Expected losses could put NWR in the red
17 February 2021 | Tourism
At the end of last year, the independent analyst Rainer Ritter prepared a report as part of an investigation by the Ministry of Public Enterprises, in which he examined the profitability of Namibia Wildlife Resorts (NWR).
According to the report, NWR made a profit of N$22.45 million for the first time in 2019. The reason for this is the increase in the profitability of the accommodation in Okaukuejo, Halali, Namutoni, Sesriem, Sossus Dune and Hobas, as well as the savings of N$20.1 million in the costs incurred by the head office.
“Nevertheless, one can say with certainty that the costs for the headquarters are around 35% too high in comparison to the size of the company,” Ritter says.
The current board of directors and the management team have proven that NWR could be in the black, “but 2019 was also an extraordinary year from a tourism perspective. Tourism will not be back on the same level anytime soon,” Ritter said. “On 31 October 2019, equity totalled N$482 million, but the balance sheet will be significantly weakened by the expected loss of N$154 million at the end of October 2020.”
The expected loss of N$123 million at the end of October 2021 could, according to the report, put NWR in a very serious financial position, making restructuring inevitable.
According to documents, the NWR’s Classic Resorts contribute 67.8% to sales and approximately 74.2% to the company's profits, with Okaukuejo being NWR's most profitable accommodation, followed by Halali.
“The profits come from the facilities at Etosha, where NWR’s monopoly helps, as no private operator has access to the park.”
Gross Barmen and Hardap, on the other hand, are loss makers and are more likely to be used by the local population than by overseas tourists.
Of the NWR campsites, Sesriem, Olifantsrus and Hobas make the most profit. Sesriem, Sossusvlei and Etosha are the preferred travel destinations for tourists.
The coastal rest camps and campsites (Torra Bay, Mile 72, Jakkalsputz, Mile 108, Mile 14 and Terrace Bay) can be combined as one business unit, according to the report, with a loss of N$1.8 million. “Such a situation is unsustainable, especially the financial situation of Terrace Bay,” Ritter said. The establishment of a separate management company for the operation of the campsites along the coast with majority shareholders from the private sector is recommended.
According to Ritter, a cost-cutting strategy with clear goals must be implemented. He suggests that the Hardap and Gross Barmen NWR properties be offered individually to the private sector as a joint venture.
“NWR should consider offering Duwisib for sale, perhaps to the Gondwana Collection, as the company has a good track record and is much better at marketing historical sites than NWR.”