Manufacturing incentives flop

19 October 2018

Finance minister, Calle Schlettwein has admitted that manufacturing incentives, which government offered as part of its Vision 2030, flopped.Finance minister, Calle Schlettwein has admitted that manufacturing incentives, which government offered as part of its Vision 2030, flopped.

He last week said that 12 years before 2030, by which Namibia was envisaged to become an industrialised country, manufacturing has averaged at 11.7 percent not much different from 11.1 percent at the introduction of the manufacturing incentive regime in 1995.
“This is especially so because the growth in manufacturing over the past years has largely been driven by mineral beneficiation. The overly generous incentive regime has an associated tax expenditure outlay of about N$305 million. This is to be seen against the tax capacity of the beneficiary sector, for which the effective tax rate, once all exemptions, deductions and losses are carried forward are considered, amount to an effective rate of about five percent,” he said.     
Schlettwein said government has now proposed graduating the net loss regime into a Special Economic Zone and cease perpetuating net economic loses.
“If the policy intervention does not contribute to the net economic gains, but only perpetual net losses, it does not make economic sense to continue with the same,” he said.
Namibia remains a destination for basic consumer goods and staple food, which according to Schlettwein, account for over 11 percent of the total import bill or N$10 billion annually.
“If a substantial lot could be produced, processed and sourced locally, this would imply large local flows.”
He said government has now introduced special designed facilities and these include the SME Financing Facility under the new approved SME Financing Strategy, comprising the Venture Capital Fund, Credit Guarantee Scheme, which will include training and mentorship. 
“A youth skill based lending facility is also being set up to serve youth entrepreneurs. Cabinet has approved for the establishment of a Provident Fund at DBN,” she said.
Schlettwein said a targeted public investment stimulus through AfDB funding to the tune of N$2 billion will be made available for SME funding.
According to the 2017 Annual National Accounts, the manufacturing sector is estimated to have recorded a slow growth of 1.3 percent in real value added for 2017 compared to a strong growth of 5.6 percent recorded in 2016.
Meat processing registered a decline in real value added of 14.4 percent, other food products declined by 4.6 percent.
Textile and wearing apparel recorded a decline of 3.2 percent during the period under review.


The Windhoek Observer is an English-language weekly newspaper, published in Namibia by Paragon Investment Holding. It is the country's oldest and largest circulating weekly.

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