WHY NAMIBIA
With a sophisticated infrastructure and a well developed economy, Namibia offers a wealth of business and property investment opportunities. The current return rate on investment in Africa is more than 30%, making the continent the fastest growing region in the developing world. However, it would be ill advised to proceed with a purchase or investment in Namibia without proper guidelines and representation. Although the following serves as basic guidelines, please contact us for more detail.
Not only does Namibia enjoy one of Africa’s most peaceful and politically stable environments, but also has the infrastructure to rival those of many developed countries. What makes it more attractive is it’s natural and diverse landscapes, moderate temperature and the fact that it is one of the most sparsely populated countries in the world, with an estimate population of 2,5 million people.
The country has an abundance of natural resources. The economy centres on agriculture (crops, stock farming and hunting), fishing and mining, which is Namibia’s most important earner of foreign exchange. The rich fishing oceans place the country among the top ten nations in the international fishing industry while the mining and natural resources include, amongst others, world class diamonds and uranium, copper, lead, zinc, gold, semi-precious stones, industrial minerals, salt and fluorspar.
With Namibia being one of the most beautiful and safest countries in Africa to visit, tourism is also a rapidly growing sector, and is becoming a major earner of foreign exchange while creating jobs and generating income for the nation.
No wonder that so many foreigners fall in love with Namibia after their first visit to the country and then want to know how to invest in Namibia and obtain Foreign Investment Status. Indeed Namibia does offer excellent opportunities for investment across all these and other sectors. Most of the country’s primary resources are exported, while almost all consumer goods are imported. Thus there is particular scope and advantages for investment in manufacturing for both local and international markets. These benefits are complemented by an advantageous legislative and fiscal environment and a government keen to foster the engines of economic growth and prosperity.
The following deals with (A) aspects regarding foreigners and real estate, (B) general investment and Investment Status in Namibia.
A. REAL ESTATE INVESTORS / FOREIGN PROPERTY OWNERS
While the rest of the world shudders at the potential impact of the Covid 19 crisis, rising inflation and financial crisis in Europe, Namibia continues to grow. Before COVID Namibia has indeed become a new international property hot spot with new developments and ambitious construction projects (both tourism and housing) springing up from the previously barren desert.
Article 16 (1) of the Namibian Constitution guarantees all persons the right to acquire, own and dispose of all forms of property in any part of Namibia.
Our laws prohibit the selling or letting of immovable property to illegal immigrants. “Foreign national” does not mean a person is an illegal immigrant; it is the term we use to describe a person who is neither a Namibian citizen, nor a holder of a resident status/permit. Without proof of a resident permit you really have no way to know whether such a person is really permitted by the authorities to reside here. From a conveyancing perspective, once legally allowed to be in the country and official permits provide proof thereof, foreign residents and citizens of Namibia are generally regarded as having equal status when it comes to the purchase and possession of land/real estate with the important exception of agricultural land.
The Agricultural Land Reform Act prohibits foreign nationals to enter into any agreement regarding the right to occupy or possess agricultural land or a portion thereof in Namibia, without the written permission and consent of the Minister.
To date no further restrictions are being placed on the acquisition of landownership by foreigners. As long as a foreigner did not enter Namibia illegally, and his/her permit does not prohibit the acquisition of immoveable property, he/she may certainly buy, own and sell real estate in Namibia.
• Your Real Estate InvestmentOver the last couple of years many local and foreign investors have turned to property in Namibia as a sound investment. Like all other investments, you need to understand how property investment works before you decide to invest your hard earned money. Keep in mind what you want to accomplish – create wealth and to protect that wealth. Whether it is for investment purpose or buying a family home, one would normally put in careful consideration. It is therefore important that you should not be pressured into making decisions and always keep the following basics in mind:
◦ Purchase Price
◦ Deposit needed
◦ Transfer and Stamp Duty payable
◦ Attorney’s transfer fees
◦ Bond Registration fees
◦ Valuation and Bank admin fees
◦ Miscellaneous such as painting, renovation, carpets, maintenance, etc.
