EESEing the business struggle

Jo-Maré Duddy – More than 40% of respondents who participated in a survey spearheaded by the International Labour Organisation (ILO) and the Namibian Employers’ Federation (NEF) were unaware that they had to be registered with the Receiver of Revenue.This is one of the findings of the Enabling Environment for Sustainable Enterprises (EESE) report that was launched last year. The survey zoomed in on political, economic, social and environmental situation of the enabling business landscape in Namibia.A total of 683 respondents participated in the survey. Compared to EESE surveys conducted in other African countries, this is an extremely representative sample, according to the ILO. Of the participants, 404 were business owners or partners, 155 were managers and 124 employees. Included were 263 from the SME sector, 206 from large enterprises, 100 from the informal sector. The survey was conducted in Khomas, Erongo, Omusati, Oshana, Kavango East and Oshikoto. 600 of the interviews were conducted face to face. Sectors covered included agriculture, wholesale and retail, manufacturing, tourism, mining, financial services, health and business services.Legal landscape“Understanding legal and regulatory measures is critical to enable adaptation to the existing business environment, and in general the EESE survey noted that a large number of respondents were not aware of regulatory measures that might pertain to them,” the report states.Whereas nearly 85% of formal enterprise respondents indicated that they were registered at the tax office, only 0.03% of those in the informal sector had a registration card. 40% did not know about registering employees with the Social Security Commission though they are compelled to do so by law.The report points out that the increased rate of urbanisation has led to the expansion of the urban informal economy, “which engages a significant percentage of low income and unskilled or semiskilled labour in the country”. “The vast majority of the informal economy remains beyond the scope of much of the existing regulatory and legal environment as set up and administered by the government,” the report states.Labour and other hindrances“The EESE survey in Namibia that there was relatively strong agreement among respondents that the formal and informal business community did not understand labour legislation, and that the labour law was not always respected,” the report states.35% of employees of large enterprises and 31% of SME employees felt that workers “partially understood” the labour law. 20% of respondents overall felt that most small businesses were aware of, but ignored provisions of the labour law. Another 31% said that most small businesses find it difficult to comply with.Respondents viewed low market demand and the cost of inputs as factors affecting business most negatively. Limited access to affordable and relevant financial services were other hindering factors. When asked if the government provided any services or incentives for small businesses, less than half of respondents were aware of any or believed that government provided these. “When it came to rating the support system for individuals looking to establish a new business, between 20% and one third gave a negative rating which implies that these systems are not supportive enough,” the report states.Not knowing how to or what to do was highlighted as the greatest barrier to formalising a business by all respondents. This was followed by too many procedures to register a business and the difficulty of obtaining a license.Other hindrances were paying taxes and social security, problems with hiring people and costs.Peer comparisonThe report refers to the Regulatory Quality Index, based on the World Bank’s Worldwide Governance Indicators, and says Namibia’s position has deteriorated since 2009. The index measures the ability of a government to provide sound policies and regulations for the promotion of the private sector on a scale of -2.5 to 2.5.In 2009, Namibia scored 0.10. In 2015, the country’s rating was -0.08. This is lower than Botswana and South Africa.Namibia’s shortcomings in the legal framework for investment are echoed in the low Ease of Doing Business Index, which ranks economies from 1 to 190, the EESE report points out. “Namibia’s dropping in rank between 2011 and 2016 from 74 to 108 reflects a worsening of the business environment.”“Well-designed and well-implemented clear regulations, including those that uphold labour and safety standards, are good for the promotion of start-ups and enterprise development. While a broader reform of government and public administration to improve efficiency might be necessary, certain specific coordinated changes might vastly improve the existing state of affairs in Namibia,” the report states.CorruptionA functioning legal framework is key to the success of efforts to reduce corruption, the report states.“Procurement mechanisms are often irregular, and state resources, in the form of contracts, licenses and concessions are often not allocated through competitive official processes,” it says.The report continues: “Additionally, a very large percentage of Namibia’s senior civil servants are prominent members of Swapo, which leads to conflicts of interest, and the preferential distribution of lucrative tenders, among other questionable results.”According to the report, the courts in Namibia tend to be “relatively independent” of the ruling party, “but the system is stymied by inefficiency and a lack of resources”.Citing the World Bank’s Control of Corruption Index, the report says Namibia’s ranking improved slightly from 0.25 in 2009 to 0.28 in 2015. The index measures the extent to which public power is exercised for private gain and the extent to which the state is captured by elites and private interests. Namibia fared better than South Africa, but worse than Botswana.Namibia’s ranking on the World Bank’s Government Effectiveness Index also improved gradually from 0.13 in 2009 to 0.26 in 2015. The index measures the quality of public services and the capacity of the civil service and its independence from political pressures. It also looks at the quality of policy formulation, and the credibility of the government’s commitment to such policy. In this regard, Botswana and South Africa ranked higher.“Key components of good governance are the absence of corruption, and efficient institutions that foster entrepreneurship, promoting private sector growth and development. In general, Namibia performs relatively well when it comes to many aspects of good governance; corruption however is a significant hindrance to progress,” the report states.

EESEing the business struggle

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