Uirab takes on critics of Namport’s expansion plan
The outgoing CEO of Namport on Friday lashed out at a researcher backed by the Economic Association of Namibia (EAN), who claimed last week that officials had sorely miscalculated the future growth forecasts for ship visits and cargo to be handled at Walvis Bay and thus took on debt commitments that could ultimately land the company and the wider economy in murky waters.
At a meeting hosted by the EAN in Windhoek last week, economist Rainer Ritter warned that Namport’s infrastructure development plans may cause long-term cash flow problems for the company and worsen Namibia’s debt burden as the parastatal firm’s bottom-line comes under pressure.
Ritter, a former director of the Bank of Namibia, in his findings noted that there had been a significant decline in ship visits and containers handled at Walvis Bay since 2012, and that Namport’s profitability had sunk to an all-time low in recent times.
His report, ‘Namport within the Context of a Logistics Hub’, shows that Namport took on several major capital projects, such as the new container terminal on reclaimed land (which should be operational by mid-2019) at a cost of an estimated N$4 billion. Its capital projects, including the north port project, were expected to cost over N$20 billion.
“The major question is, can these costly investments pay off, and whether Namport will be in a position to repay the AFDB (African Development Bank) loan without running into serious financial problems?” he asked.
Although Ritter’s report was reportedly based on data from Namport’s audited financial statements, Namport CEO Bisey Uirab in his response on Friday rejected the main argument and said the reports were compiled and distributed without the courtesy of according Namport an opportunity to verify the contents or provide some context to the issues raised.
Uirab said it was downright “slanderous” of Ritter to suggest that there was a “general lack of effective governance and appreciation of logistics within Namport and the government”.
One of Ritter’s key contentions is that the growth forecasts on which the plan for the new container terminal was based were deeply flawed. Uirab did not dispute that the growth forecasts were wrong, but disputed the implication that there was a lack of due diligence.
He said extensive studies were conducted by specialist consultant firms and international organisations, such as the Japan International Cooperation Agency and a United States of America-based consultancy firm, Nathan & Associates, resulting in “nine volume forecasts which provided the impetus, even on worst-case basis, to the expansion drive.”
The Namport CEO further said the AfDB before releasing the N$2.982 billion loan funding “also conducted a due diligence exercise on the volume forecasts and the financial feasibility of the project” and that Namport was on track with loan repayments.
Uirab conceded though that it was “indisputable” that the cargo volumes on which the original expansion plan was based “have substantially declined”, but felt it was “rather unfortunate that the writer would suggest that there was inadequate planning and due diligence in rolling out the project.”
Ritter said Namport executives initially projected that Namibia’s ports would have to handle around 1 million container units a year by 2017, but the number of containers handled and ship visits have dropped consistently since 2012.
In fact, Walvis Bay Port never reached its peak handling capacity of 350,000 containers per year, as volumes started to taper off from a previous high of 330,000 TEUs in 2012. His data show that with the onset of recession, the number of TEUs handled fell to below 200,000 by 2018.
The AfDB loan for the new terminal was based on projections that Walvis Bay would handle at least 700,000 containers per year by 2019. Ritter is consequently not convinced the terminal built on reclaimed land was necessary. “We never reached the projections for handling of containers. The old terminal could have handled the number of containers,” he argued.
He also pointed to a decline in Namport’s operating margins, profitability and return on assets. “Analysing the statement of cash flows we see that the net cash flow from operating activities decreased from N$262 million in 2013 to N$90 million in 2017.”
Uirab in turn produced figures to show that “For the year ended 2017/2018 Namport recorded an increase in revenue of 14 percent, and for the first time total income attained the N$1 billion mark compared to the N$906 million generated in the previous financial year.”
A company spokesperson last week pointed out that Namport has never needed any bailout from government though and was on schedule with its loan repayments to AfDB. Namport said the number of vessels docking in the port were declining not due to high tariffs but due to consolidation among shipping companies as bigger vessels were increasingly common, adding that the decline further reflected the overall state of the Namibian economy and the situation in Angola.
Ritter noted though that “the repayment of the loan from the African Development Bank will only commence at the end of 2019 and is yet to impact cash flows. Therefore, at present the grace period shields current cash flow. In the absence of any significant cash inflows the cash flow situation… is expected to take a turn for the worse when loan repayments commence.”
As for the decline in the ship visits and cargo handled at the Port of Walvis Bay, Uirab rejected Ritter’s argument that “the decline in cargo volumes at Namport’s ports is a result of the authority’s pricing and… that ‘drought, Zuma economics and falling commodity prices shouldn’t be convenient scapegoats for declining volumes’.”
He said: “Ports are the main conduit of inputs into all industries spanning from agriculture, construction, retail and mining and any factors negatively impacting upon the overall activity levels within these sectors therefore necessarily also impacts upon the volumes throughput through ports.
“Any attempt to divorce these fundamentals would be naïve, suffice to say the decline in the volumes of cargo throughput through Namport’s ports can be directly traceable to inter alia, the recent drought, economic downturn in the region, job losses on the local market, fluctuations in commodity and oil prices, unfavourable exchange and interest rates.”
Without mentioning names Uirab further said there is a general expectation by some businesspeople in Walvis Bay and the country at large that government and SOE services must be rendered at minimal or no cost at all.
“This is irresponsible and must be condemned, especially when it comes from businesspeople, who themselves are making their own profits without any accountability to the public, nor give due regard to the affordability of their goods and services to the Namibian population.” Uirab also rejected Ritter’s argument that ports costs in Namibia were too high and suggested his analysis was biased in favour of his backers.
“The said businessperson who triggered the study [by Ritter] claims to have a property at the coast, which has difficulty to find tenants. Surely, that can then not be attributed to harbour charges but possibly the pricing of that particular businessperson of his property, which in turn puts it beyond the reach of ordinary tenants. In fact, as far as we can notice, the current adverse economic environment has forced many companies and individuals across the country, to either lease out their properties at prices below market levels or in some cases, completely close them down.”