Wanted: Business direction

‘Policy-induced investment revolt’

26 February 2020 | Sakenuus
Jo-Maré Duddy – Government policy – or the lack thereof, government regulation, government failure, government’s fiscal position and the recession: Ask the business sector in Namibia to pin point the top five risks to the economy and the Geingob administration’s role takes centre stage.

Of the top eleven risks named by decision-makers in the corporate sector in a recent survey by Simonis Storm (SS), government needs a wake-up call to effectively mitigate the headwinds facing the battered economy.

Apart from the above, CEOs, chief financial officers, analysts and economists also singled out corruption, unemployment and Namibia’s international junk credit rating.

Other risks are the drought, exchange rate fluctuations, political instability in the region - specifically South Africa - and the global economic slow-down.

About 19% of the respondents in the SS survey expect lay-offs compared to 17% in 2019.

The Namibia Statistics Agency (NSA) labour force survey conducted in 2018 pegged the country’s broad unemployment rate at 33.4%, with youth unemployment at 46.1%.

“Even with the current scary statistics, respondents continue to expect a further increase in the unemployment rate and see no hope of the situation reverting,” SS says.

Around 78% of the respondents expect an increase in unemployment in 2020 compared to a 74% in 2019.

“The economic conditions are still expected to remain bleak, thus, low expectations of hiring. The graduates, who are mostly young people, will be on the losing end,” SS says.

Barren landscape

Both 2016 and 2017 were recession years for Namibia. Meagre growth of 0.3% was achieved in 2018, according to the latest NSA data. Analysts expect a deep contraction for 2019.

The secondary industry grew by -4% and -7% in 2016 and 2017 respectively, with fragile growth of 0.1% in 2018. Manufacturing spent 2017 in recession, growing by 0.3% the year after. Construction was in a deep contraction in 2016 and 2017, registering growth of -5.4% in 2018.

Namibia’s tertiary industry has been in recession since 2017. One of the main drivers of the economy, wholesale and retail, grew by -6.8% and -6.3% in 2017 and 2018 respectively, the result of the indebted consumer and increasing unemployment.

“The secondary and tertiary industries are likely to remain under some pressure yet,” Cirrus Capital says in their economic outlook.

The role of public administration and defence, health and education in the economy has dwindled since government embarked on its fiscal consolidation policy in 2016.

Gross fixed capital formation (GFCF), or investment, has plummeted from about N$47.4 billion in 2014 to around N$30.5 billion in 2018. Excluding general government, GFCF has fallen by nearly 40% from N$41.1 billion in 2014 to about N$25.2 billion in 2018.

Cirrus says both GFCF and foreign direct investment (FDI) as a share of gross domestic product (GDP) are “at or near historical lows”.

The slump comes both from government and the private sector, Cirrus says in its latest economic outlook.


SS’ survey found that 81% of respondents expect Namibia to attract “the same level of FDI or for it to deteriorate even further in 2020”.

“This can possibly be attributable to uncertainty around policies within certain sectors of the economy and Namibia not being competitive relative to other countries in the region,” SS says.

Cirrus is less diplomatic. “The last five years have seen increased anti-investment and anti-business rhetoric, some of which has seen its way into policy,” the analysts say.

Central to policy uncertainty is the New Equitable Economic Empowerment Framework (NEEEF) and the Namibia Investment Promotion Act (NIPA).

Repeated tax reform suggestions are also adding to the uncertainty.

“The majority of the respondents are still against or neutral over the re-tabling of the tax amendments until more clarity is provided and public consultation is finalised,” SS says.

Namibia was supposed to be rated the most competitive economy in Africa as measured by the World Economic Forum (WEF) in 2020, SS points out. In reality, Namibia is now the fifth most competitive economy in Sub-Saharan Africa behind Mauritius, South Africa, Seychelles and Botswana.


The latest IJG Business Climate Monitor (BCM), released last September, marked nearly a year in negative territory. The BCM first moved into the red in November 2018.

“This is the longest period the IJG BCM has stayed in the contraction area since the Business Climate Monitor started in 2001,” the Institute of Public Policy Research (IPPR) said.

Data released by the Bank of Namibia (BoN) shows a sharp increase in the business sector’s personal loans, credit card and overdraft debt at local commercial banks.

At the end of last year, the sector owed banks N$7.4 billion in total in personal loans and credit card – a jump of nearly N$3 billion or 64% compared to the end of 2015.

Annual growth in personal loans and credit card debt at year-end has outstripped growth in mortgage loans to the commercial sector by far in the past two years. In December 2018 and 2019, this debt grew by 25.7% and 16.8% respectively, compared to 2.6% and 3.5% for mortgage loans.

Local analysts expect the economy to grow between 0% and 1.1% this year. The economy’s saving grace is likely to come from the primary sector, mostly mining, while tough times are to continue for the secondary and tertiary sectors.

About 52% of respondents in the SS survey expect economic growth to remain below zero this year, “with only few highlighting a slight increase to a level above 0% but below 2%”.

“The general sense from the respondents is that there are still not enough catalysts to spur growth to the level of 4% long-term economic growth average Namibia has experienced over the years,” SS says.

According to SS: “Economic recovery will be unlikely if the following are not addressed: ambiguous communication to investors, slow or no structural reforms, lack of accountability, lack of private sector engagements, slow execution, corruption and lack of common goals.”


Namibia is experiencing a “policy-induced investment revolt”, Cirrus says.

“As a result, the forward-looking indicators of net foreign investment, as well as fixed capital formation, look poor – suggesting that the mid-term outlook will remain weak.

“Without this investment, there are limited prospects for sustained material recovery of household incomes, as well as material recovery in government revenues. Thus, the best-case scenario for the near term is low growth,” Cirrus says.

One of the top five solutions to Namibia’s economic woes, according to the SS survey, is “pro-business policies”.

In addition, the country needs strong leadership and it must get corruption under control.

“The highest priority should be to make the country more attractive for potential investors and avoid unrealistic laws and regulations,” SS says.

Cirrus says “no respite can be expected in the near term” from a small business and investment perspective.

“Indeed, it appears as if government remains determined to introduce additional taxes (dividend, taxes on trusts etc.), and while the worst-possible iteration of NEEEF and NIPA are unlikely to be introduced, less draconian versions (but still less desirable than the already challenging status quo) can be expected,” the analysts say.

As a result, small business – the core employers in the country – will remain under pressure, Cirrus warns.

“These short-sighted measures will push economic, fiscal and household recovery further from reach, as well as provide additional space for misappropriation of funds by individuals, not to mention failure to achieve their broad-based intended outcomes.

“As a result, and depending on the severity of the new policies, our expectation is that many small businesses, particularly, will either close their doors, or lay off further workers,” Cirrus says.

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