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I am not the economy ÔÇô Schlettwein

Fri, 21 July 2017 17:05
by Linekela Halwoodi
News Flash

Finance minister Calle Schlettwein has said he suspects that the recent accusations that he was working against progress could be connected to the upcoming Swapo elective congress. The Swapo Party elective congress is scheduled for end of the year.

 Last week Schlettwein’s name was bandied around the issue of the sale of four planes that were being leased by Air Namibia from Air France’s HOP! to Westair.

The Namibia Chamber of Commerce and Industry chief executive officer Tarah Shaanika warned Schlettwein not to sink the economy. Shaanika was responding to Schlettwein’s statement during the state of the economy address last week when he said that his ministry would take drastic action against businesses that fail to pay tax. The NCCI boss said that such threats and drastic action will only save to collapse the private sector that is reeling from the effects of recession.

 “I am the minister of finance. I am not the economy. I am not the private sector that is not investing. I am not the person who has control over commodity prices. I am not the minister who has control on the value of our currency. “The fact that liquidity dried up is not a matter that we can do much on. We can only react to it. What we did is the correct thing to do, by cutting expenditure. “If we had not done it, this economy would have crashed and we would have been fatal and in a situation that is much worse.

 ‘We would have seen pension funds and the financial sector coming under real pressure. We had to defend the liquidity of the private sector both on the banking and non-banking side. “And we achieved that, the financial sector is stable and well-funded. Liquidity is coming back, confidence is coming back. “Our bonds and bills are taking up so the rating agency is happy they maintained our rating. What we did may have caused pain but it was the correct method to avoid this economy from being in a much worse situation than we are in.

 “On the ground yes we delayed some payments but we are catching up and we have in fact caught up,” he said in an interview with The Villager on Monday. Schlettwein said the issues raised by the NCCI regarding late payments of invoices will be sorted within the next three months.

“We will have a solution worked out. For now the budget is fully funded and the ability to fund those invoices is now there. We have agreed on the strategy to do that. l have a meeting with NCCI later this week where I will talk to them about it. We will see how we go forward,” he said. Although he could not talk about whether there is need to trim the Cabinet and top officials in the president’s office, Schlettwein said: “The only thing I can say is, when you go into these economic down turns it is time to shed fat. I think government will take the responsible decisions to become leaner and more effective. That includes public enterprises but also public institutions.”

AIR NAMIBIA

Schlettwein reiterated that he had nothing to do with the sale of the aircraft by HOP! and that he has an idea why some people linked him to the deal. He said there are people who are positioning themselves ahead of the Swapo Party elective congress by deposing others. In his case, Schlettwein said, there was nothing treasury could have done with the sale of the aircraft that left Air Namibia shell-shocked last week. “If the deal is between two private companies, the lease stays intact. It has no additional impact to what the government needs to pay to air Namibia.

 “We are not involved as treasury. The factual situation is that the ministry of finance has not been involved in the deal, and we have not been approached. We have not been consulted and have not approved anything. I have no private interest in any business,” he said. The works minister Alpheus !Naruseb, who last week told The Villager that the aircraft had been sold without Air Namibia’s knowledge, also informed the airline that there would not be any bailout money for July because finance ministry had not given them anything.

Schlettwein, however, said this was an error because Air Namibia would get the bailout. “We followed up on Friday and we found out that the official quoted the wrong figure. So the money in fact made available to the ministry includes the subsidy for Air Namibia and the official just made a mistake by looking at the wrong figure.

Air Namibia will be able to get its subsidy,” Schlettwein said. While Schlettwein said Air Namibia would get bailout money, he said there is no money for the airline’s plans of buying six aircraft. A private and confidential document seen by The Villager shows that Air Namibia plans to buy six aircraft: two Embraer ER135 and Embraer ER145 for the regional and domestic routes. Westair has since said that although they have bought the aircraft, the Air Namibia agreement will hold on indefinitely. In a statement issued on Monday, Westair said the only change there will be is that the aircraft now belongs to a local company.

It said the new venture enables the renewal and upgrade of the current domestic and regional fleet and will address the issues of dispatch reliability that could have negatively impacted the travelling public in the long run. Westair’s acquisition of the aircraft came after Air Namibia was considering buying six planes. The Villager has a confidential document that shows that the airline was either considering continuing leasing or to buy. According to the documents, if Air Namibia intended to buy two Embraer ERJ 135 jets and four Embraer ERJ 145 jets for the regional and domestic routes pending board approval.

The document says that the lease agreement of the four aircraft ERJ 135 from Air France has already been extended for two consecutive months. The expiry dates of the planes were in January, April, May and June 2016, the document says, adding that after the extension, the leases will expire in February, April, May and June 2018. Of the six proposed aircraft, Air Namibia says four should have a passenger capacity of between 50-60, while the other two should have 37-40 capacity.

