Marius patrick Uwu-Gaeb
In their quest for wealth and financial freedom, Namibians in recent times have fallen prey to elaborate unregulated get-rich-quick schemes that came in the form of forex trading, investor recruitments and others, which would easily be described as the modern form of what Charles Ponzi would have come up with.
The attractions of Namibians to these types of schemes, in particular, have largely been due to the inaccessibility of established legitimate investment opportunities to the working class, as well as to the average Joe’s of Namibian society with money to spare.
Some say their reluctance of investing their money in commercial banking institutions is based on the fact that noticeable returns on investment are only visible over extended periods – and even then, the returns derived are not attractive enough.
Let’s say the nominal interest rate, as quoted by the bank, is 15% per annum. If you deposit N$1 000 for one year at this rate; you would have N$1 150 at the end of the year.
Assuming inflation was 5% for the same period, even if your contract is signed at 15%, the real interest rate that you earn on your money is only 10%, which is only N$100 on your principal investment/saving. Since people want relatively high returns over a short period the mathematics to this does not add up.
The questions at hand are not whether Namibians have money to invest, because they do. The question is how to tap into the investment potential of the citizens which could run into hundreds of millions of dollars, and the not so obvious answer would be to strategically channel those investments into Emerging Small and Medium Enterprises (ESMEs) through accessible investment companies.
In China, approximately 12 000 startups are created every day and investment flowing into these ventures were estimated to be around US$12 trillion in personal assets, a surging investment boom that tapped into the pockets of 1.4 billion Chinese. Fueling this trend were newly established private sector investment companies with some offering interest rates as high as 30% per annum. They became magnets for both ordinary and wealthy investors. Some used companies use the internet to gather money, other companies would offer an annual interest rate of 9% guaranteeing the principal investment and interest. The emergence of these investment firms was inspired by Chinas need to expand its economy. The key was to identify new growth industries. The investment from commercial banks and established venture capital companies had been very slow.
They decided to channel the much-needed capital to entrepreneurs by introducing and increasing private sector investor companies. The Communist Party decided to enact a law to encourage the establishment of investment firms and to regulate them. They gave them preferential tax breaks through a preferential tax policy and other incentives. In response to investments, firms started pumping funds into new enterprises. Today China is no longer the factory of the world but a diversified economic superpower.
The Namibia Chamber of Commerce and Industry (NCCI) chief executive officer Charity Mwiya was recently quoted to have said “We all know how important small businesses are to the global economy. They create jobs. They lift families out of poverty. They invigorate communities, and nowhere are they more important than in developing countries, where the small business are responsible for 90% of new employment opportunities and up to 70% of the GDP”.
Adopting the Chinese approach could hold key to the recovery of our private sector economy post-pandemic and also at the same time safeguard the investments made by our private citizens as regulatory authorities would be able to closely monitor the movement of money from private hands into investments firms, after stimulating the economy then back into private hands hopefully to the satisfaction of both the investors and startups.