Schlettwein partly blames downgrade on poor performing SOE’s
The Minister of Finance, Hon Calle Schlettwein called for an urgent intervention into public enterprises that extort tax payers by continually making losses.
Schlettwein expressed the opinion on Monday, 14 August, that Namibia’s downgrade by rating agency, Moody’s, might partly be based on the fact that most Namibian commercial public enterprises keep making losses year after year, which in turn leads to them coming back to government for more funds.
“Rating agencies also look at the outside and the current issues (non-performance) by some of our public entities are taken into account as ‘soft issues’,” Schlettwein said at press conference following Moody’s decision to downgrade Namibia’s credit rating from Baa3- to Ba1 while maintaining the negative outlook on Friday, 11 August.
Schlettwein argued that if it is possible for private entities to make profits, public entities should be able to do the same. “I know there are some public entities who continually need support from the government, for example the health, education, but it is our commercial entities, with the sole purpose to make a profit that make losses,” the minister stressed.
While stating that subsidy spending on these entities need to be questioned, Schlettwein said that the ruling party, SWAPO, is a people-oriented party, offering assurance that the workforce in these entities will be considered in case any decision-making takes place.
“Whatever decision we make is based on how it affects the people… it is difficult but we will not disregard our workforce. We will be considerate,” Schlettwein added.
Meanwhile, the assessment and ratings action is mainly based on Moody’s interpretation of the impact of outstanding invoices amounting to N$2.1 billion. Schlettwein also insisted that the government was not aware of the unpaid invoices and therefore by basing its rating on outstanding invoices, Moody’s credit rating was “highly regrettable.” The government has a strategy in place to complete the payments by the end of August.
“A ratings action by an international agency is just what it is. It is an action taken which in this case was taken on a narrow consideration without a holistic assessment of the developments in various sectors of the economy,” Schlettwein further said.
The government considers this action by Moody’s as an independent view of an international rating agency, based more on organizational objectives than a balanced understanding of the country’s circumstances and recent developments, Schlettwein said.
“The government takes note with concern this decision by Moody’s not because the Agency must not express its opinion and take a decision, but because we consider the action to be narrowly focused, speculative, missing recent key fundamental developments in the our economy and, indeed, not preceded by the usual stakeholder engagement to inform the ratings review. We can not allow ourselves to be distracted by a ratings action of this nature which, on the basis of current fundamentals, is based on information asymmetry,” he added.