NEEEF could dent future investments
Renowned Economic Analyst James Cumming has warned that the current format of the New Equitable Economic Empowerment Framework (NEEEF) has potential to upset investors targeting Namibia in the future.
His sentiments come at a time when a recent engagement dominated by white business owners revealed that some are contemplating relocating their businesses to other countries like Mauritius, while others clearly showed their dissatisfaction with the propositions contained in the NEEEF.
NEEEF is a policy being mooted by government to create genuine broad-based black economic empowerment in the economy.
In its current form the NEEEF requires privately owned companies to sell 25% or a percentage that is determined by a line minister to a previously disadvantaged person (PDP).
Cumming said that the NEEEF Bill, in its current form, will lead to “economic suicide”
“If the NEEEF Bill is going to be implemented in its current form, it is going to chase away investment. People who buy the shares will also be in debt. Economically speaking, I don’t think the country has enough money to buy 25% shares from private companies. Of course, government might think of printing more money, but that will come with its own impact as the Bank of Namibia (BoN) will be forced to increase interest rates, which will have a negative impact on the economy as inflation will rise and the consumers will be affected negatively,” Cumming told The Villager.
The NEEEF also requires that 50% of the management of privately owned companies should consist of PDP’s, or equivalent to about 0.5% of a company’s gross salary must be spent on training of individuals. Cumming also noted that government must encourage entrepreneurship and skills development rather than forcing people to take on shareholders they do not trust or might not want to partner with.
“Forcing businesses to enter into partnership agreements they do not want is only going to distract business and the free market system the country is currently having,” Cumming said.
Commenting on the matter Political analyst, Dr Andrew Niikondo said he does not see anything wrong with the private sector selling their shares to previously disadvantaged citizens as this allows for shared-wealth amongst citizens.
“The private sector must understand that moving their business elsewhere will not only have a negative impact on the country but also on their part. Blackmailing the government will not work. Entering into agreements with their employees or other PDP shareholder will not only be good for the private company but also for the country at large, especially now that we are looking at equal distribution of wealth,” Niikondo opined.
He noted: “The private companies standing against selling their 25% shares to private businesses only shows that they want to continue the system of ‘the rich remains rich, while the poor remains poor’.”
Niikondo also aired that overall, Black Economic Empowerment (BEE) policies fail to meet their outlined objectives because they are poorly constructed.
The NEEEF Bill is anchored in Article 23 (2) of the Constitution and its primary beneficiaries are intended to be PDPs, especially the racially disadvantaged (black people), women and persons with disabilities. This government intervention also aims to bring equity in the socio-economic environment but with the focus more on redressing the income disparities that exist in Namibia 26 years after independence. There is concern about the fact that 95% of the economic power still primarily resorts with 5% of the Namibian population, which is the private sector.
“There is always a danger that BEE will become synonymous with corruption, influence peddling and the economic elevation of a politically-connected elite. The end result of such a worst-case scenario is that NEEEF in Namibia would largely take the form of a money transfer to a small, already well-off elite and not benefit the broad mass of people who are impoverished, jobless and marginalised. This would particularly be the case if, in addition to primarily benefiting a small elite, NEEEF has the effect of deterring investment and therefore undermining job creation. Enabling the creation of meaningful job opportunities in the private sector is probably the single greatest empowerment initiative the government could take,” the Institute for Public Policy Research (IPPR) reported in comment to NEEEF.
IPPR also stated that the NEEEF Bill should not be enacted and implemented in its current form. The research institute instead suggested that the concepts underpinning NEEEF should rather be the subject of a rigorous consultative process, preceded by concerted effort to gather the data and research needed to credibly inform the introduction of an empowerment framework on the Namibian business and economic landscape.
“Bearing in mind Namibia’s painful past of apartheid colonialism, it is a given that transformation and empowerment are necessary. However, NEEEF in its current form would not achieve social justice and equitable wealth (re)-distribution and could in fact undermine equitable wealth creation and job creation. The risks of rushing headlong into the passing and implementation of the current draft bill are too great and would imperil Namibia’s hopes of development as envisaged in successive national development plans, the Harambee Prosperity Plan and Vision 2030,” IPPR reported.