Government wants NamWater to borrow N$600 million to settle Salini Impregilo invoices for work done so far at the Neckartal Dam.
Salini, the company which was awarded the N$2,8 billion tender in 2013, suspended operations at the dam site last week, and sent about 600 workers home until further notice.
Friday's work stoppage is the third this year taken by the company after government failed to pay them.
The project was expected to have been completed within 36 months from September 2013, but is only about 90% complete.
Agriculture minister John Mutorwa revealed the NamWater arrangement during a meeting with Salini management at the dam site on Friday.
He said the decision to have NamWater borrow money under a government guarantee was taken by the Cabinet treasury committee during its meeting last Wednesday.
The minister said a special technical committee was set up to engage NamWater on the decision, and to give feedback to the Cabinet treasury committee today.
Mutorwa was quick to add that the move does not mean NamWater was bailing out government, but it was transferring expenses to the bulk water supplier's balance since it is responsible for infrastructural development and maintenance.
The technical committee was also assigned to "brainstorm" all possibilities for funding to ensure the completion of the outstanding 10% work at the dam.
Mutorwa said the Neckartal Dam project was "never really adequately funded," and explained that N$1,7 billion was needed to complete the project.
He added that the ministry only received a budget allocation of N$414 million, leaving a shortfall of N$1,3 billion.
"I am not criticising anybody. But sometimes people think this problem (non-payment) is because of poor planning," he stated, adding that the economy is currently facing "headwinds," stemming from the global environment.
"Government is not bankrupt," he stressed, while assuring the nation that government, in principle, cannot or may not abandon the Neckartal Dam project.
"Let this be clear to the workers," he noted.
Mutorwa further revealed that Salini and government were embroiled in a legal battle over the costs which escalated by N$300 million because of delays.
The dam construction was set to start in April 2013, but due to a legal challenge instituted by the losing bidder, it only commenced five months later in September.
It emerged during Friday's meeting that government had paid more than N$3 billion to Salini by the end of June, while the cost of the project is expected to escalate to N$5 billion upon completion.
Salini's project manager, Fabrizio Lazzarin, told the meeting that construction work on the dam is set for completion on 2 May next year.
However, this would depend on when operations would resume, but Lazzarin was non-committal. He only stated "let's wait and see", referring to payments of Salini's overdue invoices, which Mutorwa said government will settle this week.
The project manager also revealed that workers who have been sent on forced leave last week would receive their full basic salaries.
Meanwhile, the government has temporarily cancelled the tender for the lease of land rights at the Neckartal Dam irrigation first phase project because of the new Procurement Act that came into effect on 1 April.
The tender to lease plots at the irrigation project near Keetmanshoop was advertised in 2016.
In his presentation about the project at the Keetmanshoop business seminar held last week, Agriculture Business Development Agency (Agribusdev) electrical and project manager Erikson Nghiitwikwa said the tender was cancelled due to the new procurement policy.
He said Agribusdev is currently busy working with the Ministry of Agriculture, Water and Forestry and the Ministry of Finance on the public-private partnership (PPP) framework, adding that a new tender would soon be invited.
Potential investors should thus start working on proposals, and be on the lookout for the re-advertisement of the irrigation project tender.
"Participation of local investors or joint ventures is highly encouraged," Nghiitwikwa noted.
The envisaged plots measuring 1 880 hectares will be subdivided into sectors, namely commercial (1 116 hectares), medium- scale farmers (420 hectares), and small-scale farmers (344 hectares).