Sunday 11 April 2021
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Economic depression: the importance of restoring investors’ confidence

The WINDHOEK OBSERVER of 14 December 2018 in its lead article declared: “The Namibian economy is in a coma”. The Newspaper based its conclusion on the findings of the Namibia Statistics Agency which reported at the time that the local economy had recorded a 10th straight quarter of negative growth after the economy contracted by 0.8 percent compared to a negative one percent in the same period of 2017.
Inflation was recorded at 5.6 percent and the trade deficit at NAD 3.25 billion. While retrenchment was stabilising, unemployment remained at 43.4 percent.
During this year, the Gross Domestic Product (GDP) is expected to reduce by 0.7 percent.
Most economists agree with the conclusion of the Windhoek Observer.
Rowland Brown went even further when he asserted that from a macroeconomic perspective “Namibia is a country in trouble”.
When a house is on fire the best thing to do is to take a bucket of water and try to dose the fire even if the owner is insisting that he or she is not responsible for the fire.
In this opinion piece I shall take a symbolic bucket of water and make suggestions as how to dose the fire.
I trust other well- meaning Namibians will join me in this patriotic endeavour.
One of the economic challenges faced by Namibia, on which many economists agree, is lack of business confidence in the economy.
Lack of business confidence arises because of the perceived policy uncertainty in many critical areas.
These include, but not limited to land issue, the performance of State-Owned Enterprises, debt management, taxation issues, empowerment framework, rent-seeking behaviours and perceived endemic corruption in our country.
The Second Land Conference came and went. Resolutions or recommendations were adopted during the Conference. However, the outcomes of the land conference were undermined by media reports that Government entered into dubious agreements with the Russian investor who bought large tracks of land just few days before the Second Land Conference.
Any potential investor will be confused. Are the resolutions or recommendations of the Second Land Conference to be taken seriously if Government made decisions in variance with those resolutions in the case of the Russian investor!
The State Owned-Enterprises (SOEs) have been identified by IMF as a risk factor to the Government debt management strategy.
The weaknesses of the SOEs need addressing.
There is therefore a need for a clear, transparent and consistent policy framework to address the weakness of the SOEs with the view of limiting their dependence on Government Budget. Some of the SOEs weaknesses have their origin in mismanagement and poor governance by their boards.
Some weakness could be addressed by sourcing private sector expertise and capital with the view of turning them into profit making companies and less dependent on Government bail-outs.
Public debt is increasing to unsustainable levels. It is estimated that this year, public debt as a ratio of GDP is likely to reach 50 percent. By 2020 the country is expected to own-up to its major creditors. It is known that Government has been putting up a debt cushion through a debt redemption fund or sinking fund.
How strong is that fund! Investors fear that Government may be forced to roll over some of its debt repayment.
Under such circumstances Government may either be forced to rise taxes or allow the situation where external creditors shall impose conditions which limit its policy options.
Policies on debt management and taxation are important to potential investors.
There is therefore a need for the Government to be transparent in its strategy of debt management.
Economic transformation to enable participation of those who have been excluded historically is a matter of equity and fairness. It is well known that Government has been consulting on NEEF for some time. The NEEF pillars are not the only available empowerment arrangements.
For example, the Ministry of Fisheries and Marine Resources invited citizens to apply for fishing quotas. Many individuals made efforts to apply.
However, fish biomass is limited. Only a few are likely to benefit. One would have liked that Regional Councils, municipalities and organised communities were invited to apply for ordinary citizens to have access to this public resource through such structures.
Other public empowerment policies could be developed regarding land redistribution, mining, tourism and similar sectors mostly to empower communities, groups of youth, women organisations and civil society. Policy coherence is required in these matters
Moreover, investors are concerned about rent-seeking behaviours and corruption in our country.
Rent-seeking behaviours has created a parasitic business class known as “tenderpreneurs”.
This business class adds cost of doing business to legitimate businesses. Similarly, perceived corruption erodes business confidence of genuine investors. Clear policies and enforcement measures are needed to mitigate against these tendencies.
Broadly speaking investment policy with clear laws and regulations which do not impose unnecessary burdens on investors should be promoted.
Such a policy should among others contain methods of ownership and registration of property, protection of intellectual property rules, and an effective system of contract enforcement.
Namibia needs capital investment, technology and managerial expertise. Namibia must therefore restore policy certainty to win back investor confidence.
This will go a long way in creating a conducive environment for economic recovery and growth.
A pro-active policy pronouncement aimed at boosting business confidence is urgently needed. Those in the driving seat should respond to the social and economic challenges facing our Patrimony!

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