By Staff Reporter
As Namibia’s oil and gas sector gains momentum, concerns are emerging that structural weaknesses within the industry could limit the country’s ability to fully benefit from its resources.
Among these, oil and gas expert Jofden Schalenksy says, is the growing issue of late payments to service providers, particularly local companies operating at the lower tiers of the value chain.
“While the industry remains in an early, exploration driven phase, some of the commercial practices taking root are already placing pressure on Namibian businesses expected to drive local content,” Schalenksy explained.
“As highlighted in Part 1 of this series, the sector is built around a network of operators, partners, government institutions, service companies and local suppliers. International operators lead exploration activities, while local companies provide critical support services meant to anchor economic value in Namibia,” he added.
In the sector, he adds, it is common for companies to apply payment terms of up to 90 days after invoice approval. Schalenksy noted that even these terms are difficult for most local businesses to sustain and in practice, payment timelines often stretch well beyond this period.
“For many Namibian companies, there is little room to negotiate and securing contracts in a competitive environment means accepting conditions set by larger clients, even when those terms place significant pressure on cash flow.”
He maintained: “The process itself adds further strain. Companies typically invoice only after completing work and receiving sign off, which may take weeks. This is followed by an approval process that is often unclear, with no consistent timeline or accessible point of contact.”
Even when everything runs smoothly, it is believed that payments may only be received several months after work begins and for many, the reality is far worse.
According to the expert, evidence from subcontractors shows that some companies are only paid six to eight months after services are delivered or goods supplied. While for large international firms, such delays may be manageable, it can destabilize local companies.
The impact is felt immediately as businesses face pressure on cash flow, struggle to pay employees and find it difficult to meet statutory obligations such as pay as you earn, social security and value added tax. Furthermore, this affects investment in training and skills development which are often the first to be cut.
Schalenksy maintains that due to this, local companies are forced to carry the financial burden of projects for extended periods, without the reserves to sustain it, which creates a clear imbalance in the value chain.
“Namibia’s ambition is to build a strong local content framework that ensures oil and gas development translates into jobs, skills and long term economic value. But that vision becomes difficult to realise when local businesses operate under constant financial strain.”
Late payments, according to him, weaken companies, slow their growth and limit their ability to compete. Over time, this risks pushing local players out of meaningful participation, not because they lack capability, but because they cannot withstand the financial pressure.
“Compounding the issue is the silence around it as many affected companies choose not to speak out, fearing that raising concerns could cost them contracts or damage relationships with key clients. As a result, the problem persists beneath the surface, creating a fragile operating environment where structural challenges go unaddressed.”
Furthermore, other industry voices say improving the situation does not require complex reform, but a commitment to fair business practices. They suggest shorter payment terms, clearer processes and accountability in payment systems could ease pressure on local suppliers.
