Namibia recently came into world’s focus as it became the first African state to hold electronic general elections. It’s a story of success and progress for this sub-Saharan African country which only gained independence from the German colony in 1988.
With a population figure of just less than 3 million people, Namibia is rich in natural resources including wildlife and flora, as well as an abundance of natural energy sources in the form of natural gas, wind, sun biomass, and rich mineral deposits like uranium.
The Namibia Labour Force Survey 2013, however, recently showed that the unemployment is a challenge, as the unemployment rate stands at 29%, with 41% of the youth unemployed.
Two Namibian academics Dr Cyril Ogbokor and Eslon Ngeendepi studied the state of small businesses in the country. Their research paper published in 2012, Investigating the challenges faced by SMEs in Nambia, revealed that SMEs provide employment and income to 160,000 people, which represents approximately one-third of the nation’s workforce.
The majority of SMEs in Namibia are mainly found in the retailing sector selling foodstuffs and household products with no real value addition activities. SMEs also play a significant contribution in the transition of agriculture-led economies to industrial ones, furnishing plain opportunities for processing activities.
Current conditions
Researchers concede that small to medium enterprises in Namibia still face some serious challenges of which the biggest are access to finance, access to market and market information, access to innovation, and lack of business skills and knowledge.
A report published by Namibia’s Joint Consultative Committee in 2008, concluded that the growth of the SME sector was being hampered by a number of factors, including the lack of formal collateralised credit for micro and small enterprises, and that there was a need for micro credit schemes catering specifically to the SME sector.
The Namibia Chamber of Commerce and Industry (NCCI), in a statement in the Windhoek Observer, one of the oldest weekly newspapers, said the country’s SME sector needs a complete overhaul despite contributing about 14% of Namibia’s US$12.58 billion GDP and creating thousands of jobs.
NCCI data indicates significant growth of the SME sector has been recorded in regions such as Erongo, Kavango, Omusati, Oshana and recently Karas, which is largely owing to the Kudu Gas Power Project, a 885MW gas-to-power project that is expected to start operating in June 2015.
We look at five things Namibia is doing to better its SME sector:
1. Collaboration between government and industry representatives
To help create a stimulating and enabling environment that promotes SME growth, the NCCI in the same statement, said that they are working with the country’s government to introduce reforms that make it easier for SMEs to operate. For example, the organisation is working with the Ministry of Finance to simplify business tax for both small and large enterprises.
The NCCI, through its business network, has also been instrumental in matchmaking and securing significant foreign direct investment deals and local procurement deals for the SME sector. Two such examples include the US$100 million contract between Dreamland Investment and China Light Group for the purchasing of granite stone from Namibia.
The biggest players in the industry have been called to seriously consider subcontracting some of their tenders to SMEs to build capacity in the sector, and for SMEs to do their part to ensure that quality, standards and delivery timelines are adhered to and that their prices are competitive to importers.
2. Financial support models
According to the research paper by Ogbokor and Ngeendepi, Nambia’s government has acknowledged the need to identify and develop appropriate financing models for SMEs in the country. In this regard, the government established a friendly business loaning system in 2000 through a dedicated ESME Branch of Bank Windhoek, a wing of the second-largest commercial bank that caters for emerging, small and medium enterprises, and that charges low interest rate charges to ensure continuity of businesses.
Though it cannot be quantified at this stage, simplified business registration process is believed to have led to an increase in the number of businesses registered in Namibia. The NCCI is currently urging government and the private sector to come together to address SMEs needs, especially their financial needs in a more transparent and robust manner, hence the NCCI’s proposal for a SME bank to be operational soon.
3. SMEs information services
Ogbokor and Ngeendepi in their research paper contend that there is a need for a SME information centre to be established specifically to provide information on developments relating to market trends, latest developments and assist in linking SME operators to the service providers at affordable rates.
Though not as widespread, these information centres like the Namibia Business Innovation Centre at the Polytechnic of Namibia – a university of science and technology – provide training, mentoring, and business support to innovative entrepreneurs looking to establish their own companies as well as researchers who are interested in commercialising their technologies.
4. Youth empowerment
In their statement, the NCCI says that the majority of the workers in the informal economy falls in the youth category. Thus, it is crucial that government integrate informal economy issues with youth development issues rather than isolating the youth and the informal economy.
Government has responded with plans to promote employment within the formal sector by: ensuring the use of more labour intensive work, promoting the manufacturing sector, and regulating the formal sector to level the playing field and restrict competition which in turn calls for the sector to demand highly skilled labours.
5. Economic policy review
According to the NCCI, the Ministry of Trade and Industry in Namibia recently reviewed its 1997 SME Policy, an indicator that the legal frameworks are being improved to create a more conducive business environment for SMEs.
The reviewing of this piece of legislation puts paid that the country is moving toward relaxation of most restrictions on current and capital transfers, introducing tax relief to investors as well as improving access to foreign exchange at near market rates, in order to create a conductive environment, where small businesses would be promoted.
