Tonic for business revival availed
Task force cooks up rescue plan
Some key recommendations:
Banks to reduce strict loan requirements
Moratorium on issuing of fuel retail licences
Suspension of VET levy contributions
Ban foreigners from trading in local spaces
SSC to consider relaunching stimulus package VAT registration increase from N$500 000 to N$1 million
The Business Rescue Task Force (BRTF) has recommended an amendment to the Insolvency Act to help struggling businesses which can be saved from ultimate demise, while the development of a business rescue fund was also proposed.
It made the recommendations in a report handed over to President Hage Geingob last week. The task force was set up to help government identify measures that can be taken to assist ailing businesses in the wake of the Covid-19 pandemic, which pushed many businesses to bankruptcy.
The Insolvency Act, in its current form, is outdated and in need of amending, the task force said.
“A review of Namibian policy and legislation has not identified any policy enabling business rescue legislation. Namibia currently has outdated insolvency legislation, in particular the Insolvency Act,” it said.
According to the BRTF, the Insolvency Act did not lend itself to the practice of business rescue.
“The Act makes no provision for business rescue. This Act indeed came under review by the Law Reform and Development Commission over the last several years and a finalised version is ready for discussion by the Cabinet Committee on Legislation,” it said.
Recommendations
The task force wants a restriction preventing government from doing business that directly competes with private sector.
There are calls to establish a Collateral Registry to enable businesses to use movable assets as collateral.
Following the mushrooming of fuel retail sites across the country, the task force called for a moratorium on the issuing of new fuel wholesale and retail licences.
This, it said, “[is] to stop the effect of the proliferation of fuel outlets in view of shrinking national volumes and absence of scientific margin adjustments. It is important that an immediate moratorium be placed on the construction, development and licencing of any further fuel outlets.”
Another recommendation is for the Namibian Revenue Agency to accelerate Value Added Tax (VAT) refunds as well as to considering increasing the turnover threshold for mandatory VAT registration from N$500 000 per annum to at least N$1 000 000 per annum in order to lessen the administration burden.
The task force also recommended that the Social Security Commission considers relaunching the stimulus package for employers and employees because “many businesses were excluded from participation”.
Other recommendations
Another recommendation states that: “The Namibia Training Authority [should] consider a temporary suspension of Vocational Education and Training [VET] levy contributions for affected businesses as well as refunding a portion of VET levies actually paid by businesses to help with cashflow needs now as very little training is being conducted in any event”.
The BRTF also called on commercial banks “not to apply the same measures of credit assessment during these trying times”.
“Businesses and individuals who in the past have not found themselves [blacklisted] are now easily listed because of constrained cashflows. Banks still use [blacklisting] as a key indicator to decline new facilities, leaving businesses and individuals with little or no means to access funds to keep their businesses afloat,” it said.
Furthermore, the BRTF requested banks to acknowledge that blacklisting is now the order of the day because of a five-year recession, the impact of the pandemic and the consequent business lockdowns,” the report noted.
It added: “There are fewer and fewer businesses sporting healthy cash flows and clear ITC records, while there are still many viable businesses out there with strained cash flows who just need a proper re-look with an innovative approach to financing”.
The BRTF also recommended that government establish a business rescue fund to help fund ailing businesses that showed potential to be rescued from certain demise.
According to the task force, there is a need for a comprehensive legal framework to delay insolvency proceedings, including legal action and the realisation of collateral and gaining valuable time to facilitate restructuring, workouts and re-financing where required.
The current legislation provides liquidation as the only relief for creditors of businesses in financial distress.
It made the recommendations in a report handed over to President Hage Geingob last week. The task force was set up to help government identify measures that can be taken to assist ailing businesses in the wake of the Covid-19 pandemic, which pushed many businesses to bankruptcy.
The Insolvency Act, in its current form, is outdated and in need of amending, the task force said.
“A review of Namibian policy and legislation has not identified any policy enabling business rescue legislation. Namibia currently has outdated insolvency legislation, in particular the Insolvency Act,” it said.
According to the BRTF, the Insolvency Act did not lend itself to the practice of business rescue.
“The Act makes no provision for business rescue. This Act indeed came under review by the Law Reform and Development Commission over the last several years and a finalised version is ready for discussion by the Cabinet Committee on Legislation,” it said.
Recommendations
The task force wants a restriction preventing government from doing business that directly competes with private sector.
There are calls to establish a Collateral Registry to enable businesses to use movable assets as collateral.
Following the mushrooming of fuel retail sites across the country, the task force called for a moratorium on the issuing of new fuel wholesale and retail licences.
This, it said, “[is] to stop the effect of the proliferation of fuel outlets in view of shrinking national volumes and absence of scientific margin adjustments. It is important that an immediate moratorium be placed on the construction, development and licencing of any further fuel outlets.”
Another recommendation is for the Namibian Revenue Agency to accelerate Value Added Tax (VAT) refunds as well as to considering increasing the turnover threshold for mandatory VAT registration from N$500 000 per annum to at least N$1 000 000 per annum in order to lessen the administration burden.
The task force also recommended that the Social Security Commission considers relaunching the stimulus package for employers and employees because “many businesses were excluded from participation”.
Other recommendations
Another recommendation states that: “The Namibia Training Authority [should] consider a temporary suspension of Vocational Education and Training [VET] levy contributions for affected businesses as well as refunding a portion of VET levies actually paid by businesses to help with cashflow needs now as very little training is being conducted in any event”.
The BRTF also called on commercial banks “not to apply the same measures of credit assessment during these trying times”.
“Businesses and individuals who in the past have not found themselves [blacklisted] are now easily listed because of constrained cashflows. Banks still use [blacklisting] as a key indicator to decline new facilities, leaving businesses and individuals with little or no means to access funds to keep their businesses afloat,” it said.
Furthermore, the BRTF requested banks to acknowledge that blacklisting is now the order of the day because of a five-year recession, the impact of the pandemic and the consequent business lockdowns,” the report noted.
It added: “There are fewer and fewer businesses sporting healthy cash flows and clear ITC records, while there are still many viable businesses out there with strained cash flows who just need a proper re-look with an innovative approach to financing”.
The BRTF also recommended that government establish a business rescue fund to help fund ailing businesses that showed potential to be rescued from certain demise.
According to the task force, there is a need for a comprehensive legal framework to delay insolvency proceedings, including legal action and the realisation of collateral and gaining valuable time to facilitate restructuring, workouts and re-financing where required.
The current legislation provides liquidation as the only relief for creditors of businesses in financial distress.
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