WINDHOEK - A plan by Namibia,
among the world’s most economically unequal nations, to better distribute
wealth among its citizens may end up the way neighbouring South Africa’s
has benefiting an elite minority.
The nation is working on a law that will require all
businesses to be at least a quarter owned by “racially disadvantaged people.”
While only about 6% of Namibia’s
2.5 million citizens are white, they own most enterprises.
That’s a legacy of white-minority rule South Africa imposed when it controlled Namibia
from World War I to 1990, with black people being disenfranchised and
displaced.
Critics of South
Africa’s policy, including the biggest labour-union
federation, say it has failed to redress inequalities because it focuses on
increasing black ownership of companies rather than raising education standards
to match a skills shortage, and has benefited a small number of wealthy
individuals.
Proposals by Namibia,
the world’s biggest marine-diamond producer, are similar, which could hamper
investment and growth in an economy that’s contracted every quarter since March
last year.
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The plan “has caused much unease among white business owners
and heightened investment uncertainty,” Gerrit van Rooyen, an analyst at NKC
African Economics in Paarl,
South Africa,
said in an emailed response to questions.
Both governments have to “create incentives to boost
employment and stimulate investment. Black economic empowerment cannot succeed
without job creation and wage growth.”
The New Equitable Economic Empowerment Framework Bill
outlines six areas to increase black citizens’ participation in business,
including developing people’s skills and providing financing for those
disadvantaged by inequality to buy stakes in companies.
Zimbabwe
enacted legislation a decade ago that required all foreign or white-owned
businesses to sell or cede 51% ownership to black nationals.
Shift Focus
The Namibia Chamber of Commerce and Industry wants the focus
on economic ownership scrapped, saying it will result in capital flight. It
also calls for a rethink on employment equity, because it requires “formal
racial classification and promotes racial polarization; blames white racism,
brushes over complex causes of interracial inequality,” the NCCI said in its
response to the proposed law.
The chamber suggests the bill should target “only the needy
and disadvantaged,” and that selection criteria be based on “loyalty, restraint
and goodwill and not on greed, tokenism and discrimination.” Namibia ranks alongside South Africa and Lesotho among the world’s most
unequal societies in terms of distribution of income, according to Gini
coefficients compiled by the CIA World Factbook.
The Law Reform and Development Commission is revising the
bill and doesn’t yet know when the new version will be ready, Yvonne Dausab,
the body’s chairwoman, said.
The current version of the plan has helped see Namibia, the
world’s fifth-biggest uranium producer, lose its spot as Africa’s second-most
attractive jurisdiction for mining companies to invest in, based on policies,
to Botswana, the Fraser Institute’s 2016 survey of 2,700 firms worldwide shows.
Debt Ratings
On June 19, Fitch Ratings kept its assessment of Namibia’s
foreign-currency debt at the lowest investment grade, saying the draft
empowerment law represents a “modest risk” to the business and investment
climate as uncertainties remain about what will ultimately be approved as
legislation.
Almost two months later, Moody’s Investors Service cut its
rating of the country’s debt to junk, citing a “material” decrease in the
country’s fiscal strength, with public debt reaching 42% of gross
domestic product from 26% when the company first assigned a rating in
2011.
It has the assessment on a negative outlook, which means the next move
could be another cut, saying that a change of investment sentiment is among
risks to the rating.
Besides the empowerment law, Namibia is proposing legislation
that will limit foreign ownership of land, and it has signed an investment
promotion act that will reserve some business activities for black Namibians,
Van Rooyen said.
“The government seems to be shifting towards nativist and
protectionist policies, which typically discourages foreign investment and
impedes economic growth,” he said.
-BLOOMBERG