Targeting Development?Procurement, tied aid and the use of country systems in Namibia A case study from the European Network on Debt and Development (Eurodad)Authored by Bodo Ellmers

February 2010

About EurodadEurodad (the European Network on Debt and Development) is a network of 58 non-governmental organisations from 19 European countries who work together on issues related to debt, development finance and poverty reduction. The Eurodad network offers a platform for exploring issues, collecting intelligence and ideas, and undertaking collective advocacy.

Eurodad’s aims are to:• Push for development policies that support pro-poor

and democratically defined sustainable development strategies

• Support the empowerment of Southern people to chart their own path towards development and ending poverty.

• Seek a lasting and sustainable solution to the debt crisis, promote appropriate development financing, and a stable international financial system conducive to development.

More information and recent briefings are at: www.eurodad.org

Eurodad Information Updates:Subscribe free to Eurodad’s newsletter “Development Finance Watch”:www.eurodad.org/newsletter/index.aspx?id=108

AcknowledgementsThe author would like to thank the interviewees. Without their knowledge and expertise, this research would not have been possible. The conclusions drawn from the interviews and any misinterpretations are the author’s own. A full list of interviewees is available in the Annex. Special thanks to Penny Davies and Nuria Molina for their useful comments and feedback on the draft, and to Clare Birkett for editing the report.

This report was produced with the financial support of the Bill and Melinda Gates Foundation. The views presented in this report do not necessarily represent the views of the Foundation.

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Targeting Development?

Contents

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Executive summary 2Introduction 51. Development and Development Cooperation 8 1.1 Development Challenges 8 1.2 Namibia’s development framework – Vision 2030 10 1.3 Development Finance 10 1.4 Namibia’s donors – who are they and what is the

nature of their Official Development Assistance? 11 1.5 Aid Effectiveness 122. Public Procurement Policies and Practices in Namibia 14 2.1 Procurement policies 14 Labour-based roads construction– a case for pro-poor

procurement 15 Buying social justice? Black Economic Empowerment and

Affirmative Action in Namibia 18 2.2 Accountability and Transparency in procurement 193. Procurement policies and practices of donors in Namibia 22 3.1 Procurement Policies and Practices 22 The Benefits of using country systems: 25

Procurement of pharmaceutical supplies 3.2 Preferential treatment and blacklisting 26 3.3 Tied aid 26Conclusion and Recommendations 27Annex: List of interviewees 33Bibliography 31End notes 32Abbreviations 33

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Addressing uneven development

Classified as a Lower-Middle Income country, Namibia is at first glance a non-typical recipient of aid, and one of the more privileged of the African nations. However, in reality Namibia is a country faced with serious development challenges. Income inequality is one of the most severe in the world, unemployment rates are high, the HIV/AIDS pandemic has hit society hard, and the economy is still largely commodity dependent. The Government of Namibia, with the support of donors, chooses an active, interventionist approach to tackle these challenges. One key element of its legal and policy framework is targeted public procurement – giving preferential treatment to Namibian firms when purchasing goods and supplies or contracting works.

Assessing targeted procurement

Based on 23 in-country interviews and additional desk-based research, this project aims to analyse to what extent donors have formally and de facto untied their aid and are using country procurement systems as committed in international agreements on aid effectiveness. It also looks into the developmental impacts of procurement, and assesses if and how the Namibian government and official donors actively promote development and socioeconomic objectives through procurement. This report is the pilot case study of Eurodad’s larger research project on procurement policies and practices of aid agencies and recipient country governments.

Making procurement work for development

Namibia’s own public financial management system is sound, and has passed the eligibility tests for budget support carried out by the

European Commission. Examples such as the procurement of pharmaceutical supplies by the Ministry of Health and Social Services have proven the benefits of a centralized

procurement process through the country’s own systems. Yet, approximately 70% of official development assistance (ODA) is not disbursed through Namibia’s State Revenue Fund. Parallel implementation by foreign aid agencies is widespread, including parallel procurement. Budget support is only given to three sectors: education, roads and rural development.

Most interviewees perceived that Namibia’s procurement system is sound, with most if not all institutions needed to ensure an effective procurement cycle in place. However, tender boards still suffer from severe capacity constraints, often leading to the agreement between the Government of the Republic of Namibia (GRN) and donors to outsource procurement. Capacity constraints are aggravated by the low thresholds for public tendering which imply that even small purchases run through the complex formal tender process. The tender process is seen to be transparent in the beginning, but less transparent when it comes to the results. Procurement policies and legislation are currently not sufficiently specified and well-targeted to reach the groups and enterprises designated in the national development plans. Thus, the benefits of targeted procurement are not sufficiently broad-based and its full potential in promoting development and fighting poverty remains currently underused.

Formal and genuine untying

While most traditional donors that are part of the OECD Development Assistance Committee (DAC) are increasingly untying most of their ODA grants to Namibia, their procurement practices often imply that large shares of funds flow back to donor countries’ companies and consultants rather than increasing demand, building supply-side capacities of Namibian firms and creating jobs and income for Namibians. Among these practices are high thresholds for public tendering, providing technical assistance in-kind, overly complex bureaucratic requirements, or project volumes that exceed the capacities of the

Executive summary

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local small and medium enterprises. Some donors, in particular the US Millennium Challenge Cooperation (MCC), do not use the country procurement system due to conflicts with their own procurement policies set at headquarter level. While the surge of concessional loans provided by new donors such as China has widened policy and fiscal space for the Government of Namibia (GRN), corruption and the purchase of inadequate products that has followed has lately again proved the inadequacy of tied aid for financing development.

The key recommendations to donors and to the Namibian government deriving from the research are:

Recommendations to donors

• Donors should scale up their capacity building assistance to the Namibian procurement systems without imposing conditions or biased technical advice which undermine Namibia’s sovereignty to determine its own procurement policy.

• Donors should use the Namibian country procurement systems as a first option for all ODA provided to Namibia.

• While donors are phasing out the use of their own parallel procurement and phasing in country procurement, they should end all practices of formal and informal aid tying, and reduce entry barriers for Namibian firms and consultants, e.g. through creating smaller packages, sized to be manageable by Namibian firms, and through local advertising of all tenders.

• As long as donor parallel procurement is still used, they should give preferential treatment, in particular for small and medium enterprises, firms based in structurally weak areas, and firms owned by disadvantaged groups and complying with Affirmative Action regulations.

• In the terms of their mutual agreements, donors and recipients should ensure compliance with international law and standards through debarring all firms

from ODA-financed activities that violate human rights and social or environmental standards, evade taxes or operate from tax havens.

Recommendations to the Government of Namibia

• The Government of Namibia should invest in and increase the capacities and skills of the public sector’s tender boards.

• The Government of Namibia should systematically assess the results of public procurement with regards to contracts awarded to local or foreign firms, and to certain regions and beneficiary groups, in order to be able to optimize its procurement policies and practices.

• The Government of Namibia should quickly implement its plans to make the benefits of targeted procurement more broad-based and pro-poor, along the principles of the Transformational Economic and Social Empowerment Framework.

Procurement practices often imply that large shares of funds flow back to donor countries’ companies and consultants rather than increasing demand, building supply-side capacities of Namibian firms and creating jobs and income for Namibians.

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• The Government of Namibia should increase transparency of the procurement process throughout the whole procurement cycle, from publishing tender documents to disclosing information on contract awards online.

• The Government of Namibia should apply the Public Services Act throughout the system in order to improve transparency and unveil conflicts of interest of public service officers which might lead to corruption and favouritism.

• The Government of Namibia should be more selective in choosing its development partners. It should systematically assess the real value of all grants and concessional loans provided by donors taking into account the pecuniary and political costs of, in particular, tied aid and policy conditions.

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Namibian development challenges

Namibia, the youngest nation in Africa, is not a typical recipient for ODA. It belongs to the group of Lower-Middle Income Countries. It is politically and economically stable and, compared to peers, benefits from a relatively good infrastructure and well-functioning institutions.

However, income inequality is one of the highest in the world, a heritage from the colonial and apartheid era which lasted until independence from South Africa in 1990. Thus poverty is more widespread than data on average income may suggest.1 Like most countries in Sub-Saharan Africa, the HIV and AIDS pandemic has hit Namibia hard. Almost a fifth of the population is infected with the virus. The economic and social infrastructure is much better in the southern and central regions of the country, while more than half of the population, including the majority of the poor, live in the strip of Northern provinces along the border with Angola. For these reasons, Namibia is still targeted by many donors and regularly receives substantial amounts of ODA, one the highest amounts of ODA per capita on the African continent.

Addressing a research gap

Namibia was a latecomer to the current aid effectiveness agenda. It only signed the Paris Declaration on Aid Effectiveness (PD) in 2007. It also did not participate in the OECD’s 2008 Paris Monitoring Survey which means that the OECD has not yet looked into the effectiveness of ODA to Namibia. Luckily, Namibia has not had to face a debt crisis since it became independent, and it is one of the few Sub-Saharan African countries that did not participate in the Heavily Indebted Poor Countries (HIPC) debt relief initiatives. In consequence, many of the assessment

tools imposed on HIPC countries by donors and in particular the International Financial Institutions (IFIs) have also never been applied in Namibia. This means there are considerable research and data gaps when it comes to assessing the quality of governance and public financial management, and the performance of donors and the GRN with regard to the commitments made in the PD and subsequently in the Accra Agenda for Action (AAA). This case study carried out by Eurodad in autumn 2009 intends to fill some of these gaps. It focuses on the procurement policies and practices of donors engaged in Namibia, as well as those of the Namibian government. The study is one input to a synthesis report that Eurodad will publish prior to the Fourth High-Level Forum on Aid Effectiveness in Seoul in 2011.

International commitments on aid effectiveness and procurement

The use of developing countries’ own procurement systems is a donor commitment under the PD (§30) and the AAA (§15).

Introduction

[In Namibia] income inequality is one of the highest in the world, a heritage from the colonial and apartheid era.

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Although the share of ODA which is channelled through partner countries’ own public financial management and procurement systems is growing, the targets set for 2010 remain out of reach. The OECD’s DAC has repeatedly reported that while the quality of developing countries’ own procurement systems has improved in recent years, many donors are still reluctant to use them as much as they could.2

A significant number of donors continue to tie a share of their ODA to purchases of goods and services from their own countries. Thus they pursue a procurement policy that excludes foreign suppliers – including the recipient countries’ suppliers. International aid effectiveness agreements3 are particularly weak as regards to aid untying, as governments have only committed to making continued progress ‘over time’. OECD agreements on untying aid exclude two important categories of aid: technical assistance and food aid.

What is good procurement?

