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FDI is good but don’t shun domestic investors

FDI is good but don’t shun domestic investors

By Josef Kefas Sheehama.

Let me say we live in a great country and you and I are at a perfect moment in the history of Namibia. It is not all doom and gloom, and the good news is that there is light at the end of the tunnel.

As Namibia approaches the general elections in 2024, there is immense pressure on political leaders to tackle the economic challenges and implement policies that will deliver an inclusive and competitive economy.

On 22 February 2023, Minister of Finance and Public Enterprises, Iipumbu Shiimi tabled an N$84.6 billion budget outlining his vision to build on the work the government has done to make a real difference in people’s lives, investing in Namibia, lowering costs for families, protecting, reducing the deficit, and more. However, Namibia expects economic growth of 3.2% in 2023, down from 3.4% as drivers of income streams remain uncertain.

But despite the gradual economic recovery in 2022, the socioeconomic situation did not improve significantly.

Unemployment is expected to remain high so poverty will also remain high. Namibia has a choice to implement critical macroeconomic and structural reforms that can reduce crisis vulnerabilities and increase growth. Doing so will lift per-capita incomes, sustainably reduce poverty, and deliver better life outcomes for many Namibians. Furthermore, private sector development and competitiveness can be boosted by eliminating structural constraints that hinder productivity and by expanding social protection to protect the poor and most vulnerable.

Moreover, the Chief Executive of the Namibia Investment Promotion and Development Board, Nangula Uaandja, made known that Namibia secured pledges worth N$161 billion in potential investments from abroad. This is a good move as it is expected to create 122,000 jobs.

Already a N$24.1 billion investment has been operationalised with N$2.8 billion flowing into the economy. However, Foreign Direct Investments have been received with mixed feelings. The presence of highly competitive international players on weak domestic markets often leads to market abuse followed by reluctant political pressures. Large investors more often than not persuade concessions from a host country to maximize tax obligations, hence encouraging volatile balance of payment flows. Negative results follow when the market is distorted and FDI starts influencing supply chains of domestic companies. To leverage the full potential of these investors, the government will need to design and implement national skills programmes to upskill young Namibians for a skilled local workforce.

In Namibia, domestic investment can be a driver and an engine of economic growth. The re-launched of the SME Economic Recovery Loan Scheme in the amount of N$ 500 million is a good example to create liquidity within the domestic markets. It is necessary to sustain growth, create employment and lay the foundation for poverty reduction. Our domestic markets have not grown fast enough to tackle unemployment. As a result, there is a wide and growing gap between Namibia’s investment requirements and domestic resource availability.

Since it is not viable to rely only on FDI to achieve development objectives, it has become necessary to devise policies to attract and encourag linkages between foreign multinationals and local companies. We should not forget Ramatex Textiles’ environmental concerns. The reality is we need these people, but we should not allow them to exploit our people. FDI should not be a curse on our dignity. It must always remain a win-win blessing. It should therefore not be at the expense of the dignity of our people or the sovereignty of our nation. Hence, we expect to see more action from the Ministry of Labour, Industrial Relations and Employment Creation in legally correcting any prevailing situation with deserved urgency.

Economically, we are not yet out of the woods, but we are beginning to see signs of stabilization. Namibia also faces the same inflationary pressures that have plagued economies around the world. Annual inflation rose to 7.2% in February 2023, defying the Bank of Namibia expectations for price pressures to ease. This prompted the Bank of Namibia’s Monetary Policy Committee to hike interest rates by an aggressive 25 basis points on 15 February 2023, taking the benchmark repo rate to 7%. The Bank of Namibia is expect to raise interest rates by another 50 basis points on 19 April 2023 to curtail inflation. We are expecting the Bank of Namibia to continue raising interest rates over the medium term. The current expectations are that inflation and interest rates will remain undesirably high for some time. The Bank of Namibia will play a major role in striking the balance needed to bring down the cost of living without stalling the economy.

This means that Namibia will increase the repo rate to strike balance. South Africa’s Repo Rate stands at 7.75% and Namibia at 7%. This results in difference of 0.75%. It should be noted that although much of this inflationary pressure is supply-side based, there is merit in increasing interest rates as a tool to try to slow down inflation. The fundamental debates about inflation are really concerned with whether the central bank is an inflation creator or an inflation fighter. The responsibility of monetary policymakers is to adequately respond to inflation.

To that end, the youth unemployment is one of Namibia’s most intractable challenges. Given this evidence and the fact that Namibia is facing moderate growth for some time, it is crucial that FDI, domestic institutional investors, policymakers and those working on youth employment interventions evaluate and invest in programmes on the basis of their ability to keep young people positively oriented and active in the labour market.


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