Africa-Press – Namibia. • MARIUS PATRICK UWU-GAEB
IN THEIR QUEST for wealth and financial freedom, many Namibians fall prey to elaborate, unregulated get-rich-quick schemes.
These can come in the form of forex trading, investor recruitments, and others, some of which could be described as a modern form of what Charles Ponzi might have come up with.
The attraction of these types of schemes can be attributed to the inaccessibility of established legitimate investment opportunities for the working class, as well as the ‘average Joes’ of Namibian society with money to spare.
Some say their reluctance to invest in commercial banking institutions is based on the fact that noticeable returns on investments only become visible over extended periods of time. Even then, the returns are not sufficiently attractive. Let’s say the nominal interest rate quoted by a bank is 15% a year. 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, the real interest you earn on your money is 10%, which is only N$100 on your principal investment or money saved. As people want relatively high returns over a short period, the mathematics of this does not add up.
The question is not if Namibians have money to invest. Many do. The question is how to tap into the investment potential of citizens which, collectively, could possibly run into hundreds of millions of dollars. The not so obvious answer would be to strategically channel these investments into Emerging Small and Medium Enterprises (ESMEs) through accessible investment companies.
In China, approximately 12 000 start-ups are created every day. Investment flowing into these ventures are estimated to amount to around 12 trillion US dollars in personal assets, a surging investment boom which has tapped into the pockets of 1,4 billion Chinese.
Fuelling this trend are newly established private sector investment companies with some offering interest rates as high as 30% a year. They became magnets for both ordinary and wealthy investors. Some companies use the internet to gather money, others offer an annual interest rate of 9%, guaranteeing principal investment plus interest.
The emergence of these investment firms was inspired by China’s need to expand its economy. The key was to identify new growth industries. As the investment from commercial banks and established venture capital companies was very slow, they decided to channel 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 and other incentives. In response, investment 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’s chief executive officer, Charity Mwiya, was recently quoted as saying: “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 small businesses are responsible for 90% of new employment opportunities and up to 70% of the GDP.”
Adopting the Chinese approach could hold the key to the recovery of our private sector economy post pandemic. At the same time it coud also safeguard investments made by our private citizens as regulatory authorities would be able to closely monitor the movement of money from private hands into investment firms, hopefully to the satisfaction of both investors and start-ups.
* Marius Patrick Uwu-Gaeb is an edupreneur.
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