Namibia: towards a logistics hub for Southern Africa

Namibia: towards a logistics hub for Southern Africa

Foreign direct investment (FDI) is touted for its many benefits to developing countries. The skills and technology foreign investors bring with them can help to stem the huge skills and knowledge shortage that developing countries face until a well-trained labour force can be developed. FDI often boosts exports and earns much-needed foreign reserves while improving the competitiveness and efficiency of local producers. Until developing countries have the local capacity to do so, FDI can also facilitate the expansion of many of the fundamentals of growth, such as public infrastructure and information and communications technology.
 
Namibia’s new Investment Bill represents a new foreign direct investment (FDI) regime in line with a recent shift in the developing world away from liberal FDI regulation, which favours foreign investors and restricts the state’s right to regulate in the public interest. The bill creates provisions for reserving investment in certain sectors for namibian citizens and introducing performance requirements for foreign investors. Mandatory equity, joint ventures, and employment and skills development requirements can greatly increase the cost of FDI, particularly where local capacity and skills are in short supply. In sectors where the state does not have much bargaining power, these requirements can deter foreign investors. Incentive schemes can reduce this cost and increase Namibia’s attractiveness as an investment destination, but at the expense of forfeited state revenue. Whichever mix of regulation and incentives namibia chooses, the policy approach should be clearly articulated and legislated to minimise policy uncertainty. The bill provides an interesting platform for a discussion on FDI, its role in the namibian economy, and the impact FDI policy can have on development.

This paper uses FDI in Namibia’s logistics sector as a case study to investigate these issues. Logistics development is identified as a priority for inclusive economic growth in namibia, with a focus on the Port of Walvis Bay and its associated transport corridors. FDI has played an integral role in the construction and operation of the port and the transport corridors.