How to make Namibia attractive to local investment
I have always heard that countries must attract foreign direct investment (FDI) and the reasons are that we can attract capital as well know-how in the form of technology and skills. According to economic data and the complex economy theory — the most developed economies today are determined by the level of complexity of their economy in terms of know-how. Its being likened to a game of scrabble, the more letters you have the more words you can come up with and the more complex and high scoring words you can come up with.
in the instance where you as a country, region, company have limited letters i.e skill sets, what you can produce is also equally limited and you are left feeding at the bottom and exporting either unprocessed goods or very limited number of goods into the global trade system and thus your earning power as a result is limited.
Many people think countries compete as countries, this is true to some extents in the form of your environment to attract FDI as well as to incentive investment from local investment; however when you reflect on the market place it is firms or companies that are competing with their products, their brands and their services. So for this piece I want to focus on what could be attended to create an environment that is enabling for local investors on the back of which attracting FDI should be the natural next step driven by the positive energy of the performance of the domestic economy.
With the domestic economy having contracted for some quarters and foreign investor enquiries almost at nil, the focus on local investors should perhaps receive some attention to bring back some form excitement.
However as local investors try as you can, you cannot escape being in a high cost country like Namibia, where your costs are high because you have to deal with unskilled talent that severally reduces your productivity and consequently increase your per product cost which makes it impossible to compete both locally in a market that is open to international sourced products that are cheaper because perhaps their cost of production is influenced by enabling environments in their own countries. You also as domestic firm cannot escape the high cost of electricity; the cost of high rental costs due to high construction costs resulting from construction companies that inflate their margins to factor in significant delays in invoice payment by the current biggest spender, being the Government, its agencies and sometimes failing State Owned Entities that would only be in a position to settle supplier invoices after transfers from central government; you also cannot escape the local labour laws that are so pro-employee as though the employee pays himself and fails to acknowledge that in most instances close to 80% the entrepreneur pays himself or herself last and most likely only when the business starts to make money which in most cases according to my experience and research is around year 5.
Namibia is unique in the sense that we seem to not want to create an environment that is conducive to investors be it local or foreign investors. In as far as foreign investors are concerned we at least pretend to care by going the extra mile to extend an invitation, as for local investors, our focus appears to be only on how much taxes we can collect.
I wonder sometimes what would happen if we started to focus on our local investors to encourage them to invest locally by creating an environment where its conducive to do business in Namibia.
From my perspective I reckoned perhaps it could be useful if looked at where we could start in terms of what we mean when we say conducive (list is not exhaustive by any measure)
- how about laws that enable certain things to happen not taking 5 years to be passed. Only laws that get passed within a year are tax laws— you cannot force blood out a stone;
- Work permits when you need skills to grow your business shouldn’t be denied with the rationale that we have ample skills when it is clear we don’t. There is no point in forcing me to employ someone who is not skilled when I have to contend with 99% of a work force already that is local that needs to be trained to give back to the business in terms of being productive;
- The number of returns that must be submitted must be reduced and streamlined, imagine a start-up that is required to submit, 1) monthly social security forms 2) every two months VAT returns for which one must become a ninja with the hope of recovering what is claimed on these returns after a period of 3 years 3) every 6 months provisional tax returns 4) every month Pay as you earn (PAYE) forms 5) every 2nd month Import VAT forms 6) annually employment equity commission forms etc its none ending — where as a business does one find the time. We need to streamline these processes;
- Incentives for industry to become cost efficient to be able to compete in the market place— yes I am hearing already people saying we had manufacturer incentives, EPZ etc. As a manufacturer, the incentives can only be utilized once you are already up and running and after you have been inspected by the Ministry of Industrialisation followed by another inspection by the Ministry of Finance and going through the same process at both Ministries 😡 so the incentive is there so that you don’t utilise it. Also the incentive allows for duty free import of machinery, don’t understand how this works as the approval to utilise incentive is after inspection of installed machinery and you must have invoiced what you are manufacturing;
- Recognise that a locally available imported product is not the same as locally manufactured product. We will be a perpetual supermarket economy controlled by foreign store owners.
- The cost of energy should be made more affordable for the manufacturing as well as agricultural sectors, we are not asking for subsidized costs we are just saying for certain critical sectors do not charge me a capacity charge of N$11k when my consumption is N$13k and on top of that for 5 meters charge me N$150k for the transformer that you put on your balance sheet but that I paid for in full for you to supply me energy with. Your inefficiencies shouldn’t be a cost burden to my business;
- When putting up development finance institutions don’t staff them with previous commercial bankers;
- Fight the systematic redlining of local black entrepreneurs when it comes to financial institutions with all white credit committees by actually looking at those Employment Equity Reports that are submitted annually and push for genuine reform of institutions to reflect the demographics of this country. We cannot develop when our entrepreneurs are redlined when it comes to funding by white controlled credit committees.
So much work to be done. No one invests where local entrepreneurs are not investing.