A briefing to parliament by the Minister of Finance and Development Planning, Kenneth Matambo, about the National Development Bank (NDB) sharply contrasts with received wisdom that the bank is on the brink of collapse.
For the past three weeks, newspapers have been writing NDB obituaries but when he tackled a parliamentary question this past week, Matambo said the bank was not in any extraordinarily adverse situation and had in fact, made profit last year. He admitted though that at this point in time and as a result of circumstances beyond its control, the bank was going through a rough patch.
“The National Development Bank finances high risk ventures such as agricultural projects and startup businesses, which are very sensitive to natural disasters such as drought, and/or diseases. In addition, the bank has equally been adversely affected by reduced economic activity. The impact of these factors is a sharp increase in non-performing loans, which has affected the level of profitability of the bank. As a result, the bank is anticipating reporting a loss for the financial year ended March 2014,” the minister said in response to a question from Francistown South MP, Wynter Mmolotsi.
Such challenges notwithstanding, Matambo hastened to add the bank continues to be a going concern and is fully executing its mandate, as validated by the external auditors who have issued a clean audit report. Part of the question he was answering required him to explain why the NDB financials for 2013/2014 have not been declared to date and why the bank has suspended loans to farmers.
The response was that the bank’s financial results for the year ended March 2014 will be published during the course of this month, after they have gone through all necessary corporate governance approval structures.
“The bank is migrating to a new Integrated Banking System and this has required a detailed audit to be done, taking into account the transition from the old system to the new system. Consequently, the bank experienced a delay in the production of the 2014 financial results. During this process, all key stakeholders were updated accordingly and approval was granted for the extension of time, at different levels of governance. It is worth noting that in the past years the bank’s financial statements were always published within the six months period as required by the National Development Bank Act. The bank was also profitable in this past year and was paying dividends to government accordingly,” Matambo said.
He added that while consideration of other loan applications is continuing, the bank decided to suspend receipt of loan applications for business loans, primarily because they have reached their annual budget targets and are currently being reviewed. The bank continues to consider farming loan applications, except for dry land seasonal loans.
“These are only processed within the farming period as prescribed by the Ministry of Agriculture. This is to ensure that farmers are aligned to the ploughing season and will be able to repay their loans timeously,” the minister said.