Schlettwein ponders on what’s killing economy
Poor economic growth numbers, a general meltdown in the standards of living and the business environment prompted finance minister Calle Schlettwein to invite many stakeholders at his offices yesterday to reflect on what has gone wrong in the Namibian house.
He also sought to have a collaborative effort in figuring out the way forward.
The economy last registered positive growth as far back as two years ago and has weakened nine times quarter on quarter, thereby killing business and weakening consumer demand.
With the future of the economy now uncertain, the minister gave ear to private sector players some of which advised him to do away with the 15% Value Added Tax in order to encourage local production.
Suggestions were also offered that foreign investments be dissuaded in entering into businesses already dominated by locals to protect industries.
Schlettwein was visibly irked by the fact that contrary to the ideal vision of a private-sector led growth, government and mining investments had been driving robust growth prior to 2016.
Said the minister, “As soon as the government fiscal policy receded into the consolidative mode and mining sector foreign investments ran their course, economic activity plummeted, and needed fiscal consolidation is assessed to be the main cause of slackness as if fiscal expansion is forever.”
In the meantime, private sector contribution to the economy remains worrisome and began to decline from as far back as two years ago.
Sadly, investments have been flying outside the country as production and processing capacity of the economy remains narrow.
He also expressed his dissatisfaction with the fact that despite government rolling out “generous manufacturing and export promotion incentives” since the early 1990s, manufacturing has been disappointing.
In the second quarter of this year, manufacturing suffered the strongest contraction (-12.5%) compared to all economic sectors.
The government has also rolled out positive interventions in the agricultural sector yet it remains in dire straits and contracted by 1.1% in the second quarter 2018 after a positive growth of 1.4% in the first quarter.
An example of such interventions is the Green Scheme aimed at encouraging the development of irrigation based agronomic production with the aim of increasing the contribution of agriculture to the country’s economy.
Said the minister, “A lot needs to be done and effective partnerships are needed for us to achieve a sustainable development and different growth dynamics.”
However, former Namibia Chamber of Commerce and Industry (NCCI) boss, Tarah Shaanika decried bureaucracy as scuttling private sector efforts to invest.
For instance, Shaanika said, the Attorney General has been dragging his feet to allow for the launching of investments in the Erongo region thought to inject some N$750 million in the economy.
He also said there is a need to slow down on debt financing and increase equity financing which means the setting up of a venture capital fund.
Bank of Namibia governor, Iipumbu Shiimi weighed in to suggest that such a fund should mean that the private sector is ready to pump in money backed up with government and pension fund monies.
Other stakeholders advised Schlettwein to rush into solving quarrels crippling Meatco to save the country’s largest meat exporter from going down the drain.
Corruption was also on the radar and there were calls to thicken the battle against graft as well as to open up borders for business people to come invest.
“We need to catch the criminals and not to punish people who come in to do business,” the minister agreed.
Meanwhile, analysts at PSG Namibia cut the forecast for GDP growth to 0.9% (from 1.9%) in 2018, 2.3% in 2019 (from 3.6%) and 3.6% (from 4.4%) in 2020, and indications are that the going is getting tough.
This puts the jobs-outlook to uncertainty while experts at FNB Namibia predicted that the unemployment rate will likely come down to the level where it used to be in 2014 only in 2022.