NAMIBIA Investment Guide
Foreign Investment Climate
Openness to Foreign Investment
The Government actively seeks foreign investment as a way to develop the
economy, generate employment and boost foreign exchange earnings. The 1999
Africa Competitiveness Report produced by the African Research Center at
Harvard University places Namibia fourth in Africa behind Tunisia, Mauritius
and Botswana in terms of a variety of competitiveness criteria. Namibia's
Foreign Investment Act of 1990 guarantees foreign investors treatment equal to
that given to Namibian firms, fair compensation in the event of expropriation,
international arbitration of disputes between the investors and the Government,
the right to remit profits and access to foreign exchange. Investment incentives
and special tax incentives are also available for the manufacturing and export
sectors.
While Namibia actively seeks foreign investment,
some sectors have experienced aggressive “Namibianization” of existing
investments. In particular, some foreign companies with fishing licenses in Namibia have alleged that they have been
forced into partnerships with local individuals or firms, chosen by the
government, in order to renew their licenses.
Currency Conversion and Transfer Policies
The Foreign Investment Act of 1990 offers investors, who meet certain
eligibility criteria, the opportunity to obtain a Status Investment Certificate
(SIC). The award of a SIC entitles the holder to:
• preferential access to foreign exchange in order to repay foreign debt, pay
royalty and similar charges, remit branch profits and dividends;
• preferential access to foreign currency in order to repatriate proceeds arising on the sale of the enterprise to a Namibian resident;
• exemption from regulations which may reserve certain business or categories of business for Namibians;
• right to
international arbitration in the event of a dispute with the Government;
• payment of just compensation without undue delay and in freely convertible
currency.
Non-status investors are subject to the exchange controls under the South
African regulations applicable to the Common Monetary Area (CMA). In general,
the Namibian banking system is modern and efficient, and local commercial banks
are fully capable of handling international transactions and trade financing.
Expropriation and Compensation
The Foreign
Investment Act protects the investor from expropriation. It also guarantees
settlement of any disputes by international arbitration. The local court system
provides an effective means to enforce property and contractual rights.
Performance Requirements and Incentives
Namibia imposes no performance requirements
on foreign investors, but in certain industries, local content requirements
must be met in order to exempt final products from duties under SACU.
Private Ownership Rights
There are no restrictions on the establishment of private businesses, size of
investment, sources of funds, marketing products, source of technology, or
method of training in Namibia. However, under the commercial
agricultural land reform legislation, there are restrictions concerning the
foreign ownership of agricultural farmland (although many dual passport holders
hold farmland).
Protection of Property Rights
The legal system protects and facilities acquisition and disposition of
property. The Namibian Constitution proscribes expropriation without just
compensation. The Registrar of Patents, Trade-marks and Designs in Windhoek administers registration of
intellectual property. While IPR infringement is not a major problem in Namibia, there is some ambiguity as to
whether foreign published works are protected.
Transparency of Regulatory System
The regulatory system is transparent. Labor regulations are equally applicable
to all employers, local and foreign, except as noted for companies with export
processing zone (EPZ) status.
Political Violence
Namibia enjoys a relatively stable
political system under a multiparty democratic constitution. With Namibia's increased military involvement in
the Angolan civil war, the number of violent attacks allegedly committed by
UNITA bandits along the Angolan border has surged since early 2000. While these
attacks have not specifically targeted foreign investments or foreign citizens,
some have been inadvertently affected. The economic effects of the violence are
tangible, particularly in the tourist sector. Nevertheless, political risk
throughout the rest of the country is predicted to remain low.
The troubled political and economic situation in neighboring Zimbabwe has also raised concern among
investors in Namibia. While some predict similar trends
in Namibia, it is not likely that Namibia will fall into similar political
and economic disarray because the judiciary is active and well regarded, and
the Government traditionally has abided by judicial decisions against it.
Corruption and Crime
The Government of Namibia established the Anti-Corruption Committee in the
office of the prime minister in 2000 to fight corruption and economic crime.
Given the Government's deep involvement in various business sectors, there is a
growing perception in some quarters, that close ties to the political
leadership may play an important role in wining large contracts. The fishing
and mining sectors have received several complaints of Government favoritism.
