BREAK THE CHAIN: Namibia’s import-dependency weighs down economy

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By Lahja Nashuuta

Windhoek – Experts have urged the Namibian government to break the commodity import-dependency chain and focus on elevating its manufacturing industry to allow it to benefit more from its natural resources. 

The Southern African Development Community (SADC) region is battling an economic slowdown, and Namibia has come to the realisation that only by having a strong manufacturing base will it reduce the imports and trade deficit, which at R24 billion is one of the highest trade deficits in the world.

The Namibian government’s dependency on foreign manufactured goods has also come under the microscope, with critics like opposition parties claiming that it sometimes opts for foreign-produced goods at the expense of local manufacturers. An opposition lawmaker this month complained in the National Assembly that government has been importing government registration plates for state-owned vehicles, despite the country having various number plate producers. 

According to the United Nation’s State of Commodity Dependence 2016 report, Namibia is ranked third in the region on the list of countries that rely heavily on import commodities. Botswana and Lesotho are first and second, respectively.

Experts are certain that the Namibian economy could improve significantly should the country put more emphasis on growing its manufacturing industry.

Namibia possesses vast natural resources such as diamonds, uranium, lead, gold, copper, zinc, natural gas, among other minerals. But despite the vast natural resources, Namibia still imports items that could be easily produced at home.

According to statistics, Namibia imported more goods mostly made from copper, diamond, gold, precious metals, and iron/steel in 2017.

The country also spent significant sums of money on importing items that can be classified as basic needs and would not cost as much to manufacture at home. Namibia still imports a significant number of household items needed on a daily basis, such as sanitary pads, napkin linen, toothbrushes, articles of bedding, including mattresses and sleeping bags, wooden furniture, as well as fruits and vegetables.

Data from the Namibia Statistic Agency (NSA) show that the country spent R165 million on importing fruit juice in 2017. Namibia also had to spend R100.8 million on importing tomato ketchup and other tomato sauces.

Cane sugar import cost the country R218 million while importing margarine cost R129 million. 

Other consumables such as cigarettes cost R475 million, while sulphur of all kinds cost R122 million and toothbrushes saw the country paying R15 million. Last year also saw the country spending R144 million on importing biscuits, yoghurt for R62 million, milk and other dairy products for R366 million, spices for R170 million, paint for R170 million, bath soap for R427 million and Washing powder for R358 million.

NSA’s annual trade data show that the country imported goods worth R87.9 billion while only exporting goods worth R63.5 billion in 2017. This translates to a trade deficit of R24 billion.

Other countries in the world that recorded significant trade deficits in 2017 were South Africa (R34 billion), Bulgaria (R5.8 billion), Zambia (R1.7 billion), Peru (R1.5 billion), India (R1.5 billion) and China (R1.2 billion). 

To break the chain of import dependency, economic experts in Namibia have advised the government to enhance efforts to add value to their raw materials for exports.

University of Namibia economist, Dr Omu Kakujaha-Matundu, has stressed the importance of industrial development and said import dependency negatively impacts the economy as it leads to a trade deficit, skill deficit, and increases joblessness and youth unemployment.

“Importing more goods means exporting jobs, and supporting the manufacturing industries of foreign countries. Sooner or later your people have to follow the money and migrate to those countries where jobs are created,” he said.

Among the obstacles preventing value addition in Namibia, Kakujaha-Matundu singled out the country’s population, which he says prevents companies from enjoying economies of scale. He further pointed out that a small local market and huge distances to lucrative European, Chinese and American markets also work as barriers to attracting investors to Namibia.

Kakujaha-Matundu said although Namibia has come up with incentives to promote value addition such as Export Processing Zone (EPZ), such incentives have failed to attract investment, local or foreign, in value addition.

He said Foreign Direct Investment (FDI) was received more in mining, which led to some mining activities enjoying EPZ incentives, which is not supposed to be the case.

He commended the finance ministry for ending the EPZ and proposes that the Ministry of Industrialisation, Trade and SME Development’s Growth-at-Home Strategy replace the EPZ.

“That is where real value addition could be tried out. 

The identified niche markets under these sectors should be tested,” he said.

The Growth-at-Home Strategy consists of interventions to support value addition, upgrading and economic diversification through a needs-oriented and comprehensive approach to industrial development and structural transformation of the Namibian economy towards more productive economic activities.

Kakujaha-Matundu said the problem with EPZ was not an ideal model as it restricted investors in terms of domestic market utilisation and it also had implications on logistics, geographically.

Furthermore, the academic said there is a need to invest in the promotion and support of the manufacturing sector, especially the small and medium enterprises to add value to raw materials.

He said while it is impossible for a country to be import-independent, the current negative trade balance is not good for Namibia. He said Namibia should identify those areas in which it has competitive advantage and export those goods and services in order to offset the trade deficit.

Opposition lawmaker Nico Smit has underscored the need for the country not only to invest in value addition but also to take ownership of its natural resources.

Smit, who is the treasurer general of the official opposition, the Popular Democratic Movement (PDM) has expressed concern that most of the mines in the country are foreign-owned. He said Namibian shareholders and government only own minute shares in local mines. He singled out Namibia’s Rössing Uranium where the government owns 3%, Rio Tinto owns about 69%, South Africa 10%, the Iranian government 15% and private smaller shareholders hold a 3 % stake.

In Husab Uranium Mine, the Hong Kong-based Taurus Minerals Limited owns 90% while the remaining 10% is owned by Epangelo Mining Company, the state-owned mining entity.

“This is unacceptable. The government should have more shares at least 40% shares in all mines so that the country can benefit from its natural resources,” Smit said.

The Deputy Permanent Secretary in the Ministry of Industrialisation, Trade and SME Development, Michael Humavindu, has acknowledged that Namibia lags behind in terms of adding value to products and that the country’s economy has been static since independence.

He attributed the failure to skills deficit, lack of finance, bank collateral and security requirements. He pointed out the country’s economies of scale, as some of the issues that are turning off the investors.

“Namibia has been a trader since colonialism, trading on other people’s goods and services while producing little of our own. The country needs a dynamic export based [economy to] create its own jobs, create foreign currency reserves and build skills and capacity.”

Humavindu added that Namibia’s financial sector needs to review its financial requirements in order for local businesses to venture into manufacturing.

“In Namibia, for one to acquire business mortgage from the bank, one should have collateral and security. Even the financial markets are not adopted to fund a project by just looking at the potential of the project. They first have to look at the person’s assets and collateral,” he said.

Humavindu said financial markets need to change the conceptualisation and mindset, especially when it comes to financing local projects to be able to sustain itself and become viable. He said there is a need to establish an institution that would train people on technological skills required by the market. 

According to Humavindu, signs are however there that the country is in the process of elevating its manufacturing industry. He said over the years, the country has seen goods being manufactured locally in the areas of agriculture, fishing, precious stones and other mineral resources.  

Humavindu, however, said more investment opportunities are still available in the diamond processing, beef processing, fish processing and charcoal sectors.

“We are still far from where we want to be in terms of industrialisation. 

Of course, the government has created a conducive environment and it’s up to the private sector to grab opportunities in order to fast-track the process,” he said.

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