Proposed legislation regulating franchises in Namibia

August 06, 2017

Franchise Law Alert

Author(s): Kendal H. Tyre

Namibian Competition Commission has proposed legislation regulating franchise models in Namibia.

Currently, there are no franchise-specific laws in the country of Namibia, but it appears that may not be the case for much longer. Mr. Mihe Gaomab II, CEO of the Namibian Competition Commission (NCC), announced in early 2017 that the NCC submitted proposed legislation regulating franchise models in Namibia to Namibia’s Minister of Trade and Industry. This is a long awaited step for the country, which in the last decade has had an increasing number of Namibians and local businesses express concern about the absence of franchise laws in Namibia, noting that the largest sections of the country’s modern retail sector, which typically have monopoly power over the franchise sector, are currently owned and operated by powerful foreign businesses and transnationals. These foreign businesses and transnationals have the necessary capital and connections to collude with one another to engage in anti-competitive activities by creating certain barriers to the entry of local Namibians in certain franchise opportunities.

To further illustrate the point: imagine the expansion of restaurant “XYZ” franchise outlets in the country of Namibia. All XYZ outlets in the country are owned by one South African (or some other foreign national) with exclusive franchising rights for the entire country of Namibia. XYZ restaurants are doing extremely well, but have only one owner. Essentially, the South African owner and the foreign-based franchisor of the XYZ franchise brand have reserved extra-territorial rights over a sovereign country, which blocks access to the lucrative franchise opportunity from prospective Namibian franchisees. Often XYZ is not the only franchise where this type of non-competitive activity occurs; there may be a number of foreign businesses in the same industry that have purposefully or unintentionally obstructed Namibian entrepreneurs’ access to lucrative opportunities in the same way.

Organizations like the NCC acknowledge this problematic practice, while also recognizing the benefits franchising has for the Namibian economy. In light of growing concerns, the NCC has submitted, as directed by the Ministry of Trade and Industry, a study of these non-competitive activities that will serve as guidance to the drafting of a franchising law in Namibia. The NCC, Namibians and local businesses hope that such a franchising law would improve the franchising sector by leveling the “playing field” and putting in place a licensing and registration process that ensures that franchise operations are legal, fair and positively impact enterprise development in the country.

For more information on franchising in Africa see International Franchising 2016: Legal and Business Considerations, a book edited and co-authored by Kendal H. Tyre, Executive Editor, as well as Diana V. Vilmenay-Hammond and Keri A. McWilliams, Managing Editors, and Pierce Haesung Han and Nia D. Newton, Assistant Editors. To view a video book trailer of the book, click here.

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