Industrial and Trade Policies needed that do not favour incumbents or prevent new players from entering
By Josef Kefas Sheehama.
Addressing our economic challenges requires an immediate focus on policies that will raise Namibia’s potential growth. Therefore, a sustainable trajectory for the Namibian economy is one where reforms are implemented specifically to raise the potential for growth.
Implementing flexible industrial and trade policy to promote competitiveness and facilitate long-run growth should continue to be a strategic policy focus area. Manufacturing is an engine of economic growth as industrial goods have a higher elasticity of demand especially in world markets.
Successful industrial and trade policies should be focused, flexible and premised on the notion of embedded autonomy. Focused industrial and trade policy requires the prioritization and rationalization of interventions, and flexibility which comes from learning from experience. Focus and flexibility, must be underpinned by embedded autonomy, which demands that the government elicit useful information from the private sector, which has the best knowledge of industrial and trade opportunities.
The government should urgently implement reforms that can boost Namibia’s growth in the short term, while also creating the conditions for higher long-term sustainable growth. These growth reforms should promote economic transformation, support labour intensive growth, and create a globally competitive economy.
The current state of the Namibian economy is unsustainable. Low economic growth entrenches poverty and inequality. High income inequality aggravates social fragmentation and poses a risk to economic growth. Inequality contributes to extremely divergent views, which make compromises difficult with the resulting stalemate and policy uncertainty contributing to economic weakness.
A growth-oriented policy must be accompanied by interventions that change how the benefits of growth are distributed and fundamentally transform the systems and patterns of ownership.
Initiatives that transform the economy must meet the dual tests of sustainability and inter-generational equity. In other words, economic transformation must be implemented in a manner that does not compromise the long-term ability. This means that at the heart of our economic policy must be a concurrent emphasis on economic transformation, inclusive growth, and competitiveness as these offer the most sensible strategy to address the challenges of unemployment, poverty, and inequality.
Namibia’s industrial ambition is articulated in Vision 2030, which stipulates that the country should be an industrialized nation with a high income by the year 2030. For Namibia to achieve V2030, factors that hinder greater participation by more companies, must be eliminated. These include existing regulations and policies that favour incumbents only, or fail to help new players enter the market.
Change in economic relations must be the creation of opportunities for all Namibians to live productive, prosperous, and dignified lives. Current trade and industrial policies have only made limited progress to attain economic and structural transformation and contribute to inclusive growth. Although Namibia’s industrial policy is on the right track, some important adjustments could significantly improve its effectiveness.
Furthermore, accessing credit through formal financial institutions is a challenge for entrepreneurs who have little collateral or have no proven creditworthiness and therefore a higher-risk profile. The post-funding support that is necessary to ensure the successful growth of the business is often lacking either the mentors have little experience in running small businesses or have little experience of the sector in which it operates. A failure to support early-stage entrepreneurs clearly disadvantages those who do not have capital and collateral. This policy failure, in turn, inhibits the ability of government to promote economic transformation and the resultant gap presents an opportunity where public funds can be deployed more effectively.
Namibia suffers from stubbornly high levels of unemployment that are compounded by inefficient spatial patterns that makes participation in the formal and informal economy costly and difficult for individuals.
For instance, agriculture is important in the pursuit of inclusive, labour-intensive economic growth, with its rural linkages and ability to absorb less-skilled labour. It also generates large multipliers due to extensive links with the rest of the economy, competitive labour productivity, and importance for export-led growth. A growing agricultural sector can therefore help address our challenges of unemployment and low growth while countering rural poverty.
Our agriculture sector receives less government support than those of our peers, and it seems that we have not taken up all the potential policy space that exists to support the sector. Because the agriculture sector plays an important economic and social role given its extensive links with the rest of the economy and importance for food security business continuity in the sector is critical. Many agricultural producers in Namibia are not insured against the negative impacts resulting from natural disasters, such as drought, mainly due to the high costs associated with agricultural insurance.
Tourism is another key sectors that can deliver inclusive growth through its labour absorption potential. Tourism is characterized by low barriers to entry as most tourism businesses are small, providing services such as accommodation, tour guiding, day tours, and taxi services. An important aspect of its contribution to inclusive growth and economic transformation is the fact that unlike mining, manufacturing, and financial services, tourism is not clustered in specific development nodes.
Therefore, industrial and trade policy interventions cannot effectively achieve their desired outcomes if they are not complemented by an overall supportive business environment. For this reason, Namibia needs to shift its focus towards increasingly attractive regional growth opportunities which hold significant potential to increase intra-regional exports and foster growth and economic development in the region.
