Treasury urged not to flip-flop on PDMS
Josef Sheehama
The ministry of finance’s (MoF) handling of the Payroll Deduction Management System (PDMS) highlights the complexities of reforming financial structures that directly affect government employees. The decision to discontinue payroll deductions, later postponed until February 28, 2026, underscores the importance of thorough consultation with all stakeholders before implementing such impactful changes.
Decisions of this magnitude cannot be rushed; they require careful dialogue to ensure that outcomes are both achievable and beneficial to those affected. In a society as interconnected as ours, no single institution can claim to have all the answers without engaging those whose livelihoods are at stake. Even choosing to wait for more information is, in itself, a decision—and often the wiser one.
Key institutions such as the Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory Authority (Namfisa) have raised concerns, questioning whether the proposal to phase out PDMS was adequately discussed with relevant parties. Their reservations cast doubt on the ministry of finance’s prioritisation of certain loan payments through the payroll system, a move that
risks undermining the stability of the national payment system. Excluding critical stakeholders from the decision-making process only weakens confidence in the ministry’s intent. Trust and confidence in the MoF is essential.
The ministry’s approach is driven more by emotion than by sound policy. Media reports suggest that many government officials are heavily indebted, which has influenced the decision to terminate direct deduction agreements with financiers. Yet this is not reform—it is reaction. Such abrupt measures risk creating further anxiety among employees and lenders alike. A more constructive solution would be to strengthen the deduction code by amending the framework, closing loopholes, and ensuring compliance with legal standards.
Removing direct deductions altogether only destabilizes a system that many employees rely on. Evidence supports this view. The recent Fin Fit Investment survey revealed strong support for PDMS among government employees: 79% opposed its removal, 72% believed it helped them avoid excessive debt, and 70% stated that it simplified their monthly financial management. These figures demonstrate that the system is not merely convenient but essential for economic stability. In a democracy, the voices of those affected must be heard and respected.
Regulation should improve public well-being, not undermine it.
Effective rules are those that protect individuals while fostering economic growth. The BoN and Namfisa have argued that PDMS should continue under a stricter regulatory framework rather than being abolished. This approach would safeguard employees from predatory lending practices while maintaining access to credit. If direct deductions were discontinued, microlenders would likely tighten their loan approval criteria, potentially excluding vulnerable groups and creating new financial pressures.
Some microlenders indeed impose exorbitant fees, leaving borrowers with little disposable income. Yet the payroll deduction system was designed precisely to mitigate such risks by ensuring repayments were made directly from salaries. For many government employees, especially those without access to traditional bank financing, this system provided a lifeline. Financial inclusion depends on alternative credit options, but these must be affordable and sustainable.
The stance taken by the BoN and Namfisa reflects a desire to protect the financial system from collapse, prevent rising bad debt, and ensure that low-income groups are not excluded from credit markets. The MoF should adopt a proactive and inclusive approach to its work. By engaging stakeholders openly, it balances competing priorities and avoids disadvantaging any one group. As someone with over 23 years of experience in the banking industry, discontinuing PDMS disproportionately affects low-income households and government employees who depend on microlenders for urgent loans.
In conclusion, the MoF must recognise that genuine dialogue is the cornerstone of effective reform. Regardless of the perceived benefits of its proposal, consultation with all stakeholders should be a non-negotiable requirement. Only through meaningful consultation can the ministry avoid unnecessary resistance, prevent legal challenges, and achieve reforms that genuinely serve the greater good of the people, who keep government ticking along, namely the civil servants impacted.
The ministry of finance’s (MoF) handling of the Payroll Deduction Management System (PDMS) highlights the complexities of reforming financial structures that directly affect government employees. The decision to discontinue payroll deductions, later postponed until February 28, 2026, underscores the importance of thorough consultation with all stakeholders before implementing such impactful changes.
Decisions of this magnitude cannot be rushed; they require careful dialogue to ensure that outcomes are both achievable and beneficial to those affected. In a society as interconnected as ours, no single institution can claim to have all the answers without engaging those whose livelihoods are at stake. Even choosing to wait for more information is, in itself, a decision—and often the wiser one.
Key institutions such as the Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory Authority (Namfisa) have raised concerns, questioning whether the proposal to phase out PDMS was adequately discussed with relevant parties. Their reservations cast doubt on the ministry of finance’s prioritisation of certain loan payments through the payroll system, a move that
risks undermining the stability of the national payment system. Excluding critical stakeholders from the decision-making process only weakens confidence in the ministry’s intent. Trust and confidence in the MoF is essential.
The ministry’s approach is driven more by emotion than by sound policy. Media reports suggest that many government officials are heavily indebted, which has influenced the decision to terminate direct deduction agreements with financiers. Yet this is not reform—it is reaction. Such abrupt measures risk creating further anxiety among employees and lenders alike. A more constructive solution would be to strengthen the deduction code by amending the framework, closing loopholes, and ensuring compliance with legal standards.
Removing direct deductions altogether only destabilizes a system that many employees rely on. Evidence supports this view. The recent Fin Fit Investment survey revealed strong support for PDMS among government employees: 79% opposed its removal, 72% believed it helped them avoid excessive debt, and 70% stated that it simplified their monthly financial management. These figures demonstrate that the system is not merely convenient but essential for economic stability. In a democracy, the voices of those affected must be heard and respected.
Regulation should improve public well-being, not undermine it.
Effective rules are those that protect individuals while fostering economic growth. The BoN and Namfisa have argued that PDMS should continue under a stricter regulatory framework rather than being abolished. This approach would safeguard employees from predatory lending practices while maintaining access to credit. If direct deductions were discontinued, microlenders would likely tighten their loan approval criteria, potentially excluding vulnerable groups and creating new financial pressures.
Some microlenders indeed impose exorbitant fees, leaving borrowers with little disposable income. Yet the payroll deduction system was designed precisely to mitigate such risks by ensuring repayments were made directly from salaries. For many government employees, especially those without access to traditional bank financing, this system provided a lifeline. Financial inclusion depends on alternative credit options, but these must be affordable and sustainable.
The stance taken by the BoN and Namfisa reflects a desire to protect the financial system from collapse, prevent rising bad debt, and ensure that low-income groups are not excluded from credit markets. The MoF should adopt a proactive and inclusive approach to its work. By engaging stakeholders openly, it balances competing priorities and avoids disadvantaging any one group. As someone with over 23 years of experience in the banking industry, discontinuing PDMS disproportionately affects low-income households and government employees who depend on microlenders for urgent loans.
In conclusion, the MoF must recognise that genuine dialogue is the cornerstone of effective reform. Regardless of the perceived benefits of its proposal, consultation with all stakeholders should be a non-negotiable requirement. Only through meaningful consultation can the ministry avoid unnecessary resistance, prevent legal challenges, and achieve reforms that genuinely serve the greater good of the people, who keep government ticking along, namely the civil servants impacted.
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