Guest Contributor | Jul 3, 2019 | 0
Support infant industries to ensure growth
One of the most important goals of the government is to alleviate poverty by creating optimum employment for its citizens. To reach this goal, the government drafted and approved Vision 2030 as a development strategy.
According to Vision 2030, the Namibian economy must attain growth of approximately 6% per annum to reach the set goals. This means that the manufacturing sector in Namibia has to achieve an annual growth rate of more than 6% to support this target. Growth in the manufacturing sector is a proven vehicle conducive for economic growth as it has a very high spill-over effect in the economy.
It was determined that growth in this sector has a high multiplier effect because for every N$1.00 spent on manufacturing development, an additional N$1.50 to N$2.50 (depending on the sub-sector) will be generated in the rest of the economy through products and services provided to the manufacturing sector. Thus, expanding the manufacturing sector is an important contributing factor to developing the economy as a whole.
However, for a new manufacturing business to be successful in a developing country such as Namibia, it is important that the government provides assistance to such industries especially during the start-up phase. Equally important is that such industries should be supported by and be able to rely on the support of other local private sector organisations, such as retailers and large corporates.
It is a widely accepted practice by countries to assist and protect their new or infant industries through a variety of legal trade measures (especially in the development stages). During a recent visit to Namibia, Professor Ha-Joon Chang from the Cambridge University, stated that most of the developed countries reached maturity in industrial development through a combination of development assistance and protection measures.
Examples of these are Japan that would never have had their present strong vehicle manufacturing industry without protectionism. During the period 1820 to 1950, the USA was the most heavily protected economy in the world, mainly through high import tariffs. It was only after 1950 that these measures were relaxed. The United Kingdom was the second most protected economy during this period. All three countries are now highly developed, mainly due to the assistance provided by their governments to its own industries.
Nearer to home, the South African government used similar provisions to develop their Motor Industry Development Plan, which currently constitutes the backbone of its industrial development programme. In China, special development zones were created where financial support is provided to certain targeted industries. A variety of trade and support measures are also implemented to assist the development of new industries.
The 2002 Southern African Customs Union (SACU) Agreement makes inter alia the following provision regarding the protection of Infant industries: “The government of Botswana, Lesotho, Namibia or Swaziland may as a temporary measure levy additional duties on goods imported into its area to enable infant industries in its area to meet competition from other producers or manufacturers in the Common Customs Area …”
Such additional import duties have to be phased out within a period of eight years. A few successful industries in Namibia have already benefited from such import duties, such as the pasta and long-life milk industries. The SACU provisions enabled these industries to develop to the point where they were able to compete successfully against imports. New industries such as our cement factory, the chicken broiler project and smaller projects such as the steel product manufacturing industries, are presently also in need of such assistance.
Other methods that can be utilised to assist local industries during the initial development stages, include loans at favourable rates, support of these industries in awarding government and parastatal tenders, support by local retailers and support in the procurement processes of corporates and other private sector organisations.
Should the government, local retailers and other private sector organisations support our new and infant industries, the local manufacturing industry would be able to accelerate its growth. This in itself would assist Namibia in addressing the unemployment problem and in reaching the goals of Vision 2030.