More wealth is in the service industry

PHILLEPUS UUSIKU

Despite the service industry contributing the largest chunk of about 62% to the overall gross domestic production (GDP) in Namibia, the agriculture sector remains the largest employer, according to the 2019 statistics by the Namibia Statistics Agency (NSA).

In addition, the agriculture sector is the second largest contributor to GDP, contributing about 21%, the statistics indicated. Despite it being the biggest employer, most businesses in the sector are informal and are not involved in value addition activities in order boost its contribution to GDP. Given this background, there is clearly an inequality problem in Namibia.

The Economic Association of Namibia (EAN) on Wednesday held its annual conference under the theme ‘Leveraging the Services Industry for Economic Growth’.

The discussions focused on how the country can harness the potential of the services sector to stimulate the economy and put the country back on a growth trajectory.

Speaking at the event, Dr Reinhold Kamati, senior economist at the Bank of Namibia (BoN), pointed out that the service industry contributes significantly to GDP in both developed and developing countries.

He notes that the service industry is in the formal market and very few people can escape paying tax unlike in the informal sector such as agriculture. Therefore, the government is able to collect more revenue from the formal sector.

Jobs are more labour intensive unlike in other sectors such mining where capital intensive is widely used. In terms of remuneration, about 40% of what is generated in the service sector goes to human capital which makes a significant impact in the living standards of the people, Kamati said.

“If we reposition the service sector, we will address the issue of income distribution in Namibia,” he said. There is a need to boost internet penetration to ensure that service providers reach out to a wide range of customers, improve efficiency and productivity in order to promote competition.

VALUE ADDITION

Meanwhile, Jason Kasuto, chairperson of EAN, commented that policy makers need to place greater emphasis on moving towards the provision of more sophisticated services where there is greater value addition which offer opportunities for technology transfer and linkage development with other sectors of the economy.

Also speaking at the event is Nangula Uaandja, Chief Executive Officer (CEO) of the Namibia Investment Promotion and Development Board (NIPDB), who gave a presentation titled ‘The Potential for Investment in The Service Sector’.

She notes that the service sector provides the opportunity for other sectors to excel and eventually boost economic growth.

Uaandja reiterated that the agriculture sector is the biggest employer, however, its contribution to GDP remains low.

That means that the level of productivity in the agriculture sector is relatively low compared to that in the service sector. Boosting value addition in agriculture will make the sector more productive.

Moreover, skills and knowledge play an important role in boosting productivity. Strong human capital is more in the service sector which enables the other sectors to grow. Hence, diversification of skills is crucial.

In 2018, about 80% of Namibians that were employed either have matric qualifications or less. That implies that the remaining 20% is made up people who have vocational training or tertiary education, she said.

This justifies the need to improve skills development in order to grow the service industry and solve the inequality problem in Namibia as most people are employed in the informal sector. Very few people are employed in the formal sector and most of them are employed in the public sector, Uaandja said. [email protected]