DEMOCRACY REPORT By Christopher Hope Special Briefing Report No. 27 JUNE 2019 GROWTH AT HOME FOUR YEARS ON: THE NEED FOR BETTER INDUSTRIAL POLICY IMPLEMENTATION. ost of Namibia’s leading commentators and economic actors have stressed repeatedly that in order for Namibia’s economy to thrive the government needs to intervene less in the economy, not more. If business is aided by reducing government red tape and taxes, the argument goes, Mthe private sector (both domestic and foreign) will have more confidence to deploy its capital within the country, jobs will be created, and growth will ensue. In short, the Namibian government has been encour- aged to subscribe to ‘free-market’ economic principles. Given this perspective, it was with an undoubtedly weary eye that these commentators and economic actors witnessed SWAPO – which from 1990 to 2010 had fairly diligently subscribed to the above un- derstanding of economic development – notably change its economic policy rhetoric in 2011 and begin emphasising the active role that the state would have to play in the economy were economic develop- ment to be able to occur more quickly. In particular, an idea that began to gain currency was in support of ‘industrial policy’ – that for a country’s economy to modernise, develop new industries, increase exports, and increase wealth, the state must take a central role in supporting the private sector through measures such as the provision of targeted subsidies, protecting firms from foreign competition, and the exploration of new sectors of the economy, particularly manufacturing. In 2011 the Ministry of Trade and Industry (MTI), headed at the time by Hage Geingob, began to speak more positively of the concept, and in the press it was announced that “after 21 years Government has finally woken up to the need for an industrial policy in Namibia”.1 Leading industrial policy advocate and staunch opponent of ‘free-market’ economics, Ha-Joon Chang of the University of Cambridge, was invited to the country to run a seminar for lead government officials. In 2012, the government released a new ‘Industrial Policy White Paper’ which stressed that it would be 1 “Industrial policy wake-up call.” J.M Duddy, The Namibian, 22.11.2011. See: https://www.namibian.com.na/index. php?id=88448&page=archive-read Democracy Report is a regular publication featuring analysis and commentary relating to the legislative agenda of the Parliament of the Republic of Namibia. It is produced by the Institute for Public Policy Research (IPPR), PO Box 6566, Windhoek, Namibia. Tel: +264 61 240514, Fax: +264 61 240516, [email protected]. The publication is also available as a PDF download from http://www.ippr.org.na. Democracy Report is funded by the Embassy of Finland. “necessary for Government to play a much more proactive role in economic development that what is currently the case”.2 This view was repeated by many figures within government. In 2013, recently-appointed Minister of Trade and Industry Calle Schlettwein said that “[w]e are convinced that government must accept a new role to unlock the industrial potential of different sectors and projects”.3 When parliament discussed the industrial policy paper it was reported in the press that “parliamentarians on both sides of the National Assembly… agreed in principle that Government has to become an active development agent to propel the country into an industrial nation”.4 The concept of the ‘developmental state’ (a government that is committed to proactively leading the modernisation of the economy) began to be discussed positively by members of SWAPO. As one current affairs magazine commented at the time, government seemed to have “sincerely embarked on a state-led development approach”.5 The days of independent Namibia’s adherence to free-market principles suddenly appeared to be numbered. The altered approach of the government was made clear when MTI released ‘Growth at Home: Na- mibia’s Execution Strategy for Industrialisation’ in early 2015. The 52-page policy guide is extremely de- tailed, laying out a clear plan as to how the government can help to support economic and industrial de- velopment. As well as representing a clear interventionist-turn in SWAPO’s economic policy, it is also far and away the most high-quality report produced by MTI in recent history. In the same year that Growth at Home was published, in a move to symbolize the government’s renewed commitment to industrial devel- opment, MTI was renamed the Ministry for Industrialization, Trade and SME Development (MITSMED) Below are the most important policies outlined in the document, policies that were extremely well- received by the likes of the Namibian Manufacturers Association and which, if implemented, could serve as a massive boost to Namibia’s economic development. It should be noted that replacing the Foreign Investment Act 1990 with the Namibia Investment Promotion Act (NIPA) fits in well with the governments new industrial policy