NEEEF a milestone in economic transformation

by Dr Asoka Seneviratne

NEEEF a milestone in economic transformation

We all are aware that the Constitution of the Republic of Namibia provides for advancement of persons who have been socially, economically and educationally disadvantaged due to the discriminatory laws, polices, practices and procedures of apartheid colonialism.

At the same time, government is fully committed and trying its utmost to meet the expectations of the majority of the people and the nation. Regarding the above, economy needs transformation by keeping previously disadvantaged persons and youth at the centre and among many – the main purpose of this transformation is economic empowerment.

Economic empowerment will pave the way for employment and wealth creation, reduction of poverty and inequality. The above are strategic to sustain peace, stability, and democracy and creating for a socially just society or pursuance of social justice.



When the government wants to establish the required frameworks and institutions, there are constant and frequent negative criticisms and attitudes by some individuals, organisations and groups.

The purpose of article is to indicate how New Equitable Economic Empowerment Framework (NEEEF) will help and accommodate the economy in terms of economic growth and development paving the way for a socially just society.

Economic growth and development, particularly in developing countries like Namibia, should be broad-based, highly participatory and contributory by all. In other words, no economy can grow by excluding any part of its people, and an economy that is not growing cannot integrate all of its citizens in a meaningful way.

It should be noted that “previously disadvantaged persons” are part of the national resources or part of human resources. They also have contributed to economic growth and development by way of consumers, and provision of human resource and through other resources such as small land and savings they had.

Companies have earned profits, accumulated assets and wealth. Regarding the above, previously disadvantaged persons have helped development and growth companies. The above process has been going on since independence and even before that during the apartheid colonialism.

It has not been the wish of the previously disadvantaged persons to be disadvantaged. It is an outcome of the apartheid colonialism in the past. This historical fault or wrong should be corrected in a systematic and constructive manner with participation and contribution by all citizens in order to live in harmony and peace.

After independence, one of the top priorities of the government has been to utilise the previously disadvantaged persons by integrating them to the economy in a systematic and constructive manner or through economic transformation.

Otherwise, continuation with the same situation that prevailed at the time of independence is not in the right context of the well-established norms of democracy, peace, stability and justice.

Many African countries have adopted economic empowerment frameworks. For example, South Africa’s Broad-Based Black Economic Empowerment (BBBEE) policy is very useful and relevant, because it has generated the expected outcomes on the basis of economic growth and development.

NEEEF is for Namibia to generate broader developmental outcomes. In fact, learning from the result-oriented experience from others who have similar historical background is a good practice.

In this respect, six pillars of NEEEF, namely (i) ownership (ii) management control and employment equity (iii) human resources and skills development (iv) entrepreneurship development (iv) corporate social responsibilities and (vi) value addition, technology and innovation are at the centre of economic growth and development.

With respect to economic growth, removing constraints to economic growth and stimulating economic growth are equally important. To the extent that a substantial segment of the population is excluded in economic growth and development has been a constraint.

Through NEEEF, the above-mentioned exclusion or constraint will be removed. This removal will stimulate economic growth and this aspect has not seen by individual and organizations that have negative minds and attitudes.

Currently, companies/shareholders claim dividends. Through the ownership pillar of NEEEF disadvantaged Namibians to acquire shares or equity. As a result, disadvantaged Namibians will have income through dividends.

This situation will impact on the economy in many ways. Disadvantaged Namibians become consumers that demand more and more goods and services. Furthermore, they may start accumulating assets.

Also, it is pertinent that a part of the dividends/profit remitted by foreign-owned companies (under NEEEF, companies will become joint ventures) will stay in the country.

All above mean that because of NEEEF, part of dividends/profit earned by companies will become a source stimulus for economic growth and development through the forward and backward linkages in the economy.

In fact, having income through utilisation of productive input (i.e. share capital and hence dividends) and not having such income will make a huge difference in an economy in many ways.

It should be noted that foreign investment comes to Namibia due to many reasons. Among them, they are happy with the business environment in the country, attractive to natural resources, peace and stability and increasing business opportunities and particularly the leadership of the country.

The 25% local ownership requirement is accommodative because investment is undertaken through NEEEF with the blessing and support of the government.

In order to ensure peace and stability, wealth should be created through broad-participation. As a result wealth is shared and socio-economic upliftment of the poor and others can be achieved. In other words, no economy can grow by excluding any part of its people, and an economy that is not growing cannot integrate all of its citizens in a meaningful way.

