… As Vision 2030 industrialisation agenda remains a pipe dream
By Hilary Mare
STANDARD Bank economist Naufiku Hamunime has bemoaned government’s unsuccessful pursuit of its industrialisation agenda, as contained in Vision 2030, while highlighting that manufacturing’s contribution to the country’s Gross Domestic Product (GDP) has declined by 4.5 percent between 2006 and 2016.
Hamunime said that where Namibia has failed to use resources efficiently in the past, in terms of industrialisation, it should instead be diverting resources to more productive ends, which will increase its long-term productive capacity.
He said that serious attention needs to be placed on prioritising Namibia’s industrial development.
“Vision 2030 states that Namibia aims to be an industrialised knowledge-based country, where manufactured goods and services contribute 80 percent of GDP by 2030. However, over the past decade, Namibia’s manufacturing sector has remained largely underdeveloped, with its contribution to GDP having steadily declined from 14.4 to 9.9 percent between 2006 and 2016. And whilst manufacturing has been on the decline; within recent years, mining has come to constitute a higher percentage of GDP, relative to the manufacturing sector,” Hamunime said.
“This indicates that the country has not only regressed, in terms of achieving the priorities set out in Vision 2030, but that the structure of the economy has actually become less sophisticated, as value-added goods have come to form an even smaller base of the Namibian economy than in previous years.”
Hamunime went on to state that historically, manufacturing, rather than agriculture or mining, has been the sector that has played a pivotal role in driving advanced industrialisation.
She said that initiating the process of industrialisation in Namibia will not be dependent on achieving high growth rates, but rather will be contingent on shifting resources from low to high productivity uses, within which increasing the size of manufacturing, as a share of output and employment, is prioritised.
“The budget allocations dedicated to the Ministry of Industrialisation, Trade and SME Development, which is mandated to spearhead trade and industry and increase the country’s global competitiveness, indicate that over the last decade, historically low levels of investment have been present to support Namibia’s manufacturing sector. This is evident in that the ministry of industrialisation’s budget allocation has gradually decreased from a high of 1.8 percent in 2012 to 1 percent in 2017. Whereas, allocations to government ministries’, such as the Ministry of Safety and Security, have increased from 5.8 percent of total expenditure to 8 percent over the same timeframe,” added Hamunime.
In a recent publication by the McKinsey Global Institute, Namibia was identified to have significant growth potential in the automotive, chemicals and machinery sectors – all industries that possess significant export potential. Similarly, in the Growth at Home industrialisation policy, the automotive, chemicals and agro-processing industries were all singled out as priority sectors.
Due to its linkages to the agriculture sector, agro-processing, in particular, possesses significant potential to increase value-addition and create jobs. In 2016, agriculture and the manufacturing of food and beverages contributed 8.5 percent to GDP and was believed to be the country’s largest employer.
“However, despite the potential the industry possesses, the sector is believed to be severely constrained by a lack of funding. Of the N$2 billion allocated to the agriculture ministry, on average between 71 and 78 percent of the budget is dedicated to personnel expenditure and construction spending alone, which leaves much to be desired in the way of investment.
“Where learning and financing costs of industrial development are too high for the private sector to undertake, State intervention through the provision of investment capital and research and development is needed to reduce the uncertainties that capitalists face, in venturing into the production of non-traditional exports.
“If Namibia is to truly take advantage of this opportunity to restructure, and in doing so pursue an industrialisation strategy, which involves shifting the economy away from its reliance on basic primary goods towards diversified exports and complex activities, the State will need to actively prioritise the manufacturing sector, in order to reverse the current trends of de-industrialisation, and thereby increase the nation’s resilience to external shocks,” Hamunime added.
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