Thursday 6 May 2021
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Directives on reservation to local suppliers or non-tariff measures?

The Minister of Finance, Calle Schlettwein, on 23 May 2019, announced Directives on Reservation to Local Suppliers.
The Directives aimed enhancing the participation of local suppliers in the provision of goods, services and works to public entities.
Public entities are required to source specific categories of goods, services and works from local producers. The overarching goal is to promote local productive capacity.
The Directives extend procurement reservations to locally owned Small and Medium Enterprises (SMEs) which are 100 percent equity owned by Namibian.
In case of Joint Ventures, the enterprise should be 51 percent or more Namibian owed.
It is further required that such goods, services, and works should have at least 65 percent local content.
In certain categories goods, services and works should have 100 percent local content.
It is a requirement that enterprises benefiting from these measures should have a local bank account at a Namibian banking institution.
Commenting on these directives, Namibian Sun newspaper hailed the measures as putting Namibians first.
The announcement by the Minister of Finance should motivate Namibian producers to redouble their efforts to produce and supply the category of goods, services and works covered by the measures.
This has a potential of creating more jobs and reviving the economy.
Namibian suppliers now have a good chance to expand their productive capacity.
Public entities such as boarding schools, hospitals, the uniformed services and Government at large consume millions of dollars- worth of goods, services and works.
Such money, if properly used, has a potential of stimulating the local economy. There are, however, challenges which must be addressed.
Challenge number one is whether local capacity exists. Namibia is a small country with a small population.
For the goods, services and works to be affordable they should be produced at scale. Do local producers have the resources to produce at scale? Perhaps the Development Bank of Namibia should be capacitated to open a special window for local producers and suppliers.
Unless proper capacity is enhanced local goods, services and works are likely to be more expensive.
Moreover, government entities tend to take long time to pay the bills.
This puts producers into cash flow challenges. It is therefore imperative that the Ministry of Finance should put measures into place to assist local suppliers and producers to meet their financial obligations.
Equity participation requires capital. This capital requirement can only be met by those with good savings.
This requirement is likely to benefit a small minority who were previously advantaged.
This may be offset if such investment could create jobs. One hopes this will be the case.
The big challenge is from the perspective of our trading partners. Could these measures not be construed as a form of non-tariff barriers! The Minister is well versed into SACU Agreements as well as World Trade Organisation requirements.
Africa shall soon put into operation the Africa Free Trade Agreement. Are these measures in tune with what is expected from us by our trading partners?
These concerns and the challenges discussed earlier should carefully be addressed. If this is not done, we may just give our people unrealistic expectations.
Local procurement could be encouraged through administrative measures by the Tender Board. If legislated upon, these procedures may be challenged as being discriminatory. The world is being influenced by nationalistic thinking, thanks to Trump’s American first.
The United Kingdom is stuck in the Brexit mud. It is now fashionable to be a nationalist. For a country like Namibia, that might not be a good policy.
If Namibia aspires to benefit from economies of scale, the country should first and foremost attract foreign capital and adopt export driven economic growth policy.
Our economy needs large markets in order to scale up production, using foreign capital and technology.
Given our strategic location on the African Continent we should market Namibia as a spring- board into larger Continental market.
The Port of Walvis Bay and our transport, banking, rule of law infrastructure and institutions put our country into a favourable position to attract investment targeting the Continental market.
Johaness !Gawaxab, Convener of the Higher Level Panel on the Economy is right when he told the media that his Panel looks to Private Sector to help fight the triple challenges of unemployment, poverty and inequality.
A restrictive procurement regime is not likely to help the efforts of the Panel. Namibia should remain an open economy!
The envisioned Investment Conference at the end of June should be allowed to attract foreign capital and technology in this regard.
Measures which appear closing the economy to international trade will not help matters.

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