The OECD considers good procurement primarily as a question of achieving value for money, measured in terms of quality goods or services for the lowest price. Others – including many academics and Civil Society Organisations (CSOs) - argue that procurement can and should be directly used as a tool to achieve socioeconomic objectives, such as economic development, poverty eradication, social and gender equality, and environmental sustainability.4 The Better Aid Open Platform, a global coalition of several hundred CSOs, states in its aid effectiveness position paper: “Donors should support reforms to make procurement systems more accountable, not more liberalised.”5

The GRN shares the view that procurement should be used for broader objectives. The GRN has identified government procurement as a crucial instrument to overcome the social and economic divide inherited from the apartheid era, connected to the Black Economic Empowerment (BEE) and Affirmative Action (AA) policies which have these same aims. The GRN’s Ministry of Trade and Industry has also identified targeted procurement as one pillar of the Special Industrialisation Programme which intends to diversify the Namibian economy and reduce the dependency on imported goods through substitution.6

The case study in context

This study is one of a series of case studies carried out by the European Network on Debt and Development (Eurodad), its member organisations and partners in 2009 in 2010 on the procurement policies and practices of aid agencies and recipient country governments.

The use of developing countries’ own procurement systems is a donor commitment under the Paris Declaration and the Accra Agenda for Action.

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The research aims to assess to what extent donors are implementing the commitments made in international aid effectiveness agreements. In particular, the research aims to assess to what extent they use developing countries’ own procurement systems and to what extent ODA is still formally or informally tied to the purchase of goods and services from donor countries.

But it goes beyond the narrow technical approach of the current aid effectiveness agenda, taking into account broader considerations such as policy coherence for development, development effectiveness and the politics of aid. It also aims to assess to what extent the social, ecological and gender criteria specified in donors’ own policy papers as well as in the international agreements of the United Nations, are directly taken into account in procurement policies and practices of aid agencies and recipient country

governments. Last but not least, the case study identifies and analyses how Namibia is using public procurement as an economic policy tool, to what extent, and how much policy space it has to do so.

After preparatory desk-based research, 28 interviews were conducted in Windhoek in September and October 2009. Interviewees were selected from the three stakeholder groups: the GRN, donor country and aid agency representatives, and media/academia/civil society. Namibia has been selected as a country case study due to its high aid-per-capita ratio, the low ratio of foreign aid using country procurement systems, and its interventionist procurement and affirmative action policies. These three factors make this South-West African country a particularly interesting case for the purposes of this project.

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1.1 Development Challenges

Namibia is a prime example of uneven development, between regions as well as between different social groups. 20 years after independence, the country is still struggling to overcome the divides inherited from the colonial and apartheid eras.

InequalityWhen Namibia became independent in 1990 it was the most unequal country in the world. The Gini coefficient, the standard summary measure for inequality, was 0.7. The white minority enjoyed income and education levels comparable to Europe, while those of the discriminated black majority population were even worse than in many other Sub-Saharan African countries. Bridging the income and socioeconomic divide and uplifting the “formerly disadvantaged groups” has since been a policy priority for the GRN, but twenty years later the situation has only slightly improved. With a Gini coefficient of currently 0.6, Namibia still competes with South Africa and Brazil for the highest rank in global inequality statistics. Thus, the GDP per capita rate of N$ 30.304 (€2.604) in 200732, the reason why Namibia falls into the category of lower-middle income countries, hides the actual magnitude of poverty.33

Job creationWith an unemployment rate of 36.7% (2004), job creation remains a major challenge. In recent years, new formal jobs have primarily been created in the public services sector. The booming mining sector created very few job opportunities since it became increasingly capital intensive and diamond mining moved offshore. The GRN’s policy priority is to create new jobs in the manufacturing sector, but progress so far has been limited.34 To redress imbalances at the workplace, Namibia passed an Affirmative Action Employment Act in 1998. The Act intends to foster fair employment practices and promote formerly disadvantaged people, in particular racially disadvantaged people, women and persons with disabilities.35

Land reform and rural developmentInequality is also a main challenge in land

ownership. Namibia’s agricultural sector is divided, with mainly communal farming in the North, and commercial farming in the rest of the country. Commercial farming, and ownership of land, was almost entirely in the hands of white farmers before independence. Since then the GRN’s moderate land reform based on a “willing seller, willing buyer” principle tries to increase firstly the share of black ownership of land and secondly promote redistribution and resettlement. The GRN seems to be making faster progress towards the first aim than to the second, which means that more and more farms are owned by the new black elite, but the problem of unequalaccess to land is not being sufficiently addressed. Black farm workers do not enjoy preferential treatment when government-purchased land is newly distributed. Interviewees had a mixed opinion on the land reform policy, with some seeing the land reform as too slow, badly designed and insufficient to reach the stated socioeconomic objectives, while others lauded the fact that political and social stability has been secured, and agricultural production is not being disordered by the process – which

1. Development and Development Cooperation

Namibia is a prime example of uneven development, between regions as well as between different social groups.

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has not been the case in other Southern African countries that have been facing similar challenges.36

InfrastructureNamibia inherited a good physical infrastructure at independence, albeit more so in the less populated Southern and central regions. Maintaining infrastructure in one of the world’s least densely populated countries is one challenge, extending roads and railways in the small strip of Northern regions where half of the Namibian population lives is the other. Promoting regional integration with other members of the Southern African Development Community (SADC) through new or improved roads, railways and electricity grids is one priority in the GRN’s current development efforts.

The Caprivi Link, a project to link Namibia’s electricity grid with those of neighbouring Zambia is currently the most costly ongoing development project, and is seen as essential for solving Namibia’s energy crisis (including frequent power shortages) and reducing dependency on electricity imports from South Africa by improving access to hydropower from the Zambezi river. The project has been contracted to the Swiss company ABB by Namibia’s energy parastatal NamPower.37

The Walvis Bay Corridor38 is another large-scale project, a Namibian attempt to make Walvis Bay harbor the main entry/exit point for goods from or to the land-locked countries of Southern Africa. The project encompasses the extension of Walvis Bay harbour (and the upgrade and maintenance of roads and railways to neighbouring countries). In addition, there are many other road construction, upgrading or maintenance projects ongoing, and many official development agencies are supporting this procurement-heavy sector. The major ones are the EC, Japan (JICA), China (tied soft loans), and Germany (KfW loans).39

HIV and AIDSMost development challenges were inherited by Namibia at independence, but one has emerged since then - HIV and AIDS. HIV prevalence among people aged 15 to 49

is estimated to stand at 15.3%. Namibia performs relatively well with regard to HIV and AIDS treatment. At the end of 2007 more than 50% of people in need had access to antiretroviral medicines (ARV), and UNAIDS estimates that this number will grow to about 70% by 2010.40 Prevention is promoted through education campaigns and a policy of free distribution of condoms for men and women alike. In urban areas, coverage of prevention and treatment is higher than in rural areas. As in many other Sub-Saharan African countries, the pandemic has had numerous negative side-effects on human, social and economic development, and the population as a whole.

EducationNamibia has nearly achieved universal primary school enrolment. Universal access to education is seen as a priority by the government of President Pohamba, who has been in office since 2005 and has recently been re-elected. The sector thus enjoys strong political and financial support- nearly one quarter of the government budget is spent on education. But quality of education is still perceived to be low, and school drop-out

Most development challenges were inherited by Namibia at independence, but one has emerged since then - HIV and AIDS.

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rates are high. Namibia has a 15-year strategic plan in place to develop the education system.41 Engagement of official donors in the sector is high and has grown in recent years. Education is one of the few sectors that are supported through sector budget support in a sector-wide approach.

1.2. Namibia’s development framework – Vision 2030

The GRN, and in particular the National Planning Commission (NPC) which is attached to the Office of the President, has elaborated a detailed framework and development strategy entitled “Vision 2030”. Launched in 2004, the “Vision 2030” is a national long-term development strategy which aims, according to ex-President Sam Nujoma, “to improve the quality of life of our people to the level of their counterparts in the developed world, by 2030.”42

Vision 2030 provides the guidelines for the National Development Plans (NDP). NDP 3, the most recent one, was launched in 2008 by President Pohamba and covers the period from 2007 to 2012. The five year plan aims at achieving an average growth rate of 5 per cent and requires investments of N$ 76.3bn from all public, private and international stakeholders, of which N$ 15.7bn are supposed to come from foreign sources, from ODA and Foreign Direct Investment (FDI).43 In the foreword of NDP3, President Pohamba says: “Like the Vision, NDP3 is the product of efforts of a wide range of Namibian and international stakeholders in Windhoek and the 13 Regions that participated in the identification of needs, priorities and opportunities and challenges facing our people, and prepared responsive policies and programmes following the National Consultative Conference in October 2007.”44

While Namibia managed to sustain a high average growth rate of more than 4 percent during the NDP2 (although it did not reach the development and poverty reduction targets), times are likely to become harder. Due to the world financial and economic crisis, Namibia’s GDP is expected to contract by 0.6% in 2009, mainly due to the collapse of global

demand for diamonds and minerals and the subsequent fall in exports, and a temporary complete standstill of diamond production in Namibia.45 This makes additional funding through scaled-up ODA even more important if the ambitious development and poverty reduction targets are to be met.

Annual budgeting is done in the context of Medium-Term Expenditure Frameworks. While the regular budget is drafted by the Ministry of Finance, the National Planning Commission is in charge of coordinating the Development Budget. For the 2009/10 to 2011/12 MTEF, a total of 481 development projects are planned, at a cost of N$ 13.6 bn.46

1.3 Development Finance

Namibia has a wide range of domestic and foreign choices when it comes to financing development. The economy’s savings rate is relatively high at around 30% of GDP, partly thanks to the characteristics of the public pension system. Namibia’s economy is to a large extent formalised, which has helped the GRN to generate a high tax income of N$ 19.2bn or 30.6% of GDP in fiscal year 2007/08.47 The GRN has also successfully attracted growing amounts of FDI in recent years, especially in the extractive industries sector. FDI, however, might lead to higher outflows in the future, endangering GRN’s stated aim to namibianize the economy. FDI has also been attracted through export processing zones, e.g. in Walvis Bay and along the Angolan border. This naturally reduces the FDI’s contribution to public finances.

Namibian government bonds have received an investment grade rating (BBB-) by rating agency Fitch, thus the GRN can raise private capital on international financial markets when needed. With a debt to GDP ratio of 19.6%, the central government debt levels are sustainable and manageable, and its foreign debt stock amounts to only 5.5% of GDP.48 However, financing shortfalls caused by the financial crisis which have to be filled by new loans are expected to lead to a surge in total debt and external debt in 2009 and beyond. More than half (55%) of foreign debt is

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denominated in Euros and an increasing share (12%) in Chinese Yuan. While ODA might be needed as an add-on source of development finance to achieve the ambitious development and poverty reduction goals of Vision 2030 and NDP3, it amounted to less than 5% of GDP in recent years. Thus, Namibia is not an aid dependent country.

