Namibia: Govt Wants Special Dividends From SOEs

13 December 2019

THE government is asking state-owned businesses to declare special dividends to sustain its operations.

The finance ministry is hoping that this will enable the government to borrow less from the market.

Public enterprises minister Leon Jooste wrote to several commercial parastatals, asking them to indicate if they will be able to declare a special dividend to the government before April 2020.

In this case, a special dividend refers to an additional dividend beyond the regular annual dividend declared by parastatals.

Namibia's economy is facing an unprecedented crisis, with growth having stagnated drastically, while unemployment rates spiked steadily over the years.

As a result, Namibia's position in the global competitiveness rankings fell from 74th to 94th between 2009 and 2019.

Under normal circumstances, SOEs would declare dividends to the government only when their financial year ends.

The Namibian has seen request letters sent to MTC, Telecom, Namibia Post and Telecom Holdings (NPTH), NamPower and Namcor.

"A report on your ability to declare a special dividend during the current financial year and the value of such dividend [is needed]," said Jooste in his letter dated 29 October 2019.

Jooste insisted to The Namibian yesterday that no public enterprise was instructed to declare a special dividend, adding that they were approached to assess if any of them would have the ability to do so.

"This is, therefore, not infringing on the commercial sustainability of any of these entities, and those that declined gave good technical explanations, which we support 100%," he explained.

Jooste also denied claims that the funds generated from the declaration of special dividends are for government salaries.

"The purpose is to request a special dividend in cases where commercial public enterprises may be sitting on more cash reserves than required to sustain normal commercial operations," he said.

He furthermore indicated that the request came from the finance ministry after a meeting with all the commercial public enterprises.

Jooste also wants to know the list of financial investments, and the type of investments as well as the terms, maturity date and projected return on each investment.

Last week, The Namibian reported that the finance ministry was pulling out all the stops to meet conditions for the government to qualify for a N$2 billion loan from the African Development Bank to fund the national budget deficit this financial year.

The loan is part of a N$10 billion funding package approved in 2017.

Cirrus Capital co-founder Rowland Brown yesterday said finding more money to spend is not the answer to the fiscal problems currently facing the country.

"We need real reform on the expenditure side of the budget, while a material improvement in public sector capital allocation is critical to resolve the current fiscal constraints. This starts with a demonstrated commitment to rooting out corruption and self-enrichment among those trusted by the public to allocate public resources," he reasoned.

Brown said he is not surprised that the finance ministry is looking for funds in this manner.

"While it certainly makes sense to not sit with large idle balances in state-owned entities while the central government is short of funds (and thus paying interest on more and more borrowed funds), pressure from cash-strapped shareholders is rarely good for the balance-sheet and operations of a company," Brown noted.

He, however, said the ability to pay a special dividend, and the impact of such, will vary dramatically from state agency to state agency.

Brown added that serious steps also need to be taken to address the civil service wage bill in a sensible, political and socially acceptable manner.

Fellow economist Salomo Hei, who is Makalani Fund Managers' managing director, said treasury is well within its mandate to source for additional funds.

"This is not something new. In fact, if it is well-managed, it can have a positive impact on the entire country. I just hope the identified companies will do proper due diligence to ensure that they do not stretch their resources," he stated.

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