Investors spooked

Jo-Maré Duddy – If government gets its way, the Investment Promotion and Facilitation Bill will become law this week, giving the trade minister sole power to shape the country’s already dilapidated investment and business environment, while reducing the highly skilled Namibia Investment Promotion and Development Board to a non-independent sidekick.Industrialisation and trade minister Lucia Iipumbu last week sneaked the Investment Promotion and Facilitation Bill (IPFB) into parliament, tabling it as the replacement of the controversial Namibia Investment Promotion Act (NIPA), which was enacted in 2016. However, NIPA has not been enforced due to substantive legal concerns raised by the private sector. The IFDB virtually gives the minister unlimited powers to decide who may invest, how much may be invested, who must partner with investors, on what conditions investments may proceed, as well as when, how and if investments can be repatriated.Since NIPA’s appearance on Namibia’s investment landscape, gross fixed capital formation (GFCF or investment) has consistently been plummeting. In 2015, GFCF exceeded N$45 billion. Last year it couldn’t top N$26 billion. NIPA, together with the National Equitable Economic Empowerment Bill (NEEEB), has been fuelling policy uncertainty in the country.The Public Policy Research Institute (IPPR) last year said with the uncertainty caused by NEEEB and NIPA, Namibia has effectively hung out a sign to foreign investors saying: “No entry: please come back in five years.”END OF FREE MARKET ECONOMYThe review of NIPA has been shrouded in controversy since 2016 and the private sector has been fuming following the tabling of the IPFB.The Economic Policy Research Association (EPRA), one of the frontrunners lobbying against a flimsy review of NIPA, summarised the IPFB: “This Bill goes against every single principle of an open and free market economy. It will effectively, in fact instantly, destroy our Namibian free market economy.”Almost immediately after the IPFB was tabled, a legal analysis of the Bill was circulated anonymously on social media. “The IPFB fundamentally alters the basic parameters under which business is done in Namibia,” the expert, confirmed by Business7 as reputable, said.Namibia is currently a constitutional democracy where all persons shall have the right to practise any profession, or carry on any occupation, trade or business in any area of the country, unless the specific profession, trade or business is specifically regulated, the writer states.The statement continues: “In terms of the IPFB, the fundamental nature of who may conduct business in Namibia is altered to a scenario where no business may be conducted by a person unless specifically authorised by the state.”As such, the Bill disregards the constitutional protection in Article 21 (1)(j) of the Namibian Constitution, which states: “All persons shall have the right to practise any profession, or carry on any occupation, trade or business.”EPRA, too, stresses that the Bill is “clearly unconstitutional”.BUSINESS VETERANS VS BUROCRATSThe Namibia Investment Promotion and Development Board (NIPDB) was established in November 2020 as an autonomous entity in the Presidency. The IPFB, however, provides no independence for the NIPDB.The NIPDB’s board and advisory board include heavyweights like Nangula Uaandja (former chief of PwC Namibia), Vetumbuavi Mungunda (former CEO of Standard Bank Namibia), James Mnyupe (former MD at Allan Gray Namibia and currently the economic advisor of Pres Hage Geingob), Hans-Bruno Gerdes (former chair of Old Mutual Namibia), and Stefan Hugo (former lax leader at PwC Namibia).The IPFB waters NIPDB’s functions down to, among others, coordinating the implementation of the act, providing support services to investors, assessing investment proposals, as well as registering potential investors and maintaining an investor register.The trade minister, on the other hand, has the following powers: to formulise incentive programmes for investments, to access and improve economic sectors for investment potential, opportunities and social economic impact. The latter includes private and public sector participation.The minister may set out the terms and conditions of investing in economic sectors and business activities. She may review investment policies, including the levels of domestic and foreign investment in different sectors, as well as the development benefits of these investments.The minister may also identify and designate sectors that are reserved for certain categories of investors and investments.