pull-out
John Grobler
Insurance companies operating in Namibia are threatening to pull out before the implementation of controversial legislation analysts say will spell the beginning of the end of Namibia’s market economy.
The Long-Term Re-Insurance Act will require the companies to pay increasing amounts of their income on premiums to the government.
Sanlam (Namibia) managing director Bob Meiring this week called for calm and consultation, expressing hope that sense would prevail over opinions based on bad advice. “This is legislation based on perceptions which cannot stand logical scrutiny,” Meiring said. “These are perceptions held by non-financial people in government who are not well-advised.”
The Act and its implications were initially dismissed as illogical and unworkable by the insurance industry. It allows the government to force insurance companies to place unspecified amounts of their long-term insurance income with a local government-owned company that only exists on paper.
The brainchild of London-based insurer Alexander Howden who has, according to top industry sources, several consultants working for free for the local Ministry of Finance, the Act has the backing of a few powerful South West African Peoples’ Organisation politicians who pushed it through Parliament four weeks ago.
With a 72% majority in the National Assembly and many back-benchers keen on lucrative appointments, mustering support for the controversial Act was not difficult.
Some insurance companies, including Southern Life, have already signalled their intention to withdraw from the Namibian economy.
Eddie Engelhage, MD of the new Southern Life-Metropolitan Life merger, said its Namibian affiliate would definitely be closing its books and retrenching all 170 staff members at the end of September.
Engelhage acknowledged that the decision to stop doing business in Namibia was motivated by equal measures of a new, post-merger business focus and the Act. “The Namibian market is overtraded,” he said of the R10-billion per annum local long-term insurance industry, “but the new Act makes it virtually impossible to even make a living.”
The first wind that the industry got of the move was when insurance companies were called before the standing committee for finance to give their input on a potentially disastrous piece of legislation they had never before been consulted on.
But by then, it was to late to suspend the legislative process.
With officials already clamouring for cushy positions with the as yet unnamed company, expenses would kill off any profits, a top industry source pointed out. She also pointed out that the Act will allow for ever-increasing, creeping nationalisation of the insurance industry. Insurance companies are already obliged to invest 35% of all premium income in Namibian development – but investment opportunities are scarce and risks have to be spread ever wider in a globalising economy to ensure survival in this fiercely competitive industry.
And financial management is not the Namibian government’s strong point – the Auditor-General, Dr Fanuel Tjingaete, recently reported that nearly all ministries have over-spent up to 40% on their budgets.
“If they go ahead with this thing, it will be the beginning of the end,” said a source. “People will stop investing in long-term savings and keep their money under their mattrases – because you just know that if you give it to the government, you are never going to see it again. You can imagine what that’s going to do to our small, localised economy.”