Therefore, the GRN has more fiscal space and policy space than other Sub-Saharan African countries, and finds itself in a relatively strong negotiating position vis-à-vis foreign donors. In its most recent country-strategy paper the African Development Bank (AfDB) says that the main constraint for the partnership with Namibia is that the AfDB and its loans are not really needed.49 Namibia can access sources of foreign finance which are either cheaper than AfDB loans (ODA grants) or come with fewer conditions attached (private loans). In addition, the pressure to align ODA to the national development strategies is weaker than in other aid receiving countries as Namibia can to a large extent let donors finance their darling sectors, and fund the aid orphan sectors through its own sources of income.

1.4 Namibia’s donors – who are they and what is the nature of their Official Development Assistance?

Due to its status as a lower-middle income country (LMIC), Namibia receives less and less traditional bilateral ODA. Several bilateral donors have closed their country offices and are currently phasing out their programs and projects, e.g. the UK, Netherlands, Sweden or Finland. Nevertheless, Namibia has one of the highest ODA per capita rates in the world. In 2007, Namibia received US$ 207.2mn in ODA, of which US$ 144.5mn came from DAC donors. Although the perception of interviewees is that donors’ in-country representatives have withdrawn in recent years, the DAC’s own database reports that 16 bilateral DAC donors are still active in Namibia. Their ODA is highly fragmented and scattered over many small interventions. According to the DAC, donors implemented 472 projects (interventions) in 2007 – an average volume of just US$ 0.3mn

per intervention.50

The USA is currently the main DAC donor, due to large contributions of the US President’s Emergency Plan for AIDS Relief (PEPFAR) to the health sector in general and projects related to combating HIV/AIDS in particular. The USA’s contribution is likely to increase. For 2009, PEPFAR approved funding alone amounted to US$ 107.1mn51. In September 2009 the MCC compact entered into force, paving the way for the disbursement of an additional US$ 304.5mn over a period of five years which is intended for the education, tourism and agriculture sectors.52

Among EU Member States, Germany is the most important bilateral donor. Germany’s “special relationship” with Namibia has been acknowledged twice by the German parliament, and is shaped through the colonial heritage and the large number of ethnic Germans among Namibia’s citizens. Germany’s numerous aid agencies are particularly but not exclusively active in the three focal sectors: transport, natural resources and economic promotion.53 Germany’s ODA is characterised by a relatively high share of concessional loans, administered by Kreditanstalt fuer

Namibia is not an aid dependent country. Therefore, the Government of Namibia finds itself in a relatively strong negotiating position vis-á-vis foreign donors.

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Wiederaufbau (KfW), and the deployment of a notable number of German consultants in and outside Namibian government institutions.

According to the EC, Spain is scaling-up its engagement in Namibia, contrary to the trend of European bilateral donors. Spain’s engagement – and economic interest – focuses in particular on the fisheries sector, where Spanish companies are strongly involved. Assistance to the fishery sector is ironically subordinated to food security in Spain’s country strategy paper.54 Most Namibian fish, however, are exported, and mainly to Spain. However, export promotion has not been agreed on as a priority area of cooperation between Spain and Namibia.

The EC is involved in eight different sectors, and has pledged EUR 104.9mn under the 10th European Development Fund for the period 2008-2013. It is moving increasingly away from individual projects and towards sector-wide approaches and budget support in its operations.55 On the downside, it also has burdensome bureaucratic procedures, and late disbursements. While in Brussels the mid-term review for the 10th European Development Fund (EDF 10) has already started, the first disbursements in Namibia are only just being made.

In addition to the traditional DAC donors, Namibia receives substantial amounts of ODA from multilateral organizations and vertical funds such as the AfDB, and The Global Fund to combat AIDS, Tuberculosis and Malaria. South-South-Cooperation is strong and growing, in particular with China and South Africa, but also with former allies in the anti-colonial struggle such as North Korea and Cuba. The big international development Non-Governmental Organisations (NGOs) are largely absent, but still there are innovative projects implemented in cooperation with national and international CSOs, churches and trade unions, e.g. the Basic Income Grant Pilot Project in Otjivero.56

1.5 Aid Effectiveness

Namibia ratified the PD in 2007, much later than most other countries. According to government sources and donor

representatives consulted this signature so far has not made a big difference in GRN and donors’ relations with regards to ODA implementation. The country did not take part in the OECD’s Paris Monitoring Survey of 2008, and this is why its performance vis-à-vis most of the targets and indicators of the PD are not officially recorded as yet.

OwnershipNamibia’s strong development framework and limited aid dependence guarantee ownership of the development process to a certain extent. However, the influence of foreign consultants in drafting development strategies is high. For instance, as one interviewee pointed out, the Education and Training Sector Improvement Program (ETSIP) was entirely drafted by World Bank consultants. Foreign consultants also often have management functions in development programs, not just advisory functions, which further undermines ownership. Another aid agency representative noted: “The negotiation capacity of partner countries is too weak. The current system lives from this weakness.”

Civil society participationThe inclusion of CSOs in development planning leaves room for improvement. The GRN does offer some limited options for CSOs to feed into development planning, but Namibian CSOs’ policy and advocacy capacities are weak. According to the CSO representatives interviewed, even these limited possibilities are not being used properly. Negotiations between the GRN and donors are in principal not open for CSO participation, and only the EC consulted Namibian CSOs when evaluating its development cooperation.

AlignmentDue to the high amount of domestic resources available for financing development, alignment of donors’ sectoral and project activities to Namibia’s development plans is not the main concern in making aid more effective. However, it could still be improved. In particular the non-alignment of donors’ annual spending plans (mostly following the calendar year) to Namibia’s own fiscal year (from April to March) poses a significant challenge for Namibian budget and development planners. Most donors

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Overview of bilateral development assistance 2007/8External Funding agency

Sector Indicative expenditure 2007/8 (N$´000)

Estimated expenditure 2008/9 (N$´000)

China Education, agriculture, health, construction, capacity-building

25,566 157,291

Egypt Food donation - 750

Finland Health, forestry, decentralization, institutional capacity-building

146,613 146,613

France Culture, rural development, education, health, agriculture, rural development

286,212 286,212

Germany Natural resource management and rural development, transport, promotion of the economy, capacity-building, HIV and AIDS

831,996 351,938

Iceland Fisheries, education and social projects 1,599 2,652,000Japan Agriculture, education, transport,

diplomacy, emergency support54,304 140,668

Luxembourg Education, rural development, water and sanitation

42,222 42,222

Netherlands Good governance (including human rights and peace-building)

- 5,300,000

Spain Fisheries, resettlement, health, rural water supply, education

62,793 31,599

Sweden Development cooperation 16,500 16,500USA Education and training, environment, trade

and rural development, good governance812,292 1,240,531

TOTAL 2,294,199 2,839,528

Overview of bilateral development assistance 2007/8Development partner

Sector 2007/8 (N$’000)

UN HIV and AIDS, Environmental and sustainable resource management, capacity building

138,954

European Union Education, rural development, public finance, health, capacity-building, public service reform, support to non-state actors

257,492

World Bank 17,894TOTAL 414,340

Source: National Planning Commission: Annual Progress Report 2007-2008, p. 12

started to use multi-annual development planning and spending plans which increased the predictability of ODA, but they often do not allow for the flexibility needed in keeping track with GRN’s changing policy priorities. According to Sylvia Demas, the NPC’s Director for Development Planning, it was more a

coincidence that the US MCC drafted its assistance strategy just at the time when the new president Pohamba came into office and chose rural development as a focus for the coming years. Thus, rural development became a thrust of MCC operations in Namibia.

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2.1 Procurement policies

Public procurement is a key administrative activity of public financial management, and due to its large share of GDP it is the most important economic activity carried out by governments. The way procurement policies are designed has therefore a significant impact on economic development and (re-) distribution of wealth in a society. Targeted public procurement using price preferences plays a central role in Namibia’s legal and policy framework in promoting economic development and diversification, and achieving socioeconomic objectives.

Namibia is not a HIPC country, and as such it has not been required to carry out all the assessments externally imposed on the HIPC by IFIs and other foreign creditors as a condition attached to debt relief. There is also not a great deal of internal assessment being done. However, the EC funded a Public Expenditure and Financial Accountability (PEFA) assessment which followed the World Bank set criteria for assessing public financial management systems. The GRN refused to publicly disclose the results of the assessment, but donors seem to be well informed about the results.

Namibia’s Public Financial Management (PFM) system is at least good enough to render the country eligible for budget support according to EC criteria. Budgeting in general is considered to be good. Interviewed aid agency representatives also appreciate the predictability in budget implementation, the fact that the GRN generally runs a conservative public financing policy, and is known for fiscal discipline and has even generated a fiscal surplus for several years during the commodity boom. Even the International Monetary Fund (IMF) lauded “the authorities’ prudent fiscal policies in recent years” in the most recent Article IV Consultations, while at the same time “cautioned that the planned fiscal expansion [in response to the financial crisis] is sizable, and should not compromise the quality of spending.” 7

Capacity constraints are a weakness that has often been mentioned by interviewed

government officials as well as aid agency staff, and this is an issue that affects the procurement system even more than other PFM areas. In general, the public sector suffers from a brain drain of well or newly trained experts to better paid positions in the parastatals, in the private sector or in South Africa, which puts the sustainability of capacity building measures in the PFM system at risk.

Several donors see an urgent need for additional capacity building in the administration, including PFM and procurement. This is reconfirmed by government officials, e.g. the Secretary of the Tender Board, Welma Enssle, or the Director of Development Planning, Sylvia Demas, who identified capacity constraints as major barriers to achieving better results in PFM and procurement.

Very few donors mentioned that they support Namibia in improving the PFM system. The EC provided € 8mn budget support for a PFM support program linked to its education budget support in 2007. Beneficiaries are primarily the Ministry of Finance, the NPC and the Office of the Auditor-General. Among other aims, the program intends to significantly reduce procurement delays, introduce system audits by major line ministries, and enable all public offices, ministries and agencies to publish annual accountability reports.8 Besides the EC, only Germany’s KfW has stated that it has an ongoing € 1.1mn program to strengthen PFM systems in the transport sector where many KfW financed projects are currently being implemented.9

Very few bilateral donors make their own independent assessment of PFM systems. While for example the KfW country office is obliged to assess the PFM system for the German parliament’s budget committee to authorise budget support as an aid modality, their assessment is mainly based on previous assessments done by the IMF, and on the World Bank developed PEFA assessments. This proves the strong influence of the IFIs in assessing the quality of PFM systems in ODA recipient countries.

