Economic Progression: Part 5……Logistics, ICT, regional integration and financial inclusion

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Staff Reporter

Windhoek-The Fifth National Development Plan (NDP5), which was recently launched by President Geingob is the 5th NDP in the series of a total of seven National Development Plans that are to implement and achieve the objectives and aspirations of Namibia’s long-term vision, Vision 2030. In sequence, NDP5 will be the third five-year implementation vehicle towards Vision 2030 and will be implemented from the financial year 2017/18 up until 2021/22.

The NDP5 framework is organised around the four interconnected pillars that are founded on the principle of sustainable development, namely: economic progression; social transformation; environmental sustainability; and good governance. These pillars are aligned with Namibia’s commitment to eradicate poverty and inequality as outlined in Vision 2030, the Harambee Prosperity Plan (2016), and the SWAPO Party Manifesto (2014).

Additionally, the pillars support the global and continental development frameworks to which Namibia is committed. These include Agenda 2030, Sustainable Development Goals (SDGs), The Paris Agreement (CoP21); African Union (AU) Agenda 2063 and SADC Regional Indicative Strategic Development Plan (RISDP).

Within these contexts, Namibia commits itself to enhancing growth and economic diversification while addressing challenges that include a high degree of regulation and a mismatch between the skill levels in Namibia’s workforce and the skills demanded by the labour market.

NDP5 identifies five game changers that will move Namibia from a reactive, input-based economy towards a proactive, high performing economy. The game changers are: Increase investment in infrastructure development; Increase productivity in agriculture, especially for smallholder farmers; Invest in quality technical skills development; Improve value addition in natural resources; Achieve industrial development through local procurement.

Transport and Logistics: Where we are
Transport and logistics are essential for trade, industrialization, socio-economic development and regional integration and thus remains a key developmental priority. Over the past 20 years, the government has invested in transport infrastructure development (roads, rail, maritime and ports, and aviation) in order to meet the national demand and position Namibia as a logistics hub within the Southern Africa Development Community (SADC).

Currently, the sector employs about 25,700 persons which is about 3.6 percent of the total workforce, while contributing 4.7 percent to the GDP. Sluggish economic growth and weakened demand, coupled with a decline in commodity and oil prices and an unfavourable exchange rate, has resulted in a decline in volumes handled by the ports in the past few years. Namibia has been consistently improving its position on this indicator of the Global Competitiveness Index, moving to 24 out of 138 countries in 2016/2017. Given the potential of this sector to enhance industrial development and contribute substantially to the GDP, NDP5 takes a holistic and integrated approach to transport planning, including a multimodal and intermodal approach to handling goods, transporting people and providing services in accordance with the Transport Master Plan and Master Plan of an International Logistics Hub for SADC countries. A functional and efficient transport and logistics sector is the backbone for the realisation of the NDP5 targets in agriculture, mining, manufacturing, fisheries, rural and urban development and tourism. It is also a critical factor in promoting environmental sustainability.

Desired outcome
By 2022, Namibia has a sustainable transport system supporting a world-class logistics hub connecting SADC to international markets.

Challenges
The lack of adequate funding for the development of transport infrastructure, inadequate skills and an imbalance between the development and preservation of infrastructure hamper sustainability of the sector. Transfer of technical skills is taking place at a slow pace. A shift of transporting heavy bulk from rail to road has put immense pressure on the structural integrity of the road infrastructure. The railway subsector is characterised by dilapidated infrastructure, aged and obsolete locomotives and rolling stock while the maritime sub-sector suffers from a weak institutional and legislative framework.

Information & Communication Technology (ICT)
Where we are
A knowledge-based economy requires the widespread availability, affordability and accessibility of a full range of communication and technology infrastructure services from fixed and mobile telephone, radio and television broadcasting and high speed internet services. This also requires skills development to support and enable the full utilisation of available ICTs. Namibia ranks 51 out of 138 countries in the World Economic Forum’s Global Competitiveness Report 2016/17. Namibia’s mobile phone network population coverage has increased exponentially to 95 percent while mobile subscriptions are recorded at 119.16 per 100 inhabitants.

Desired outcome
By 2022, Namibia has universal access to information, affordable communication and technology infrastructure and services.

Strengthened Export Capacity and Greater Regional Integration
For a resource-rich country like Namibia, with a small population but an advantageous geographical location, an outward orientation is essential. Regional integration plays a vital role in diversifying the economy, delivering food and energy security; generating jobs and alleviating poverty through shared prosperity.

Where we are
Total exports reached N$67.9 billion in 2016 from N$41 billion in 2011. This translates into 44 percent of GDP. Manufactured goods account for 43 percent of the total exports, while ores and mineral account for 37 percent. Diamonds constitutes 65 percent of ores and mineral exports. Namibia has adopted an economic diplomacy strategy, where Namibian embassies/commissions promote investment opportunities in Namibia and Namibian exports in their countries’ of posting.

Desired outcome
By 2022, Namibia has diversified and increased exports of manufactured goods.

Challenges
There is limited diversification and value addition capacity leading to a slow pace in industrialization. Furthermore there are limited cross-sector linkages within the economy and skills mismatch.

Supportive Financial Infrastructure for Greater Inclusion
Where we are
During the NDP4 period, the financial sector recorded a significant growth, averaging 8.4 percent per annum. Domestic credit to the private sector as a percentage of GDP improved to 55.3 percent in 2016 compared to 49.2 percent in 2011. Over the same period, banking financial institutions increased to six banks from four banks in 2011. The Micro, Small and Medium Enterprises (MSME) sector in Namibia is estimated to be around 33,700 in 2015.

About half of these MSMEs are formally registered while others remain in the informal sector of the economy. During NDP4 the four priority sectors identified under NDP4 collectively received disbursements to the value of N$1.6 billion, representing 37 percent of total disbursements from the Development Bank of Namibia. Furthermore, Agricultural Bank of Namibia (Agribank) provided short and long-term lending facilities aimed at promoting growth in the agriculture sector. Accordingly, Agribank’s total loans and advances increased from N$1.6 billion in 2010/11 to N$2.3 billion in 2014/15, mainly driven by farmland acquisitions and livestock purchases.

Namibia’s banking industry has established a clearing house (NAMCLEAR) that facilitates the clearing of interbank payment transactions. In addition, the local switch (NAMSWITCH) was established. NAMSWITCH enables the local switching of all Namibian inter-bank Automated Teller Machine (ATM) card transactions as well as Point-of-Sale terminals card transactions. At regional level, the SADC Integrated Regional Electronic Settlement System (SIRESS) has been established which enables settlement of all Rand-denominated cross-border transactions, with discussions underway to make it a multi-currency settlement system. The establishment of SIRESS contributes to the enhancement of regional trade.

Desired outcome
By 2022, Namibia has an effective, resilient and inclusive financial system that supports accelerated industrialization and infrastructure development.

Challenges
Limited access to finance and support services for MSMEs inhibit growth and sustainable development. Secondary, supportive financial infrastructure to enhance the provision and access to financial services are limited. Other challenges include:
• Lack of collateral required by lending institutions: Many of the borrowers, especially SMEs do not have the required collateral and hence are unable to get credit.
• Poor financial and business management on the part of MSMEs: Improved business and financial management increases the businesses’ ability to access finance from a financial institution and improves the business’s ability to service debt and to grow.
• Inadequate information on availability of financial services and products: the majority of business especially those residing in rural areas are unaware of the existence of financial services and products.
• Limited competition within the national payment system: Competition in the payment systems is beneficial not only to consumers but for the competitiveness of the financial sector as whole.

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