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Despite being an upper-middle-income country, Namibia faces multiple challenges in its economic development. The legacies of apartheid policies have nurtured a highly skewed distribution of assets and opportunities, and this has to date not been overcome. The private sector remains divided into a small number of large, profitable and mainly white businesses, and a large number of very small, unproductive, low-skilled and mainly black businesses. The economic structure is geared mainly toward the extraction of resources with limited value-addition and limited linkages to the rest of the economy. Small businesses face barriers to growth due to the large size of the country, its low population density, and limited purchasing power of the large part of the population, leading to high transaction costs and preventing economies of scale, amongst others. Nonetheless, Namibia has seen productivity growth and diversification in a number of sectors which have a potential for contributing to more broad-based, inclusive and sustainable growth. The Namibian Government can pride itself on a stable political, legal and institutional environment and sound macroeconomic policies. To date, however, it has not played a proactive part in fostering new economic activities. The strategic goal of the Government is for Namibia to become a fully industrialized nation by the year 2030. This is to be achieved by processing Namibian raw materials and through import substitution of manufactured goods. This goal and the resultant strategies are, however, not based on rigorous economic analysis and disregard important constraints in the country’s business and investment climate. The Ministry of Trade and Industry sees itself narrowly as a promoter of the manufacturing sector, rather than as a coordinator of cross-sectoral search processes for promising new activities. For the past ten years the Ministry has been in a process of revising its 1992 White Paper on Industrial Development. Due to a lack of consensus on the general direction, Namibia is left without any applicable policy that delineates its strategy for private sector development and industrial transformation as well as the role of the Ministry in achieving this. Although social and equity concerns rank high in all policy papers, policies are not effectively targeted towards reducing spatial and social inequalities. The Ministry of Trade and Industry pursues stand-alone promotional activities rather than tackling full value chains in a comprehensive way. As the example of the Sites and Premises Programme shows, programs designed to support the development of Micro-, Small and Medium Enterprises are often top-down in structure and not targeted to businesses' real needs; they are not integrated, they lack outreach and are not aimed at creating linkages with larger companies. Since dialogue with the private sector is informal and ad-hoc, the interests of small businesses are not effectively represented in policy-making. Furthermore, policy implementation is hampered by an inefficient public service, lack of performance monitoring and built-in checks and balances – as shown strikingly by the example of the Export Processing Zone regime - and by a generally low level of democratic pressure on the Government. An exception to this is the example of the Indigenous Plant Task Team (IPTT), which carries out a constant search process for market-oriented pro-poor activities and supporting instruments, but which is mainly driven by Non-Governmental Organisations (NGOs) and donors.

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