21 February 2013

Namibia: Big Bang Development Approach Crucial

Windhoek — Namibia needs to adopt a 'big bang' approach in terms of development, since the incremental approach the country has followed so far is not yielding the desired results.

This is the view of the Director General of the National Planning Commission (NPC), Tom Alweendo, who yesterday said: "I am not saying that development is impossible, but rather to point out that we can no longer afford to approach our development in a laissez faire manner because time is no longer on our side." One of the development initiatives he was referring to is the Targeted Intervention Programme for Employment and Economic Growth (TIPEEG) launched by President Hifikepunye Pohamba in April 2011.

The three-year targeted public investment programme, which aims at creating over 100 000 jobs and focuses specifically on the sectors of agriculture, tourism and infrastructure development, spent N$4.01 billion out of a budgeted N$5.35 billion during 2011/2012, but which resulted in just over 25 000 jobs so far.

For the first six months of TIPEEG's second year of implementation, up to September 2012, about N$1.1 billion (27.5 percent of the annual budget) was spent resulting in the creation of approximately 8 500 jobs.

"I will be the first one to admit that we need to do more in terms of executing the planned projects," Alweendo said yesterday at a media briefing held at the Prime Minister's Office. On the economic front Alweendo, who was flanked at the media briefing by Bank of Namibia Governor, Ipumbu Shiimi, said the country's economic growth, while positive, continues to be low compared to targets the country has set for itself.

"During the past five years the average real economic growth rate was only 3.7 percent as opposed to the desired growth rate of seven percent required to meet Vision 2030 goals. Not only was the growth rate low, but was also mainly driven by capital-intensive sectors. As a result the economy was not able to create sufficient employment opportunities for those looking for jobs, especially young people. Today we are having one of the highest unemployment rates in the region and indeed the world," he noted.

The Director General of the NPC also touched on Namibia's high rate of inequality with a Gini-coefficient of 0.6. Translated into dollars consumed by different segments of society, the latest statistics show that 20 percent of the population own 80 percent of the total income generated by the economy in any particular year. "Although there has been a reduction in the measure of inequality, this is still something we cannot be satisfied with. Related to the huge disparity in income is also the incidence of poverty, that although declining, remains too high for a so-called upper middle-income country," he said.

Touching on Namibia's much lauded Fourth National Development Plan (NDP4), Alweendo said that in cases where there is market failure and where the market does not exist at all, the State has an obligation to stimulate domestic economic development. Compared to its predecessors, NDPs 1, 2 and 3, NDP4 is a more focused plan that prioritises three goals, namely high and sustainable economic growth, employment creation and the reduction of income inequality. With regard to economic growth the plan aims to grow the Namibian economy by an average 6 percent over a five-year period, while it aims to reduce unemployment by 4 percentage points and to reduce inequality to a Gini-coefficient of 0.48.

NDP4 stipulates that the key to reaching the average 6 percent growth target is the implementation of a few large-scale infrastructure projects. While some have argued that these types of projects are too big for a small nation like Namibia, Alweendo believes that it is both necessary and "doable". The projects are in the areas of power generation, port expansion, roads construction and maintenance, air transport facilities and the upgrading of railways. Other areas of growth are manufacturing, housing construction and tourism.

"The goals of NDP4 cannot be realised unless we make the necessary public and private sector investment. In this respect, I am aware that there are those who are anxious about the affordability of the needed investment, especially public investment. They caution against high budget deficits that will lead to unsustainable public debt. Unsustainable debt, they argue, will erode our macro-economic stability that we have so far managed to build over the years and that must be treasured," said Alweendo.

While he noted that these are legitimate concerns, he assured the public that one of the principles underpinning the formulation of NDP4 is the maintenance of Namibia's macro-economic stability, without which it would be impossible to achieve the set targets. "What is equally important is for us to recognise that in the long run we cannot resolve the problem of unsustainable debt and deficits without a credible economic growth strategy. In the long run it is only sustainable economic growth that is capable of successfully addressing the twin problems of deficit and public debt," said Alweendo.

Over the last five years Namibia's public debt to Gross Domestic Product (GDP) ratio was 20 percent, while the deficit ratio was 2 percent. It is estimated that the 2012/2013 deficit will be below five percent.

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