Thread: Doing business in Namibia

This is an overview by the law company LorentzAngula:

Type of Government / Political Development

Prior to the First World War, Namibia was a German Colony which was known as "German South-West Africa". At the out break of the war South Africa, which was a member of the British Empire, also declared war on Germany and its forces invaded the Territory. The German Forces finally surrendered on 9th July, 1915 and Martial Law was declared over the entire country, where after it was known as "South West Africa". In terms of the Indemnity and Withdrawal of Martial Law Proclamation, 1920 (Proclamation No. 76 of 1920) dated 31st December, 1920, Martial Law was withdrawn from and after the first day of January, 1921. Civil law thereafter prevailed in South West Africa, with the country being administered by the Government of the Union of South Africa in terms of a mandate conferred upon "His Britannic Majesty for and on behalf of the Government of the Union of South Africa" in accordance with Article 22, Part 1 (Covenant of the League of Nations) of the Treaty of Peace with Germany signed at Versailles on the 28th June, 1919.

This position continued until 1990, with ever-increasing pressure being put on the South African Government to grant independence to South West Africa, and finally free and fair elections were held in which all members of the population participated for the purpose of electing a Constituent Assembly whose duty was to draw up a constitution for the future Namibia. The Constitution was agreed, and finally Namibia attained its independence on 21st March, 1990.

The Constitution of Namibia is the supreme law of the country. In terms thereof a sovereign, secular, democratic and unitary State is founded upon the principles of democracy, the rule of law and justice for all. It entrenches the protection of fundamental human rights and freedoms and defines the powers of government. An independent judiciary is vested with the responsibility and authority to uphold and enforce the rights framed in the Constitution.


Legal System

Namibia while being a common law country has as its core Roman-Dutch law created by glosses and commentaries to the Roman law texts adopting Roman law to the customary law of Holland. After the First World War when South Africa was given the mandate over the former German colony of South West Africa by the Treaty of Versailles, the common law, being created by precedent, as applied in the Cape Province of the then Union of South Africa (Roman Dutch Law) was introduced as the common law of the mandated territory with effect from 1st January, 1920. English law has also had a bearing, mainly on commercial law. Upon the country attaining its independence on 21st March, 1990, the Constitution of Namibia preserved all laws in force immediately before the date of independence until repealed or declared unconstitutional by a competent court. Consequently many laws passed by the South African legislature prior to independence still apply and there are areas of statute law in which no or minimal differences exist between the laws of the two countries.


Currency and exchange control

Until September 1993, when Namibia introduced its own currency, the Namibia Dollar (N$), the South African Rand was also the currency of Namibia. The Rand still remains legal tender, and the two currencies are traded at parity subject however to a service charge of 10% levied by South African Banks when the N$ is converted to the South African Rand in that country. After independence Namibia remained part of the Southern African Rand monetary area (known as "the Common Monetary Area" or the "CMA") which comprises Namibia, South Africa, Swaziland and Lesotho, and the exchange control regulations pertaining to that area are applicable to Namibia. There is no intention to depart from the CMA.

The basic purpose of exchange control is -

* to ensure the timeous repatriation into the Namibian banking system of all foreign currency acquired by residents of Namibia, whether through transactions of a current- or a capital nature; and
* to ensure that foreign currency outflows are for legitimate purpose only in the best interest of Namibia as a whole, and less for the individuals concerned.
* Exchange Control is administered by the Bank of Namibia under powers delegated to it by the Minister of Finance and the Treasury, in whom responsibility for this matter is vested.


Natural resources & Gross Domestic Product

Mineral resources, such as diamonds, gold, uranium, copper, tin, lead and zinc as well as marble and granite are abundant and have formed the basis of the country's commercial economy. Based to some extent on German Colonial Mining legislation, mineral rights are owned by the State and not by private persons or bodies but are passed on to them for prospecting, exploration and mining in the form of licenses grants or concessions. The applicable legislation is the Minerals (Prospecting and Mining) Act which came into operation on 1st April, 1994.

Other statutes may also be applicable, such as the Diamonds Act, 1999. The Petroleum (Exploration and Production) Act provides for the reconnaissance, exploration, production and disposal of, and the exercise of control over petroleum.

The fishing industry, tourism and agriculture are also major contributors to the country's economy.


Economy

Namibia's economy is still largely influenced by and dependant upon that of South Africa due to the historic ties between the two countries, and Namibia is a member of the Southern African Customs Union.

The Stock Exchange Control Amendment Act introduced a stock exchange in Namibia (NSX) which opened in September 1992 and which currently has thirty-seven listings, with a continually increasing market capitalisation which presently totals N$417.7 billion.

The country boasts a good infrastructure with modern telecommunications systems and good road, rail and air links.


