The manufacturing sector has become Namibia’s hope to achieve and maintain a sustained economy. With the 1993 introduction of tax incentives for manufacturers and the SACU agreement, signed in 2002, that makes provision for infant industry protection, it’s no doubt that government is committed to supporting the growth of the manufacturing sector. Government wishes to have a manufacturing sector together with a services sector contributing approximately 80 per cent to the gross domestic product (GDP) by 2030. However, some things are easier said than done.
From a practical point of view, what does it really mean to set up and operate a manufacturing company in Namibia?
First things first, you have to determine a market for what you want to manufacture. Without a market, you do not have a business. As a first time manufacturer, it is important to foremost consider Namibia’s small population size and geographic spread, which presents a small economic base and other critical factors. Amongst others these include a small domestic market, costly export exposures, as well as the presence of competitive imported products from well-established industries, such as from neighbouring South Africa – a country with large economies of scale.
Unlike in Namibia, products from export markets such as China and Europe are often subsidised by their governments, which presents an unequal playing field. However, once you have identified a niche market and are committed to entering into manufacturing, the basic factors to consider are seed capital, land, machinery, working capital, employees and a strong management.
Factors to consider include the fact that most raw materials have to be imported. For example, Namibia imports 50 per cent of maize, 85 per cent of wheat, all of its sugar and rice. Since technological equipment is key to a manufacturing plant, these often have to be sourced from South Africa or further abroad. The issue of skill shortages is real and hence manufacturing companies should be ready to spend additional costs on training and in most cases special skills especially for new start-up operations, which require expatriates.
The under-performing rail service in Namibia currently has forced manufacturers to utilise expensive road transport. Moreover long distances across the country contribute to high distribution costs. And of course, manufacturing plants face high utility costs on a daily basis.
“Growth at Home” is a must for Namibia if we want to eradicate unemployment. The country simply cannot be or become a ‘trader’ by just importing and re-selling goods. It has to manufacture for internal consumption and export to neighbouring countries. Manufacturers must see to what extent they can utilise local raw materials and or import raw material and produce products to satisfy local demand. Manufacturers should also strive to produce value added products. For example, pasta from wheat flour milled locally, or processed meat products, even for export.
Hartlief’s high quality products and Namibian brewed beer currently enjoy success in South Africa, Zambia, Angola, Botswana and other markets. Due to the negative factors impacting on the competitiveness of manufacturing in Namibia, government’s support in terms of infant industry protection and import control is very crucial for especially start-up operations.
Issues of skills shortage in the manufacturing sector
It is a known fact that Namibia spends a very high percentage of its budget on education. However, the entrants into the labour market often do not match industry needs in terms of standard and hence further on-the-job and skills training is required. New manufacturing start-ups struggle a lot as local skills are sometimes not available and expatriates must be employed for a period to get started.
For example, Namib Poultry Industry’s broiler operation presently employs 17 expatriates out of a workforce of 685 people, while Namib Mills has two expatriates out of 1 000 employees. Further investment in vocational training is required in order to develop more vocational skills in the country and to introduce vocational subjects at early educational levels.
There are three top key policy recommendations towards manufacturing, starting with turning Namibia into a truly logistical hub by modernizing and expanding the rail network infrastructure to connect it with all our neighbouring countries; promoting private sector investment in health facilities and training facilities, as well as tourism targeted to attract foreign consumption to grow the local market and thereby create opportunities for manufacturing; and to resolve the energy crisis quickly and find long-term solutions for a sustainable water supply; and make both urban and developmental land affordable for industries and residents.
• Maria Immanuel is a Senior Trade & Investment Policy Analyst at Namibia Trade Forum.