth of the top 30 companies in Namibia where the financial information is available. 29% is owned by foreigners and only 13% by Namibians including the GIPF as shareholder.
“What one can deduct from the above analysis is that the wealth is not predominately in the hands of advantaged white Namibians. Wealth is concentrated in the hands of Government and foreign shareholders. NEEEF should not apply economic transformation at the local private sector but rather should focus to unlock the wealth of the SOE’s and bigger efforts should be done to curtail inefficient spending and root out corruption,” he said.
Ritter said another angle to the NEEEF debate would be to compare non-mining company tax revenue with the Government expenditure on social grants.
The 2017/18 Budget provides for an expenditure on social grants of N$ 6.3 billion and N$ 5.7 billion revenue from non-mining company tax.
Social grants to assist the needy and the poor and from a moral point of view make more sense than a mandatory 25% shareholding in white owned businesses, said Ritter, adding that “especially if that shareholding goes to small well-connected rich black elite.”
“From an ethical perspective one could argue that those who suffered under apartheid, those who sacrificed their jobs and went into exile to join the liberation struggle and who are currently poor, are the most deserving from an economic transformation point of view. Apartheid legislation was abolished in 1978 in Namibia.
The generation who experienced apartheid and who left into exile are probably from a moral point of you the most deserving or previously disadvantaged.
It is not the current youth or the AR movement, they don’t have any entitlement. Social grants create a safety net and reduce poverty significantly,” he explained.