Agribank takes advantage of the disaster

EXPLOITED FARMER WRITES:

I feel obliged to respond to an article in the Republikein of 3 September 2021 in which the Agricultural Bank of Namibia boasted with good financial results. When one looks at the operations of the Bank, I tend to feel that this is not an earned performance in a competitive environment.

The bank is treated with a soft hand at the expense of the poor farmers. I am particularly surprised by the finance minister who praises the Bank’s performance while he gives the Bank state resources on a silver plate.

In September 2019, the prime rate in the country was 10.25%. At that time, the Bank offered its drought relief at a rate of 9.5%. That was 0.75% below prime.

With the advent of Covid-19 in order to give the consumers some needed relief, central banks reduced lending rates and commercial banks followed suit. In Namibia, I noticed that if the central bank announces a reduction in repo rate, the commercial banks followed within a period of less a week.

In Namibia the prime lending rate fell from 10.25% in late 2019 to 7.75%. This welcome debt relief of 2.5% has been passed onto the consumers by the major commercial banks following the announcement by the central bank. To the contrary Agribank passed onto the borrower only 0.45%, denying the burdened borrower a whopping 2.05%. Ironically, the talk about hard times due to the pandemic whilst the Covid-19 brought them Manna from heaven. In fact, the Agribank borrower has been ripped off. They started with a position of 0.75% below prime and now they stand at 1.25% above prime, why is the Government happy with this?

To add insult to injury, this year the Minister of Finance allocated them N$90 million of public money for the Bank to lend out at 9.05%. We see every night on national television that the FNB home loan lending rate is 8.75%, Agribank gets free state resources and lends at 9.05%, and call this an affirmative action loan – what a joke? This is unfair financial practice subsidised by the state. If one looks at the opportunity cost of money, 9.05% that Agribank charges will be obtained nowhere else in the local financial market, only through the exploitation of the already disaster-stricken farmer.

The percentages discussed above may seem insignificant but if you apply them to loans in millions, you will realise how the Agribank borrower is denied a benefit that is rightfully his. For example, on a loan of N$1,000,000 the commercial borrower enjoys a relief of N$25,000, whilst the Agribank borrower gets only N$5,000 – who is happy to forfeit N$20,000 per year?

It should not be forgotten that in 2019, during the drought, the president declared a state of emergency and called upon public institutions to assist. Agribank took the opportunity to grow their loan book and with another disaster a year later, they do not come to the table and instead of being called to order they receive praises. This is amazing!

I trust the parliamentarians will take their job more seriously and protect those they represent. It looks like they might have been sleeping on duty when they approved the N$90 million public money to be lent to the same public at exorbitant rates of interest beyond the market rates in the name of affirmative action.