Inequality holds Namibia back
… analysts call for major socio-economic intervention
Alocal labour expert has warned that without a fundamental change in Namibia’s social and economic architecture, the country will continue to see rising levels of inequality.
This warning by Herbert Jauch is issued even though between 1990 and 2019 Namibia’s Human Development Index (HDI) increased by more than 11% from 0.581 to 0.646.
Despite this improvement, the UN report shows that Namibia remains one of the most unequal societies in the world where more than 50% of the population earn less than N$1 400 per month. “Socio-economic inequalities do not disappear simply because equal legal rights are introduced. This is clearly shown in Namibia where huge levels of inequality have been maintained since independence. The power imbalance in society has remained and therefore inequalities continue to reproduce themselves,” said Jauch in response to questions by New Era.
The latest Human Development Report (HDR) by the UN shows that the richest 0.5% of Namibians continue to increase their wealth further while a large part of the population is stuck in poverty, unable to meet their basic needs.
Jauch said in order to change this dire situation, a host of interventions are needed; “Firstly, poverty needs to be tackled directly through the introduction of a basic income grant (BIG) accompanied by basic services including education, healthcare, housing and sanitation. Such interventions will have an immediate redistributive effect in favour of the poor.”
The labour expert continued that at the other end of the spectrum, wealth accumulated by a tiny elite needs to be spread more evenly to ensure general benefits for the public.
Thus, he advocates for the introduction of a capital gains tax and inheritance tax as examples of immediate options to remedy the disproportion.
Also, he proposes the utilisation of national resources, such as minerals and fish, to be altered to ensure the material benefits do not end up with individuals but rather serves the general public and the poor.
Jauch also suggests workers’ and communal ownership, for example in the form of cooperatives, to be introduced as part of a move towards economic democracy that he says will significantly reduce inequalities.
“Currently, we see the opposite happening and the Fishrot saga only exemplifies this point. Without a fundamental change in our social and economic architecture, we will continue to see rising levels of inequality,” Jauch cautioned.
He continued that one of the most shocking aspects of the latest UN HDR report is the low wages being earned by more than half of Namibians, standing at N$1 353 per month, stating that this shows how exploitative the Namibian economy and society is.
“It is simply impossible to meet basic needs on such low incomes and drastic interventions are required to overcome this low wage economy which relegates so many workers to the rank of the working poor…Article 95 of the Namibian constitution mentions a living wage and current wage levels are far below that. Thus, the need to set a living wage that will allow workers to meet their basic needs is essential. The national minimum wage, which is currently explored by the recently set up commission needs to take cognisance of that and proposes a minimum wage that will lead towards a living wage. Otherwise, we will cement the low wage economy further,” said Jauch.
Jauch noted that employers often argue that due to market pressures and competition, they cannot increase wages but he said this is often merely a justification for exploitative practices.
“Hugely profitable companies like Shoprite are continuously refusing to pay decent wages and are still way below a living wage despite their huge earnings. In a broader economic context, both government and employers need to realise that wages are not just a cost of production but are also the basis for economic activity in the country as improved wages will create local demand which is a form of economic stimulus. Maintaining low wage on the other hand constricts the local economy and increases inequality,” Jauch warned.
Meanwhile, Daan Strauss, Secretary General of the Namibia Employers’ Federation (NEF) said there is no arguing with international standards and as Namibians, we must accept that the national gini-coefficient is bad. According to Strauss, pronounced income inequality is a reality in Namibia and is the reason for the massive income divides.
Noting that Namibia is also not an industrial, neither a high-tech country, with agriculture being the major employer and government in the second position, Strauss bemoaned low skill levels and wanting educational standards. As the leading employer representative in the country, Strauss cautioned that if skills and education are not addressed as a matter of urgency there will not be a positive change in the current status of labour or employment.
“There is a huge unemployment rate and an over-supply of labour for too few positions, hence 400 people turning up to be interviewed for a few cleaner positions! Market powers of supply and demand dictate price; in this case, wages and salaries. The sad fact is that some people are exploited due to a lack of jobs…If Government had used resources well after many years of independence, if corruption, nepotism and self-enrichment did not become embedded in top circles, we would be in a better position. If the management of public enterprises had been better, so much capital would not have been lost, Air Namibia being a case in point,” said Strauss.
The NEF secretary general also questioned the low figure of N$1 400 per month reportedly earned by more than half of the population.
“Who decided this figure? Has it really been established? Is it just salaries or includes, where appropriate, transport allowance, housing allowance, etc.? Does it take into consideration that at least 40% of workers are unemployed? Most industries pay better than those levels and it is assumed that it is only applicable to labourer levels such as people working in households. It is difficult to comment without more information,” Strauss admitted.
However, from an employer’s perspective, Strauss said setting a national minimum wage is fraught with danger, asking ‘how low or high do you se it’?
“Too low and it is ineffective, too high and it will lead to redundancies. Government is in the process of investigating a national minimum wage (NMW). However, the problem is often that minimum wages in turn cause the unemployment rate to increase as certain employees lose their jobs, due to employers not being able to afford the minimum wages or switch to further mechanisation. Employers also must compete against each other, imports, and alternate products and cannot simply pass higher production cost due to wage increases and recoup it in prices from the consumers. For starters, the input cost of electricity and water is already of the highest any were in the world,” Strauss lamented.
He added that the economic realities need to be recognised and shortcomings such as education need to be addressed to rectify the situation over time, saying that unfortunately, there is no quick fix.
Strauss concluded that Namibia urgently needs additional local and foreign investment but pointed out that investors require certainty and amongst others, the National Equitable Economic Empowerment Bill (NEEEB) and Namibia investment promotion need to be sorted out to restore the certainty required.