◦ Monthly rates and taxes
◦ What is the return that you will be getting?
◦ What happens if I lose the tenant?
◦ What happens if the interest rates go up?
◦ Will the property produce a positive cash flow?
◦ Will I be able to easily sell the property if I need to?
◦ Have I done sufficient research?
◦ Am I prepared to manage the investment?
• Investing in real estate to let may be a safe and profitable investment if managed correctly. It is not a “get rich quick” type of investment, but rather a long-term commitment. It may certainly also be seen as an extra monthly contribution to the home loan repayments and will enable you to subsequently reap the benefits of a quicker return on your investment.
• The first of a series of important steps is to get a suitable property. This is a long term investment; do not buy a property in haste, and rather make sure the property will generate the expected return on your investment. Therefore you need to obtain as much information as possible regarding the property and location before you invest in it. Once you have the property, remember that a well maintained rental property normally attracts the right type of tenant. Poorly maintained properties may attract those who would overlook “these problems” but may also overlook the monthly rental payments.
• Be practical; you need to live close by the property to enable you to manage it properly and to make regular inspections. However, keep in mind that the tenant has a right to the undisturbed use of the premises, therefore surprise visits will be illegal and you need to be reasonable in making appointments to visit and have inspections.
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• Invest wise: Don’t just buy any property. Buy only those properties you feel you can almost not carry on living without! Try to find a property with something (wow) special about it – a view, large trees, rich history, sea-front, water rights, rezoning, consolidation or subdivision potential, a new road or future supermarket, etc. Be creative when you look at properties to buy. Look for potential that will increase the curb value. Besides location, space (big land and large rooms) and the possibility of a garden are other important factors. There is also a huge psychological and price difference for instance between a seafront property and one just behind it in the second row. Go for the best, because your returns will be much higher. If you are short of money here, then negotiate with your financial institution granting the loan for a lower deposit. This means that you will probably spend the same amount of your hard earned cash on the seafront one as you would on the second row at a higher deposit.
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• Without losing the deal, try to buy for as low a price as possible; you’ll be looking to make more “profit” when you buy a home than when you sell it in future.
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• When buying with the idea to rent the property; ask yourself the following questions:
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• For a long term investment: Try to find a large piece of land in an area which you know will become valuable in future (10-15 years’ time). Without buildings on the land your rates and taxes will be low. If possible, establish something at low cost that people would want on that land in fifteen years’ time; a garden or something which cannot be established overnight. A few investments like this at low prices will make a fortune for you in the future. Always keep in mind that most properties have a sharp growth rate and then level off. Always think about the money which is tied up in a property which has levelled out. Think what this money can do on another property.
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• The serious investor: Buy as expensive as you possibly can. A property of, say, N$ 400 000.00 cannot be pushed too much because buyers in that bracket simply may not have the money to pay more. The opposite is true for a property with a value of N$ 5 000 000.00 to N$ 10 000 000.00. If someone really wants it they will be prepared to pay a few hundred thousand more. Remember, the time that you will spend on the above examples (or wait for the return of your investment) will be the same.
B. GENERAL INVESTMENT INCENTIVES AND FOREIGN INVESTORS STATUS IN NAMIBIA
Namibia has a highly competitive incentive and fiscal regime which adds to its attractions for foreign investors. The cornerstone of this is the Foreign Investment Act (The Act) and its provision for a Certificate of Status Investment (CSI), the Special Incentives for Manufacturers and Exporters and the Export Processing Zone (EPZ) Incentives. Besides the granting of a CSI, the Act further provides for liberal foreign investment conditions with equal treatment of foreign and local investors, openness of all sectors of the economy to foreign investment, and full protection of investments.
