By Desie Heita
Sheer ignorance and financial indiscipline among consumers may be some of the reasons behind the rise in repossessions of their property at a time when Namibians are better off compared to South African consumers where interest rates are shooting up to the sky.
Unlike South Africa, Namibia did not increase its bank rates this year, currently at 10,5 percent, thus providing an advantageous breathing space of 1,5 percent to consumers, compared to South Africa’s 12 percent bank rate.
Yet, repossessions of residential houses and vehicles are skyrocketing as commercial banks recoup items for non-payments. Last week, a leading auctioning house and Africa’s Auction Authority, Aucor, auctioned off hundreds of repossessed luxury vehicles.
Aucor is currently preparing to put under the hammer a number of ‘bank repo’ – a term used by auction houses to refer to repossessed items – of more than 20 vehicles and a bucket load of furniture as well as household effects. The auction is scheduled for next Thursday.
Ideally, this should not be happening, but Lazarus Shigwedha of Investec Asset Management Namibia, says otherwise.
“In an environment where the economy is faced with rising production and living costs, one would expect a cutback on discretionary spending and ideally an increase in the repayment of loans, were consumers in the position to pay a little extra to service their loans. But the reality is that debtors often get caught on the back foot and are threatened by bad debts that they will struggle to service,” said Shigwedha.
The depressing financial state among many households comes after an indication by recent statistics of a drop in consumer spending. Statistics from the Bank of Namibia indicate that the two credit components for consumers – hire purchase instalments and mortgage loans – dropped by half compared to the same period last year. Credit instalment extension decreased to 5,1 percent from 10,3 percent at the same period last year, while extensions in mortgage loans went down from 21,9 to 10,1 percent, said the Bank of Namibia.
The reserve bank said although the interest rate hike of mid-last year may have contributed to the slowdown in spending, statistics do also show a “second-round effects” from rising fuel and food prices. In addition, these effects contributed to a soaring inflation of 9.7 percent, recorded in May, up from the 8,4 percent in April.
In addition, other domestic demand indicators such as vehicle sales and building plans passed have shown a similar sluggish trend. This with exception to the vehicle sales figures for Namibia only with the Bank of Namibia saying the sector “was not very responsive” during March and April.
However, this is because of acquisitions made by business institutions that bought light commercial vehicles as part of their business expansion plans.
Earlier last month, Monica Kalondo, the Chief Executive Officer of Stimulus, and renowned local economist Martin Mwinga, advised consumers to assess their debts, their living standards and take whatever steps are needed before the creditors knock on the door.
“Inform the creditors of your situation, engage them and negotiate with sincerity on how to best to solve the problem. Do not wait for the repossession note or the delivery of the default judgment as that would be too late and you might lose what one could have saved,” they said.
“Egos have no place in debt negotiations. Why try to impress people you do not know. Cashiers and officials at the creditors offices may laugh at you but in the end it is you who will smile afterwards if you sort out the situation,” said Kalondo then.