Capricorn denies benefitting from Entrépo loans

Capricorn Group has denied being the main beneficiary of government employee loans through Entrépo Finance, clarifying that borrowers, not the group, gain from the lending scheme.

The Namibian on Monday reported that “the majority shareholder and beneficiary of this debt is Capricorn Group, which owns 55.5% of Entrépo Finance”, which the group says is misleading.

The group, which owns 55.5% of Entrépo, says it only benefits from the profits realised by the microlender through its activities, such as extending loans.

This means the group receives a portion of interest income when Entrépo extends government employees loans.

Capricorn spokesperson Marlize Horn in a statement on Tuesday says government employees are the beneficiaries of these loans.

“Capricorn Group is not the beneficiary of the debt, the borrowers, being the government employees, are the beneficiaries of the loans extended to them,” she says.

Additionally, Horn says the statement that a discontinuation might lead to non-performing loans, referring to the decision by the Ministry of Finance to end the payroll deduction management system (PDMS), is incorrect.

“It is also incorrect as the Ministry of Finance did indicate that all current loans lodged through the PDMS will be honoured until maturity,” she says.

A Simonis Storm analysis on Capricorn’s annual result states that forthcoming regulatory changes to the deduction code would have a material effect on Capricorn’s return on equity (RoE).

According to the analysis, Entrépo had been one of the group’s most profitable businesses, delivering exceptionally high net margins and RoE well above the consolidated average.

Despite representing only about 4% of the loan book, it contributed roughly 11% of group net profit, underscoring its outsized role in driving returns.

“While the existing book will continue to generate income, its top-line contribution will gradually diminish, and the structural driver of incremental earnings has ended,” says Simonis Storm.

The analysts say without Entrépo’s extraordinary profitability, sustaining a group RoE at current levels (~18%) and maintaining net interest margins above 5% will be significantly more challenging.

In its latest annual report Capricorn says the decision by the ministry creates uncertainty as Entrépo depends on the PDMS for loan collections.

“This development introduces uncertainty regarding the future of the mechanism and could affect the risk profile and business model of the respective subsidiaries. Management is actively engaging with stakeholders and preparing contingency collection measures,” the report reads.

Additionally, The Namibian reported that Capricon Group is a bank, however, Horn says the group is not a bank but owns Bank Windhoek, which is a licensed bank.

Speaking on behalf of Entrépo, Horn says the statement that the company “is suing the minister of finance, the prime minister and various other parties”, published by The Namibian last week is factually incorrect.

She says Entrépo filed an urgent interim interdict at the High Court against the minister of finance’s decision to discontinue the use of deduction codes through the PDMS, operated by Avril.

Entrépo is also seeking the review and setting aside of the minister’s decision to discontinue the use of deduction codes

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