SOE debt government’s albatross

Jo-Maré Duddy – The high debt of state-owned enterprises (SOEs) presents a significant contingent liability for government, according to Fitch Ratings, the international credit rating agency which kept Namibia’s credit rating at junk this week.According to Fitch, SOEs’ total debt at the end of March 2017 stood at 25% of gross domestic product (GDP). Of this 7.5% of GDP was guaranteed by government.Budget documents tabled by finance minister in March show that Namibia’s GDP at the end of March 2017 was nearly N$164.2 billion. That means that the total debt of SOEs at that date was about N$41 billion. Government guarantees therefore amounted to around N$3 billion.“Some loss-making SOEs, notably in the transport sector, could require re-structuring supported by the sovereign,” Fitch says.“The expected liquidations of the troubled SME bank and Road Contractor Company are still pending judicial approval but will generate only modest costs for the budget. A capital injection of around 0.3% of GDP is also expected at the public Agribank,” it continues.The agency says the Public Enterprise Governance Act Amendment bill will streamline the institutional framework of SOEs. “Its approval in parliament is likely in 2018.”The partial privatisation and listing of MTC on the Namibian Stock Exhange (NSX) is expected in the coming months, Fitch says. “Additional privatisations of major government-owned assets seem unlikely in the medium term.”In Fitch’s view, the government's plan to "leverage the assets" of some profitable SOEs and increase their involvement in the execution of public investment could weaken transparency and undermine the balance sheets of the affected enterprises.NEEEF, landPolicy uncertainty has somewhat eased following the November 2017 congress of Swapo, in line with its expectations, Fitch says.“The party elections were won by the incumbent president's slate and were followed by a minor government reshuffle. We do not expect the 2019 presidential elections to lead to a significant shift in policies given Swapo's dominant position in the political landscape,” it says.Namibia's governance indicators are a major credit strength, at well above the 'BB' median, “reflecting long-standing political stability and a robust institutional framework”, the rating agency says.Commenting on the National Economic Equitable Empowerment Framework (NEEEF), Fitch mentions that government has retracted “the controversial provision” of the draft bill that required a 25% stake in the capital of private companies to be reserved for previously disadvantaged persons. “We expect a revised NEEEF draft bill to be submitted to parliament ahead of the 2019 presidential election,” Fitch adds.Reacting to the latest Fitch report, Dylan van Wyk, senior analyst at Cirrus Capital, it is a plus that “the risk of policy uncertainty has eased since the last review as controversial legislation such as National Economic Equitable Empowerment (NEEEF) draft bill has been retracted for the time being”.On the land issue the credit rating agency refers to the Second Land Conference scheduled for October. This may lead to “some policy uncertainty amid calls for expropriation without compensation, a measure that is opposed by the government”. “These demands and the withdrawn controversial provisions of the NEEEF draft bill illustrate the lingering policy risks resulting from Namibia's high inequality,” Fitch says.

SOE debt government’s albatross

Kommentaar

Republikein 2026-03-10

Meld asseblief aan om kommentaar te lewer

SOE debt government’s albatross

Kommentaar

Republikein 2026-03-10

Meld asseblief aan om kommentaar te lewer

Intekening vereis om toegang tot inhoud te kry. ×

MELD AAN

Advertensie

Intekening vereis om toegang tot inhoud te kry.