2. Public procurement Policies and Practices in Namibia

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Box 1: Labour-based roads construction – A case of pro-poor procurement?

In the mid-1980s, when it became apparent that Namibia would gain its independence, the mandate power South Africa stopped investments in Namibia’s infrastructure, including roads construction. Eventually, most private Namibian roads construction companies went bankrupt.

When investment was relaunched in the mid-1990s, the GRN introduced policies for promoting small and medium enterprises (SME) and job creation in the construction sector, partly due to donor pressure from Sweden and Germany. The intention was that the poor should not only benefit from improved infrastructure, but should directly profit from the construction itself through job and income creation. At the same time, the devastated Namibian constructions sector should be rebuilt from scratch by targeting and promoting SMEs.

The construction projects are usually implemented in joint ventures of one main contractor who is in charge of the capital intensive works, overall management and insurances among others, and several SME who divide the labour-intensive works amongst themselves. As a general rule, 50% of the volume goes to the main contractor and 50% to SMEs.

SME staff bidding for tenders are obliged to complete a training course led by the Roads Construction Authority, in which they learn how to draft tender documents, including the pricing of different items, and how to access financing from the Namibian Development Bank.

According to Rudi Polzin from the Namibian Roads Construction Authority, 35% of disbursed funds in labour-based construction projects stay in the region where the roads are built or maintained and thus create significant second round effects for the local economy.

Namibian trade unions are quite supportive of the approach. One critical aspect, however, is that workers in labour-based construction projects do not receive hourly wages, but a performance-based wage, which makes it unclear if the payment they receive is above the minimum wage, or similar to hourly wages paid in other construction projects. And, as Herbert Jauch from LaRRI pointed out: “labour-based works create temporary jobs and income, but they are not sustainable solutions for structural weaknesses and unemployment in the Namibian economy.”

Sources: Interviews with Rudi Polzin (RCA) and Herbert Jauch (LaRRI), White Paper on Labour-based works

Many stakeholders agree that the procurement system is in urgent need of reform, including Tender Board Secretary Welma Enssle herself: “We are quite far behind in what we want to have. The first thing we have to tackle is the legal framework”. The Tender Board Act dates back to 1996 and, according to Enssle, it did not keep track with the policy development of GRN in which procurement is seen as a central policy tool to achieve socioeconomic objectives. These policy objectives identified in the Tender Board Act and the accompanying regulations are primarily:

• The reduction of inequalities and the uplifting of formerly disadvantaged groups, in particular due to Affirmative Action and BEE policies.

• The “namibianization” of the economy,

The poor should not only benefit from improved infrastructure, but should directly profit from the construction itself through job and income creation.

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through targeting and channeling of public spending to Namibian owned companies.

• The promotion of SME which are particularly useful for job creation.

• The industrialisation and diversification of Namibia’s currently extremely commodity dependent economy.

Thus far, these aims are only partly reflected in the legal framework which guides Namibia’s procurement practices – The Tender Board of Namibia Act – and the accompanying Tender Board Regulations and the Tender Board of Namibia Code of Procedure. In the current Tender Board Act, price preferences and exemptions are the main tools used for targeted procurement. Price preferences give preferential treatment in such a way that it is possible for firms with certain characteristics to win a contract without having submitted the lowest bid. In Namibia, price preferences are granted for:

a) Goods produced, manufactured or assembled in Namibia.

b) Bona fide Namibian small scale industries.

c) Tenderers located in communal areas or notified underdeveloped areas.

d) Bona fide Namibian tenderers implementing Affirmative Action (AA) policies.10

The political pressure and political will to reform the procurement policies to make public procurement an even more interventionist and developmental tool is high – the ruling party’s most recent Election Manifesto reads:

“Public procurement shall be used as a tool to promote the development of national industries and the service sector. In doing so, priority will be given to Namibian entrepreneurs to enhance their involvement in key national economic activities as well as improve service delivery to the people.

The SWAPO party will put in place relevant laws and policies to ensure that the national budget will be utilized to advance and support rural development, job creation, industrial development, economic empowerment, growth and expansion of local industry and the retention of a substantial portion of public expenditure in the domestic economy as well as increase the procurement of local goods and services by central, regional and local governments and SOEs.”11

In this regard, SWAPO is supported by some CSO representatives: “Procurement could be a key strategy to fight poverty and create jobs but so far it is not (…) you could structure the tenders deliberately in a way that local participation could be a real empowerment mechanism.”12

Procedural shortcomings mentioned by interviewees are particularly slow and inefficient procedures. Line ministries do for the most part have tender committees, but as soon as the relatively low threshold of N$ 10.000 is exceeded, the central Tender Board in the Ministry of Finance takes charge. The

We are quite far behind in what we want to have. The first thing we have to tackle is the legal framework.

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low threshold means that a large number of small tenders have to be handled by the Tender Board, a process that often slows down processes and poses a considerable burden for the involved officers. There is no procurement threshold matrix that separately addresses goods, works and services procurement, the low threshold applies to all categories. There is also no systematic procurement planning, and in consequence the potential to secure economies of scale in procurement currently remains underexploited.

For some observers, even the Namibian rules became too strict. Interviewees observed that even the procurement of a car can take more than a year. Procurement processes take much too long, especially for consultants that need to be deployed quickly. Obviously rules have been tightened to prevent corruption but: “We have reached a point where there is a strangulation of activities.” Project managers spent up to one third of their time on procurement related work.

Another shortcoming identified is that tender documents are not made public and available for download on the Ministry of Finance’s website. Interested bidders have to buy them and pick them up at the Tender Board’s Office in Windhoek. While this structural constraint could promote the GRN’s intention to give preferential treatment to Namibian companies, different stakeholders see other problematic implications:

The NPC’s Director for Development Planning fears that this could exclude foreign bidders who can offer the expertise needed to carry out complex and complicated development projects: “It is unrealistic to think that all expertise can be found in Namibia.”

The NANGOF Trust’s chair Ronny Dempers sees it more as a disadvantage for applicants in the poorer and less developed Namibian regions far away from the capital: “For people living in Caprivi it is really difficult to access them. They would need an agent in Windhoek. If you really want to promote decentralization, this should be addressed.”

For larger projects, the costs of tender documents can be impressively high. With

regard to the tender (license) documents for the Skeleton National Park that were priced at NAM$ 20000, Ronny Dempers said: “that seems to be set aside for those who already have.”

The Tender Board Act is currently being revised to address several shortcomings which constrain the effectiveness of procurement for achieving Namibia’s (GRN’s) socioeconomic objectives. The draft of the new revision was developed in consultation with local stakeholders and African peers. According to Enssle, the revised Act requires companies to strictly apply AA laws, and take on board vocational trainers. Preferences are also being revised, especially to prevent foreign-owned but Namibian registered companies profiting from them. This new regulation seems to target in particular the mushrooming Chinese construction companies which are increasingly gaining market shares and are in danger of crowding out their Namibian competitors.13 In a context where FDI and trade are increasingly liberalised, procurement thus remains a key policy tool for the government to boost national companies. The new Act aims to set

“We have reached a point where there is a strangulation of activities.”

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box 2 continued

Box 2. Buying social justice? Black Economic Empowerment and Affirmative Action in Namibia

Namibia entered independence as one of the most unequal countries in the world. The Gini coefficient amounted to 0.7, with whites earning an income roughly equivalent to European levels, and blacks earning an income equivalent to Sub-Saharan Africa levels. Access to quality education and productive assets such as land or capital were as unequally distributed. To overcome these inherited inequalities, the GRN reacted with a series of interventions under the labels Affirmative Action (AA) and Black Economic Empowerment (BEE).

Besides preferential treatment for blacks in public sector employment and a relatively moderate land reform based on the “willing seller – willing buyer” principle, AA was also incorporated into Namibia’s procurement law. The Tender Board of Namibia Act of 1996 requires bidders to present an AA compliance certificate. The Affirmative Action (Employment) Act of 1998 requires that employers give preference to Namibian citizens and candidates who belong to three designated groups: the racially disadvantaged, women (irrespective of race), and persons with disabilities. For every non-Namibian citizen employed by a firm or organisation, employers must train a Namibian citizen.

What are the results of BEE and AA thus far? Firstly, there is the problem that the GRN never exactly defined what it hoped to achieve. As Sherbourne points out: “After 18 years of independence, it is fair to say that no clear consensus emerged on the meaning of BEE. Some see it more as a way of promoting the creation of an indigenous class of black business people while others view it primarily as a way of spreading wealth more evenly among the mass of population.”14 Secondly, there is no thorough monitoring and evaluation being conducted by the GRN, and there is no possibility of obtaining data from independent researchers.

It is obvious that BEE policies, including preferential procurement, have contributed to the creation of a new black elite in Namibia. But it is often not so obvious what the added value of BEE companies is for projects that employ them. One official familiar with BEE policies in other countries criticized that, unlike South Africa, Namibia does not apply a scoring system to assess the qualifications of BEE companies which are applying for tenders with regard to managerial, financial and technical skills and capacities. Thus, it is often not clear if these private BEE companies are able to carry out the tasks they have been entrusted with by the public sector. Furthermore, many private companies simply comply with BEE principles by transferring a share of equity to black proxies or reserve seats on their board for blacks, but without accompanying training, or a gradual scaling-up of responsibilities. Thus, BEE occasionally leads to pure rent-seeking rather than real and sustainable entrepreneurial empowerment.

BEE in Namibia currently lacks a comprehensive policy framework, and is based on a fragmented legislation. The Namibian Constitution allows for “the implementation of policies and programmes aimed at redressing social, economic and educational imbalances in the Namibian society arising out of past discriminatory laws or practices” (Art.23 (2)). But in the absence of a policy framework, BEE is mainly implemented by numerous fragmented private sector initiatives, including the Namibian Preferential Procurement Council established by the three largest Namibian mines in 2003.

Particularly criticised by representatives of CSOs was the complete lack of transparency. This view is also shared by academic researchers: “it was never quite clear who was benefiting, why particular individuals or groups were chosen, and who was footing the bill.”15 The lack of clear policies, rules and regulations make BEE policies vulnerable to abuse and favouritism. Many share Sherbourne’s view that the lucky few close to power profit more from the current model

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aside tenders not exceeding N$ 5mn for SMEs, in particular in the construction sector, and includes a right to review. It is supposed to enter into force in 2010.

Currently there are no proper monitoring systems for approved tenders which would analyse the expenditures of the tender and whether both parties deliver. There is only the annual audit and a “gentlemen’s agreement’’ between tenderers and ministries.

