Renthia Kaimbi
The Ministry of Finance will reduce loan repayment deductions from civil servants’ salaries by 2%, with the change taking effect this Friday for teachers and police officers.
Windhoek Observer understands that the adjustment follows a new government position that the 2% surcharge previously deducted from employees’ salaries should not have been carried by workers.
The ministry now intends to recover the charge directly from deduction code holders, such as microlenders.
The development comes as the High Court on Monday dismissed an urgent application to hold finance minister Ericah Shafudah in contempt of court.
High Court judge Lotta Ambunda dismissed with costs an application brought by microlender Entrepo Finance, which accused Shafudah of interfering with the payroll deductions management system (PDMS).
The PDMS, in place since 2003, allows microlenders to deduct loan repayments directly from the salaries of government employees.
Entrepo alleged that Shafudah failed to comply with a 28 November court order issued by High Court deputy judge president Hannelie Prinsloo.
That order barred the ministry from interfering with new deductions and allowed the PDMS to continue operating until a main review application is heard in March 2026, with or without Avril Payroll Deduction Management.
In court papers, Entrepo managing director Liffie Champion said the company had been unable to access the PDMS since the ministry took over its management from Avril on 1 December.
She claimed the minister intended to replace the automated system with a manual one, placing about N$70 million in monthly deductions at risk.
In her answering affidavit filed last week, Shafudah denied the allegations.
“I have no intention of interfering with the loading of new deductions onto the PDMS,” she said.
She explained that access issues arose because Avril’s contract expired on 30 November and was not renewed, as the government opted to bring the system in-house.
Shafudah told the court that structures were being put in place to comply with the interim order.
She said deductions for teachers and police officers would be paid to lenders by Wednesday, with net salaries reaching employees by Friday.
Friday’s pay will reflect the 2% reduction in loan-related deductions for affected civil servants.
The ministry maintains that the adjustment corrects an earlier practice where employees unfairly absorbed Avril’s 2% surcharge.
Entrepo, which has held a deduction code since 2013, is challenging the termination of the arrangement. The company argues that the decision was irrational and unlawful and that it was not consulted.
Entrepo said its business depends entirely on the PDMS and that nearly half of its loans are used by civil servants for education-related expenses.
The finance ministry has said it plans to discontinue deduction codes, arguing that managing the system internally could save about N$11.5 million a month and ensure compliance with labour laws, including affordability limits under the Microlending Act.
While the contempt application has been dismissed, the main legal dispute remains.
In March 2026, the High Court is expected to hear a review application on whether the ministry acted lawfully in ending the PDMS arrangement.
Until then, the system will continue operating under government management.
Sources say the ministry has identified discrepancies in data submitted by some deduction code holders.
