Boost business to boost growth

Phillepus Uusiku- To prevent massive capital outflow, it is of critical importance to put more emphasis on policy certainty to attract investors, avoid tax changes and increase private sector regulation, Rowland Brown of Cirrus Capital says.

Speaking at the Elota investment summit earlier this week, Brown gave an update of the global and Namibian economic outlook.

Since 2015, Namibia has experienced very low growth. Growth has been lower than the population growth, implying that Namibia is becoming less wealthy.

The low growth is brought about as a result of various macroeconomic challenges including weak investor confidence, high youth unemployment, constrained public spending and prolonged recession, Brown said.

Most of the jobs that were created during this recession were in the informal sector such as the agriculture. Formal sector employment has dropped, resulting in households receiving less income which constrain them from stimulating the economy through spending, he added.

With the diamond sector picking up and with the good rainfall that Namibia has received, it is expected that positive growth will return.

The tourism sector however, is expected to contribute very little to economic growth due to the outbreak of the coronavirus which has forced various tourists to cancel their travelling plans, Brown pointed out.

In 2020, it is expected that the growth rate will again be lower than the population growth rate, therefore households are still expected to experience tough times. A growth rate of at least 4.5% is needed, he said.

Capital outflow

In 2018, net outflow of capital was noticed. This could only mean that Namibian investors are getting uncomfortable and are investing elsewhere, while foreign investors are not coming forth due to weak business confidence as well as the weakening of economic performances.

Also speaking at the summit on Tuesday was John Naanda, the capital markets manager at the Namibia Financial Institutions Supervisory Authority (Namfisa), highlighting the trends, opportunities and challenges of domestic asset requirements.

He emphasised the importance of diversifying local investment and investing in untapped areas that has the potential to contribute to economic growth such as in the manufacturing, tourism and retail sector.

There are however challenges that needs to be addressed, such as the presence of an ineffective regulatory framework, illiquid access to finance instruments and limited access to finance instruments, he warned.

Banks

In a panel discussion, Vetumbuavi Mungunda, the chief executive officer of Standard Bank Namibia, highlighted the role of banking in the economy which serves as an intermediary to channel funds from agents that has surpluses to those that have deficits.

The performances of banks in Namibia is a true reflection of the state of the Namibia economy as loans on vehicles have decreased, he said. This implies that individuals are not coming forth to borrow in order to purchase vehicles because of the tough economic situation.

Banks have large liquidity, however the demand for funds from the public for investment purposes is very low due to low business confidence.

There is a need for all the key players in the economy to set up sustainable businesses and banks will always be willing to avail funds as they are not willing to finance risky business ventures, Mungunda said.