‘WHAT’S THE POINT?’On the same day Iipumbu tabled the IFPB, NIPDB CEO and chairperson Nangula Uaandja wrote a letter to the minister, expressing her dismay that the Bill provides no independence for the Board.The letter was also sent to Christine //Hoebes (minister in presidency), finance minister Iipumbu Shiimi (in his capacity as the chair of the cabinet committee on treasury), Obeth Kandjoze (chair of the cabinet committee on trade and economic development) and attorney general Festus Mbandeka.No independence for the NIPDB is “contrary to the roles and responsibilities attributed to investment promotion agencies [IPAs] in benchmark best-practice countries. “These IPAs are given full independence to act. They are sometimes appended to a ministry, however, this is often the Presidency itself. It is no point having an IPA that has no power to engage in actual investment promotion, facilitation and advocacy,” Uaandja said.EPRA says the IFPB “effectively nullifies” the existence of NIPBD. “One wonders why the President [Hage Geingob] found it wise to establish NIPDB if the Honourable Minister [Lucia Iipumbu] had the, now clear, intention to reduce that agency to a mere registry and completely bypass it in future investment decisions, even potentially replacing it in future, at the whim of the Minister,” EPRA says.In her letter, Uaandja said the NIPDB was specifically concerned that its “various inputs” were excluded from the IFPB.These inputs were presented and submitted to the trade ministry and the cabinet committees in April and June this year respectively.“We equally register our disappointment that some of those recommendations were completely left out without engagement, consultation and explanation as to the rationale of the exclusion,” she wrote.BONES OF CONTENTIONThe IFPB entitles the minister to appoint an inspector to “assist” her and NIPDB in the administration and implementation of the act, to ensure the effective enforcement of and compliance with the law. The inspector will also have the power to investigate and report on any contraventions of the act to the minister and relevant law enforcement agencies.In her letter, Uaandja described the role of such an inspector as “quite unique”.“None of the benchmark countries that we have reviewed has an inspector for investment. It is incongruent first with the concept of facilitating investment. Moreover, policing investments in this way is a negative element for our private sector development. It is a larger issue of trust,” she said. According to Uaandja: “In most best practice countries, we found instead that there are forums that are created to facilitate the investment and resolve issues. In fact, rather than an inspector, it is better to set up an ombudsperson office for Investment as we had suggested in our submissions to the ministry.”The IFDB gives the minister the right to, in consultation with the chief of the Namibian Intelligence Service, to prescribe and regulate investments “in a manner necessary to maintain security and international peace”.CRIME AND PUNISHMENTThe Bill stipulates various offences – ranging from undertaking, establishing or operating an investment contrary to the act to changing the ownership or control of the investment.A conviction of an offence could result in a fine of up to N$2 million or a prison sentence of up to ten years or both.“Normally investment promotion laws are meant more for facilitating investment and providing the right framework for investment to happen in the country. Instead, this proposed bill is heavier on offences, penalties, [and] disputes,” Uaandja wrote.The dispute settlement clauses as they are drafted in the IFDB, is likely to be an open door for Namibia to face international disputes of large magnitude, she said. The Bill allows for international arbitration.“As we know in the international arena, the amount linked to awards is increasing exponentially. We would recommend that these be reviewed as it can cause large prejudice to our national coffers,” Uaandja said.“We are afraid that if investors read this law in detail, they may decide to shy away instead from our country as it is not very business friendly,” she warned.‘HOST OF DISINCENTIVES’The IFDB contains no incentives for domestic or foreign investment, only a host of disincentives, EPRA says.The complete control the IFDB grants the minister will “effectively and instantly destroy the free market economy”, the think tank says, adding: “This will result in massive contraction in the economy, major job losses and reduced tax revenue.”“The most successful economies in the world are open economies. It makes no sense that Namibia, in its current dire economic position, wants to close her economy, by such extreme measures on top of that," EPRA added.Uaandja wrote: “Given the severity and potential impact of some of these provisions on the ability of the country to attract investments, to enhance our competitiveness as a viable investment destination, to ensure greater ease of doing business (notably in reducing bureaucracy and the amount of time it takes for investors to become operational), and for NIPDB to deliver on our mandate, we will raise these concerns with our appointing authority.”She added: “Engaging the private sector and effectively communicating the provisions of this Act would determine its acceptance and impact on investment promotion efforts, in light of the demise of its predecessor Act of 2016 [NIPA]. “It is therefore the request of NIPDB that our two institutions set up a small communication team that would put together and co-implement a communication strategy for the bill. We also need to ensure that Namibia is well equipped to carve out a position in the already very competitive landscape of international investment attraction and facilitation.”

Investors spooked

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Namibian Sun 2024-11-15

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Investors spooked

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Namibian Sun 2024-11-15

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