Mr Tweya's Toothpicks

Mr Tweya’s Toothpicks

Earlier this week the minister responsible for Trade and Industrialization Mr Tjeroko Tweya pointed quite eloquently to the fact we do not even produce toothpicks in Namibia. What cannot be avoided is the fact that the minister responsible for industrialization got up and said that after 28 years the cornerstone of Namibia’s economic policy i.e. industrialization is so clearly a failure. The question is why have we failed to industrialize?

The reason is simple enough – we cannot compete with our neighbors, let alone the economic giants of China and India. We cannot compete because our costs are too high and this is largely, but not exclusively because professional labour costs are high along with much of the costs of setting up and running a business in this country. But there is another reason that is also obvious, we are simply too small to industrialize. Even though we have access to the huge SA market through SACU,  that proves to be a commercial liability not an asset as larger and more cost competitive South African producers can just as easily sell into Namibia as vice versa.

Let us assume that you are unwise enough to establish a tooth pick factory in the SADC market. First you would have to compete with Chinese toothpicks which are low cost with toothpicks produced in the billions for a nation where picking teeth after a meal is widely practiced. The economies of scale that the Chinese have would simply make any small scale operation in Africa commercially unviable. We would need high tariffs against Chinese imports. Assume that you can compete with China which is a mighty assumption – where would you locate such a factory in SADC? You would not choose Namibia but rather Gauteng where all the inputs and skilled and specialized labour and services are located. Alternatively you would choose a place close to the raw materials ie. either bamboo or hardwoods but close to markets. The only place close to materials that could be used would be in the North but that would mean that you would have to ship your toothpicks to South Africa. Who would you sell your toothpicks to? The South African owned supermarkets of course, but they hate buying from multiple sources. They want their toothpicks delivered to one location, usually in South Africa and then distributed through their trucking networks to all their supermarkets. Multiple points of sale and distribution are totally against the modern supermarket model which exists because products are bought in bulk to one place and then distributed.

What is true of toothpicks is unfortunately true of almost everything that is manufactured whether it is refrigerators or cut diamonds or gold jewellery. We simply cannot compete and as a result our children have no jobs. All we can do is make holes in the ground to extract minerals and ship out our rich fish resource.  There are two ways to deal with our high cost structure but they are both would be about as politically popular as cancelling Christmas. The first is to bring in large numbers of African and possibly even Asian professionals to Namibia. This would drive down salaries of the professional elite in Namibia, both the old and new, would suffer a significant decline in their living standards. The second option is easier but even more painful. Namibia could decouple from the South African rand and continue to devalue the Namibian dollar until the cost of producing manufactured goods in Namibia is competitive with Asia. This would take a real devaluation of between 30-50% according to recent estimates and will lower everyone’s living standard. The suffering that such a policy would create, especially for the poor,  would need to last for at least ten years before real positive results occurred in terms of increased industrial production in Namibia.

So neither of these hard policies will happen and this is precisely why Namibia’s children will linger in unemployment. But what Mr Teywa, as an honest man, should now do is to go to cabinet and tell his colleagues including the Prime Minister and the President that Harambe, as currently designed, will not work. Furthermore, the country does not have the stomach for the painful economic changes needed to make industry competitive. Such honesty would earn the good minister an immediate dismissal from cabinet for his troubles. It is thus up to the President Geingob to face the truth that Harambee needs to be re-jigged and we need another road for Namibia.

Fortunately Namibia’s predicament is far from impossible. Namibia is a spectacularly beautiful country with tourism potential in abundance. Historically, the closing of the ‘sperregebeit’ in the south and northern part of the Skeleton Coast to only the super-rich who can fly in to the north has stopped Namibia from being what it could be, which is the most fascinating dessert journey in the world. Tourism arrivals are growing rapidly and will, with fluctuations continue in the future. Agriculture also constitutes an enormous opportunity given the discovery of the Ohangwena II aquifer in the north which is often described as ‘oceanic’ in proportions and enough to supply water for Namibia for over 400 years. We are in fact a water rich nation, not water poor. Only those who have never visited a cattle feed lot, a modern piggery or a poultry producing facility can still naively think that agriculture is not industry. A shift to agriculture can easily be fitted into a revised Harambee where we use what we have in Namibia to provide thousands of rural jobs rather than dreaming of industrialization. Sudan has used the equally large Sudanese aquifer to become a major producer of fodder for export to Saudi Arabia.

Mr President, our policies of industrialization are not working and will not work without imposing terribly painful economic reforms. Your ministers are all telling you this and the mark of a great leader is one that examines the situation and concludes that change is necessary. To continue on the current path is to condemn a whole generation of young Namibians to virtually permanent unemployment and yourself to historical oblivion.

These are the views of the Professor Roman Grynberg and not necessarily those of  UNAM where he is employed.