Forms of business organisations

Various forms of enterprise are available to the businessman, both under common and statute law. These are as follows -

* Statute law
o Limited liability companies, both public and private, and companies limited by guarantee
o Close Corporations

* Common law
o agents, licencees and distributors
o partnerships
o trusts



Formation of a business

It is necessary for enterprises desirous of conducting business in specific areas to obtain licences or other permits, irrespective of the nature of the enterprise.

Examples are road carrier permits for transportation of persons or goods, prospecting and mining licences for mining concerns, import and export permits, liquor licences for businesses selling liquor and registration of certain industries. Formalities and procedures in obtaining licences or permits vary significantly.

Employment and Residence Permits must be obtained before entering Namibia for any purpose other than tourism. The residents of a number of countries have been exempted from visa requirements, and can obtain a ninety day tourist visa on arrival, but it is advisable to contact a travel agent before travelling to Namibia in order to verify the requirement.


Customs & Excise

On independence Namibia elected to remain part of the South African Customs Union and as such is bound by the applicable regulations as determined by the member states. The Export Processing Zones Act came into operation on 18 April 1995. The only zones established so far are in Walvis Bay and Oshikango, whilst various individual factories have been declared to be export processing zones. The idea behind the Act is to encourage export manufacture and production in such areas. This entails inter alia "tax holidays", duty and Value Added Tax exemptions and employees' salary subsidies.


Foreign Investment

The Namibian Constitution expressly encourages foreign investments. Realising the importance of foreign investments to the country, the Namibian government passed the Foreign Investments Act in 1990. The Act establishes an Investment Centre as part of the Ministry of Trade and Industry, to assist in the administration of the Act.


Intellectual Property

Rights to intellectual property are protected under Namibian law, largely by statute, but also at common law. The existing statutes applicable are being reviewed in order to ensure eventual compliance with international agreements to which Namibia is party.


Labour

Like most other African countries, Namibia experiences high unemployment, essentially of unskilled labour, and has shortages of skilled labour. Expertise is often obtained from outside the country, but the Ministry of Home Affairs has to issue the requisite work permit.

The Labour Act, 1992 is applicable to all employees in the private sector, and stipulates basic conditions of employment, prohibits discrimination on various grounds in relation to a person's employment or occupation, and authorises affirmative action.

Affirmative action is regulated by the Affirmative Action (Employment) Act, 1998.


Taxation

The relevant legislation is similar to that applicable in neighbouring countries, notably the Republic of South Africa. There is no Estate Duty and Donations Tax in Namibia. Namibia has double-taxation treaties with the United Kingdom, the Republic of South Africa, Mauritius, Sweden, France, India, the Russian Federation, Romania, and Germany, which have a bearing on income tax, and other such treaties are being negotiated. Capital gains are not taxable, and although municipalities and similar local authorities levy rates and taxes based on the valuation of immovable property in order to cover municipal expenses, these are moderate;

* The principal statute is the Income Tax Act, 1981 which was last amended during 1999. Income tax is presently levied at 35% in respect of companies, other than mining companies, whilst the marginal rate of tax for individuals, who are taxed on a sliding scale, is 36%. Persons earning less than N$20 000 per annum are exempt from the payment of income tax. Mining companies are taxed as follows -
1. hardrock mining companies in terms of a formula which has the effect of increasing the rate of tax as the ratio of profit to revenue increases. The minimum tax rate for hardrock mining companies is 25%;
2. diamond mining companies are taxed at 50% plus a surcharge of 10%, resulting in an effective rate of 55%;
3. oil and gas extraction companies pay at the rate of 35%. These companies are subject to additional profits tax which is calculated in terms of a complex formula contained in the Petroleum Taxation Act;

* Petroleum income tax and additional profits tax apply in respect of petroleum exploration and certain royalties may be payable to Government in respect of the exploitation and sale of other minerals recovered in the course of operations;

* Importers and manufacturers of goods are obliged to pay additinal sales duty (ASD) at a rate which ranges from 5% to 10-15% covering the range of goods from necessities to luxuries. This rate is calculated on the value of the goods at the time of import or sale of goods respectively;

* Value Added Tax is levied on goods and services at a zero rate or 15% depending on the nature thereof;

* Transfer duty is payable by the purchaser of immovable property, be it improved or unimproved, ranging from 1%, 5% and 8% for land value in excess of N$250 000;

* Stamp duty is levied on various documents at specified rates in terms of the Stamp Duties Act, 1993 and the schedules thereto.



Legal Disclaimer

This information is not intended for use without professional advice

Dude,

For general enquiries the Ministry of Trade and Industry's Investment Centre would probably be the best and first point of contact.

Ministry of Trade and Industry - Namibia - Incentives

For financial affairs, the Bank of Namibia ( Welcome to Bank of Namibia) or the Ministry of Finance (Customs & Excise) would probably have the most up-to-date information.