Lazarus Kwedhi
During the induction workshop for newly elected Local Authority Councillors, the Minister of Urban and Rural Development, Hon. Sankwasa James Sankwasa, raised concern about the inability of Local Authority Councils to provide affordable land and housing to residents and the general public. He cited their inability to generate sufficient revenue from their own sources or to find alternative funding sources, other than relying on central government.
As such, Hon. Sankwasa informed and reminded councillors of their power and obligation to find other sources of funding for housing purposes, which may include land servicing. The minister’s statement finds its legal basis in Sections 30 and 80 of the Local Authorities Act, 1992 (Act No. 23 of 1992), as amended, specifically Sections 30(1)(v)(i) and 80(1)(c). These provisions empower Local Authority Councils to borrow money in the form of loans from any source within Namibia, subject to prior approval from the Minister of Urban and Rural Development, after consultation with the Minister of Finance. Any loan borrowed is regarded as part of the local authority’s funds.
While local authority councils have such powers and obligations, the meaning and implications involved cannot be left unattended, both from an administrative and public interest perspective. The meaning and implications are as follows.
Firstly, soon after councillors’ induction, the Ministry of Urban and Rural Development is likely to be flooded with requests from various local authorities seeking ministerial approval to borrow money, as stipulated in Section 30(1)(v)(i) of the Local Authorities Act, 1992. Hence, a policy framework apart from the financial lender’s requirement that clearly defines the criteria for approving or disapproving councils’ requests to borrow money is required. Such a framework would guide the internal process of both the Ministry of Urban and Rural Development, the Ministry of Finance, and Local Authority Councils.
Secondly, issues of affordability and sustainability arise when securing the required funds from financial institutions or lenders. Some local authorities may not have sufficient asset values or properties to use as collateral to secure funding for housing construction or land servicing. If this issue remains unaddressed, it defeats the purpose of the provision that seeks to encourage local authorities to find alternative funding sources rather than relying on central government.
Thirdly, the financial burden may ultimately remain with the central government should specific local authorities fail to meet their loan repayment obligations to financial lenders. Although the provision allowing Local Authorities to borrow money is made in good faith, the reality is that many Local Authorities are already heavily indebted and are failing to meet their financial obligations to bulk service providers such as NamPower and NamWater, as well as third-party institutions such as NAMRA, the Social Security Commission, pension funds, and medical aid schemes. Furthermore, local authorities are confronted with corruption and misappropriation of public funds. Under these circumstances, many local authorities are likely to struggle with loan repayment, and in case the financial lenders threaten to repossess local authority assets and properties, this predicament will automatically leave the central government with no option but to bail out the affected local authorities.
Fourthly, Section 30(1)(i) of the Local Authorities Act, 1992, provides for Local Authority Councils to establish housing schemes, subject to prior approval by the Minister, either independently or in partnership with other persons. To date, no Local Authority Council has implemented such schemes to adequately address land and housing needs in their respective municipalities, towns, or villages. Given the minister’s call urging local authority councils to borrow money to address the land and housing crisis, it remains unclear whether local authorities and the Ministry of Urban and Rural Development intend to establish the required housing schemes and whether borrowing for housing purposes will be centred around such schemes as envisaged in the act.
Ideally, local authority councils should source funds from their own sources of revenue or central government or donors for land servicing and housing construction and use their internal capacity through departments such as Infrastructure Development and Technical Services. However, the challenge is that most local authorities lack the human capacity and equipment required to undertake such large-scale projects. In this predicament, borrowing from profit-orientated financial lenders, combined with the need to appoint private contractors, poses further risks. Contractors may inflate tender prices or abandon projects, leaving councils with unfinished houses, as seen in the Mass Housing Programme. Such outcomes defeat the goal of providing affordable land and housing, as financial lenders and private contractors are driven by profit rather than public interest.
In conclusion, borrowing money in terms of Section 30(1)(v)(i) is an important source of funds for Local Authority Councils to supplement their budgets. However, it is not an ideal model for providing affordable, accessible, and sustainable housing to the majority of Namibians. Give the fact that the such model is shifting financial burden to the housing end-users who are riable to the profit of both properties developers, commecial bank on top of paying cost-recovery and of the Local Authority. The provision of borrowing money would be more appropriate for the local authority to secure funds and reinvest them in revenue-generating infrastructure such as open markets, shopping malls, recreational and sports facilities, warehouses, and community halls that can be rented to the public. Many local authorities fail to maximise revenue collection due to a lack of innovation in local economic development and investment attraction, including donor funding.
While financial lenders such as commercial banks have their own criteria for granting loans, the absence of a strong legal framework from central government to regulate local authority debt management, coupled with unresolved issues of corruption and misappropriation of public funds as well as unethical leadership in local authority councils, will ultimately defeat the intended public value in land and housing delivery.
