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Economist calls for private sector participation

Sun, 1 February 2015 22:45
by Kudzai Chimhangwa

Renowned Economist, James Cumming believes Namibia’s real challenge lies in the implementation of reforms that are essential to supporting the private sector to play its catalytic role of driving economic growth.
Cumming told The Villager that there is a need for economic reforms to be made to enable the private sector to do business with more ease.
He pointed out that the predominance of the services sector in the economy was basically a function of the value addition to other sectors of the economy.
Turning to the aspect of many big firms being comfortable with serving the local economy only, Cumming said it was just a stage.
“I don’t think we are lagging behind. It’s the evolution of the economy which has had to look inwards and serve locally.
We are now at a point where the economy is pretty much saturated in terms of the services sector. The next phase will now have to be on focusing on external markets,” he said, adding that government’s policy of turning the country into a logistics hub was a positive sign.
His sentiments also cement revelations by the World Bank that several factors appear to discourage private investment in activities that could transform the structure of the economy, although the basic preconditions for growth such as political stability and prudent fiscal and monetary policies are currently in place.
The bank noted that while most business regulations in Namibia are not overly burdensome in themselves, Namibia’s peers around the world have been moving faster to streamline regulations and eliminate red tape or bureaucracy.
Consequently, businesses are finding it easier to make new investments in those countries and therefore create more jobs.
Former senior adviser at the United Nations Industrial Development Organisation, Dr. Frank Bartels, argues in a recent FDI Intelligence note, that incentives only matter after a foreign investor has established a presence in the host country.
“Once a foreign investment has been made, policymakers should shift emphasis from resources to market advantages that will ultimately reduce operational costs for investors.
“Examples include the removal of administrative obstacles and managerial impediments,” noted Bartels.
Despite Namibia’s high unemployment rate, some businesses find it cheaper to invest in labour-saving capital equipment rather than hire more workers.
The bank said that private entrepreneurs who begin with micro and small businesses can only survive and grow in a market where competition facing them is fair.
Conversely, in a market where a small number of large firms dominate with extensive abuse of their market power, micro and small firms can hardly grow, and some may not be created in the first place.
The lack of competitiveness of the market, the bank notes, may be a result of dominance of powerful private companies such as multi-nationals, as well as that of state owned enterprises and parastatals that are granted monopolistic power.
“This is why in the past two years the World Bank has provided technical assistance to the Namibia Competition Commission to support their efforts in making Namibian markets more competitive,” the official said.
The bank said that a competitive market is just one important part of a broader business environment in which private entrepreneurs operate to grow their business and create jobs.
Using ten indicators, the World Bank regularly evaluates business environment of economies across the World Bank in its Doing Business Report.
“What we see in the latest 2015 Doing Business Report is that Namibia is well advanced among African economies, but significant distance remains in comparison with best performers in the world. Many reforms have been initiated in the past years, but progress and impact seem to have been slow to come,” the bank said.
In the 2013 Doing Business report, Namibia is ranked 87th out of 185 economies but two years later, it stood at 88th out of 189 economies.