The following will set out the basic guidelines of the Act and more specifically pertaining to Foreign Investment Status and the requirements to be met to obtain a CSI:
A CSI certificate can be obtained from Namibia’s Ministry of Trade and Industry (hereinafter referred to as The Ministry) by applying for such in terms of The Act. The person or entity will have to conform to all the requirements as set out in The Act as well comply with all the requirements set out by The Ministry.
Business activities of foreign nationals
A foreign national may invest and engage in any business activity in Namibia which any Namibian may undertake. A foreign national shall be in no different position than any Namibian, except as may be otherwise provided by the Act.
No foreign national engaged in a business activity or intending to commence a business activity in Namibia shall be required to provide for the participation of the Government or any Namibian as shareholder or as partner in such business, or for the transfer of such business to the Government or any Namibian: Provided that it may be a condition of any licence or other authorisation to or any agreement with a foreign national for the grant of rights over natural resources that the Government shall be entitled to or may acquire an interest in any enterprise to be formed for the exploitation of such rights.
The Minister may, by notice in the Gazette, specify any business or category of business which, in the Minister’s opinion, is engaged primarily in the provision of services or the production of goods which can be provided or produced adequately by Namibians and, with effect from the date of such notice, no foreign national shall, subject to the provisions of section 7(3), through the investment of foreign assets, become engaged in or be permitted to become engaged in any business so specified or falling within any category of business so specified.
Section 7(3) sets out the following:
“A notice by the Minister under section 3(4) shall not affect the validity of any Certificate issued before the date of such notice in respect of any enterprise which is an enterprise specified in such notice or which falls in any category of business so specified, or any right, privilege or benefit accorded by this Act to the holder of such a Certificate.”
Currently there are no notices in any Government Gazettes setting out any business or category of business that prohibits foreign nationals from investing in Namibia. Furthermore it is quite clear from Section 7 (3) that persons with existing Foreign Investment Status cannot “lose” the status after The Ministry has granted the person with such a certificate before a Gazetted notice.
Where the investment is for the acquisition of shares in a company incorporated in Namibia:
The investment shall, notwithstanding that the value thereof is equal to or exceeds the amount determined under subsection (1)(a), qualify as an eligible investment only if-
1 Not less than ten per cent of the share capital of the company is held or will, following the investment, be held by the foreign national making the investment; or
2 The Minister is satisfied that the foreign national making the investment is or will be actively involved in the management of the company.
Where the investment is for the acquisition of a participating share in an unincorporated joint venture, the investment shall, notwithstanding that the value thereof is equal to or exceeds the amount determined under subsection (1)(a), qualify as an eligible investment only if-
1 Not less than ten per cent of the participating share of the joint venture is held or will, following the investment, be held by the foreign national making the investment; or
2 The Minister is satisfied that the foreign national making the investment is or will be actively involved in the management of the joint venture. (Sub. Sec. 3 (b))
The last “minimum value” set out in a Government Gazette was the 1st of November 1996 in Gazette Number 1436 in which Honourable Minister H. L Hamutenya determined that the minimum value of foreign assets required to constitute an eligible investment under The Act shall be the equivalent (at the date of lodging the relative application for a Certificate of Status Investment) of N$ 2 000 000 (Two Million Namibian Dollars).
Application for a Certificate of Status Investment
In terms of Section 16 of the Act, a foreign national may apply to the Minister for a Certificate of Status Investment in respect of an investment which qualifies as an eligible investment in terms of section 5. Such application shall be in the prescribed form, which shall require such information from the applicant as may be necessary to enable the Minister to consider applications in with the Act.
