The Ministry of Industrialisation and Trade says the government is pinning its hope on the Special Economic Zone (SEZ) policy that is being crafted to revive the country’s economy through a sectoral focus.
The Minister of Industrialisation and Trade Lucia Iipumbu said the existing Export Processing Zone (EPZ), which has been in place since 1996, and is set to be phased out in 2025, had little economic impact including little tax gain for the state.
The EPZ instead only benefitted investors, and nearly led to Namibia being blacklisted for being a tax haven, resulting in the review and eventual transition to SEZ being drafted.
The EPZ regime served as a tax haven for export-oriented manufacturing enterprises in the country, in exchange for technology transfer, capital inflow, skills development and job creation, but not much value was derived from it.
“Therefore, the Ministry is committed to ensuring that our policy and legislative framework is favourable for both local and international investors. Among key legislative reforms in the work is our Special Economic Zone law, which we are at an advanced stage to promulgate,” Iipumbu said.
“This law provides for both fiscal and non-fiscal incentives aimed at attracting much needed investments in our economy. MIT is further finalising the review of our investment promotion law, which is expected to be tabled this year. This is key as it provides for the promotion and facilitation of foreign and Namibian investment to enhance sustainable economic development.”
EPZ enterprises are exempted from corporate income tax, duties and value-added tax on machinery, equipment and raw materials imported into Namibia for manufacturing purposes.
The only taxes payable are personal income tax on employees’ income as well as the 10% withholding tax (non-resident shareholders) on declared dividends. In addition, EPZ enterprises are allowed to hold foreign currency accounts at commercial banks as well as to repatriate their capital and profits.
However, with the SEZ, the government aims to attract both foreign and domestic investment, increase exports, foster employment creation and act as a catalyst for structural transformation and industrialisation.
According to the National Policy on Sustainable Special Economic Zone 2021-2016, SEZs are useful in addressing policy key constraints such as limited access to serviced land, poor quality infrastructure and high regulatory constraints on investment and business operations.
In addition, the proposed Bill offers free trade zones that can be fenced-in, duty-free areas, including warehousing, storage, and distribution facilities for trade, trans-shipment, and re-export operations.
It further provides export processing zones for industrial estates aimed primarily at foreign markets, in addition to Enterprise zones, intended to revitalize distressed urban or rural areas through the provision of tax incentives and financial grants.
In addition, SEZ will make provision for free ports, making larger areas available that accommodate all types of activities including tourism and retail sales, permit onsite residence, and provide a broader set of incentives and benefits.
Whereas specialised zones will create avenues for science/technology parks, coastal economic zones, petrochemical zones, logistics parks, and airport-based zones.
