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IFC, World Bank call for increased private sector reforms in Namibia

July 10, 2022
IFC, World Bank call for increased private sector reforms in Namibia

Namibia can transform its economy, create jobs, reduce inequality, and recover faster from the impact of COVID-19 by deepening private sector reforms and increasing private sector participation in key sectors, research has found.

The Namibia Country Private Sector Diagnostic (CPSD) report, which was jointly prepared by the International Finance Corporation (IFC) and the World Bank, examined how Namibia can recover faster from its gradual economic decline in recent years by addressing private sector constraints in key enabling sectors with high growth potential, such as renewable energy, climate-smart agribusiness and housing.

“Namibia can harness the power of the private sector to reach its goal of becoming a high-income, industrialised nation focused on increased innovation, productivity, and value addition, one with vibrant micro small and medium enterprise (MSME) and export sectors,” said the report.

 The CPSD suggests addressing policy challenges to attract investment and achieve sustainable private sector-driven growth.

“Namibia’s largely monopolistic market structure and dominant public sector create an uneven playing field for the private sector. Public sector dominance in a small economy such as Namibia’s can create anti-competitive effects, especially when state-owned enterprises (SOEs) operate in monopolistic and privileged positions in key sectors of the economy—as they do even in sectors where private participation could be more efficient and transformative. This monopolistic nature of SOEs undermines the incentive to improve productivity and efficiency within key sectors such as water and electricity,” the report noted.

“Namibia has a sound, albeit nascent, public-private partnership (PPP) system. The country has sought to build a PPP framework through legislation, regulation, setup of a PPP Unit under the Ministry of Finance, and establish capacity for facilitating PPP projects. But the new framework is not fully tested yet, as no PPP transaction has reached financial close under the Public Private Partnership Act of 2017. Implementation capacity is developing but remains nascent. A robust PPP framework accompanied by critical business environment reforms could attract much-needed private investments, especially in energy and water, thereby reducing the fiscal burden. The new PPP framework could be more effective if broader business environment constraints are addressed.” 

DIGITECH LAGGING 

The IFC and World Bank report also called for increased competition in the country's telecommunications sector, a development it noted could enhance investments and technology, and improve service quality, access, and affordability.

“Despite a mature telecommunications market, adoption of digital technologies is lagging. Although Namibia was a pioneer in Africa in launching both 3G and 4G/LTE (Long-Term Evolution) networks and has good network coverage, it lags upper-middle-income comparator countries on the World Bank Digital Adoption Index. Weak competition in the broadband market is keeping costs high. Promoting digital transformation will require a multi-tiered approach. This includes reducing market concentration while facilitating the entry of new operators, accelerating international connectivity and national open-access fibre infrastructure through private participation, which could increase access to affordable and reliable bandwidth; and adopting new internet service provider licences and infrastructure-sharing arrangements to accelerate the deployment of high-speed broadband services.”

MAPPING OF TRADE PATTERNS

The CPSD report further points to the need for greater efficiencies in Namibia’s logistics and trade facilitation sectors.

“To gain a competitive edge, Namibia needs to improve its performance in timeliness, tracking and tracing, logistics competence, international shipments, infrastructure, and trade facilitation,” the report said.

“Sea connectivity is infrequent or unavailable because of competing ports, air connectivity depends on passenger traffic rather than cargo needs, rail transportation is unreliable because of outdated railway and equipment, and road transportation entails high costs because of empty backhauls and a restricted trucking market. In addition, the development of logistics facilities has been delayed because of hesitancy by logistics investors, a lack of skilled logistics professionals, limited availability of data to monitor the performance of Walvis Bay corridors, and a lack of good-quality third-party storage facilities. A mapping of trade patterns and flows to identify priority areas for strengthening transport and logistics infrastructure could be a good basis to identify private investment opportunities.”

 HOUSING SECTOR SPILLOVERS

In terms of housing, the report found that formal housing delivery in Namibia is not keeping pace with demand, with the urban population expected to increase from 52% to 60% by 2030 with annual urbanisation of around 3.8%, translating to 50 000 people or 13 500 new urban households, resulting in the rapid growth of informal settlements.

“The current need for about 45 000 new housing units per year offers a key economic opportunity. The housing sector creates spillovers across other sectors along the value chain and thus has a high job-creating potential. Housing accounts for 10-30% of a country’s consumption, and 50-90% of household wealth and savings. The high economic multiplier in the housing construction sector offers significant potential to support economic recovery by influencing demand for intermediate manufacturing and services inputs into the housing sector.”

The primary objective of the CPSD is to identify near and medium-term reform opportunities to revitalize the private sector and help reposition Namibia’s growth on a green, resilient, and inclusive trajectory.

The diagnostic looked in-depth at three sectors prioritised by the Namibian government—renewable energy, climate-smart agribusiness, and housing—and provides recommendations for reducing sector-specific bottlenecks to stimulate growth potential.

IFC is a member of the World Bank and member of the World Bank Group and is the largest global development institution focused on the private sector in emerging markets and has committed US$31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic.

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Last modified on Wednesday, 13 July 2022 09:24
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