THE Namibia Trade Forum (NTF) says policymakers should consider offering the manufacturing sector rebates – especially the underdeveloped sectors, such as the fashion industry.
This was discussed at the forum’s weekly trade talk, during which Roberth Simon, a trade and investment analyst at the forum, said targeted rebates would boost manufacturing.
Rebates involve exempting firms from paying customs duties and are considered on a case-by-case basis on resource-based raw materials.
This lowers the input costs of production in labour-intensive industries and enables global competitiveness.
According to the Namibia Statistics Agency, fashion apparel costs the country more than N$740 million annually through imports.
Simon at the trade talks said despite the Southern African Customs Union (Sacu) agreement of 2002 (as amended on 12 April 2013) which provides for member states to “apply identical rebates on imported goods”, Namibia rarely makes use of this tool to encourage industrialisation.
Neighbouring South Africa, on the other hand, benefits greatly from rebates and in turn ends up dressing Namibians through its well-distributed clothing retailers in the country.
South Africa has identified and created strategies for various industries, including the textile and clothing sector.
The country has also created a rebate facility specifically for input materials for clothing production.
Simon, therefore, proposed a clothing manufacturer’s rebate, which, he says, is necessary for local businesses growth.
Namibia regularly hosts various fashion events, such as the Windhoek Fashion Week and the Katutura Fashion Week, where Namibian designers showcase their products.
However, none of these items are available at big retail stores.
The stagnant local manufacturing industry has suffered a double blow in the past two years, with the government revoking the Export Processing Zone, and repealing the act which granted manufacturers low corporate income tax rates at 18%.
Simon said manufacturing incentives have been in place since 1993, which intended to raise investments and improve certain macroeconomic variables, such as employment levels and the country’s gross domestic product.
He said various policy instruments can be used to refresh the industrial development agenda to support business growth.
“This includes, among others, infant industry protection and rebates for manufacturers,” he said.
One of Namibia’s producers of chicken braai packs is flourishing on infant industry protection, while companies selling wheat products also enjoy rebates on imports.
The Sacu agreement dictates that “member states shall apply identical rebates on imported goods”, which should be good news for Namibian garment manufacturers whose sourcing of raw materials was limited to the Sacu market and South Africa in particular, Simon said.
About 110 rebates are currently utilised by South Africa to advance its industries.
Rebates would have an impact on revenue made by Sacu, which could be why policymakers are reluctant to pursue it.
A rebate facility was created by South Africa in October last year for the importation of raw materials.
This means South African firms can be rebated on the importation of raw materials classified under customs tariff products, which Simon said is enabling South African companies to take advantage of the African Continental Free Trade Area agreement.
“Establishing a rebate facility for input material to manufacture apparel is a clear indication that existing textile mills in Sacu no longer have the capacity to supply sufficient fabrics to garment manufacturers in the region,” he said.
Therefore, creating a similar rebate facility for Namibian clothing manufacturers presents an opportunity for meaningful participation in Sacu’s regional value chains, as a range and variety of fabrics can be sourced at competitive prices from the international market.
Between 2016 and 2019, the NTF, in partnership with Benchmarking and Manufacturing Analysts SA, conducted an industry assessment, particularly among Namibian clothing manufacturers, through a programme called ‘Capacity Development and Retail Linkage’.
The assessment results indicated there is opportunity for development among the pre-production components of a South African design house in Namibia to link to commercial retail functions by developing cut-make-and-trim capacity in Namibia and providing a base for upgraded manufacturing support.
“Without this critical part of the value chain being in Namibia, the relationship gap between Namibian clothing manufacturers and South African retailers is unlikely to be bridged,” Simon said.
The implication of such a development implies that existing Namibian clothing manufacturers would need to function as cut-make-and-trim agents for design centres, Simon said.
This means making basic fashion products for retail, and upgrading capacity gradually.
The assessment further indicated this process could create between 300 and 400 new jobs.
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