Namibian labour is expensive – IMF

NAMIBIA’S skilled labour is expensive and has contributed to hampering the country’s export competitiveness, says the International Monetary Fund.

The fund said this in a detailed findings report following their conclusion of the Namibian Article IV consultations which ended in June this year, and focused on Namibia’s economic developments and policies.

According to the report, labour costs have risen quickly over the years, and are now high when compared to the country’s peers, especially for skilled and specialised workers.

“On average, Namibia’s wages are relatively high compared to the median of peer countries, both in the economy as a whole and in the manufacturing sector. The difference is particularly marked for high and specialised skills (e.g. plant and machine operators, technicians and associate professionals),” the fund said.

The IMF listed the high labour costs as part of the contributors to the decreasing export competitiveness of the country, amongst skills shortages, costly production inputs such as electricity, a deteriorating business environment, as well as costly transport and logistics, although there is good infrastructure.

“Namibia’s median wages for a highly educated and specialised workforce appear high, even compared to median wages in South Africa, where salaries are particularly high, relative to income per capita,” the fund noted.

This should be expected, because there is a lower unemployment rate for high-skilled workers.

“It also reflects obvious skills shortages and mismatches in the labour market that may be exacerbated by the possible competition for skills from the public sector, restrictions on work permits for foreigners, as well as tight access regulations for some professions,” the fund stated.

On the cost of production inputs such as electricity, the fund said although privatisation is soon coming to the table to a sector now monopolised by NamPower, Namibia’s electricity tariffs are one of the highest in the SADC region.

“They are on average 20% – 25% higher than in South Africa, although the difference has been reducing since 2007,” the fund added.

The IMF said while Namibia has of the best infrastructure in Africa, long distances from trading partners and small-scale businesses weigh on transportation unit costs.

“Remoteness and the dependence on imports also require firms to hold higher inventories for a longer period, thereby incurring larger inventories and financing costs, “ the fund noted.

According to the IMF, the business environment in Namibia appears to have deteriorated in recent years, and the country’s related ranking has declined, citing that it is costly and takes long to start a business in Namibia while the insolvency regime frameworks are weak, discouraging both domestic and foreign investments.

The fund has recommended that the government eases restrictions on skilled foreign labour, which will reduce skills mismatches and pressure on wages.

In addition, the fund also called for the state to address the long and costly processes of starting a business, construction permits, and property registration, and to set the development of a vibrant and independent private sector as a priority.

Email: lazarus@namibian.com.na

Twitter: @Lasarus_A