NEB laments informal sector exclusion from GDP figures

Namibia Equity Brokers (NEB) analyst in the research division Ngoni Bopoto has lamented the exclusion of Namibia’s informal sector in the calculation of the country’s economic growth.

Reacting to the release of the latest Gross Domestic Product (GDP) figures by the Namibia Statistics Agency (NSA) recently, Bopoto said, “Focus on GDP growth as a measure of economic development has been critiqued around the globe.”

 Bopoto submits that, “Particularly for a developmental state as ours, it would be beneficial to measure attributes beyond those captured in the national accounts.”

 By simple definition, according to Investopedia GDP represents the total dollar value of all goods and services produced over a specific time period; one can think of it as the size of the economy. “For instance, we all realise the importance of the informal sector, which, according to the IMF, accounts for about 45% of economic output in developing nations, however the bulk of activity in this sector is not captured by the GDP measure,” he said.

 His observations raise eye brows on the credibility of the official figures coming from Namibia’s statistics power-house, while the questions over NSA’s credibility are not a new phenomenon.

“Similarly, the depletion of natural resources and environmental degradation are not accounted for as these are considered to have been provided free by nature. Perhaps the most misleading element of GDP is that economic activity conducted by multinationals within the borders of a country is ascribed to the country whereas most of the economic benefit accrues to non-resident entities,” Bopoto said.

 Responding to these observations, NSA’s Senior Communications Officer Nelson Ashipala bluntly dismissed that the informal sector was being elbowed out of the growth calculations. “(In) the compilation of GDP, whether Annual or Quarterly, (the) informal sector is taken into account and thus form part of the GDP indicator.

The informal sector is included in the compilation of National accounts, the baseline of this inclusion is based on the informal sector survey that was conducted in 2001 by the Ministry of Labour and subsequent series are extrapolated on the assumption that the movement (direction) observed in the formal sector is similar in the informal sector,” Ashipala said in defense. He thus categorically stated that the credibility of the GDP is out of question while he said NSA was not aware of the IMF figure as far as the contribution of the informal sector is concerned.

 “The source of the statement is unknown to us but referring to the response above, it is just correct to say that since the informal activities are included in calculation of the GDP, it suffices to say that our GDP meets the credibility criteria,” he said. Namibia Equity Brokers has advised that, “It is important that we consider alternative measures that have social relevance and would allow policymakers to use a broader set of indicators rather than a single, at times misleading number.”

Ashipala responded to this advice with a mixture of cynicism, hinting that NSA was not at a point of radically getting off its lane via seeking alternative means of measuring economic growth.

“The issue of alternative measures (has) been discussed at UN forums and UN has developed the System of Environmental and Economic Accounts (SEEA). However, the SEEA is still work in progress. A single figure does not necessarily mislead but however can be supplemented by other measures to give a holistic view,” he said. (FNB) Research Market Manager, Daniel Kavishe said Namibia’s informal sector was still quite small while the only way they can be a part of the GDP was fomalisation, thus contradicting NSA’s claim that the sector is inclusive of the GDP.

“You can’t include the informal sector that’s why it’s informal; it’s like guys who make Kapana, your mechanic in Katutura. Including them means first of all they have to pay tax and they need to have registered businesses. It can go the Nigerian way where they included what was considered informal which the movie making businesses were and they became the biggest economy in Africa,” he submitted.

 A time the economy has registered negative growth in the last four quarters, he said once the informal sector was formalised it could automatically translate to higher levels of growth