NEEEF: ‘There are two sides to this coin’ - Kosmos Radio 94.1 FM

NEEEF: ‘There are two sides to this coin’

JM Kretschmer

A ‘final draft’ of the National Equitable Economic Empowerment Framework, or NEEEF has been released by Cabinet. It has been approved by the Law Reform Development Commission as well as government’s legal drafters. Its next stop now is parliament, the ‘new’ parliament, where it will be debated. NEEEF has long been a contentious issue and experts in the field have come out guns blazing about the uncertainty that the framework brings to industry in the country thus, limiting much-needed investment.
The Economic Policy Research Association (EPRA) has issued an analysis of the ‘final draft’ questioning its constitutionality and describing the document as “vague and draconian”. According to EPRA, the document, or Bill if it is to be passed, “expressly and deliberately divides Namibians along racial lines and its beneficiaries include any and all Namibians previously disadvantaged, irrespective of past, current or future economic status”.
The Association goes on to say that it “excludes any and all white Namibian citizens, including females, and residents”. Eben de Klerk of the Association says that while there was an undertaking to remove the 25% ownership to be transferred and this was done, the 25%, in his words, “is now anything”.
According to the document, a Minister and a Commissioner will be appointed and the power to make decisions and rulings will rest in their entirety with the yet-to-be-appointed Commissioner and Minister.
The framework, as it stands, applies to all entities, occupational categories and productive assets. That would include farms, rental properties and more, which are registered in closed corporations. But, EPRA says none of these are defined. There is also no sunset clause and hence, the law can be applied ad infinitum. There are no set criteria – not for evaluating the poverty level of the beneficiary, nor for which criteria will be applicable. They can be changed at any time, and at will, and sectoral charters can be applied at any time by the Minister. Contracts and tenders will rely on compliance.
“There is no duty on the Minister to meaningfully consult on any criteria or sector transformation charters.”
Moreover, says EPRA, there is no empirical evidence presented to support the “purported positive effects on poverty and inequality, opportunity or empowerment”.
Inequality in Namibia remains a massive challenge. Recent international media reports say that 5% of the country’s population currently reside in Katutura, the majority of which are in informal settlements. According to the World Bank, the Gini Index for Namibia for 2018 is 55%, down from 71.3% in 1993/94. But inequality is a tricky thing because it is not equally distributed. The National Planning Commission, in its March 2018 ‘State of the Namibian Economy’ report states that “inequality increased in seven of the 13 regions between 2003 and 2010 indicating that the economic growth of 4.2 percent experienced during this period benefited the population differently. Further, despite great strides by women with regards to educational attainment and economic participation, data from the Namibia Labour Force Survey 2014 indicates that there is an observed gender pay gap, the amount by which women’s salaries falls below or exceeds men’s salaries. To address inequality in the country, policy intervention needs to be devised aimed at addressing the observed wage differences.” The status quo remains largely unchanged and women form the bulk of the informal sector which currently makes up more than 30% of the Namibian economy.
There are few Namibians who care about this country who would contend that inequality is simply the status quo and is omnipresent everywhere in the world. It needs to be addressed and this is an agreed-upon concept.
According to EPRA, inequality is the “pain caused by the wound and not the wound itself”. The Association asserts that Oshiwambo-speaking people are more unequal than any other language group, saying that this indicates that “many Oshiwambo-speaking people have moved into the middle-class post-independence while fewer members of other language groups have achieved similar socio-economic status”.
The concern remains that there is no clause that will provide the blue-collar worker with an option to advance.
The document mentions “pillars” of empowerment. The first is the ownership pillar, which no doubt is open to those with resources to purchase shares. The second ensures that management structures are more representative of Namibian demographics. This too is reliant on education and formal training. Human resources and skills development, as the third pillar, rests entirely on the employer. The fourth pillar will evaluate companies on how much support they have given to entrepreneurial development, free or at a discounted cost, as well as providing expertise and mentorship. The procurement pillar will evaluate how much support companies have given empowerment beneficiaries while the sixth pillar, corporate social responsibility is just that. Seventh is how far companies have gone to support empowerment beneficiaries to value-add, create jobs and transfer skills. The final pillar is access to financing by empowerment beneficiaries.
The knee-jerk reaction that this draft has created lies in its vague and undefined nature. Far from being a policy, it is more of an ‘idea’ and is open to different interpretations.
EPRA says that the framework will carry a downside risk for especially the most disadvantaged and vulnerable Namibians because it “sets the stage for substantive abuse of power, corruption, nepotism and mismanagement”.
The Association goes on to say that it actively discourages both foreign and domestic investment and encourages capital outflows.
Of concern is the international treaty obligations Namibia has signed for.
“It can only achieve sub-optimal outcomes for the majority while padding the pockets of a politically connected minority,” says EPRA.
The framework as it now stands, the Association says, cannot address the root causes of the socio-economic marginalisation of those who are most vulnerable and affected by poverty and unemployment.
Job Muniaro, secretary-general of the National Union of Namibian Workers (NUNW), also shares some of these concerns, primarily in the field of job losses.