Interestingly, while the GRN’s policies clearly state that public procurement is to be used to promote economic development and achieve socioeconomic objectives, there is no systematic assessment being done to gauge whether these objectives are being achieved. There is no systematic assessment on to what extent Namibian or foreign contractors win tenders, to what extent SME profit, or what the foreign exchange costs of procurement results are.

2.2. Accountability and Transparency in procurement

Namibia became a multi-party democracy at independence, with elections that are generally seen as free and fair. The South-West African People’s Organization (SWAPO) assumed power in 1990 in the first elections with universal suffrage, and has stayed in power since. In the most recent elections in November 2009, SWAPO again gained a solid majority of nearly three-quarters and

President Pohamba was re-elected for a second term. Thus, SWAPO holds the majority in both chambers of the parliament, and is also widely represented in the judicial system through members. SWAPO’s dominant position has ensured political stability over the past two decades. However, due to the lack of a strong opposition, SWAPO must largely control itself if optimal outcomes for the sake of the whole nation are to be achieved. This challenge is met with varied levels of success.

Box 2. continued

than the broad mass of impoverished black Namibians.

Widespread criticism has led to an elaboration of BEE policies by the current Namibian government. The new Transformational Economic and Social Empowerment Framework (TESEF) aims to make BEE more broad-based. Preferential procurement is seen as one cornerstone

of TESEF’s empowerment strategy for ‘historically-deprived Namibians’.16

No donor country representative explicitly stated that BEE or AA plays a significant role in its procurement policies and practices, with one exception being the UNDP which, as a UN agency, is bound to strive for cultural and ethnical diversity in staffing and operations. An alignment to Namibian policy preferences therefore does not take place when it comes to BEE or AA.

After 18 years of independence, it is fair to say that no clear consensus emerged on the meaning of Black Economic Empowerment.

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Trade Unions in Namibia are involved in governance processes through a tripartite system, including trade-unions, employers associations and government representatives. However, the National Union of Namibian Worker’s (NUNW) is closely linked to the ruling party, which limits its space for action in cases when the GRN drives forward policies that are potentially harmful for workers’ interests.

CSOs in Namibia are weak, even in their self-assessment. Most NGOs are service-providers in the health and education sector, and just a handful are engaged in policy and advocacy activities, or act as watch-dogs, mainly on human rights and corruption. Aid watchers - CSOs that specialise in watching official donors and development cooperation – do not exist. The GRN engages CSOs in dialogue and consultations. But shortcomings of a meaningful dialogue are that invitations from the government’s side come late and often do not come with enough disclosed background material, while on the other hand NGOs lack capacities and knowledge.

Freedom of press and freedom of speech are largely secured, but the political opposition often faces aggressive verbal and sometimes physical attacks by supporters of the ruling party.17 The free press plays an important role as watchdog of the government’s policies in general, and the procedures and results of public procurement in particular. Newspapers such as The Namibian18 or the Insight magazine’s monthly Corruption Tracker19 continuously monitor the procurement process, unveil cases of corruption and favoritism, and blame and shame officers, companies and donors involved. Thus, the media plays a crucial role in improving the efficiency and effectiveness of public procurement in meeting Namibia’s socioeconomic objectives by improving the transparency and accountability of the procurement process.

Conflicts of interest are an issue in Namibia’s public procurement processes. Beyond its political functions, the ruling party also plays a strong role as an economic actor and owns several companies, a situation that could potentially distort the decision-

making of Tender Board members and public procurement officers, many of which are members of the ruling party.20 The Tender Board makes decisions based on votes, not on points. For some interviewees, this is an opaque process.

The authorities are also lagging behind in registering ownership of Namibian companies. It is therefore often not clear how far companies that profit from procurement decisions are fully or partly owned by state officers which may be directly involved in or indirectly influential in decision-making. Namibia’s Public Service Act (Act 13 of 1995) deals with conflicts of interest, e.g. it obliges public service officers to declare if they – or members of the their household – undertake private work related to the field of operations of their office.21 But according to observers this is currently not applied throughout the whole system.

There are diverging views on the extent of corruption in procurement. Namibia scores relatively well in Transparency International’s Corruption Perception Index (rank 56 of 180). The institutions to combat corruption are nowadays largely in place, but it took quite a long time after independence to install them. The Anti-Corruption Act (No. 8 of 2003) constituted the Anti-Corruption Commission (ACC), which only became fully operational in 2006. The ACC’s mandate is to fight corruption through investigation, prevention and public education. It is not a body corporate and does not sue in its name.22 Beyond the ACC, the Ombudsman and the Auditor-General play a role in ensuring accountability of the public procurement process. Stakeholders perceive that auditing is professional and of good quality, but that the auditing process is often delayed and reports are published late.

While the legal and institutional framework for accountable public procurement has been improved in recent years, there is still the widespread perception in civil society, and to a certain extent by representatives from donor countries and aid agencies, that these institutions are more effective in combating corruption by middle-level officers than top-level corruption. As one CSO interviewee put

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it: “They don’t touch the big fish.”

While the regular tender process is becoming increasingly watertight, there are severe loopholes in the accountability framework. A large share of public procurement is done by the parastatal infrastructure companies. The parastatals have fewer legal obligations

and seem to enjoy much less oversight and control. Moreover, there is a high number of exemptions, for example for projects in which security concerns play a role (e.g. government buildings) or for projects funded by foreign donors, in particular when tied soft loans are used as financing modalities.

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3.1. Procurement Policies and Practices

In the Accra Agenda for Action, donors have agreed to use recipient countries’ own procurement as the first option, but the use of Parallel Implementation Units (PIUs), including parallel procurement systems, is still common. The exact extent to which ODA flows through the country’s own systems, or through foreign aid agencies’ parallel procurement systems is unknown for Namibia, since no comprehensive assessment has been made.

The main purpose of using country systems in the context of the current aid effectiveness reform agenda is to strengthen these systems, to enhance recipient countries’ capacities to oversee what donors are financing in their countries and how, and to build capacities which enable them to implement development projects without having to rely on the foreign aid agencies’ staff. Therefore, using country systems is a prerequisite for making development interventions sustainable, as well as for enabling ownership of development projects by recipient countries. Using country systems is crucial for aligning development cooperation to the programme countries’ self-developed and self-set policies, including their own procurement policies. However, aid effectiveness commitments on the use of country procurement systems do not explicitly refer to this objective.

Procurement by aid agencies in Namibia can be categorised by:

1. Parallel procurement using expatriate staff.

2. Parallel procurement using local staff.

3. Using recipient country procurement systems.

One example for the first category is Germany’s GTZ. The second option is used for example by the US MCC. Some bilaterals use the recipient country systems for their project and programme aid in Namibia, but often country systems are only used for budget support or in sector-wide programmes.

According to the NPC’s Sylvie Demas, Namibia is advocating for increased budget support, but so far progress has been slow. Only in the education and public financial management sectors and the rural access roads and rural water supply sub-sectors do there exist sector-wide-approaches where donors disburse ODA as sector budget support. There is a plan to develop a rural development sector-wide strategy. The EC disburses the highest share of budget support – in the current country strategy (EDF 10), 85% of ODA uses country systems, mainly for budget support for the education and rural development sectors. The remaining 15% is mainly for capacity building projects. Eligibility criteria for budget support are a sound public financial management system and a stable macroeconomic environment. Procurement is not necessarily an issue, says the EC’s Bruno Kruijer.23

Categories one and two both have a number of disadvantages, which are clearly apparent in Namibia’s case. Working with expatriate staff neither contributes to job creation in program countries, nor does it build capacities of local staff through training on the job. Wages are paid to the expats, who usually repatriate a significant share to their home countries. Thus, significant shares of aid inflows immediately flow out again, and there is no sustainable increase in the purchase power of the local population. GTZ has frequently been criticised for using too many costly expat consultants. The Namibian MoF’s Permanent Secretary, Calle Schlettwein, was quoted by Insight Magazine saying: “How many [donor-funded projects] are tied to jobs and profits by western countries …? How many have large sums reserved to pay western consultants who do not know the country and whose inputs often have little beneficial results?”24

These problems can be solved by using local staff for parallel procurement. However, in a country where qualified procurement officers are a scarce resource, employing local staff for parallel implementation units (PIU) usually leads to a significant brain drain from the public institutions to the aid agencies’ PIU, thereby further weakening the capacities of the government to implement development projects itself. The MCC was therefore

3. Procurement policies and practices of donors in Namibia

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criticised by a representative of another aid agency for enticing well-trained officers away from the ministries and especially the NPC when setting up its Millennium Challenge Account office in Namibia in 2009.

In principle, it is best to use country systems to ensure ownership of development cooperation by recipient countries and to ensure a sustainable impact. But in practice capacity constraints are an issue: several aid agency officers, including GTZ and UNDP, reported that their parallel procurement is largely done in agreement with the GRN, because the GRN’s Tender Boards and Commissions lack sufficient capacities and are therefore keen to outsource some project management activities, including procurement, to foreign aid agencies.25

It is clear that there is a lack of harmonisation as regards procurement policies and donor practices. Each uses its own procurement policies, legislation or regulations. This poses great challenges and entails a de facto exclusion of potential bidders from the recipient country, in particular for SME. The EC Practical Guide to Contract procedures for External action26 is a 137-page document, and other donors have similar complex regulations. In consequence, only large transnational corporations or specialised contractors, mostly from the respective aid agency’s country or region, have the necessary technical expertise to prepare formally correct bids.

The sheer volume of information that an interested and potentially qualified company (qualified with regard to being able to provide the works, services or supplies asked for) from Namibia has to digest is enormous. Ironically, the current trend of more and better cooperation between donors is further complicating matters, rather than simplifying them: in sector-wide approaches, practitioners often have to comply with the procurement criteria of several donors involved, plus those of the recipient country. This was seen as a severe challenge by interviewees.

In particular, the EC procurement regulations are widely perceived to be overly tedious. For complex and complicated projects, in which technical assistance consultancy is even

needed to prepare the tender documents, the procurement cycle can take up to nine months until termination. The EC procurement procedures are thus one of the decisive reasons why EC aid is often disbursed late and involves high transaction costs. Following the rules keeps numerous costly officers and consultants busy for a long while. For smaller Namibian companies or even NGOs they are in fact a closed book. As Carola Engelbrecht, trustee of Citizens for a Transparent and Accountable Society (CATS) put it: “The people here are familiar with the Namibian rules, but the EU regulations are a nightmare. They are extremely fastidious.”

The situation does not improve when it comes to donors from the other side of the Atlantic. The Millennium Challenge Account (MCA) tender requirements are also quite extensive, and often Namibian companies cannot meet them. “Namibian companies can often only access them if they team up with internationals” comments NANGOF Trust’s Ronny Dempers. Even a GTZ interviewee argued with regard to one of MCA’s tender documents: “No one in the world can meet all these criteria.”