focus, despite not appearing in Growth at Home. Key policies put forward in Growth at Home Deploy tariff protection, quantitative restrictions, Create a job attachment programme to support and incentives to support infant industries skills training Expand the Industrial Upgrading and Modernisa- Establish a system for the import of skilled labour tion Programme (IUMP) Enhance the incentive schemes for manufactur- Launch an Industrial Infrastructure Development ing firms Master Plan Ensure the new Public Procurement Act supports Review Namibia’s SME Policy manufacturing firms Establish a Retail Charter Launch sub-sectoral strategy documents Establish a National Export Strategy Establish the Namibia Industrial Development Agency (NIDA) Operationalise the Namibian Board of Trade Given that economic history and present-day examples overwhelmingly point to the central role that gov- ernments must play in encouraging economic development through the diversification of the economy, the ideas embedded within Growth at Home should be welcomed. But ideas are only ever as good as their execution. As such, the question, four years on from the publication of Growth at Home (and eight years on from the shift in government rhetoric), is: how much progress has Namibia been able to make in its industrial policy drive? The Disappointing Record To Date Despite the pursuit of industrial development having received heightened attention from policymakers, the record to date has been resoundingly disappointing. The contribution of manufacturing to total gross domestic product (GDP) fell from 13.7% in 2011 to 10.8% in 2017. In addition to this, the value added by manufacturing in Namibia (in constant 2010 N$) was in fact lower in 2017 than it was in 2011. Manu- facturing exports, too, have failed to advance. With little reason to expect things to have improved for the sector over 2018 and the first part of 2019, it can be said that the government has been failing in its 2 Ministry of Trade and Industry (2012). Namibia’s Industrial Policy. 3 Quoted in “Kicking over the traces.” Insight Namibia, 10.4.2013. See: http://www.insight.com.na/kicking-over-the-trac- es/ 4 “State’s role in economy debated.” C. Sasman, The Namibian. 15.11.2012. See: https://www.namibian.com.na/index. php?id=102409&page=archive-read 5 Insight Namibia. 2014a. “Book review: Economics: The User’s Guide by Ha-Joon Chang.” Available at: http://insightnam- ibiamagazine.blogspot.com/2014/11/book-review-economics-users-guide-by-ha.html 2 JUNE 2019 ambitions towards industrial development. Statistics can, of course, be misleading. And, more to the point, industrial policy is typically a relatively slow process – it can take time for support measures directed towards firms to have an effect, or for new industries to be identified and fostered. It could be assumed that, while the Namibian government has been successfully implementing industrial policy, the country has yet to reap the benefits. Unfortunately, this is not the case. Since 2011 and, particularly since Growth at Home was published in 2015, efforts towards industrial policy have been cumbersome, frustrated, and ultimately fruitless. Indeed, of the thirteen proposals outlined above, only four can be seen to have been implemented to any extent: the Retail Charter, the review of Namibia’s SME policy, the Public Procurement Act, and the launch of the sub-sectoral strategy documents. However, the likes of the Retail Charter and the sub- sectoral strategy documents, to be discussed below, have been fraught with difficulties. Similarly, the Public Procurement Act of 2015, despite pledging to support Namibian manufacturers, has so far failed to improve the Government’s procurement system, which remains shrouded in controversy.6 For the other proposals, progress has been even more limited. Many of the above programmes have hardly been mentioned since the release of Growth at Home (e.g. the job attachment programme; a national export strategy, the system for the import of skilled labour. Similarly, the investment framework NIPA still appears a long way from becoming law, and pledges to improve incentives for manufacturing firms and to support certain sub-sectors through tariff protection have not been fulfilled. Most emblematically, the Namibia Industrial Development Agency (NIDA), first suggested by MTI in 2012, is still at the starting blocks. In Growth at Home, it was said that NIDA – to be formed through a merger of the much-maligned Namibia Development Corporation and the Offshore Development Com- pany – would serve as the implementation branch of MTI to “drive the economic transformation process” in Namibia. In 2015, then Minister of Trade and Industry Immanuel Ngatjizeko stated that the suppos- edly imminent establishment of NIDA would mean that the Ministry would now “be able to implement practically what we are talking about”.7 Yet, close to four years later, we are still waiting for the agency to become operational.