Current legislation hinders business rescue efforts
Namibia’s current legislative environment hinders businesses negatively impacted by the pandemic from being adequately rescued to preserve their integrity and in the process save jobs and stimulate economic activity.
In fact, the legislative environment is actually believed to be obstructing the effectiveness of business rescue measures.
This is according to Jason Hailonga, a member of President Hage Geingob’s recently appointed Business Rescue Task Force. The task force commenced with its assignment on 1 July 2021, and is scheduled to run until March 2022.
“As much as they have been helpful, they have not been effective to the extent that we need, and that is because of the legislative environment that we are in. It limits us in terms of what we can do, and that is where business rescue comes in with a task to create a legislative environment that enables efficient and effective rescue and recovery of businesses,” Hailonga explained last week.
“Even though the central bank responded with positive initiatives of reducing the repo rate to a historic low of 3.75%, influencing the prime rate, and also commercial banks came through with more efforts to help individuals and businesses, we are still yet to see full benefits of these efforts,” Hailonga added while unpacking the mission of the task force.
The task force is comprised of 11 members responsible for reviewing business and insolvency legislation and policies. They then recommend amendments to legislation to save businesses from financial distress, and to preserve jobs caused by the devastating pandemic in the country.
He added the impact of Covid-19 on businesses is overwhelming as it hit an already contracted economy due to prolonged drought, depreciation in exchange rates, and also fluctuations in commodity prices.
“Business rescue has been framed as a very crucial intervention in the economic advancement pillar in the Harambee Prosperity Plan II,” noted Hailonga, who is responsible for finance affairs of the task force.
He said results from the task force’s work would not be seen immediately as the interventions will take some time. However, he noted that recognising the fact businesses are already suffering, a streamlined approach was created for short, medium and long-term solutions.
Chairperson of the task force, Thinus Prinsloo, explained they have been mandated to identify opportunities and improvements to safe jobs and rescue businesses mostly from a solvency perspective.
“The task force is looking at laws in the banking and financial sector that should support businesses, and we are also looking internationally for best practices and laws that are proving to be successful in other territories,” he said. Moreover, the task force is expected to make recommendations to Cabinet about specific approaches and amendments to relevant laws to help businesses recover.
“That can help the Namibian economy recover, save jobs, reestablish businesses and most importantly create a culture of entrepreneurship within Namibia and make business rescue the preferred path for entities to follow should they face trouble,” Prinsloo stated.
Business rescue applies to companies undergoing financial distress for a number of reasons, including depressed economic activity, the impact from Covid-19 where businesses were forced to close down, as well as companies struggling to service debt.