The people here are familiar with the Namibian rules, but the EU regulations are a nightmare. They are extremely fastidious.

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The overly complex and complicated procurement regulations of foreign aid agencies are supposed to minimize fiduciary risks and make sure that aid monies are spent efficiently and for the intended purposes. But in fact donors’ regulations have led to high transaction and overhead costs – the opposite of efficiency. From a development effectiveness perspective, they act as an entry barrier for companies from recipient countries, in particular for SME, and thus actually exclude them from doing business opportunities. In consequence, they are a major impediment for economic development and thus for one of the major intended purposes of development cooperation.

Aid agency procurement is to a large extent transparent – at least in the cases where works, supplies or services are procured through open and competitive bidding. Most agencies place advertisements in Namibian newspapers, on globally accessible websites and in media in donor countries. However, for external observers, it is much more difficult to follow which bidder has been awarded a contract, and almost impossible to find out why.27

For technical assistance, thresholds can be quite high. GTZ generally does not apply open and competitive bidding procedures for consultancies of less than 20.000 Euros (or less than four weeks). Only if the projects are funded through EC monies (EDF 9) a lower threshold of 5.000 Euros is applied. Under EC regulations, project managers need to review three offers for all activities between 5.000 and 150.000 Euros. Above this threshold, open and competitive bidding applies. Only budget support and some forms of sector assistance are exempted from EC procedures.

It should also be noted that EC monies are deposited in EC accounts and from there directly transferred to contractors. Recipient country ownership may be the main principle of the current aid effectiveness agenda, but at no stage of the project cycle is the money actually owned by the Namibian government in the strict sense of commercial law. However, there is at least an ongoing deconcentration process in EuropeAid. The EC delegations now

have a Finance and Contracts department, whereas five years ago decisions were made in Brussels, which further reduced the chances of local companies being awarded tenders. Still, suppliers need a certificate of origin from the EU-ACP region under EDF 9, issued by the EU trade delegation. For local SMEs, these certificates are not easy to get.

The GTZ justifies the high threshold for open tendering of consultancies by saying that the selection of consultants is usually done in agreement with Namibian partners. They mostly conduct work with German staff – qualified Namibian consultants are often either not available, or they are even more expensive than the Germans. For supplies, there is an internal ruling to procure locally, and also to facilitate the maintenance of products by the local provider, and guarantee items.

The MCA cannot use country systems in all cases where the local procurement legislation or policy includes preferential treatment rules. This is due to conditionalities for MCA operations set by the US authorities in Washington DC. MCA operations in Namibia operate totally outside the country system, and ignore local procurement policies and preferential treatment provisions. However, it is interesting to note that MCA Namibia is a unit attached to the Namibian NPC. The MCC is in charge of oversight and provides the money that is deposited into US accounts. According to country director John Wingle, the MCC did send a due diligence team to assess the country systems, but contrary to the EC assessment, Namibia was not considered to be eligible for aid implementation through country systems. The US Congress and public is generally more sensitive to fiduciary risks than other donor countries, which has an impact on the way some US aid agencies operate: “We accept a fairly low level of fiduciary risks”.

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Box 3

The benefits of using country systems: Procurement of pharmaceutical supplies

Due to an HIV prevalence of 15.3 % among people aged 15 to 49,28 and a strong commitment by the GRN to reach universal access to prevention, treatment and care by 2010, the procurement of pharmaceutical supplies constitutes a significant share of government spending. Dependency on foreign assistance in this particular area is extremely high. Roughly 50 percent of antiretroviral medicine (ARV) supply is currently financed through a grant of the Global Fund to Fight HIV/AIDS, Tuberculosis and Malaria, and an additional 15.2 % by PEPFAR.29

Procurement of pharmaceuticals is done through a centralised tender process at the Ministry of Health and Social Services. Only the Clinton Foundation and the Supply Chain Management System (part of PEPFAR) support the fight against AIDS with in-kind contributions. On the one hand, the centralised process through Namibia’s own country systems ensures the required scale of demand to purchase at low prices, and on the other hand it favours quality management throughout the supply chain.

Since HIV and AIDS patients need an uninterrupted supply of ARVs if treatment is to work, it is crucial that the right amount of medicine is made available when and where it is needed. This is very unlikely to succeed if a large number of different agencies run their own processes and procedures in a fragmented manner. Furthermore, according to Jenny Lates from MoHSS, even a simple change in the colour of the pills can confuse uneducated patients and might encourage them to cease intake. This is another case against the fragmented approach seen in many other African countries where procurement is done by parallel entities, and some pharmacies have different ARV stocks for different donor-led programmes.

Donor feedback on Namibia’s pharmaceutical procurement and supply system is very good. For PEPFAR country coordinator Dennis Weeks it is “the best I have seen in Africa (…) they have good people, good warehouses, and they buy at the right prices.”30 However, this fact does not seem thus far enough to encourage more donors and other US aid agencies to increase their use of country systems.

The Ministry’s own tender committee procures pharmaceuticals through open, international tenders. The Ministry is thus exempted from using the national tender board, but it uses the same preferences for local suppliers and wholesalers. According to MoHSS, local suppliers provide 57% of stock received in central medical stores.

Local production, however, is inexistent. Namibia lacks its own pharmaceutical industry capacities, so all ARVs have to be imported and their purchase is an enormous drain on the country’s foreign exchange stock. This puts supply sustainability at risk, particularly since large donors such as PEPFAR and the Global Fund might in future reduce or phase out their assistance, which is currently being contributed in foreign currency. Pledges from countries such as Brazil to support Namibia in building their own pharmaceutical capacities have so far not materialized. According to Jenny Lates, the government of Namibia was also negotiating local production capacity building with different pharma corporations, but failed to reach an agreement because the corporations demanded a guaranteed purchase for a period of five years. The GRN refused to accept this since the counterparts could not guarantee quality, and in HIV/AIDS treatment, “quality is not negotiable”, says Jenny Lates. Now the SADC Member States are striving for a pooled production of ARVs in the SADC region, which Ms. Lates sees as the most feasible option31.

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3.2. Preferential treatment and blacklisting

Namibia’s national development strategies and policies see public procurement as a tool for achieving socioeconomic objectives, in particular economic development and social equity. In addition, numerous international declarations and donors’ own policy papers state that beyond economic development, achieving human rights, social justice, gender equity and environmentally sustainable development are the aims of development cooperation. But to what extent are these intended results reflected in aid agencies’ own procurement policies and practices? And to what extent are they aligned to the procurement policies of the recipient country Namibia?

Very few donor country representatives mentioned that they apply preferential treatment rules for the recipient countries’ companies, take social or ecological factors into account in procurement, or debar companies which have violated labour rights or environmental laws, or evaded taxes:

• The EC has an early warning system to debar companies for financial and contractual reasons, in particular for corruption and fraud, but social and environmental considerations are not directly taken into account in procurement, and there is no gender balance policy for contracting consultancies. Consultants and supplies must be from EU-ACP countries, but there are regular derogations from this rule. In addition, there is a preferential treatment rule for bidders from land-locked countries, least developed countries and small island states in cases where there is an equality of price.

• The MCC/MCA has no blacklist for debarring bidders – it uses the World Bank’s list. The World Bank debars only firms which have violated the fraud and corruption provisions of its procurement guidelines. Social and environmental criteria or tax evasion do not play a role.

• The German KfW also states that it does

not have its own blacklist, but it uses others. The GTZ has a blacklist (internally called the ‘terror list’) for debarring bidders which have been involved in terror financing, fraud, money laundering or corruption. But also for the GTZ, social or ecological criteria do not play a role in procurement decisions.

• Spain looks into cross-cutting issues such as gender and the environment, but it has no official gender policy with regard to consultancies. In regards to their bilateral aid, social and environmental criteria are not so applicable since it mostly consists of technical assistance.

• The UNDP is the only aid agency interviewed that explicitly stated it would take social, environmental and gender criteria directly into account. According to Lebogang Motlana, gender balance “is a must” and “gender criteria is absolutely necessary”. For the Global Environment Facility administered by the UNDP “environmental impact assessments are absolutely necessary”, and “we have to adhere to ILO standards on decent employment.” It is, however, not clear how far these criteria are applied and checked throughout the supply chain.

3.3. Tied aid

Tying aid to the obligation to purchase goods and services from the donor country significantly reduces value for money. The OECD has calculated that it increases the costs of development interventions by 15 to 40%. Tying also leads to the purchase of goods which might not be functional in the recipient country’s environment, or cannot be maintained due to the limited availability of spare parts from local markets.57 Needless to say that tying prevents the use of available local capacities, and thus undermines development.

Due to its limited dependence on aid, and the corresponding strong bargaining power of the GRN vis-à-vis donors and their vested economic interests, there are less shocking cases of fully inadequate tied aid in Namibia

27

than in many other aid recipient countries. However, especially when it comes to loans from traditional DAC as well as new donors, and to technical assistance, tied aid is still a worrisome issue. Technical assistance, along with food aid, is one of the areas excluded from the 2001 OECD DAC agreements on untying aid to Least Developed Countries. There is no systematic assessment being made on to what extent ODA to Namibia is formally or informally tied, but anecdotal evidence suggests that aid tying is still a factor that significantly reduces the value of foreign aid reaching the nation’s development goals outlined in Vision 2030 and the National Development Plans.

Several interviewees criticised the World Bank for tying its loan to the ETSIP education programme to the employment of World Bank employed or World Bank selected consultants. World Bank consultants are usually at the top end of remuneration schemes, and are infamous for applying one-size-fits-all solutions developed in Washington in local contexts where they may or may not be relevant. Moreover, GTZ and USAID mostly use their own nationals when providing technical assistance, although they try to link with local partners, and GTZ increasingly uses local capacities. The EC used to apply the principle that consultants need to be EU or ACP citizens, but according to Joris Heeren, this has changed under the 10th EDF. Supplies have also recently been opened up. With regard to aid tying, the MCC was an important innovation in the US American aid architecture: all MCC monies are formally untied, but it has yet to be seen what this means in practice for Namibian firms accessing funds in the context of the entry barrier concerns flagged before.

EC aid is not formally tied. However, “when the EC finances infrastructure, it are mainly the big European companies who apply” admits the EC staff in Namibia. Many of the big infrastructure and industrial development projects are implemented by European firms, e.g. the Caprivi link electricity project by ABB, and Namibia’s first cement factory by the German Schenk group. The latter project is partly financed by a loan from

the European Investment Bank. Cause and effect are often not easy to distinguish with regard to European donors and multilateral development banks funding projects that are implemented by European companies. It is often not clear if the European business involvement was a clear condition set by EU donors, or if it simply facilitated access to European funding. However, there is an obvious correlation between the source of funding and the origin of the contractor. In general, EU donor loans are tied more often than grants. Spain ties all concessional loans for projects that are mostly in the fisheries sector; likewise, Finland ties up to 50% of its loans in trade-related sectors.