 Air Namibia, the documents further show, had an option to buy the CRJ 100 and the CRJ 200 from Canada, which they can land and take off anywhere in the region and the country.

 “The only downside is that Air Namibia does not have any operational or technical experience with the CRJ aircraft,” the documents say. In the case that Air Namibia opts to buy second hand aircraft, they will part with about US$26 million for four ERJs 135 and two 145s. “The purchase option will therefore cost the airline a total of US$12 million (N$156 million if we assume a price of US$2 million per aircraft. Furthermore, if the airline borrows the N$156 million from the market to finance the aircraft purchase over a five-year repayment period, the approximate interest cost will be N$41,7 million,” the documents said.

Since Air Namibia has already invested in the ERJs, the documents recommended that the airline should continue with this aircraft type. If Air Namibia chooses to lease, they would need two ERJ 135 and four ERJ 145 from Air France or look for similar aircraft from other lessors. “The GRN will continue to subsidize the payment of leases depending on the annual budget allocations by the Treasury,” the documents said. “If for instance, the airline manages to get aircraft to lease at indicative monthly lease amounts of US$50, 000, the total for six aircraft will be US$300, 000 (N$3,9 million).

“The annual cost for leasing six aircraft is US$3, 6 million and if the aircraft are leased for five years, the total contract will be US$18 million (N$234 million) at the current rate,” the document titled Supply of Six Embraer Regional Aircraft said. About these plans, Schlettwein said: “They have no money for that.”

SME BANK

Asked whether he was not aware of SME Bank’s problems before February 2017, Schlettwein said he was and that they had been propping up the bank for three years in a row. Currently, the SME Bank is undergoing liquidation following a successful application by the Bank of Namibia to shut it down because it is insolvent. The insolvency is being blamed on the N$200 million that was invested in South Africa last year by some managers who have since been disempowered.

The SME Bank was a joint venture between the government of Namibia, Metbank Zimbabwe and Enock Kamushinda, a Zimbabwean businessman. According to Schlettwein, establishing the SME Bank was a good idea and is still a good idea in his opinion because SMEs need to be funded. “We were aware that there are difficulties at the beginning and the competition was very stiff. They are nothing else but a retail bank that tried to establish itself amongst very well established banks and it was difficult for them, so that’s why we did not say collapse it and stop it,” he said.

The minister also said there is need for a public entity that takes up the responsibility of funding small businesses because the private sector is not doing it. “That was the original idea and is still the opinion of government but everything comes so far and then you realise you can spend those public resources better,” he said. If you perpetually bail an entity out, he said, and it falls back into loss making year after year, a decision has to be taken on whether that public fund is best used at the manner or whether it should be used differently. “When it became clear that there were some illicit activities where these N$196 million left the country without being in compliance with the bank’s institutional action that’s when the red flags became serious.

“Because then the question is, do you actually replenish for stolen money and you leave the same structure and the same people in place? That is when the regulator, the Bank of Namibia stepped in and said well this is outside the compliance of what a bank is obliged to adhere to and we were informed hat yes that is the situation and that there are issues with the bank being not liquid enough and technically insolvent and there is evidence of monies that have left the country illicitly.

 “We then said the regulator must do what the Banking Institutions Act obliges it to do and take over the custodianship and replace the management. And see what they can do to rescue the bank. They came back and said they can’t rescue without additional capital.

 “We then said because of the fact that it would be tantamount to repay stolen money we don’t see a way clear to commit public resources for that. We had a look at the loan book, there were defectors on the loan book so the bank actually failed in its mandate to fund SMEs, there were more consumption loans to individuals than to SMEs and that we had problems with the structure of the bank itself. We the majority shareholder said it is better to have this bank collapsed, we will curb our damages and then restart with similar capital amounts a structure that is well effectively funding SMEs,” he explained.

BULK FUEL TENDER

The Villager also asked Schlettwein why picked up Patrick Swartz as the chairperson of the procurement when he was said to have signed off the controversial tender for the bulk fuel storage at Walvis Bay. The tender for storage was awarded to CRB, a consortium of China Harbour Construction Company, Roads Contractor Company and Babyface Civils. The cost of the storage has escalated from N$3, 5 billion to N$5, 6 billion because it was quoted in US$. Swartz was Ericah Shafudah’s deputy at the now defunct Tender Board of Namibia. He was the one who signed off the tender when Shafudah did not attend the meeting that discussed and finalised the deal.

 Schlettwein said he does not have any evidence that the tender board was at fault, saying that someone changed the details. “The tender board allocated a tender for a certain amount in N$ but that tender award is the one that was not implemented. It was changed by someone else not the tender board. “The tender board actually said no. I have no evidence that the person who was in charge of the tender board did anything wrong. They actually evaluated the tender and in the interest of the state. So what happened after and who changed data date that is where we have to look into. The matter is under investigation,” he said.