Finance minister clashes with payroll company in High Court

The minister of finance has formally objected to an affidavit filed by Avril Payroll Deduction Management, rejecting its attempt to defend its operations in the ongoing High Court dispute over the government’s payroll deductions management system (PDMS).

Avril, cited as the sixth respondent in the case, delivered an affidavit on 5 November in which it responded to allegations by the minister that its payroll services are unlawful under the Payment Systems Management Act of 2023.

On 13 November, a government lawyer notified Avril’s counsel that the affidavit was irregular, arguing that a respondent cannot support the relief sought by the applicant in the case, the microlending company Entrépo Finance.

Avril countered that its affidavit is essential to defend itself against an order that could declare its business illegal.

“The minister seeks a declarator against Avril while simultaneously arguing that Avril should be sidelined,” the affidavit states.

Avril said refusing to admit its statement would force the court to decide the matter on incomplete and inaccurate facts, undermining the principle of the right to be heard.

The dispute centres on the ministry’s decision to discontinue deduction codes on the PDMS, which allows repayments of microloans granted by Entrépo to be automatically deducted from government employees’ salaries.

Entrépo launched an urgent application on 30 September, following a 25 August letter from the finance ministry instructing that no new deduction codes be loaded and that all codes be discontinued by 30 November.

Leonard Louw, Entrépo’s group chief executive, said in a sworn statement that the discontinuation is “irrational, irregular, unreasonable and disproportionate”.

He highlighted that over the last 18 months, 47% of the value of Entrépo microloans went to education, 12% to housing, 11% to business and 5% to medical expenses, meaning the removal of deductions could lead to non-performing loans and financial strain for borrowers.

Avril, which has provided payroll services to the ministry for more than 22 years, argued that many of the functions the minister attributes to it are in fact performed by First National Bank of Namibia under an agency agreement.

Avril also noted that a section of the Payment Systems Management Act allows companies operating before the law came into effect to continue providing such services lawfully.

The minister’s affidavit alleges that Avril provides “payment services” and operates a “payment system” without authorisation, but Avril maintains its services are limited to payroll management and are fully compliant with the law.

Avril described the minister’s position as self-contradictory, noting that the ministry intends to internalise the same functions it claims are unlawful when performed by Avril.

In its urgent application, Entrépo is asking the court to direct the finance minister not to interfere with the loading of new deductions on the Ministry of Finance’s payroll deductions management system, and also not to issue instructions that no new deductions may be loaded on the system.

Entrépo is also asking the court to authorise the continued operation of the PDMS with effect from 29 August, until an application to review finance minister Ericah Shafudah’s decision to discontinue the system from the end of November and to stop the loading of all new deductions on the system has been decided by the court.

Deputy judge president Hannelie Prinsloo heard oral arguments on the application yesterday.

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