According to him, if the implication of NEEEF is the closure of companies, then the plan is not feasible.
“If it is about ownership then we are really ‘in for it’,” he says, asking whether government will offer the guarantees originally put up by the ‘former’ owner once NEEEF takes hold. Will government pay the debts companies have; he asks?
Describing NEEEF as a “good idea”, Muniaro adds that will the same employment standard, and medical, pension and allowance benefits still be applied?
“We want NEEEF in terms of black empowerment but with that comes responsibility and accountability. Will government provide those guarantees for companies on behalf of NEEEF? Everyone now becomes self-employed but part and parcel of that is responsibility, not just benefits. We can implement NEEEF tomorrow but government must provide the bail-out.”
His primary concern, Muniaro says, is the current economic state. And right now, “we must be fair and frank in our goals; we support NEEEF but in this Namibia, it is a risk we should not take”. Proper consultation is essential because in this economy, “the workers under my leadership will suffer the most”.
The Haas Institute at the University of California, Berkeley developed a policy for reducing inequality. One of the tenets is to increase the minimum wage and along with that, augment earned income tax credit, specifically on the basis of the lower-earning segment based on number of children and other criteria. Expanding access to low-cost, fair financial services as well as retirement plans allows low-income families to build wealth. In this light, home ownership is an important element. Investment into education and ending residential segregation are also listed as important. According to the Institute: “Higher levels of racial residential segregation within a metropolitan region are strongly correlated with significantly reduced levels of intergenerational upward mobility for all residents of that area. Segregation by income, particularly the isolation of low-income households, also correlates with significantly reduced levels of upward mobility. Eliminating residential segregation by income and race can boost economic mobility for all.”
NEEEF if implemented will increase the cost of doing business. That, according to Ian Collard, Chairman of the NMI Group of Companies, decreases competitiveness, something we can ill afford. He adds that competitiveness in industry in the country is already challenging with high water and electricity tariffs, among others, and implementing NEEEF in its current form will “increase the gap between the ‘I will’ and the ‘I wish’”.
EPRA also expressed its concern over in the impact of NEEEF on capital formation with an increased investor-unfriendly environment. It is at “an all-time low as a percentage of GDP” says EPRA. Capital formation is essential for economies and increases investment because it increases per capita income which enhances purchasing power because it creates demand. Low productivity leads to low income, low purchasing power and low demand. This reduces national income and productivity and the rate of capital formation remains low. There is a link between inequality and low growth which runs through low levels of education and human capital formation.
In a paper on the effects of the expropriation of land without compensation in South Africa, Professor Ilse Botha and Dr Roelof Botha write: “The importance of capital formation to the well-being of the economy cannot be over-emphasised. It represents the physical assets that are required to produce goods and services and examples include infrastructure (water supply, roads and electricity) and the factories, tractors, machinery and tower cranes that make production and employment by the private sector possible. In the absence of adequate levels of capital formation, current and future economic growth is curtailed, which compromises fiscal stability via below-optimum taxation revenues. Furthermore, employment growth is also restricted and government’s ability to provide basic services to a growing population and to maintain infrastructure is diminished.”
Sven Thieme, speaking as president of the Namibia Chamber of Commerce and Industry, said he has not yet reviewed the new draft nor has he studied the comments and analyses which have been released. However, he added that if the new NEEEF draft addresses the poor and meets that need, and if the outcome is improved education, health and safety, it carries his support. He added that he would release a statement once he has had time to peruse the document.
Other stakeholders, who declined to be named, expressed concern of the lack of transparency regarding the amendments to the original NEEEF draft adding that industry, and investors, fear surprises. The transparency they say, has not been satisfactory.
One businessperson said, “Government does not belong in my value chain because if it is there, I lose all efficiency. Government is not a business enabler.”
Ombudsman John Walters, who is a member of the Law Reform Development Commission, called for calm.
“There has never been a better time for the public, and civil society, to get involved. The framework will go to parliament for debate. Speak to your local politician, ensure they receive your inputs, attend debates and take an active role in this Bill,” he said.
Walters’ concern is that the blue-collar worker, along with the public at large, are not at all well-informed about NEEEF. The new parliament will debate the Bill, “and then it has to stand up to a constitutional challenge”. Provide your local representative with the necessary tools for arguments and raise all your concerns with the relevant stakeholders, says Walters.
In his view, the empowerment of workers is essential and the practical implications of the document, as it stands now, must be debated at all levels of society.
Of concern to him, is the silence of the blue-collar worker, the real beneficiary.
“Where are their voices? If they understood what this was about, would there not be more pressure to apply it as soon as possible? Why are they so silent? They are not informed,” he said.
Muniaro says: There are two sides to this coin. On the one side is the country flag, representing empowerment but not employment. On the other side is money, which represents [decent] employment but not empowerment. Which side do you want to take?