Petronella Sibeene
25 April 2008
Windhoek — The number of people defaulting on obligatory monthly loan repayments is on the increase and more and more houses and cars are being repossessed as higher interest rates, inflation and fuel hikes complicate matters for debt servicing.
Current economic pressures have affected almost all Namibians regardless of their socio-economic status.
Debt-strapped Namibians are losing their homes and information from one of the banks indicates that every month, at least one Namibian loses his or her house and the same could be happening with other commercial banks.
Most banks could not disclose how many houses are being repossessed monthly saying their risk policies do not allow them to divulge credit risk information.
But they said an increase in defaulters is likely given the prevailing economic conditions.
Chief Risk Officer of Nedbank Namibia, Andre Venter says "a deterioration in the arrears portfolio and an increase in defaults on home loan payments and vehicle instalments over the next 12 to 18 months is expected."
It is anticipated that this will be a difficult period, he added. Venter attributes this trend mainly to current economic conditions, affected by rising fuel costs, and the subsequent effect on food prices and increase on other commodities.
A growing trend is that more Namibians, under growing economic pressure, are surrendering their houses in luxurious areas opting to purchase cheaper houses in other suburbs.
One house owner in Hochlandpark who preferred to remain anonymous has put her house on sale saying, "Bank interest rates have gone up. I used to pay about N$4000 to the bank last year and already, I have to cough out more than N$1000 more. I can no longer afford. I have to look for another cheaper place in Katutura."
First National Bank (FNB) Housing Index Report 2007 shows that there has been demand for properties in the lower price segments (below N$500000) and demand for houses in higher price range diminished over 2007.
Actually, the current interest rate cycle has slowed demand for upmarket property by 15 percent and Swakopmund is most affected (23 percent).
"This is confirmed by the subdued activity rates of estate agents operating in the upper price segments, the number of transactions have slowed down significantly in the higher income areas," the report says.
During 2006/7, the National index fell by 15 percent and according to FNB Namibia Holdings' Manager for Market Research and Intelligence, Daniel Motinga, there is little in sight to suggest the situation will change anytime soon.
Motinga added that for the average consumer, food accounts for approximately 30 percent of the consumption basket, followed by utilities, i.e. housing, water, electricity, gas and other fuels, standing at 20 percent, while transport accounts for 15 percent of the consumption basket.
"What makes the situation drastic for consumers is the fact that these consumables, particularly food and transport witnessed high inflation rates.
Annual average food inflation stands at 15.4 percent as at end of March 2008, with transport coming in at 10.27 percent over the same period," Motinga said.
As recently as last week, the Electricity Control Board announced that electricity tariffs will increase by over 18 percent by June, which will exert further pressure on consumers' disposable income, Motinga said.
With oil prices skyrocketing and the economy in a downturn, consumers are looking to downsize to cheaper, more fuel-efficient vehicle models and reduce their payments. Even those with good credit and lower interest rates are finding it difficult to sell their vehicles because they have more left to pay off than their cars are worth.
Local auction companies have also experienced an increase in the number of repossessed cars since February this year.
"We have about 100 cars going for auction every month," says Aucor Namibia.
Similarly, cash-converting businesses say sales of second-hand goods to the businesses has increased since the beginning of the year.
"We urge the public to approach the bank pro-actively to look at alternative ways to assist in these trying times, as repossession is the last resort we would opt for," advises the Nedbank Chief Risk Officer.
Nedbank will continue focussing on quality lending, ensuring affordability taking into account the present economic climate and taking action on early warning signals, to minimise defaults on the bank's existing book, he added.
Venter further recommends that during this period customers should refrain or minimise high interest debt, for example credit cards and micro-lending.
While it is well-known that many Namibians are undergoing a tough time financially, Bank Windhoek says the bank's arrears book is under control and managed diligently on a day-to-day basis.
"In these uncertain times, consumers must try to reduce their household debts and be wary of spending too much on non-essential items. Surplus cash must rather be used to pay off loans earlier," advises Marlize Horn, Bank Windhoek Senior Manager: Marketing and Corporate Communication Services.
Standard Bank advises that in times of foreclosure or financial difficulties, clients should be visible and be pro-active in engaging with the bank in person.
The Banking Act stipulates that a client must rectify his debt within 90 days thereafter it can institute legal action.
As soon as the bank realises that the client has fallen in arrears, it calls on the client to make arrangements to rectify the account. If this fails, the bank sends a letter of demand and gives the client a timeframe of 14 or 30 days (depending on the situation) to settle the arrears.
If the client continuously fails to respond, the bank can repossess the assets and institute legal action for the outstanding amount after the asset has been sold or security has been realised.
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