28 January 2013

Namibia: NamibRe Financial Reports in Disarray

ALLEGED incompetence of Namibia National Reinsurance Corporation Ltd (NamibRe) management is blamed for the fact that the parastatal's auditing report for the 2012/13 financial year is still outstanding.

Critics of the only reinsurance company in Namibia said the NamibRe financials are "qualified" according to auditing firm Ernest & Young, which means that the audit "cannot be done" because there is insufficient documentation to do a proper reconciliation of the company's books.

Ernest & Young started the auditing process in April last year, and was supposed to have finalised the report by September for approval by the NamibRe board.

The critics said such incompetence by NamibRe management could mean disaster for Namibia's future in reinsurance.

Reinsurance is insurance bought by an insurance company from one or more insurance companies as a form of risk management.

"What can the future of reinsurance in Namibia be if top management can't get its financials in order?" a source queried. "NamibRe does business in Malawi, Botswana, Zimbabwe ... Does it mean the company is playing with the resources of Namibia? It must get rid of incompetent staff."

According to a letter NamibRe board chairperson Maria Dax wrote to managing director Anna Nakale-Kawana on January 23, the auditor was of the opinion that there was a "significant breakdown" of controls at the company due to a lack of "diligence / lack of skills by management".

She also reprimanded Nakale-Kawana over the use of credit cards by managers that was not always accompanied by supporting documents, and wanted the use of credit cards by the management, including Nakale-Kawana, to be suspended .

Dax then asked Nakale-Kawana to provide the board with a strategy to engage internal and external stakeholders to protect the reputation and image of the company, as well as to provide the board with investment policies or procedures in place.

Nakale-Kawana, in a response to Dax, said it is true that some of the company's financial and reinsurance records were not done "with diligence and full competency", saying that in response she has launched a three- to six-months project to "clean up all the mess to bring the situation to normal".

It is understood that the board in October last year approved the use of a consultant, Francois Francis, a former employee of NamibRe, to assist the parastatal with the reconciliation of the financials.

Sources say Francis was paid over N$100 000, "but this did not help; it was a waste of money".

Dax over the weekend acknowledged that the company had to source outside assistance "on an ongoing basis" to get the information of 2011/12 ready for the audit, saying "but we realised that mistakes made in some parts of the 2010/11 financial period need to be rectified first in order to correct the transactions of 2012".

"This implies that more time would be needed to finish the work," she said.

Sources are calling for the heads of Nakale-Kawana and her two general managers, finance GM Fertjie Veldskoen and reinsurance GM Rudolph Humavindu, for their alleged incompetence.

Dax however squarely laid the blame for the mess at the door of Veldskoen and Humavindu, and not Nakale-Kawana who has been the MD for the last nine years.

"The MD supervises a reinsurance company. Reinsurance requires very technical skills which are rare in Namibia. Critical technical people must know what needs to be done," Dax said.

Dax further said that this was the first time NamibRe couldn't complete its audit on time, and because of the delay, the auditors have issued a disclaimer of opinion on the financial statements of NamibRe for the 2012 financial year.

This, said Dax, is a "serious situation and the board is disappointed about it".

The board is still deliberating on what to do about the situation, and it is not clear if there will be any consequences for Nakale-Kawana or her two GMs.

"This is a sad situation because the disclaimer could, and probably will, influence the excellent credit rating of NamibRe which is AA nationally, A regionally, BB US claims paying ability. The rating is aligned to Namibia's sovereign credit rating," Dax said.

Nakale-Kawana said the two new GMs, who have not been in those positions for long, would have to receive training and coaching as a matter of urgency, but said there was also an urgent need for recruiting a senior manager to supervise the two GMs.

NamibRe was in the news because of a reported 47 percent increase in Nakale-Kawana's restructured package, while staff were reported to have received less than three percent, which prompted sources to accuse her of "self-enrichment" at the expense of other staff and the company.

Dax over the weekend said reports of the 47 percent salary increase to Nakale-Kawana are "untrue", and that there is documentary proof to back this. She said Nakale-Kawana only received a seven percent inflationary increase in line with all other employees.

Another claim is that 70 percent of the salary bill goes to the three top managers - Nakale-Kawana, Veldskoen and Humavindu, while only 30 percent goes to the remaining seven staff members.

Dax could not confirm these figures because she did not have the requisite documents when The Namibian approached her for comment over the weekend.

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