The Importance of Reinvestment

The failure of a town to reinvest a portion of revenue generated from rates, property taxes and income from supplying utilities and services to its residents usually manifests in the visible state of that town’s infrastructure.

The absence of road maintenance and faded road markings have become evident, not only on my early morning walks, but also when driving around Oranjemund.

Unfortunately, I have discovered a similar situation at far too many other Namibian towns.

Qualified audit reports highlighting wasteful expenditure with limited value for a town’s population are commonly observed.

Media reports will frequently highlight the government’s concern about the lack of maintenance and funding for infrastructure expansion from its own resources at towns.

Upon seeing decline at a town, such as road infrastructure decay and broken streetlights, one immediately wonders if maintenance and expansion of that town’s water, sanitation and other infrastructure is even attracting the deserved attention of its elected officials and administration.

As for Oranjemund, surely councillors and the administration are aware that mining and diamond extraction are not infinite.

That by now it would have dawned on them that the focus must be on attracting manufacturing industries and job-creation entities to invest, and thus ensure the town’s future.

Is an investor mobilisation plan in place?
A local economic development plan that attracts job-creating industries and not just more foreign food, clothing and furniture retailers is needed.

It is equally important for entrepreneurs to recognise the importance of embracing a culture of saving for maintenance and reinvestment purposes.

By cultivating a savings and reinvestment culture, entrepreneurs can utilise the funds saved by a business to keep the firm’s infrastructure in top-tier condition, acquire assets, pay off loans and liabilities and fund new projects.

It is essential for an entrepreneur to avoid consuming all the profits generated over the course of a financial year.

An enterprise that doesn’t grow, particularly in an inflationary and competitive open market like Namibia, will decrease in size and could eventually become bankrupt.

Reinvesting a portion of the profits generated is of crucial importance for the owners of all enterprises who aim to scale or grow their businesses, regardless of the sector or size.

It provides the necessary resources for expansion and diversification and thus enables the business to increase revenue without incurring the cost of borrowing when investing in such growth strategies.

In business, reinvesting should not be considered an option, but should rather be viewed as a strategic growth objective.

Without reinvesting a portion of profit generated, the business may plateau and stagnate.

This opens the doors for competitors to get the upper hand by gaining market share and growing, and over time the business of a myopic entrepreneur runs the risk of becoming irrelevant.

For public and private entities, reinvestment is a crucial component in the pursuit of long-term growth objectives.

But it involves saving to later use the funds for reinvestment in maintenance, infrastructure upkeep and fund growth.

Reinvestment is incredibly important for businesses and local authorities, but unfortunately it often does not receive the attention it deserves as a maintenance and growth-funding strategy.

• Danny Meyer is reachable at danny@smecompete.com