Agribank coffers run dry

THE Agricultural Bank of Namibia (Agribank) is teetering on the edge of bankruptcy.With losses of N$37,6 million recorded during the last financial year and its liquidity called into question, Auditor General Junias Kandjeke says he has doubts about the bank being able to continue trading as if it were profitable.

“The continued operations of the bank will rely heavily on receiving interest subsidies from Government in respect of guarantees as well as [the] successful collection of loans and advances,” the Auditor General’s report for 2004, which has just been tabled in Parliament, says. Agribank cannot be liquidated, except by an act of Parliament.INADEQUATE CONTROLS The report also expresses concern over whether the bank has made adequate provision for its losses and the recovery of loans and advances, which make up more than 90 per cent of the bank’s total assets.”There was no system of control on which the auditors could rely for the purpose of the audit and they could not conduct auditing procedures to obtain reasonable assurance that the provision for doubtful debts is adequate and valid,” is Kandjeke’s audit opinion.By the end of March 2004, loans and advances granted by Agribank totalled N$1,2 billion, up from N$997 million the previous year.The Affirmative Action Loan Scheme (AALS) further pushed up the loan figure to N$1,4 billion by the end of February.According to the report of Agribank Board Chairperson Hans-Gunther Stier, the growth of the AALS is putting tremendous pressure on the bank’s treasury department to raise funds to finance the scheme.Stier acknowledges that in the past the bank has understated its bad debts and that it needed to adjust this figure upwards by N$46 million.Agribank also faces legal claims amounting to N$7,4 million – the biggest of which – N$6,2 million – is from former CEO Tjeripo Hijarunguru, who is challenging the termination of his contract.The bank has not provided for these claims in its financial statements.FARM REPOSSESSIONS Agribank suffered losses of N$233 000 from the sale of repossessed farms during the 2002-03 financial year.However during the period under review, no repossessed farms were sold at a loss.Auditors expressed concern over the primitive manner in which Agribank keeps track of its doubtful debts, which it said was “prone to mistakes”.”There is no system of control on which the auditors can rely nor were there satisfactory auditing procedures that could be performed to obtain reasonable assurance that the provision for doubtful debts is adequate and valid,” note the auditors.Auditors found that its loan amount to the now defunct !Uri !Khubis abattoir changed from N$59,5 million on one spreadsheet to N$50,4 million on another, while the total arrears was decreased from a whopping N$9,8 million to only N$710 000.The security changed from N$21,2 million to N$9 million, depending on which document is consulted.Auditors said they were concerned that the bank planned to write off outstanding debts without demanding payments from the signatories of the sureties.ABATTOIR ANGUISH The security on the Agribank loan included two amounts of N$23 million each signed by the shareholders of !Uri Khubis.Agribank advanced them the loan despite one shareholder, Namibia Harvest Investments, not signing surety.Agribank management said that it realised during the liquidation of the abattoir that it would not be able to recover the N$21,2 million in immovable and movable property, and that it would only be able to get N$9 million.Namibia Harvest allegedly refused to sign surety, arguing that it had already made an advance of N$9 million to the abattoir and was not prepared to sign surety as well.It was agreed that the abattoir would first use Namibia Harvest’s money for costs before turning to the bank.Agribank entered into its first credit agreement with the African Development Bank in 2001 for N$60 million to assist in financing new loans for farmers.The amount, plus interest, is guaranteed by Government and repayable as from August 2004 for 10 years.From this first credit line, N$38 million was used for 51 land purchases and another N$13 million for livestock.The bank entered into a second credit agreement – for N$75 million – in 2002.The amount, also guaranteed by Government, is due for repayment starting May 2007, over 10 years.Agribank used this money to grant 61 loans for land purchases in the amount of N$54,2 million.Agribank cannot be liquidated, except by an act of Parliament.INADEQUATE CONTROLS The report also expresses concern over whether the bank has made adequate provision for its losses and the recovery of loans and advances, which make up more than 90 per cent of the bank’s total assets.”There was no system of control on which the auditors could rely for the purpose of the audit and they could not conduct auditing procedures to obtain reasonable assurance that the provision for doubtful debts is adequate and valid,” is Kandjeke’s audit opinion.By the end of March 2004, loans and advances granted by Agribank totalled N$1,2 billion, up from N$997 million the previous year.The Affirmative Action Loan Scheme (AALS) further pushed up the loan figure to N$1,4 billion by the end of February.According to the report of Agribank Board Chairperson Hans-Gunther Stier, the growth of the AALS is putting tremendous pressure on the bank’s treasury department to raise funds to finance the scheme. Stier acknowledges that in the past the bank has understated its bad debts and that it needed to adjust this figure upwards by N$46 million.Agribank also faces legal claims amounting to N$7,4 million – the biggest of which – N$6,2 million – is from former CEO Tjeripo Hijarunguru, who is challenging the termination of his contract.The bank has not provided for these claims in its financial statements.FARM REPOSSESSIONS Agribank suffered losses of N$233 000 from the sale of repossessed farms during the 2002-03 financial year.However during the period under review, no repossessed farms were sold at a loss.Auditors expressed concern over the primitive manner in which Agribank keeps track of its doubtful debts, which it said was “prone to mistakes”.”There is no system of control on which the auditors can rely nor were there satisfactory auditing procedures that could be performed to obtain reasonable assurance that the provision for doubtful debts is adequate and valid,” note the auditors.Auditors found that its loan amount to the now defunct !Uri !Khubis abattoir changed from N$59,5 million on one spreadsheet to N$50,4 million on another, while the total arrears was decreased from a whopping N$9,8 million to only N$710 000.The security changed from N$21,2 million to N$9 million, depending on which document is consulted.Auditors said they were concerned that the bank planned to write off outstanding debts without demanding payments from the signatories of the sureties.ABATTOIR ANGUISH The security on the Agribank loan included two amounts of N$23 million each signed by the shareholders of !Uri Khubis.Agribank advanced them the loan despite one shareholder, Namibia Harvest Investments, not signing surety.Agribank management said that it realised during the liquidation of the abattoir that it would not be able to recover the N$21,2 million in immovable and movable property, and that it would only be able to get N$9 million.Namibia Harvest allegedly refused to sign surety, arguing that it had already made an advance of N$9 million to the abattoir and was not prepared to sign surety as well.It was agreed that the abattoir would first use Namibia Harvest’s money for costs before turning to the bank.Agribank entered into its first credit agreement with the African Development Bank in 2001 for N$60 million to assist in financing new loans for farmers.The amount, plus interest, is guaranteed by Government and repayable as from August 2004 for 10 years.From this first credit line, N$38 million was used for 51 land purchases and another N$13 million for livestock.The bank entered into a second credit agreement – for N$75 million – in 2002.The amount, also guaranteed by Gover
nment, is due for repayment starting May 2007, over 10 years.Agribank used this money to grant 61 loans for land purchases in the amount of N$54,2 million.