Further, given the relatively small size of the ruling elite, many of the same
people serve on different corporate boards, giving rise to apparent conflicts
of interest. Petty corruption for the performance of routine Government services
is not the rule, but may be encountered.
Labor
The Namibian Constitution allows for the formation of independent trade unions
to protect workers' rights and to promote sound labor relations and fair
employment practices. Businesses operating within the EPZ are required to
adhere to the Labor Act. In terms of EPZ legislation, however, strikes and
lockouts are prohibited within the zone.
While there is a large pool of qualified workers in varying professions in Namibia, a shortage does exist in the highly
skilled labor force. The Government offers special tax deductions of up to 25
percent to manufacturing companies that provide technical training to
employees. Government will also reimburse companies for costs directly related
to employee training under approved conditions.
International Investment Agreements
Namibia has ratified “Reciprocal Investment
Promotion and Protection Treaties” with Switzerland, Malaysia, France, Germany, and The Netherlands. Negotiations
of similar treaties are in the advanced stages with Belgium/Luxemburg, Italy, Romania, and Austria. There is no bilateral investment
agreement between the United
States and Namibia.
Foreign Trade Zones
Foreign firms enjoy the same investment opportunities as local companies. There
are no free ports in Namibia, although Namport, the state-owned
port authority, is considering establishment of a free port distribution center
at Walvis Bay.
The port city of Walvis
Bay and Oshikango, on
the Angolan border, are the sites of Namibia's first full-scale export processing zones. Another EPZ site is under
consideration in Katima Mulilo in the Caprivi area, in Namibia's far northeast. In addition, EPZ
status can be granted to a stand-alone plant anywhere in the country, enabling
companies to be close to raw material sites without geographical restrictions
on their exporting policies.
Export Processing Zone (EPZ) Incentives
Enterprises which undertake manufacturing, assembly, re-packaging and break-bulk operation and gear all or almost all of their production for export, earn foreign exchange and employ Namibians, will be eligible for EPZ status, which confers an attractive range of both tax and non-tax benefits.
Tax incentives for EPZ enterprises
Enterprises with EPZ status do not pay:
· corporate tax;
· import tax;
· sales tax, stamp and transfer duties on goods and services required for EPZ activities.
These benefits are of unlimited duration.
Other incentives for EPZ enterprises
Because Government recognises the considerable costs of establishing new operations and training a new workforce, EPZ enterprises investing in upgrading the skills and productivity of Namibian workers will receive a grant to cover a substantial part of the direct costs of on-the-job and institutional training. The grant is paid by the Government on the basis of pre-approved training plans, once training is complete.
· EPZ enterprises are allowed to hold foreign currency accounts in local banks.
· They also enjoy industrial calm as no strikes or lock-out are allowed in the EPZ-regime.
· Companies operating under the regime are free to locate their operations anywhere in Namibia.
Through the Offshore Development Company, EPZ enterprises also have access to factory facilities rented at economical rates.
Taxation
The corporate income and branch tax rates in Namibia are both 35 percent. Special income tax rates apply to
petroleum companies (minimum of 25 percent) and diamond operations (55
percent). Enterprises operating in the Walvis Bay export processing zone are not subject to income tax. There is no tax
on capital gains or interest. There is a 10 percent withholding tax on
dividends, except those from petroleum profits.
Manufacturing companies are eligible for substantial tax deductions. Manufacturing companies are allowed a deduction of 50 percent of taxable income for the first five years of registration, to be gradually reduced for the subsequent nine years. Manufacturers are allowed a 25 percent deduction on wages paid to staff and training expenses. Expenses on export marketing are subject to a deduction ranging from 25 percent to 75 percent. Exporters of manufactured goods are eligible for a taxable income deduction of 80 percent.
Stock Market
The Namibian Stock Exchange, in Windhoek, opened in 1992 and has become the second largest market in the
continent, behind the Johannesburg Stock exchange. By the end of the 1990s, it
had 14 listed companies.
Foreign investment is unrestricted.
In early November 1998, the Namibian Stock Exchange was
linked to the Johannesburg Stock Exchange. While the Namibian Stock Exchange
will remain independent, the move should increase the overall efficiency of one
of Africa's fastest growing markets.
For more information on the Namibia Stock Exchange, see URL: http://www.nsx.com.na/
For more information on investing in Namibia, see URL: http://www.mti.gov.na/