TRALAC - Trade Law Centre

Namibia: Setback to EPZ policy as large investor leaves

Monday, 10 March 2008

Source: Inter Press Service News Agency

The Namibian government plans to stay the course with export processing zones (EPZ) despite one of the largest of the foreign investors, Malaysian textile company Ramatex, deciding last week to close down its operations--a move that will destroy 3,000 jobs.

Ramatex came to Namibia in 2001. The one billion Namibian dollar project (about 127 million dollars) was the first large-scale industrialisation investment in the country, with an incentive package including subsidised water and electricity and a 99-year lease exemption for the 65 hectare site.

The government provided the site with electricity and sewerage infrastructure to the tune of 100 million Namibian dollars (almost 13 million dollars).

Ramatex has subsidiaries in China, Mauritius and South Africa. It chose Namibia in an attempt to benefit from the U.S.’s Africa Growth and Opportunity Act (AGOA).

AGOA provides preferential access to certain imports, such as clothing and textiles, from developing countries in Africa. Since Ramatex's arrival, the U.S. Congress has reviewed AGOA and some incentives have expired.

Ramatex’s operations showed losses of 500 million Namibian dollars (63,4 million dollars) in the past year, Ramatex’s general manager in Namibia Boon Keon Ong told the 3,000 frustrated workers, mainly women, on Feb 6.

Five years ago, the workforce stood at nearly 8,000. In 2005, a subsidiary shop called Rhino garments closed down. Ramatex’s cotton spinning and ginning plant closed shortly afterwards and the workforce shrunk to 3,000.

According to Trade and Industry Minister Immanuel Ngatjizeko, ‘‘the EPZ regime remains the core incentive in attracting foreign direct investment to Namibia. They have collectively invested 5.2 billion Namibian dollars (about 658 million dollars).

‘‘We will review our incentive regimes to make Namibia even more attractive as an investment destination.’’

Namibia started the EPZ in 1996 with wide-ranging incentives to create an accommodating and profitable environment for manufacturers exporting to markets outside the Southern African Customs Union.

The state-owned Offshore Development Company (ODC) promotes and markets Namibia’s EPZ to facilitate export-led industrialisation. The country’s economy is driven by primary sector commodities. The idea behind the EPZ was to boost economic diversification.

Companies with EPZ status are exempt from corporate tax, import duties on imported inputs, value added tax (currently at 15 percent) and transfer duties. There are no geographical restrictions on the location of approved EPZ companies. Local investors can also apply for EPZ status.

Companies qualifying to operate in an EPZ are allowed to repatriate their capital and profits while enjoying freedom from exchange controls. They can hold foreign currency accounts at local banks.

Unlike in other countries, EPZ firms in Namibia must comply with the labour law. The first five years no strikes or lock-outs were allowed, but this was changed eight years ago and workers can exercise their rights, including affiliation to labour unions.

Today some 20 companies from the rest of Africa, Asia, Europe and the U.S. are making use of Namibia’s EPZ incentives. They are involved in the manufacturing of plastic products, automotive parts for VW and Audi vehicles, clothing, fishing-related accessories and diamond cutting and polishing.

Most recently two companies started stone processing from local mining sites. The polished products are shipped to mainly the U.S.

However, there is no direct shipping line from Walvis Bay harbour to the U.S. The freight route goes via Cape Town in South Africa, adding time and costs.

‘‘We don’t grant EPZ status to the extractive industries like mining,’’ Nghidinua Daniel, ODC acting CEO, told IPS. ‘‘But the large zinc mining operation in southern Namibia called Skorpion Zinc has a refinery plant on site, Nam Zinc, and that has EPZ status.’’

Despite the generous incentives, government projections of creating 25,000 jobs with the EPZ were over-optimistic. ‘‘EPZ jobs peaked at over 10,000 by 2002 when Ramatex came here but are now at 5,200 employees,’’ says Daniel.

‘‘Some EPZ companies changed their status to become ordinary enterprises. Reasons are often that competition is tight for international markets from low-cost countries like India or China. Other factors like increasing fuel prices and their effects on transport and the recent electricity shortage play a role,’’ according to Daniel.

According to researcher Herbert Jauch of Namibia’s non-governmental Labour Resource and Research Institute (LaRRi), ordinary workers usually lose out as trans-national companies make use of EPZ regimes in countries for a short while, only to quickly disappear again to the next.

‘‘Trans-national corporations like Ramatex are highly mobile and exploit the opportunities created by neo-liberal globalisation,’’ Jauch wrote in a recent study called ‘‘The Textile and Clothing Industry in Sub-Saharan Africa’’.

‘‘There is a need to tackle such companies by questioning the neo-liberal global order and by creating mechanisms of democratic control that will ensure an end to exploitative practices and the free reign of capital,’’ Jauch, stated in the publication.

In 2006, Namibia's manufacturing sector contributed about 12,6% of GDP. Namibian manufacturers have historically been inhibited by a small domestic market, dependence on imported goods, limited supply of local capital, a widely dispersed population, and a small skilled labour force with high wages.

Strong competition from South Africa has not helped. Namibia imports approximately 80 percent of its goods from South Africa.

Namibia’s competitiveness has degenerated, according to the ‘‘Africa Competitiveness Report 2007’’ (ACR), compiled by the World Economic Forum. According to the ACR, Namibia continues to rank fourth in sub-Saharan Africa but slipped from rank 79 to 88 on the global scale, compared to 2005.

The main reason cited by the ACR is an inadequately educated workforce. On the other hand, Namibia performs well when measured according on political stability, inflation and foreign exchange regulation.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Namibia’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.