Namibia black-ownership plan risks repeating SA errors

Namibian President Hage Geingob. Picture: Ntswe Mokoena

Namibian President Hage Geingob. Picture: Ntswe Mokoena

Published Aug 29, 2017

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WINDHOEK - A plan by Namibia,

among the world’s most economically unequal nations, to better distribute

wealth among its citizens may end up the way neighbouring South Africa’s

has benefiting an elite minority.

The nation is working on a law that will require all

businesses to be at least a quarter owned by “racially disadvantaged people.”

While only about 6% of Namibia’s

2.5 million citizens are white, they own most enterprises.

That’s a legacy of white-minority rule South Africa imposed when it controlled Namibia

from World War I to 1990, with black people being disenfranchised and

displaced.

Critics of South

Africa’s policy, including the biggest labour-union

federation, say it has failed to redress inequalities because it focuses on

increasing black ownership of companies rather than raising education standards

to match a skills shortage, and has benefited a small number of wealthy

individuals.

Proposals by Namibia,

the world’s biggest marine-diamond producer, are similar, which could hamper

investment and growth in an economy that’s contracted every quarter since March

last year.

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The plan “has caused much unease among white business owners

and heightened investment uncertainty,” Gerrit van Rooyen, an analyst at NKC

African Economics in Paarl,

South Africa,

said in an emailed response to questions.

Both governments have to “create incentives to boost

employment and stimulate investment. Black economic empowerment cannot succeed

without job creation and wage growth.”

The New Equitable Economic Empowerment Framework Bill

outlines six areas to increase black citizens’ participation in business,

including developing people’s skills and providing financing for those

disadvantaged by inequality to buy stakes in companies.

Zimbabwe

enacted legislation a decade ago that required all foreign or white-owned

businesses to sell or cede 51% ownership to black nationals.

Shift Focus

The Namibia Chamber of Commerce and Industry wants the focus

on economic ownership scrapped, saying it will result in capital flight. It

also calls for a rethink on employment equity, because it requires “formal

racial classification and promotes racial polarization; blames white racism,

brushes over complex causes of interracial inequality,” the NCCI said in its

response to the proposed law.

The chamber suggests the bill should target “only the needy

and disadvantaged,” and that selection criteria be based on “loyalty, restraint

and goodwill and not on greed, tokenism and discrimination.” Namibia ranks alongside South Africa and Lesotho among the world’s most

unequal societies in terms of distribution of income, according to Gini

coefficients compiled by the CIA World Factbook.

The Law Reform and Development Commission is revising the

bill and doesn’t yet know when the new version will be ready, Yvonne Dausab,

the body’s chairwoman, said.

The current version of the plan has helped see Namibia, the

world’s fifth-biggest uranium producer, lose its spot as Africa’s second-most

attractive jurisdiction for mining companies to invest in, based on policies,

to Botswana, the Fraser Institute’s 2016 survey of 2,700 firms worldwide shows.

Debt Ratings

On June 19, Fitch Ratings kept its assessment of Namibia’s

foreign-currency debt at the lowest investment grade, saying the draft

empowerment law represents a “modest risk” to the business and investment

climate as uncertainties remain about what will ultimately be approved as

legislation.

Almost two months later, Moody’s Investors Service cut its

rating of the country’s debt to junk, citing a “material” decrease in the

country’s fiscal strength, with public debt reaching 42% of gross

domestic product from 26% when the company first assigned a rating in

2011. 

It has the assessment on a negative outlook, which means the next move

could be another cut, saying that a change of investment sentiment is among

risks to the rating.

Besides the empowerment law, Namibia is proposing legislation

that will limit foreign ownership of land, and it has signed an investment

promotion act that will reserve some business activities for black Namibians,

Van Rooyen said.

“The government seems to be shifting towards nativist and

protectionist policies, which typically discourages foreign investment and

impedes economic growth,” he said.

-BLOOMBERG 

 

 

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