Repayment holiday could deepen farmers’ debt burden
While a repayment holiday may offer farmers temporary relief from foot-and-mouth disease (FMD) and climate-related pressures, accumulated interest could leave them with significantly higher debt, Meatco interim chief executive Albertus Aochamub has warned.
In an opinion piece written in his personal capacity, Aochamub said the Bank of Namibia’s Determination BID-42 provides a framework for banks to assist eligible farmers and agricultural businesses whose income and cash flow have been materially affected by FMD and El Niño-induced climatic conditions.
However, he cautioned that postponed repayments do not mean the debt disappears.
Under the determination, performing loans may qualify for a principal repayment moratorium of up to 24 months, subject to a documented assessment by the bank. Interest may continue accumulating unless the bank and borrower agree otherwise in writing.
“A holiday postpones a payment; it does not make the underlying obligation disappear,” Aochamub said.
He illustrated the potential impact using a N$100 million loan. If neither principal nor interest is paid over 24 months, and interest compounds monthly at 10.75%, the outstanding balance could rise to about N$123.9 million. At an interest rate of 12.75%, it could reach approximately N$128.9 million.
He stressed that these figures are illustrative, with the actual cost depending on individual loan agreements, interest calculations and whether borrowers continue paying interest during the moratorium.
Aochamub also highlighted a safeguard in BID-42 requiring banks to demonstrate that borrowers will not be worse off at the end of the repayment holiday.
He urged farmers to obtain clear information on deferred payments, interest calculations, revised repayment periods, future instalments and the total cost of credit before accepting any arrangement.
The impact of financial distress in agriculture extends beyond farmers, affecting workers, transporters, veterinary services, suppliers, abattoirs and retailers, he said.
Rather than relying on emergency repayment holidays whenever the sector faces difficulties, Aochamub called for a permanent agricultural financing framework that accounts for recurring droughts, disease outbreaks and market disruptions.
One proposal is an Agricultural Climate Resilience Facility involving government, development finance institutions and commercial banks. It would support investment in water security, fodder storage, rangeland restoration, biosecurity and climate-smart farming.
He also called for expanded agricultural risk insurance and earlier financial intervention when drought and animal-health indicators point to potential distress.
“Relief after a shock is costlier than preparedness before it,” he said.
Aochamub said BID-42 could provide essential short-term relief, but stressed that transparency and longer-term financial measures would be needed to prevent farmers from emerging from repayment holidays with an even heavier debt burden.
