Quo vadis Namibia’s GDP vs employment

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Three months into the positively charged presidency of President Hage Geingob, where prosperity for all is the theme, analysts are now paying attention to how the implementation of government policies would eventually close the gap between high economic growth and low wages and salaries as well as stimulating a stagnant labour market.

Namibia’s eye-popping economic growth since 2008 continues to generate very little employment, bringing about few real economic benefits for citizens such as increased wages and salaries, even among sectors contributing handsomely to the country’s Gross Domestic Product (GDP). Sectors crucial to the GDP, such as agriculture and mining continue to employ less and pay very low wages in comparison to their growth over the years.

The Ministry of Labour, Industrial Relations and Employment Creation has, at a recent workshop on labour related matters, said it is grappling with how to have economic growth that translates into decent wages and real economic benefits for the citizens.

Ngoni Bopoto, an analyst at Namibia Equity Brokers (NEB), in a report he issued last week, says given the GDP growth framework, overarching socio-economic issues and stated priorities, “government faces the challenge of a typical optimisation conundrum, where resources must be allocated to areas which speak to the national needs. However, optimality also pre-supposes efficient execution of projects by the various organs of the state, meaning that implementation is equally important”.

“Employment creation cannot be instantaneous; while noble, the gratification is delayed. Therefore, it is our opinion that a drive to improve the quality of existing employment in the agricultural sector will go a long way in alleviating poverty amongst the broader population. This is largely a function of increased co-ordination throughout the sector country-wide to improve resource allocation, and subsequent gains from production,” noted Bopoto.

Simonis Storm Securities (SSS) head of research James Cumming points at a report he issued late December 2014 that compared the Namibian growth and employment since 2003 to that of the USA, noting that “industries that paid highest wages in 2013 actually reduced employees since 2003”. This “offers some meaningful insight into the Namibian labour market. Industries that are adding jobs are not growing enough, which makes it difficult to raise wages meaningfully.”

The disparities have long been on the radar of the International Labour Organisation (ILO) and a report on the topic, ‘Growth, employment and decent work in Namibia: A situation analysis’ was released in March 2012.

SSS, a private research and equity brokerage firm, noted that since 2003 mining, manufacturing, public administration and education sectors contributed only a 9 percent to job creation, compared to 49 percent contribution to the economic growth. The percentage excludes the ‘trade’ sector component that is a high job creator and high GDP growth contributor.

Namibia’s Gross Domestic Product (GDP) growth averaged at 4.6 percent per annum during the period 2001-2009. The 2014 Namibia Labour Force Survey (NLFS) reflects unemployment rate of 28.1 percent, compared to the 2013 rate of 29.6 percent.

SSS had earlier recommended that government “encourage job growth in the industries which are growing and pay well if it wishes to address Namibia’s widening income gap”.

“Manufacturing and mining is a good start, but scope for sustained future growth there is limited. Focus should be placed on services, such as education, health, professional, financial services and logistics, which offer the greatest job, wage and economic growth potential for Namibia,” SSS said in its report.

Analysts are, however, bullish government would be able to turn the tide.

Managing Director of Lexus Securities, Andrew Jansen remarks, “I don’t think it is an absence of policy or the implementation of our macroeconomic policies. It is just basic economics, price determines demand for a specific good or service. What I would say is that governments policy with localisation and local beneficiation of mining production in Namibia will add to GDP growth.”

He says addressing water scarcity in agriculture, as through investments like the Neckertal Dam with irrigation plantations close by, can add to the contribution that agriculture makes to GDP. “This should add to employment numbers and also food security which is one of our Vision 2030 goals,” notes Jansen.

Economist Klaus Schade says Namibia needs to distinguish between the commercial and communal agricultural sectors. The communal or subsistence sector is characterised by low productivity although it provides employment including self-employment for the largest part of the agricultural workforce. Subsequently, wages are very low and owing to the low productivity, its contribution to the GDP is also low.

“As pilot project with different crop farming techniques such as conservation agriculture and conservation tillage have demonstrated it is possible to increase the yields of crop farming substantially without substantial investment. It requires a change in the preparation of the fields using ripper-furrowers and not financial resources to purchase fertilisers and pesticides. If conservation tillage would be rolled out in the northern communal areas we would see a substantial increase in output, in the sector’s contribution to GDP and in the standard of living of communal farmers, who could produce surpluses. The surplus production could induce grain milling and other food processing activities. We would also experience a reduction in malnourishment of children and a reduction in stunting and wasting and better educational attainment,” said Schade.

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