NEEEF does no aim to take wealth from one group and give it to another. NEEEF has accepted and respected the role of the private sector in the economy and the constitutional provisions guarantee the right to own property.

Investment or acquisition of shares cannot be labelled as “robbing” because it is an outcome of a legal process or transaction NEEEF is essentially a growth strategy.

* Dr Asoka Seneviratne is the director of programmes and institutional development at the International University of Management (IUM) in Windhoek. These views are his own.

3 Responses to "NEEEF a milestone in economic transformation"

  1. Eben de Klerk  October 3, 2016 at 7:09 pm

    I guess that says enough of the quality of lecturers UIM appoints.

    Reply
  2. Robin  October 3, 2016 at 8:56 pm

    Absolute nonsense! Dr. you are surely a highly educated person and simply cannot be serious!

    Little wonder the credibility of IUM must suffer as an institution of higher learning.

    Please explain …
    How can NEEEB not have a negative impact on the economy?
    How can NEEEB invite positive business investment?
    How is NEEEB not stealing from one to give to another?
    How and why Fitch (and other ratings) surely will downgrade Namibia if NEEEB in its current form is introduced?
    How have the “many” countries in Africa performed succesfully where some or other NEEEB system is in place? Zim, Zam, Mal, Congo, Angola, Kenya, et el. You name them, they have failed. RSA is also failing. Who are the succesful countries you speak of?
    How can NEEEB work in the current format without EDUCATED socalled pdp’s.
    How is NEEEB going to provide peace, stability and wealth when you steal from Peter to enrich Paul?

    The old adage still remains unchanged ” don’t give fish – teach to fish”.

    I am amazed at the persistent perception that pdp’s cannot be successful and must forever be damned to be forever dependant on the socalled advataged. What utter rubbish!

    Give them the opportunities, educate them, give them financial assistance from SMS Bank, ensure that business both private and GRN must provide internships and on the job training. These are just some of the positives.

    Reply
  3. Brian Black  October 15, 2016 at 5:31 pm

    Response from a concern citizen Brian Black
    The economies and social dynamics of the world is complex and the interlinking dynamics of trends many times causes misdiagnoses of the cause and effect relationships. Dr. Asoka Seneviratne states in his 3 October 2016 article published on the New Era website that: “Economic empowerment will pave the way for employment and wealth creation, reduction of poverty and inequality.” This is a typical misdiagnoses of the causal loop of interknitted dynamics.
    The very definition of empowerment also sheds light on how to achieve its desired effect. The term dates from the work done by American Julian Rappaport in 1981 and reads as follows: The term empowerment refers to measures designed to increase the degree of autonomy and self-determination in people and in communities in order to enable them to represent their interests in a responsible and self-determined way, acting on their own authority. {Source: Wikipedia}
    Economic empowerment is not the means – it is the end. The answer to sustained economic empowerment – and not a fleeting disposition of temporary wealth – is to develop and encourage the spirit of entrepreneurship and to develop skills in which communities maybe enabled to act on their own authority and in doing so determine their own destiny.
    I agree that the youth and previously disadvantaged persons need to be kept at the center of the nation’s development goals. This entails equipping these individuals with skills that they may increase their earning potential and contribute to the development of the country and expansion of industry. Economic development leads economic empowerment and our efforts and resources should be focused on increasing the size of our economy and not the number of slices.
    Dr. Asoka mentions the removal of constraints in order to promote economic growth. The proposed NEEEF bill places many new constraints and requirements on existing business that have long contributed to tax revenues, employment creation and wealth distribution in Namibia. It also places requirements on businesses that still need to be established – in the light of these many may never be established and the opportunity cost of the potential jobs and tax revenue will be incalculable.
    It is also important to note that there are no barriers in Namibia to start a business. The challenges faced by entrepreneurs have remained unchanged for decades across the globe. It is the access to capital and skills. These are not addressed by restrictive policy but rather by investment in job-related education and the promotion of an open market.
    Dr. Asoka continues his premise that dividends received by the beneficiaries of NEEEF would stimulate the economy through consumption expenditure. Firstly it is important to mention that not all business pays a dividend, many struggle and all profits are utilized to keep the business afloat. Also it is noteworthy to mention from 40 years experience in the Namibian business environment that business owners get paid last in the course of business. First to get paid are suppliers, then employees through salaries, then government through taxes and what remains is for the owner.
    Good entrepreneurs consume a relatively small portion of their dividend – the dividend is mostly used in the expansion of the existing business or the investment in new ventures. This is known as fixed capital formation and is a critical part to GDP growth and more importantly to increase the potential of future GDP growth. If the proceeds from invested capital are consumed then the long run potential GDP growth will fall. And even if entrepreneurs consumed their entire dividend received then the transfer to someone else of this dividend would not be a source of new stimulation for the economy.
    Lastly, Dr. Asoka Seveviratne makes mention that foreign investment comes to Namibia for many reasons. Some of those reasons might be exactly that there are no laws restricting ownership like in South Africa or Zimbabwe, that our economy is open and that the business environment is conducive to growth. In my humble opinion,the implementation of NEEEF shall erode those reasons and we may see much less of these investments – which everybody knows is critical to our development as a nation and for the creation of much-need jobs for the thousands of our fellow jobless Namibians.
    As far as the promotion of peace and stability is concerned, it is more important to ensure a truly bright future for our youth by empowering them with skills in order to act on their own authority in a strong economy than by implementing short term quick fixes that would hamper economic growth and that does not enable people to increase their degree of self-determination and sustainability. The current scenario in Zimbabwe is testament to the fact that redistribution only solves the problem of inequality and poverty for a short period of time – after which the degree of the original problem is exacerbated and peace and stability is demolished.
    In 1916 Reverend Boetcker as director of the Citizens’ Industrial Alliance published a list of entries which became known (inter alia) as the American Charter – and just look where the USA is today.
    * You cannot bring about prosperity by discouraging thrift.
    * You cannot strengthen the weak by weakening the strong.
    * You cannot help little men by tearing down big men.
    * You cannot lift the wage earner by pulling down the wage payer.
    * You cannot help the poor by destroying the rich.
    * You cannot establish sound security on borrowed money.
    * You cannot further the brotherhood of man by inciting class hatred.
    * You cannot keep out of trouble by spending more than you earn.
    * You cannot build character and courage by destroying men’s initiative and independence.
    * You cannot help men permanently by doing for them what they can and should do for themselves.
    I do appreciate and share Government’s concern with regards to PDP’s empowerment and will support any a workable solution to this global problem which is not uniquely only a Namibian problem.

