Guest Contributor | Sep 14, 2018 | 0
Chamber of Commerce calls for accelerated local value addition
The NCCI would like to unequivocally support the national emphasis on industrialization – the addition of value on Namibia’s basic resources, to facilitate broader development.
Namibia has a vast source of comparative and competitive advantage through its massive natural endowments of minerals that are not being leveraged sufficiently. This therefore, although an often-difficult task and one that requires reversing certain long entrenched economic and social practices, we at NCCI hereby call on all Namibian Businesses to embrace value addition.
Put simply, value-addition drives its importance from the fact that it has been known to have led to increased revenues of businesses as every extra layer adds a percentage of increased financial value. This has the effect of improving the incomes of the producers.
The NCCI ascribes fully to Government’ stand on value-addition. Government is clear on its approach. For Government, promotion of Local value addition is perhaps the most important feature of Growth at Home. Taking cognizance of the fact that Namibia is well endowed with numerous raw materials, this presents a tremendous opportunity for value addition, job creation, accelerated economic growth and reduction in inequalities.
We stand behind the “Growth at Home” narrative – which basically says that whatever raw materials Namibia has, whether minerals; agricultural commodities or any other commodity, local value addition should take place before it is exported. This is because the export of raw materials equates to the export of job opportunities.
Value addition will be achieved by strengthening the local and national value chains, and even regional value chains by creating more and efficient back and forward linkages to our raw materials. The key point is to make the most of available natural resources and to add as much as possible value to raw materials before they are exported.
Central to value addition is the manufacturing sector. Our call to embrace value addition is primarily informed by our support for a common vision – a shared and inclusive growth in a prosperous Namibia as articulated in the Vision 2030. Here are further reasons why we believe that value-addition is the way to go.
Firstly, value-addition is synonymous for national development. at National level, one critical reason is the overwhelming evidence that value -addition (industrialization) and structural economic change enables a country to fast-track its development. Virtually all cases of rapid and sustained economic growth in modern economic development have been associated with value-addition (industrialization), and particularly growth in manufacturing production. Conversely, those countries that remained focused only on the extractive industries – usually minerals and basic agricultural commodities – and did not move up the so-called value chain, have often seen economic benefits concentrated amongst a small segment of society, and have not experienced the same strong sustainable economic (or GDP) growth of their peers. They may have experienced short bursts of growth, especially during times of commodity booms, but never the kind of relentless growth that persists over decades.
Secondly, value-addition guarantees sustainable growth. We at NCCI have a strong belief that it is only growth that persists over decades that will transform Namibia and its structure, spreads economic benefits widely and engenders innovation and brings about the creation of new industries that this country so badly needs. It’s only growth that is sustained over long periods of time that results in intergenerational wealth creation and the reduction in many social ills such as poverty, inequality and unemployment.
Whilst we wish to emulate those countries that have successfully transformed their economies, by undertaking reforms to promote industrialization and structural change, we acknowledge that no country has ever walked this path alone. Rather, countries have integrated their efforts with those of their neighbors and often adopted a regional approach. They have plugged their productive capacity into global value chains. They have analyzed the needs and demands of other nations, and utilized or complemented, the strengths or deficiencies, and the resources and endowments of others. We too are calling for greater partnership in this journey.
THE BENEFITS OF VALUE ADDITION
Value-addition (Industrialization) has, for most countries, been the precursor to periods of accelerated growth for the following reasons:
Firstly – as alluded to – manufacturing drives productivity and structural change, moving the economy from low to high productivity activities. But it also drives technological progress and is, globally, the main driver of innovation.
Secondly, these innovations and technologies emerging from industrialization, and the benefits they provide to efficiency and productivity also benefit other sectors. This is because backward and forward linkages and spill-over effects tend to be stronger in manufacturing than in other sectors. Combined with productivity and innovation, manufacturing is able to “pull” along economic growth in ways that growth in other sectors do not.
Thirdly, this pull factor can also stimulate employment growth in other sectors – particularly the services sector, but also potentially the agricultural sector. Thus, the manufacturing sector results in economy-wide inclusive growth and employment creation.
Fourthly, the manufacturing sector offers special opportunities for capital accumulation and investment in developing countries – which in turn drives growth. Capital accumulation and clustering effects can be more easily realized in spatially concentrated manufacturing than in spatially dispersed agriculture or services.
Fifthly, industrialization enables economies of scale because manufactured items are generally traded goods; companies are driven by competitive pressures of increasingly global industries. This benefits downstream industries and consumers through lower prices and improved quality and performance.
Lastly, from a macroeconomic perspective, manufacturing exports in many countries provide an anchor for the current account, the currency, the balance of payments and sovereign or currency risk ratings. During normal business cycles, it can prove an invaluable source of foreign currency, and for stability of the balance of payments. Over the longer term, the economic activity, jobs and exports created by the sector become increasingly important in the context of a finite exhaustible endowment of resources. And this brings us on to beneficiation.
In conclusion, we hope that the policy momentum of Government will be sufficient to realize the beneficiation idea and diversify the economy from an over-reliance on commodities towards industrial sectors with stronger economic links, sustainable growth and job creation potential. We also at the same time acknowledge that to successfully industrialize and create greater value addition for mineral downstream industries, we require greater market access and a pool of resources that we alone, as a single country, cannot achieve.
While we appreciate and commend Government efforts in marketing Namibia at various regional and global markets, we reiterate and urge Government to continue doing more. Ultimately, we are confident that together we can move in the right direction, and that the key to the development of our nation lies in the industrialization and beneficiation.