Chamwe Kaira
The government has extended the implementation of the payment deduction management system (PDMS) reforms to next year.
In a statement, the Ministry of Finance said reforms to the system have been extended to allow for more consultations.
The ministry noted that following its letter dated 25 August and the stakeholder meeting held on 16 September, the engagement period on the proposed reforms has been extended to 28 February.
The ministry’s decision to suspend the deduction code has raised concerns among micro-lenders about their sustainability.
Simonis Storm Securities analyst Kara van den Heever said the suspension of the deduction code, effective 30 November, poses a risk to Letshego Namibia, as a large portion of its deduction at source model relies on this system.
Letshego Holdings Namibia, together with its subsidiaries Letshego Bank Namibia and Letshego Micro Financial Services Namibia, announced that they have suspended all new deduction-at-source loans for government employees with immediate effect.
The implementation of PDMS reforms during the 2024 financial year is expected to change the earnings profile of Entrepo Finance, a subsidiary of Capricorn Group.
Entrepo has been one of the group’s most profitable businesses, recording high margins and returns on equity above the group average.
Entrepo Finance has taken legal action against the government, filing a case in the High Court to stop the planned discontinuation of the payroll deduction system.
The Ministry of Finance said deduction code holders may continue to use the PDMS, provided that all deductions comply with legal requirements, including the Labour Act of 2007, the State Finance Act of 1991, and the Microlending Act of 2018.
The ministry emphasised that the requirements under Section 12 of the Labour Act, read together with Microlending Standard No. 4, issued under section 35(1) of the Microlending Act, must be strictly enforced.
“Until 30 November 2025, the payments of deductions for those deduction code holders who conduct their business through Avril Payroll Deduction Management Company (Pty) Ltd (Avril) shall be made through Avril, but upon expiry of the agreement between the MOF and Avril on 30 November 2025, the MOF shall conduct all aspects of the PDMS in-house,” the ministry said.
The ministry urged all stakeholders to use the extended consultation period to raise their concerns about the proposed discontinuation of deduction codes and discretionary deductions from the ministry’s payroll.
Caption
Minister of Finance, Ericah Shafudah. The finance ministry has extended implementation of the payment deduction management system.
– Photo: Contributed