South-South-Cooperation as offered by countries such as China is also often tied, which means it is exempted from normal tender procedures. The GRN has realized that tied ‘soft loans’ are often not as cheap as the concessionality rate may suggest, due to the condition to purchase overpriced or inadequate products from the creditor

Conclusion and Recommendations

The OECD has calculated that tied aid increases the costs of development interventions by 15 to 40%.

Targeting Development?

28

country. Thanks to the limited aid dependence and the wide range of choices with regard to financing development, Namibia can and does take an increasingly selective approach to foreign financial assistance. In October 2009, it rejected a US$ 100mn credit line offered by the Export-Import (Exim) Bank of China because of the ‘unfavourable’ terms and conditions.58

Namibia is not typical, in that it maintains an interventionist procurement policy. Procurement policies and practices aim to promote economic development, reduce dependency on imports and foreign economic actors through industrialisation and namibianisation of its own economy, and address socioeconomic imbalances in particular by uplifting formerly disadvantaged groups. The main tools of preferential treatment are price preferences for Namibian owned and Namibia located firms.

Namibia’s procurement policy would not be regarded as best practice by global opinion leaders such as the World Bank and the OECD. These institutions favour (international) open and competitive bidding as best practice procurement methods and promote this in global policy forums and through their technical assistance provided to developing countries. Four factors enable Namibia’s ownership and self-determination of its procurement policy: it is relatively aid independent; it has a large selection of financing for development options to choose from and thus a strong negotiating position vis-à-vis donors or creditors and their conditionalities. It has a low (external) debt-to-GDP ratio and is thus under little pressure to refinance debts. Last but not least, it did not need to participate in the debt relief initiatives for the Heavily Indebted Poor Countries and did not need to endure its conditionalities and assessment tools which are biased towards liberalised and deregulated systems.

It is difficult to assess how far Namibia’s procurement policies have helped to achieve the targets they are supposed to achieve. Namibia’s economy has been on a solid growth track over the past two decades and external debt levels are impressively low for

a developing country that never received debt relief. This indicates that the strategy of channelling as much public money as possible to local economic actors through targeted procurement was successful. But inequality in Namibia has only slightly been reduced since the Tender Board Act was passed in 1996. This in turn, indicates that some members of formerly disadvantaged groups profited disproportionately high, and that the benefits of targeted procurement were not equally distributed and the socioeconomic aim of broad-based uplifting of the post-Apartheid state’s formerly disadvantaged groups remains a challenge that still needs to be mastered.

These deficiencies are known to Namibian policy makers, as well as to civil society organisations advocating for social equity. It remains to be seen if new policies and legislation which are currently being developed such as the revised Tender Board Act and the Transformational Economic and Social Empowerment Framework can make public procurement contribute more effectively to the intended economic and social results of the country’s national development strategy Vision 2030.

Foreign donors carry out their obligation to use Namibia’s own country procurement system as the first option only to a limited extent. Some point to capacity constraints of Namibian tender boards which make them use their own parallel procurement systems in agreement with their Namibian counterparts. The US Millennium Challenge Corporation was the only aid agency surveyed which is legally constrained to use the Namibian system due to its procurement policy’s preferential treatment provisions, which favour Namibian firms and therefore necessarily disfavouring US firms.

DAC donors have increasingly untied their aid, at least formally. Notable exemptions are mostly linked to concessional loans. They also publish most tender notices in local newspapers what improves accessibility for Namibian firms. None of them seem to assess systematically how far Namibian, international, or their own country’s firms profit from contract awards, but there are

29

strong indications that the own country’s firms share is still disproportionately high. No bilateral donors indicated having preferential treatment provisions for Namibian firms, or designated social groups or regions in country. Most strikingly, no bilateral donor explicitly considers social, ecological or human rights criteria in its procurement practices, despite the fact that the relatively large amounts of money donors channel through procurement would create significant incentives for economic actors to promote social and ecological goals – which are ultimately internationally agreed development goals signed by these donors. However thus far, policy coherence for development does not play a role when donors spend their money.

Recommendations to donors

• Donors should scale up their capacity building assistance to the Namibian procurement systems without imposing conditions or biased technical advice which undermines Namibia’s sovereignty to determine its own procurement policy.

• Donors should use the Namibian country procurement systems as a first option for all ODA provided to Namibia.

• While donors are phasing out the use of their own parallel procurement and phasing in country procurement, they should end all practices of formal and informal aid tying, and reduce entry barriers for Namibian firms and consultants, e.g. through creating smaller packages, sized to be manageable by Namibian firms, and through local advertising of all tenders.

• As long as donors are still using their own parallel procurement, they should give preferential treatment, in particular for small and medium enterprises, firms based in structurally weak areas, and firms owned by disadvantaged groups and complying with Affirmative Action regulations.

• In the terms of their mutual agreements, donors and recipients should ensure

compliance with international law and standards through debarring all firms from ODA-financed activities that violate human rights and social or environmental standards, evade taxes or operate from tax havens.

Recommendations to the Government of Namibia

• The Government of Namibia should invest in and increase the capacities and skills of the public sector’s tender boards.

• The Government of Namibia should systematically assess the results of public procurement with regard to contracts awarded to local or foreign firms, and to certain regions and beneficiary groups, in order to be able to optimise the development impact of its procurement policies and practices.

• The Government of Namibia should quickly implement its plans to make the benefits of targeted procurement more broad-based and pro-poor, along the principles of the Transformational Economic and Social Empowerment Framework.

• The Government of Namibia should increase transparency of the procurement process throughout the whole procurement cycle, from publishing tender documents to disclosing information on contract awards online.

• The Government of Namibia should apply the Public Services Act throughout the system in order to improve transparency and unveil conflicts of interest of public service officers which might lead to corruption.

The Government of Namibia should be more selective in choosing its development partners. It should systematically assess the real value of all grants and concessional loans provided by donors taking into account the pecuniary and political costs, in particular, of tied aid and policy conditions.

Targeting Development?

30

List of intervieweesName Position OrganisationGovernment of Namibia

Demas, Sylvia Director of Development Planning National Planning Commission

Enssle, Welma Secretary to the Tender Board Ministry of FinanceLates, Jennie Deputy Director Pharmaceutical Services Ministry of Health and Social ServicesMutonga, Michael Deputy Director 1,599Development Cooperation Resource Management

National Planning Commission 54,304

Polzin, Rudi Roads AuthorityRojahn, Harald Team Leader Rural Poverty Reduction

ProgrammeNational Planning Commission

CSOs, Media, AcademiaDempers, Ronny Chair NANGOF TrustEngelbrecht, Carola Trustee Citizens for an Accountable and

Transparent SocietyGrobler, John Investigative JournalistHopwood, Graham Executive Director Institute for Public Policy ResearchKleine, Wolfgang Resident Representative Hanns-Seidel-FoundationJauch, Herbert Senior Researcher Labour Resource and Research InstituteSchultheiss, Michael Resident Representative Friedrich-Ebert-FoundationTjombe, Norman Director Legal Assistance CentreYa Nangolo, Phil Executive Director National Society for Human RightsDonorsBennoun, Robert Country Coordinator UNAIDSFabre, Luc Counsellor for Cooperation & Cultural Affairs Embassy of FranceGraefen, Christian Sector Coordinator Natural Resource

ManagementGTZ

Heeren, Joris Head of Economic, Social & Trade Section Delegation of the European Commission Kruijer, Bruno Second Secretary – Finance and Contracts Delegation of the European CommissionMotlana, Lebogang Deputy Resident Representative UNDPNeumann, Martin Team Leader Namibia Water Resource

Management ProjectGTZ

Neunsinger, Sven Programme Manager Transport and Energy KfWSckell, Stefan Counsellor for Development Cooperation Embassy of GermanySegurola, Asier Acting Head Spanish Agency for International

Development CooperationSykkö, Janne Counsellor for Development Cooperation Embassy of FinlandWeeks, Dennis Country Coordinator PEPFARWingle, John Resident Country Director MCC

Annex

31

List of intervieweesName Position OrganisationGovernment of Namibia

Demas, Sylvia Director of Development Planning National Planning Commission

Enssle, Welma Secretary to the Tender Board Ministry of FinanceLates, Jennie Deputy Director Pharmaceutical Services Ministry of Health and Social ServicesMutonga, Michael Deputy Director 1,599Development Cooperation Resource Management

National Planning Commission 54,304

Polzin, Rudi Roads AuthorityRojahn, Harald Team Leader Rural Poverty Reduction

ProgrammeNational Planning Commission

CSOs, Media, AcademiaDempers, Ronny Chair NANGOF TrustEngelbrecht, Carola Trustee Citizens for an Accountable and

Transparent SocietyGrobler, John Investigative JournalistHopwood, Graham Executive Director Institute for Public Policy ResearchKleine, Wolfgang Resident Representative Hanns-Seidel-FoundationJauch, Herbert Senior Researcher Labour Resource and Research InstituteSchultheiss, Michael Resident Representative Friedrich-Ebert-FoundationTjombe, Norman Director Legal Assistance CentreYa Nangolo, Phil Executive Director National Society for Human RightsDonorsBennoun, Robert Country Coordinator UNAIDSFabre, Luc Counsellor for Cooperation & Cultural Affairs Embassy of FranceGraefen, Christian Sector Coordinator Natural Resource

ManagementGTZ

Heeren, Joris Head of Economic, Social & Trade Section Delegation of the European Commission Kruijer, Bruno Second Secretary – Finance and Contracts Delegation of the European CommissionMotlana, Lebogang Deputy Resident Representative UNDPNeumann, Martin Team Leader Namibia Water Resource

Management ProjectGTZ

Neunsinger, Sven Programme Manager Transport and Energy KfWSckell, Stefan Counsellor for Development Cooperation Embassy of GermanySegurola, Asier Acting Head Spanish Agency for International

Development CooperationSykkö, Janne Counsellor for Development Cooperation Embassy of FinlandWeeks, Dennis Country Coordinator PEPFARWingle, John Resident Country Director MCC

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Bank of Namibia (2008): Annual Report 2008 http://www.bon.com.na/Content/Top-LevelItems/EconomicInfo/Publications/AnnualReports.aspx

Bank of Namibia (2009): The Economic Outlook Mid-Year Revision June 2009; http://www.bon.com.na/docs/pub/Economic%20Outlook%20%20June%202009.pdf

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European Commission (2007): Financing Agreement between the European Com-mission and the Republic of Namibia. Public Finance Management Support Programme. (NAM/002/04), EDF 9 (unpublished)Eurodad / German Marshall Fund of the United States (2008): Harmonization and Alignment. Challenges and Opportunities for U.S. and European donors post-Accra; http://www.eurodad.org/whatsnew/reports.aspx?id=3102

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Schmidt, Matthias (2009): The Estimation of Poverty Trends in Post-Independence Namibia, Windhoek: Institute for Public Policy Research Schmidt, Matthias (2009): Access to Public Services in Namibia. Has there been Pro-poor Growth, Windhoek: Institute for Public Policy ResearchSWAPO: 2009 SWAPO Party Election Mani-festo. Striving for Economic Independence and Prosperity for All Tender Board of Namibia Act (16 of 1996)UNAIDS: Progress towards Universal Access Namibia. http://data.unaids.o rg/pub/FactSheet/2008/ua08_nam_en.pdf

Targeting Development?

