N$9.5bn guarantees for SOE borrowing

OGONE TLHAGEWINDHOEKGovernment guarantees to back borrowing by public enterprises stood at N$9.5 billon as at the end of August 2021.This has been confirmed by the director for assets, cash and debt control in the ministry of finance, Martin Ashikoto.Ashikoto said the current contingent liabilities stood at 5% of GDP, far below the benchmark of 10% of GDP, as set out in the Treasury’s sovereign debt management strategy of 2018-2025.Beneficiaries of these guarantees includes N$500 million for the Development Bank of Namibia for its public entity and SME relief package, N$300 million for Agribank, N$500 million extended towards commercial banks and N$148 million for the ongoing expansion of the Hosea Kutako International Airport to the Namibia Airports Company.The current rate of government guarantees is considered lower, considering that this stood at N$13 billion, or 7% of GDP, in the 2017/18 fiscal year, N$13 billion for the 2018/19 fiscal year, N$11 billion for the 2019/20 fiscal year.RisksAlthough the repayment obligation lies with the borrowing public enterprises, the government would have to step in should those entities fail to fulfil those commitments.The latest example of this was when the government paid N$1.6 billion in July to American aircraft lessor Castlelake, after the government had backed a lease agreement with Air Namibia up to October 2025. The airline has been defaulting on its payments, even before it was liquidated earlier this year.“Given the economic environment, there are SOEs that have displayed inability to repay the guaranteed loans. However, payment arrangements are being considered to either extend or for the government to pay on behalf of those entities,” Ashikoto told Namibian Sun.“Thus, far and due to the liquidation of Air-Namibia, an amount of about N$1.9 billion has been defaulted on aircraft leases.”All in all, guarantees provided by the government have been on the decline – a trend which local economists have hailed.Experts commentCommenting on the trend, University of Namibia academic Omo Matundu-Kakujaha said it was a matter of interest what public entities were spending the loans on which the government was providing security for.“The problem is not the cap; the problem is what are public entities using the money for. Do their activities contribute to stimulating the economy and as such expand your GDP so that you can increase your tax base? Then it is not a big problem,” said Matundu-Kakujaha.IJG Securities MD Eric Van Zyl also hailed the decline in government guarantees, especially during these trying economic times where such guarantees have become riskier.Ashikoto said the guarantees were necessary in providing a safety buffer to government entities pursuing projects.“Guarantee loans are issued to entities that are conducting economic activities that are aimed at achieving government objectives and improving the government service delivery,” said Ashikoto.To mitigate a situation where the government would have to pay a guarantee on behalf of public entities currently struggling to honour loan agreements, arrangements have been made in some instances to extend loans.“Given the economic environment, there are public entities that have displayed inability to repay the guaranteed loans. However, payment arrangements are being considered to either extend or for the government to pay on behalf of those entities,” Ashikoto said.

N$9.5bn guarantees for SOE borrowing

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Namibian Sun 2025-09-18

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N$9.5bn guarantees for SOE borrowing

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Namibian Sun 2025-09-18

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