Tourism Board Faces ALiquidity Risk …as it incurred a deficit of N$19 million

By:Justicia Shipena
Entrusted with implementing the national policy on tourism the country, the Namibia Tourism Board (NTB) now faces a liquidity risk. This was revealed in the latest NTB’s audit report released by auditor general Junias Kandjeke.
The audit was conducted for the 2020/21 financial year.
“The board is exposed to liquidity risk, which is the risk that the board will encounter difficulties in meeting its obligations as they become due,” Kandjeke said.
According to Kandjeke, the agency however manages its liquidity risk by effectively managing its working capital, capital expenditure and cash flows.
He said that NTB’s financing requirements are met through a mixture of cash generated from operations and long and short-term borrowings adding that committed borrowing facilities are available for meeting liquidity requirements. He added that deposits are held at central banking institutions.
In this light, he observed that there have been no deviations in the agency’s liquidity risk management practices.
“There have been no significant changes in the liquidity risk management policies and processes since the prior reporting period,” he said.
The audit report shows that the board in 2020 had borrowings from two to five years of N$10.5 million and, over a year of N$2.2 million with lease liabilities from two to five years of N$927 171 and lease liabilities over a year stood at N$1 million.
In the following year, the borrowings of NTB from two to five years stood at N$9.9 million, and borrowing in less than a year at N$2.4 million.
The auditor general said the agency is also exposed to foreign currency risk as a result of certain transactions which are denominated in foreign currencies.
“Exchange rate exposures are managed within approved policy parameters utilising foreign forward exchange contracts where necessary. The foreign currencies in which the board deals primarily are US dollar, Euro and Yen. There have been no significant changes in the foreign currency risk management policies and processes since the prior reporting period,” he added.
Additionally, when it comes to interest risk, he said fluctuations in interest rates impact on the value of investments and financing activities, giving rise to interest rate risk.
In this case, he said that the board’s debt is composed of different instruments which bear interest at either fixed or floating interest rates, and that the ratio of fixed and floating rate instruments in the loan portfolio is monitored and managed by incurring either variable rate bank loans or fixed rate bonds as necessary.
“Board policy with regards to financial assets, is to invest cash at floating rates of interest and to maintain cash reserves in short-term investments in order to maintain liquidity, while also achieving a satisfactory return for shareholders. There have been no significant changes in the interest rate risk management policies and processes since the prior reporting period,” he stated.
Another observation he made was that the state entity has not experienced a change in the maturity of the property, plant, and equipment.
In this light, between March 2020 and 2021, the board’s investment in property, plant and equipment amounted to N$43 million.
The Covid-19 pandemic with its lockdowns negatively affected revenues in the tourism industry.
Kandjeke said management assessed the impact of Covid-19 on the cash flow of the agency and expressed satisfaction that the board that the board was still able to continue generating sufficient levels of revenue to meet reduced expenditure levels.
“The board has access to cash and funding resources to meet its obligations as and when they become due and payable. The shareholders will be advised of any new developments that may have a material effect on the operations of the board,” he noted.
Furthermore, Kandjeke said that during the period under review the deficit incurred by NTB amounted to N$19 million, also stating that projected cash flows are inadequate to meet the operational requirements for the foreseeable future.