From a practical point of view, what does it entail to establish and operate a manufacturing business in Namibia?
First of all, there needs to be a market for the product, because no market means no business. Also, given Namibia’s small population of just more than two million, leaves a manufacturer with a small domestic market. This small market can hinder the creation of additional employment opportunities, as expansion is often limited by market size and market share.
Economies of scale are therefore the principal barrier for the development of manufacturing in Namibia. Countries with well-established companies and large economies of scale, such as neighbouring South Africa, are able to export large volumes of products to Namibia. This can be a threat to a new entrepreneur in the local manufacturing sector.
Thus, an entrepreneur needs to maintain high productivity and quality standards in order to achieve a competitive advantage. Furthermore, local exporters who value strong economies in neighbouring countries are also currently faced with weakened economies, as is the case with Angola and Zimbabwe.
The future of manufacturing is somehow uncertain, especially considering the downward trend in value-added output. Change is inevitable as new technologies emerge, such as mobile connections, artificial intelligence, robotics, 3D printing and many more.
Factory floor and supply chains will soon be totally transformed resulting in the next industrial revolution that will discard old industrial patterns (Aurik, 2016).
Interesting statistics from the USA indicate that the production of goods is no more the principal occupation of workers in the manufacturing sector. Only about two out of five workers are producing goods.
Clerical jobs also decreased and 31 percent of jobs in this sector are managers and professional persons (Levinson, 2016). This trend is also observed in Namibia judging by the variety of vacancies advertised by the sector.
Another important hindrance observed in the manufacturing sector is the lack of applied scientific training in Namibia. Many graduates from tertiary institutions in Namibia do not find employment in the manufacturing sector. It is as if there is a lack of co-ordination between these institutions and the private sector, which must definitely be addressed.
President Geingob during a recent Foreign Policy Review Conference said he no longer supports a vision that emphasises liberation struggle ties as some sort of prerequisite for diplomatic ties, but looks towards a policy that has significant economic spin-offs.
When talking strategy, a focused export strategy is critical. That is why many African countries are striving towards regional integration in order to link their markets. However, the implementation of this seems currently not to be the main concern.
Africa accounts for only 1.9 percent of GDP worldwide, compared to the 21 percent contributed by the USA and 23 percent by Europe (Yufi Lin, 2015).
Most empirical studies show that China’s growth since the reform period can be contributed to institutions and policies, as well as economic factors (Lin, 1992). If policymakers want to make a real difference in what they implement they should specifically be knowledgeable about the following
Reasons companies establish themselves, or close down;
Reasons companies choose specific locations to establish themselves;
Ways and means to save costs;
Access to labour;
Entering growing and niche markets; and
Exchange rate influences. (OECD Observer, 2012)
These should be comprehended to create a conducive manufacturing environment that includes, inter alia, cost savings, being closer to cheap labour, tapping into growing markets, accessing commodities and even consumer tastes.
It is absolutely essential that a conducive environment is established where entrepreneurs and companies who rely on efficient financial systems to fund investments are accommodated. It is not only the access to finance that is important, but also the knowledge of productive and sustainable use of capital (NamBIC Report, 2014).
Price stability in the electricity market is crucial. Namibian manufacturers already pay high prices and will further lose economic competitiveness and social coherence if electricity prices continue to rise.
The following actions should be put in place to enable effective electricity supply (NMA, 2016):
Secure supply, meaning there must be a risk-minimizing strategy in electricity supply. It is unwise to sign supply contracts with countries that cannot generate sufficient supply for themselves;
Support to independent power producers and the use of solar, wind and biomass as an untapped resource for energy generation;
Increase the coverage of electricity supply to all Namibians;
Improve the market structure of the energy market by revising the power of the current monopoly;
Review the role of government and the Electricity Control Board in the industry;
Unbundle the roles and functions of the institutions in this sector in a viable way by revisiting generation, transmission, systems operations and trading.
Short-term strategy: Embark on an intensive nationwide awareness campaign to bring information to users to save water and thus to adopt a different attitude towards water. Enforcement of regulations must be strict and consequences need to be communicated very clearly.
Medium to long-term strategy: Business entities need to take into consideration the status and future prospects of water supply in Namibia. Rationing of water will send a signal to the business world that Namibia has become a no-go area. All stakeholders need to likewise reflect on water and energy to define the way forward for the industrialisation process.
The private sector on numerous occasions voiced concern about the lack of planning to guarantee a secure water supply to especially the central areas of Namibia. The business community views the City of Windhoek’s project in the development of infrastructure towards the establishment of the Windhoek Managed Aquifer Recharge Scheme (WMARS) as strategically important to the security of a potable water supply.
The WMARS aims at accessing additional supply sources to mitigate the current water crisis. This is crucial for the manufacturing sector, as a rationing of water will result in increased unemployment, especially towards the end of 2016/2017.
The expansion of the Walvis Bay Corridor into SADC countries should receive more attention and funding to ensure that more targeted manufacturing opportunities are identified and implemented along the said corridors. This will stimulate new employment creation.
It is unfortunately a fact that cabotage (the right to operate sea, air, or other transport services within a particular territory) limits the quantity of goods that can be transported across borders, which results in empty trucks returning to destinations. An opportunity exists to change this practice.
Another strategy would be to bring the private sector on par with rail activities especially with regard to the availing of rolling stock, which should be done in partnership with the government. One suggestion would be to aim to move over 60% of cargo to rail by 2020, especially heavy products, such as fuel, coal and cement (NMA, 2016). Rail must, however, offer competitive prices and reliable services.
In addition, domestic flight connections should be improved and flight costs should be more affordable to encourage air travelling by business persons to be able to easily commute to businesses in remote areas.
QUICK FIXES TO ENCOURAGE JOB CREATION
The question is: are there quick fixes to encourage employment creation in the manufacturing sector? Let’s look at some possibilities:
Dialogue between government and the private sector pertaining to insecurities with regards to the availability and costing of utilities, such as water, electricity, and infrastructure;
Avoidance of unwanted policy signals to investors so as to maintain investor confidence;
Promote local manufacturing and the procurement of local products, especially through government tenders, and draft local standards for imported products;
Increased focus on skills transfer and development;
Increased role for the private sector in government initiatives;
Increased focus on the development of cross-border value chains to stimulate local manufacturing. The Southern African Customs Union (SACU) agreement is currently being re-negotiated to deepen regional integration;
A single country of origin certificate would assist in establishing cross-border value chains; and
Create a national culture with a focus on manufacturing what is needed locally.
Manufacturing can create employment. Prosperity and wealth are within the reach of all Namibians. Namibia is a great country with great people, but needs to focus on opportunities to eradicate poverty.
In conclusion, I would like to quote from Thomas Edison: “Opportunity is missed by most people because it is dressed in overalls and looks like work”.
* This is an edited excerpt from the paper ‘Opportunities and Impediments in Addressing Unemployment in Namibia using the Manufacturing Sector’ by Dr Diana van Schalkwyk presented to the Bank of Namibia’s 17th Annual Symposium on September 22. Dr Schalkwyk is a food scientist and is the owner and director of Food Chain Solutions Namibia and is the vice chairperson of the Namibia Manufacturers Association on whose board she has served for 10 years.