Windhoek – The central banks of Angola and Namibia have renegotiated the re-payment schedule for the approximate N$4 billion debt Angola owes Namibia, following the currency exchange agreement that went wrong in 2015.
Bank of Namibia (BoN) governor Ipumbu Shiimi confirmed during an exclusive interview with New Era yesterday that the Namibian reserve bank and Banco Nacional de Angola agreed in December 2016 to shorten the repayment timeframe and, therefore, increase the amount to be paid in each instalment.
Previously, the Angolans were obliged to pay US$20 million (N$269 million at yesterday’s exchange rate) per quarter,a commitment that Shiimi said the northern neighbours have fulfilled without fail.
Shiimi – speaking in a wide-ranging interview which will appear in full on Friday – also dismissed the popular belief that this agreement was to blame for the current poor state of business at the border town of Oshikango.
If anything, he argues, this agreement has actually helped keep Oshikango afloat because it allowed Angolan customers – currently hit by the severe shortage of US dollars in their country – to exchange kwanza for Namibian dollars which enables them to acquire goods and services at Oshikango.
With US dollars hard to come by, Angolans would not have been able to buy anything at Oshikango had it not been for the agreement that allows them to exchange their local kwanza currency for Namibian dollars at the border town.
The reserve bank governor did not share details of the new shortened repayment timeframe, saying this would be made public once government and the minister of finance have been adequately briefed.
On June 18, 2015 bureaucrats from both Namibia and Angola lifted high their champagne glasses to celebrate what was hailed as a landmark agreement that would usher into being an era of doing business easier at Oshikango, teeming with hordes of Angolan customers at the time.
The agreement followed research by BoN, premised around maintaining – or even expanding – the Angolan clientele which spent money willy-nilly at Oshikango at the time.
“The goal was, how do we lock in the Angolan customers to continue supporting economic activities in Namibia, and particularly at Oshikango and other border points?” Shiimi explained.
“They (BoN research team) came back saying that they are a bit worried about the low-income customers who come there to buy things like bread. They earn their income in kwanza, so before they come to Namibia they have to go to a bank in Angola and exchange kwanzas into US dollars – because they can only come and buy in Namibia with US dollars. They are charged a commission (at Angolan banks).”
“When they arrive in Namibia they don’t go straight to a shop but to an authorised currency exchange dealer to exchange US dollars into Namibian dollars for them to be able to buy in Namibia,” he added.
“For this (Namibian exchange transaction) they again have to pay commission. These are low-income people who were paying the commission twice. So we felt if we remove these obstacles then we’ll attract more low-value customers into Namibia. We then started talking to the (reserve) bank of Angola to say ‘can we remove these obstacles by agreeing between ourselves that these customers can come with kwanzas and go to authorised (currency exchange) dealers in Namibia, and then pay the commission once, not twice’,” he further explained.
“Then we will receive the kwanzas from the commercial banks and we will repatriate the money back to Angola and they will pay us once we have reconciled our books. They were to pay us in US dollars because we have no use for the kwanzas. So the goal was to enhance business in Oshikango.”
Shiimi, speaking in detail for the first time on this deal, said that at the time of negotiating this agreement with oil-rich Angola a barrel of oil fetched US$100 on the global market.
The implementation of the agreement, however, coincided with the collapse of the global oil market, with prices plummeting to US$28 per barrel.
“This was a significant loss of income for Angola because about 95 percent of their foreign exchange comes from oil.
They lost about 70 percent of their income in US dollars. When we implemented this decision on 18 June 2015, the problem (oil price collapse) was at its peak,” he recalled.
“Many people then realised they can actually convert their kwanza to Namibian dollar and flocked to Oshikango.
This included Namibian businesspeople who had stashes of kwanzas at their businesses in Angola – yet this was not the original principle of the agreement.”
“While we thought the monthly exchange will be in the region of US$20 million, within a few weeks that amount stood at about US$200 million. We and the Angolans decided to put up some limits, which worked for a few days, then people found ways around this. Angola had problems bringing in US dollars so it was unthinkable that they would pay US$200 million in one month. We had to change the way the agreement was structured.”
By the time the two countries were able to arrest the escalating crisis emanating from the agreement, the bill owed to Namibia stood at a staggering US$426 million (about N$5 billion).
“There were no longer debts accumulating against Angola. We then agreed on the repayment schedule because this amount cannot be paid off in one month. The initial agreement was to pay US$20 million a quarter, and they have been honouring that,” Shiimi said.
The Angolans have so far paid US$120 million (N$1.6 billion), but still owe Namibia a hefty US$306 million. This money, Shiimi said, will be paid back within the spirit of the agreement reached on December 6, 2016 which shortens the payback period and increases the amount per instalment.
“I must make clear that there was no time that the Angolans indicated that they were not going to pay back this money. They have always shown strong commitment towards this by paying according to existing timelines.”