Namcor Blames N$700m Loss on Internal Breach, Market Instability
The National Petroleum Corporation of Namibia (Namcor) has revealed that it suffered a financial loss of N$700 million, citing significant breaches of internal controls, governance systems, and market volatility as the primary causes. However, the company has declined to disclose specific details regarding the breaches.
In a press conference held yesterday, Namcor’s acting managing director, Shiwana Ndeunyema, along with the executive team and board chairperson Jennifer Comalie, addressed the media in response to reports of the company’s financial struggles and a request for a government bailout.
Namcor is currently grappling with cash flow management challenges, following a turbulent 2022. As of September 2023, the company’s debt to suppliers stands at N$1.9 billion. Some suppliers have issued Namcor a deadline of November 30th and have hinted at the possibility of liquidation if their debts are not settled.
Ndeunyema acknowledged that it was the responsibility of the board and management to ensure effective risk management, but he admitted that the internal controls were lacking. He specifically pointed out market volatility and significant breaches in internal controls and governance systems as major issues.
Taking ownership of the situation, Ndeunyema emphasized that the company could have avoided this predicament. He pointed out the absence of a trade desk or hedging instrument to absorb shocks resulting from sudden changes in international market conditions.
In its bid to overcome the financial crisis, Namcor has approached the Cabinet for assistance. However, the corporation denies seeking a bailout and instead refers to it as a capital injection with two undisclosed proposals.
This is the second time that Namcor has sought assistance from the Cabinet. The government previously provided a package to Namcor in 2010, which included the settlement of debts totaling nearly N$260 million.
To address the working capital deficit, Namcor has devised a three-phase turnaround strategy. The first phase focuses on short-term survival and stabilization, aiming to secure decisive shareholder capital intervention. The second phase entails implementing a new operating model to minimize exposure and ensure sustained success. Ultimately, Namcor aims to develop a 15-year strategic business plan outlining its long-term sustainability, considering recent oil discoveries.
In response to Namcor’s plans, economist Mally Likukela expressed skepticism, declaring them uninspiring and lacking depth and context. He questioned the detachment of the plans from the reality revealed in previous audited annual reports. Likukela noted that Namcor has only made a profit four times in the last decade, with the most recent profit recorded in 2017 at N$42 million. He argued that the war between Russia and Ukraine, cited as a factor for the company’s losses, does not explain the consistent losses prior to the conflict.
Likukela further criticized the government for allowing Namcor to report continuous losses without taking appropriate action. He stressed that every loss incurred by the company wastes state resources. According to him, the lack of a comprehensive external examination of the organization leaves serious investors cautious and uninspired about the future of Namcor.
Economist Omu Kakujaha-Matundu highlighted the issue of accountability within public enterprises. He criticized the failure to hold responsible individuals accountable for the company’s performance. Kakujaha-Matundu emphasized that ethical and moral leadership, along with effective checks and balances, are essential for any company’s success. He raised concerns about the sustainability of Namcor and warned of potential fuel shortages in Namibia if the situation is not addressed promptly.
Namcor’s financial struggle calls for a comprehensive assessment of the organization and its operations. Addressing the concerns raised by economists is crucial to restore confidence and develop a solid plan for the company’s future.
With Namcor’s 15-year strategic business plan and potential involvement of industry experts, the company aims to leverage recent oil discoveries to ensure long-term sustainability. However, it remains to be seen whether these efforts will be enough to reverse the course and pave the way for a prosperous future.