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1 On basis of the cost of basic needs concept of measuring pov-erty which is used by Namibia’s National Planning Commission, 27.6% of Namibian households are poor, 13.8% even severely poor; (Republic of Namibia (2008): A Review of Poverty and In-equality in Namibia, p. 6 http://www.npc.gov.na/publications/Review_of_Poverty_and_Inequality_in_Namibia_2008.pdf)

2 Eurodad / German Marshall Fund of the United States (2008) Harmonization and Alignment. Challenges and Opportunities for U.S. and European donors post-Accra, p. 8

3 (Paris Declaration §31, Accra Agenda for Action §18)4 For an overview of literature related to procurement as policy

tool to promote socioeconomic objectives: Eurodad (2009): Procurement and Development Effectiveness. A Literature Review.

5 Better Aid: A civil society position paper for the 2008 Accra High Level Forum on Aid Effectiveness, p.7; www.betteraid.org

6 Ministry of Trade and Industries: Special Industrialization Programme: http://www.mti.gov.na/subpage.php?linkNo=21

32 Bank of Namibia (2009): Annual Report 2008, p. 179; US$ 4200 per capita according to World Bank estimations, using the Atlas method.

33 Schmidt, Matthias (2009): The Estimation of Poverty Trends in Post-Independence Namibia, IPPR Briefing Paper No. 45, March 2009

34 Sherbourne, Robin (2009): Guide to the Namibian Economy 2009, p. 57-70

35 Republic of Namibia Employment Equity Commission (2002): The Employer’s Guidelines to the Affirmative Action (Employ-ment) Act, Act No. 29 of 1998

36 Cf. also Wietersheim, Erika von (2008): This Land is my Land. Motions and emotions around land reform in Namibia; http://www.fesnam.org/pdf/2008/reports/This_Land2008.pdf

37 See NamPower’s website (http://www.nampower.com.na/pages/caprivi.asp) and ABB’s press release “ABB wins $180mn power order in Namibia, Nov. 9, 2007 (http://www.abb.com/cawp/seitp202/4fffb1b9bac38eebc125738e00327903.aspx

38 http://www.wbcg.com.na/home-page.html 39 See the Ministry of Works and Transport’s Website for a proj-

ect list, and engagement of donors http://www.mwtc.gov.na/projects.php

40 UNAIDS: Progress towards Universal Access Namibia. http://data.unaids.org/pub/FactSheet/2008/ua08_nam_en.pdf

41 The Education and Training Sector Support Programme (ETSIP), see http://www.etsip.na/about_us.php

42 Republic of Namibia (2004): Namibia Vision 2030. Policy Framework for Long-Term National Development. Foreword by President Sam Nujoma. http://www.npc.gov.na/vision/vision_2030bgd.htm

43 Republic of Namibia (2008). Third National Development Plan (NDP3). 2007/08 – 2011/12. Volume 1. Executive Summary, p. 4f; http://www.npc.gov.na/npc/ndp3info.html

44 Ibd., p. i45 Bank of Namibia (2009): The Economic Outlook Mid-Year

Revision June 2009; http://www.bon.com.na/docs/pub/Eco-nomic%20Outlook%20%20June%202009.pdf

46 Republic of Namibia: Medium-Term Expenditure Framework for 2008-2009 to 2010-2011 http://www.mof.gov.na/Bud-get%20Documents/2008-09/Medium%20Term%20Expendi-ture%20Framework%20for%202008-2009%20to%202010-2011.pdf

47 Bank of Namibia: Annual Report 2008, p. 141; http://www.bon.com.na/docs/pub/BoN%20AR%2008%20final.pdf

48 Ibd., p. 14549 African Development Bank (2009): Namibia Country Strategy

Paper 2009-2013, p. VIII http://www.afdb.org/fileadmin/up-loads/afdb/Documents/Project-and-Operations/Namibia-CSP-OPs%20COM%206.pdf

50 Source: OECD database; http://stats.oecd.org/qwids/ ; Note that the DAC data often deviates from GRN’s own data on ODA due to exchange rate fluctuations, different fiscal years used by

the DAC and GRN, and other factors.51 http://www.pepfar.gov/about/122591.htm 52 MCC Namibia Fact Sheet: http://www.mcc.gov/mcc/bm.doc/

factsheet-072808-namibia.pdf 53 GTZ Country page Namibia; http://www.gtz.de/en/praxis/592.

htm 54 Ministerio de Asuntos Exteriores y de Cooperación: Documen-

tos de Estrategia País 2005-2008. Namibia.55 Republic of Namibia – European Union: Country Strategy

Paper and National Indicative Programme 2008-2013, http://ec.europa.eu/development/icenter/repository/scanned_na_csp10_en.pdf

56 Basic Income Grant Coalition (2008): Towards a Basic Income Grant for all. Basic Income Grant Pilot Project Assessment Re-port September 2008, http://www.bignam.org/Publications/BIG_Assessment_report_08a.pdf

7 IMF Executive Board concludes Article IV Consultations with Namibia; Public Information Notice (PIN) No. 09/48; April 15, 2009

8 European Commission (2007): Financing Agreement between the European Commission and the Republic of Namibia. Public Finance Management Support Programme. (NAM/002/04), EDF 9 (unpublished)

9 Interview with Sven Neunsinger, KfW10 See the Tender Board of Namibia Act, 16 of 1996; and the

accompanying Tender Board Regulation and Tender Board of Namibia Code of Procedures.

11 SWAPO: 2009 SWAPO Party Election Manifesto. Striving for Economic Independence and Prosperity for All, p.31

12 Interview with Ronny Dempers (NANGOF Trust)13 Chinese construction companies have also been criticized for

underbidding Namibian competitors through social dumping. Many interviewees suspect that they do not pay the minimal wage of N$9 per hour compulsory in the construction sector.

14 Sherbourne, Robin: Guide to the Namibian Economy 2009, p. 359

15 Ibd. P. 36216 Transformation of Economic and Social Empowerment Frame-

work (TESEF). Strategy Document 200817 National Society for Human Rights (2008): Human Rights

Report 200818 www.namibian.com.na 19 http://www.insight.com.na/ 20 Particularly contested was the ballot case, in which a SWAPO-

owned company was awarded the contract to print the ballot papers for the November 2009 national elections. http://www.namibian.com.na/index.php?id=28&tx_ttnews[tt_news]=60570&no_cache=1

21 Namibia Institute for Democracy: Stop Corruption. A Namibian citizen’s guide to Anti-Corruption, p. 26

22 http://www.accnamibia.org/ 23 Ironically, donor’s malperformance vis a vis the commitments

made in international aid effectiveness agreements negatively effect the assessment of Namibia’s public financial manage-ment system. In the most recent (unpublished) PEFA assess-ment, Namibia scored “D” (worst grade) in all three areas of donor practices, in the predictability of direct budget support, the financial information provided by donors fro budgeting and reporting on project and program aid, Proportion of aid that is managed by use of national procedures.

24 Insight September 2009, p. 17; see also: “Western consultants and its discontents in Namibia”, New Era, 2nd Octobr 2009

25 Interviews with Thomas Graefen (GTZ) and Lebogang Moth-lana (UNDP)

26 http://ec.europa.eu/europeaid/work/procedures/implementa-tion/practical_guide/index_en.htm

27 The MCC is a positive example, the website includes a contract awards section. http://www.mcc.gov/mcc/procurement/index.

Endnotes

33

shtml 28 UNAIDS data: http://www.unaids.org/en/CountryResponses/

Countries/namibia.asp 29 Interview with Robert Bennoun (UNAIDS)30 Interview with Dennis Weeks (PEPFAR)31 Sources: UNAIDS (data), and interviews with Robert Bennoun

(UNAIDS), Dennis Weeks (PEPFAR), Jenny Lates (MoHSS)57 TransNamib, for example, purchased Chinese locomatives in

2004 financed by a tied soft loan from China, this at a cost of NAM$ 36mn. They suffered 265 failures in less then three years, after which they were withdrawn from service http://www.railwaysafrica.com/2009/07/namibia%E2%80%99s-chinese-locomotives/

58 “Namibia warned against ‘soft loans’”, The Namibian Online, 25. August 09

Abbreviations

AA Affirmative Action

AAA Accra Agenda for Action

ACC Anti-Corruption Commission

ACP African, Caribbean and Pacific group of states

AfDB African Development Bank

ARV Anti-retroviral medicine

BEE Black Economic Empowerment

CSO Civil Society Organisation

DAC (OECD) Development Assistance Committee

EC European Commission

EDF European Development Fund

ETSIP Education and Training Sector Improvement Programme

FDI Foreign Direct Investment

GDP Gross Domestic Product

GRN Government of the Republic of Namibia

GTZ Gesellschaft fuer Technische Zusammenarbeit

HIPC Heavily Indebted Poor Countries

IFIs International Financial Institutions

JICA Japan International Cooperation Agency

KfW Kreditanstalt fuer Wiederaufbau

LMIC Lower Middle Income Country

MCA Millennium Challenge Account

MCC Millennium Challenge Cooperation

MoF Ministry of Finance

MoHSS Ministry of Health and Social Services

NANGOF Namibian NGO Federation

NDP National Development Plan

NGO Non Governmental Organisation

NPC National Planning Commission

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PD Paris Declaration on Aid Effectiveness

PEFA Public Expenditure and Financial Accountability

PEPFAR US President’s Emergency Plan for AIDS Relief

PFM Public Financial Management

PIU Parallel Implementation Units

SADC Southern African Development Community

SME Small and medium enterprises

SOE State-owned enterprise

SWAPO South-West African People’s Organization

TESEF Transformation of Economic and Social Empowerment Framework

UNDP United Nations Development Program

EurodadRue d’Edimbourg18 - 261050 IxellesBrusselsBelgiumTel: +32 (0) 2 894 4640eFax: +32 (0) 2 791 98 09www.eurodad.org