    Whilst supporting the principles of empowerment and a more fair distribution of our Country’s wealth, I however do belief that the proposed empowerment in its current form will not only take our Country backwards and do damage to the economy, but the bill is also in strong contrast with the Harambee Prosperity Plan (HPP) which I fully support and embrace.

    In my view Namibia cannot afford to make the same mistakes made by others nor can we afford to use Namibia as a testing ground for something which has not been tested elsewhere on our continent of the magnitude of NEEEF.

    It is my view that if Namibia wishes to remain the beacon of hope, uniqueness and beauty on the African Continent, we must lead with sustainable initiatives and not follow or try to resolve a global problem with an untested solution.

    Why not rather unite as One Nation behind HPP and forget about an untested action plan such as NEEEF?
    HPP aims in promoting and enhancing prosperity and wealth creation through good, accountable and transparent governance.
    NEEEF aims in promoting a culture of handouts and entitlement.
    HPP aims in promoting a high performance culture.
    NEEEF aims in accelerating the same old culture of the continuous empowerment of the already empowered well connected individuals.
    HPP aims in reducing poverty by fostering a culture of entrepreneurship amongst our youth, and by so doing creating more wealth and job opportunities.
    NEEEF aims in obstructing the noble objectives of HPP, forcing new and current investors to repatriate their businesses elsewhere.
    HPP promotes transparency whilst NEEEF on the other hand promotes confidentialities.
    NEEEF has and continue to evoke serious fear, uncertainty and reluctance to invest amongst current and future investors.

    If promises were made without due consideration of the implications of NEEEF, than the bill must be of voluntary nature and not compulsory. If of a compulsory nature, than this should strictly be limited to those private Sector companies doing business with government, local authorities and SOE’s or applying for exploration permits etc.

    The above being subjected to KSF’s have been determined by a proper Economic Impact Assessment Study with regards to the following:
    • The impact of NEEEF on the Namibian Economy.
    • In which other African country has a similar legislation been successfully implemented?
    • How do those similar Acts in other African Countries fair/ compare to NEEEF?
    • A study to determine the current empowerment position in Namibia.
    • A Study to determine the current ownership ratio between foreigners and locals.
    • How many companies are currently in the hands of PDP’s?
    • How will NEEEF contribute to Good Governance?
    • How will NEEEF improve Namibia’s competitive advantage and the way of doing business?
    • How will NEEEF contribute to GDP growth?
    • What will NEEEF’s affect be on our development goals, i.e. NDP5 and Vision 2030?

    Reply

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