Renthia Kaimbi
Finance minister Ericah Shafudah has denied being in contempt of court, saying the High Court order on the government’s payroll deduction system is unclear and difficult to implement. She also argues that serious data problems from a microlender have delayed the system’s transition.
Shafudah filed her defence last Thursday in a case brought by Entrepo Finance (Pty) Ltd, which centres on the Payroll Deduction Management System (PDMS).
The system allows civil servants to repay loans directly from their salaries.
The Ministry of Finance decided to take over management of the PDMS after its contract with private service provider Avril Payroll Deduction Management expired on 30 November 2025.
In her answering affidavit, Shafudah denies wilfully disobeying an interim court order issued last month.
She says she has not interfered with the loading of new deductions onto the system and has not instructed anyone to block them.
“I have neither interfered with the loading of new deductions nor issued any instructions to prevent it,” she states, adding that she has complied with the order.
Her defence focuses on what she describes as a lack of clarity in the court order.
Shafudah argues that the order does not state who must carry it out or how the PDMS should continue operating after Avril’s contract ended.
She says her legal advisers have told her that the court cannot suspend existing laws.
According to her affidavit, the interim order would in effect suspend parts of the Labour Act of 2007 and the Public Procurement Act of 2015.
“Does the court order purport to grant me the powers I do not have, or am I expected to act unlawfully to give effect to it?” Shafudah asks.
She also points to serious data integrity problems that emerged during attempts to migrate the system.
When the ministry received data from both Avril and Entrepo, officials found major inconsistencies.
More than 70 770 records from Entrepo had no matching entries in Avril’s data, with all Entrepo amounts listed as higher.
Another 22 active payments appeared in Avril’s system but were missing from Entrepo’s records. Over 1 400 records showed expired end dates.
Officials also found that 896 employees were inactive on the government payroll. Of these, 662 were listed by Avril and 234 by Entrepo.
The affidavit outlines further problems, including invalid characters in bank account and identity number fields, as well as records where a date was entered instead of a numeric loan balance.
These issues prevented the data from being imported.
Shafudah says Entrepo was informed of the discrepancies in early December but could not explain them.
Entrepo later submitted a new dataset that matched Avril’s data exactly. This raised concerns, as Avril’s file included a 2% service surcharge that did not appear in Entrepo’s revised submission.
The ministry maintains that bringing the PDMS in-house could save the state about N$11.5 million per month.
In a supporting affidavit, the Namibia Financial Institutions Supervisory Authority (Namfisa) said discretionary payroll deductions were unlawful and stressed that microlending must follow affordability rules under the Microlending Act.
The Bank of Namibia (BoN), which did not file an affidavit, warned about the lack of competition in the current system.
It noted that fewer than 12 microlenders and deduction code holders have direct access to the PDMS, out of more than 860.
The central bank said the Payment Systems Act of 2023 promotes fair competition through platforms such as the Enhanced Debit Order system.
The ministry says all other financial institutions with deduction codes are working with officials to resolve data issues. It aims to complete the migration soon, with the first payments under the government-managed system for teachers and police officers expected by mid-December.
Sources told the Windhoek Observer that some deductions were scheduled to run until 2080, even though microloans are limited to a 60-month period.
They said this keeps civil servants in debt for longer than allowed.
The sources said the ministry should finalise investigations into all deduction code holders and either make the findings public or include them in court proceedings set for March next year.
High Court acting judge Lotta Ambunda is expected to rule on the contempt application later today.
Shafudah says she needs the High Court’s reasons for granting the interim order to fully understand her obligations.
March 2026 is the scheduled date for hearing the main review application, which contests the lawfulness of the decision to terminate the PDMS arrangement.
This comes as earlier this month, the High Court directed Shafudah not to interfere with the loading of new deductions onto the PDMS.
