Friday, May 18, 2018

Namibia, Angola to Abandon Currency Conversion Pact
By Southern Times
Timo Shihepo

Windhoek – Bank of Namibia (BoN) will no longer allow the exchange of Angolan kwanzas through commercial banks in Oshikango, even if Banco Nacional de Angola (BNA) settles its debt next month.

This is a big blow to a deal, which was once hailed as a landmark bargain meant to revive business at the border towns of Oshikango in Namibia and Santa Clara in Angola.

The deal, which was inked in 2015, allowed for the exchange of Angolan kwanzas at the border town of Oshikango through commercial banks but the deal went south after BNA experienced difficulties in repaying the debt, which accrued to R5 billion.

As a result, late in 2015, BoN informed BNA that it was altering the initial agreement. The changes, which came into effect on December 21, 2015, included a cash-based arrangement that did not attract any repayment, unlike before when Angola kwanzas were only exchanged through commercial banks in Namibia.

At the time of negotiating the currency conversion agreement, a barrel of oil then cost about US$100 on the world market. Angola, whose oil is the main source of income, is one of the world’s leading oil producers.

But at the time of implementation, both parties were rocked by the news that the price of oil per barrel had plunged to US$28 per barrel, sending the Angolan economy into headwinds.

Extracting oil is an expensive undertaking and companies need higher crude prices to turn a profit. If oil prices plummet, businesses would have no option but to reduce production and lay off workers to stay afloat while hoping for prices to recover.

Many Angolans lost their income, got stuck with worthless kwanzas until they realised that they could go to Oshikango, dump the kwanzas in the commercial banks then leave with Namibian dollars.

Although they spent the Namibian dollars in Oshikango, the kwanzas in Namibia’s commercial banks at the border town became too much. BoN would then send the kwanzas to BNA for the latter to repay in US dollars but BNA struggled to keep up with the influx of kwanzas and could not simply payback.

The two banks had anticipated that the transfer of the kwanzas from Namibia would total US$20 million per month but weeks later that amount was valued to about US$200 million.

“The two central banks observed some challenges including the exchanging of currencies outside the scope of the agreement,” BoN’s deputy director of corporate communications, Kazembire Zemburuka, told The Southern Times.

Measures (such as deploying police officers to kill the black market) were introduced to address the identified challenges, however, they did not fully address the crisis. As a result, a black market for currency exchange grew and, by the time the two banks agreed to make changes to the agreement, Angola was already owing Namibia about R5 billion.

Despite tough economic conditions in Angola, BNA has been managing to repay back the money and is expected to pay its last instalment of R600 million in June.

The halting of the agreement resulted in the disintegration of Oshikango into a ghost town with many businesses closing down as Angolans no longer flock to the town to do business.

Chairperson of the Namibia Chamber of Commerce and Industry Northern Branch, Tomas Iindji said they hope to see this agreement in operation again as soon as possible.

He said it was a pity that there was widespread misuse during the brief period when the agreement was operational. He said, unfortunately, dishonesty people quickly found ways to skirt around the rules and black market currency exchanges contributed to the halting of the currency agreement.

“Many NCCI North members in that area cater to the consumer demands of wealthy Angolans looking to purchase goods and services they can’t find in their home markets, as well as Angolan businesses wishing to import products from the bonded warehouses operating along the border.”

Iindji urged the Bank of Namibia and the Banco Nacional de Angola to find a solution that will bring back the use of Angolan kwanzas at Namibia’s border town of Oshikango, saying the agreement has the potential to revive the business side of Oshikango.

Meanwhile, Bank of Namibia has said the Currency Conversion Agreement between Bank of Namibia and Banco Nacional de Angola (BNA) is still in place through the implementation mechanism, which commenced on December 21, 2015.

“This entails the Bank of Namibia selling the Namibia dollars to Banco Nacional de Angola. BNA then facilitates currency exchange at commercial banks and Bureau de Changes in Santa Clara in Angola through their normal banking transactions,” said Zemburuka.

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