In considering an applicant for a Certificate of Status Investment, the Minister shall have special regard to-
• the extent to which the proposed investment is likely to contribute towards Namibia’s development objectives;
• the extent to which the enterprise in which the proposed investment is to be made will utilize Namibian resources, including labour and natural resources so as to contribute to the economy, by, inter alia-
◦ increasing employment opportunities in Namibia;
◦ providing for the training of Namibians;
◦ earning or saving foreign exchange; and
◦ generating development in the less developed areas of Namibia;
• the extent to which the enterprise in which the proposed investment is to be made will contribute to the advancement of persons within Namibia who have been socially, economically or educationally disadvantaged by past discriminatory laws and practices or will facilitate the implementation of policies and programmes aimed at redressing social, economic or educational imbalances in the Namibian society;
• the extent to which the enterprise in which the proposed investment is to be made will make provision for equal opportunities for women; and
• the impact which the activities of the enterprise in which the proposed investment is to be made is likely to have on the environment and, where necessary, the measures proposed to deal with any adverse environmental consequences.
The Act furthermore sets out the basic framework of the application that is to be brought before The Ministry. It will be clear from the part of this document that deals with the application for Investment Status how the application form and format is determined by this section. Furthermore, it can clearly be seen in this section that the Government intends to uplift the community with foreign investment, as well as protect the country’s resources from exploitation by foreign nationals.
Recent history has shown the difficulties of foreign nationals starting new businesses in Namibia. These investors should ensure that they are aware of Labour Legislation, Affirmative Action and proposed Black Economic Empowerment. It is therefore imperative that potential investors should consult with a local legal practitioner, labour consultant and auditor or accountant to enable them to make well informed decisions.
• Obligations of holder of Certificate The holder of a Certificate shall bring to Namibia and invest in or apply for the benefit of the enterprise, the foreign assets to which the Certificate relates within the time or times provided in the Certificate. The holder shall furthermore carry out the obligations agreed between the Minister and the holder as specified in the Certificate. If the holder of the Certificate fails to carry out the obligations referred to in this section within the time or periods, if any, specified in the Certificate, the Certificate may be cancelled in accordance with the provisions of the Act.
• Amendment and transfer of a Certificate The Minister may, with the consent or on application of the holder of a Certificate, as the case may be, amend a Certificate issued under this Act or transfer the Certificate to any other foreign national.
• Cancellation of a Certificate The Act also makes provision for the cancellation of the Certificate in case of offences and when it is established that a Certificate was issued in consequence of incorrect information supplied by the applicant; or a person who acted on behalf of an applicant for a Certificate; or where the holder of a Certificate failed or neglected to implement the proposals forming part of the application for the Certificate, as set out in the Certificate; or failed or neglected to comply with any other obligation referred to specifically in section 12.
• The Act refers to dispute resolution and determines that a foreign national applying for Investment Status can chose whether the person wants to go for international arbitration or refer the dispute to a competent Namibian Court if and when a dispute arises between The Ministry and the foreign national. Theses implications should be discussed with a legal practitioner.
• Offences Any person who in connection with an application for a Certificate or for the purpose of obtaining or retaining any foreign currency as provided for in the Act, makes any statement which he or she knows to be false or does not believe to be true, or knowingly furnishes any false information, shall be guilty of an offence and liable on conviction to a fine not exceeding R100 000 or to imprisonment for a term not exceeding ten years, or to both such fine and such imprisonment.
• It is clear from this section that a harsh penalty will be imposed on any person trying to obtain Investment Status with false information.
CONCLUSION
The application for Foreign Investment Status is quite a strenuous process and the foreigner desirous of investing and obtaining such a certificate must make sure that they have done the proper homework on what exactly they wish to do in Namibia.
It is clear from the aforementioned that the Government and people of Namibia are open to foreign direct investment and foreign nationals coming to Namibia. However, it is also clear that the Government and Namibian people do not want to be extorted and want the local communities to be uplifted and educated in the process of foreign investment
To date no further restrictions are being placed on the acquisition of landownership by foreigners. As long as a foreigner did not enter Namibia illegally, and his/her permit does not prohibit the acquisition of immoveable property, he/she may certainly buy, own and sell real estate in Namibia.