Banking in Namibia – the “African Renaissance”

Bringing into play a quote used by Thabo Mbeki – “The African renaissance” may be delayed a little due to the current global economic crises, but remains a real and attainable vision for a number of large corporations.

Several large financial services organisations have in recent years established a strong and viable foothold in Namibia, as a step in the direction of Africa. In the financial services industry, these range from insurance companies in short term, long term and bancassurance fields, to large corporate banks.

A recent survey by Finscope, revealed that as much as 50% of Namibians do not have formal banking arrangements, and given the great distances in Namibia between centres of business, and the concentration of business in few centres scattered across the country, providing services to the estimated 2.3m populace, spread over approximately 823,000 square kilometres, remains a challenge.

As Namibia’s central bank, the Bank of Namibia execute various functions such as: supporting economic growth and development, promoting price stability, efficient payment systems, effective banking supervision, reserves management and economic research. The Bank of Namibia was recently quoted in local papers: “although the impact on the financial sector has been limited, the Namibian economy is expected to be adversely affected by the weaknesses in the global financial system through the concomitant slowdown in the world economy and the shying away of investors from emerging markets.” This view is generally held, and many market participants believe that the banking sector in Namibia is supported by a stable environment and that the close regulatory supervision by Bank of Namibia has proven to be one of the stabilising factors supporting a strong banking environment in Namibia.

Bank of Namibia have also implemented a project plan, which will culminate in the Basel II Framework as introduced by the Basel Committee on Banking Supervision in June 2004, to go live in January 2010, thereby ensuring that Namibia remains on the forefront in the implementation of global responsible banking practises, as described in the three main pillars:

• Pillar 1 - Minimum capital requirements
• Pillar 2 - Supervisory review process
• Pillar 3 - Market discipline through disclosure.

In essence, Namibia inherited a strong regulatory environment from South Africa at independence in 1991, and is slowly working their way through “Namibianisation” and “globalisation” of its laws and regulations. The challenge this poses, is that entities operating in Namibia, need to remain alert to the constant developing regulatory environment, not to mention the world of taxation.

A recent development in the banking environment, requires localised core banking systems to be in place by the end of 2009, and for a moment ignoring the external challenges facing banks, the recruitment and retention of trained and experienced staff to deal such requirements, the implementation of BASEL II with its increased banking supervision requirements not to mention the actual business of dealing with clients, remains one of the biggest internal facing challenges for banks in Namibia today. Our clients remain at the vanguard of constant change through pro-active planning and we assist in many fields such as dealing with ex-pats, change management and regulatory filings to name but a few of our services.

Conservative practises surrounding the granting of loans has meant that the Namibian banking sector did not suffer the same fate as their more aggressive US counterparts, and the loan book has been growing around 17% over the last number of years.

This is supported by statistics from the Ministry of Finance, which shows that the financial services sector (which includes banking and insurance) contributes 4% of GDP (in 2006) and the sector as a whole has been growing at a rate of 9.8%.

The four main commercial banks (Bank Windhoek, Standard Bank, First National Bank and Nedbank) are expected to experience stiff competition from the new entrance by ABSA.

The commercial banks participate on a voluntary basis in the Bankers Association of Namibia which serves as a platform for them to interact on issues of mutual concern.

Other public sector financial institutions providing further banking services and specialist financing include The Development Bank of Namibia, The Agricultural Bank of Namibia (Agribank), Namibia Post Limited (Nampost) and the Solar Revolving Fund established by the Namibian Government through the Ministry of Mines and Energy.