Government incurs losses in Green Scheme Projects

14 Nov 2013 14:00pm
WINDHOEK, 14 NOV (NAMPA) – Government is incurring losses through an agreement under which it acts as guarantor for Green Scheme-affiliated small-scale farmers with Agricultural Bank of Namibia (Agribank) loans.
An Auditor-General's report on the Green Scheme programme has revealed that the lack of a clause in a tri-partite agreement in terms of repayment of Agribank loans in case of death and breach of contract by small-scale farmers (SSFs), leads to Government incurring the losses.
The report, which particularly focused on an audit study on the Green Scheme programme in the Ministry of Agriculture, Water and Forestry (MAWF) for the financial years 2009 to 2011, was tabled in Parliament on Wednesday.
It said the lack of a system to automatically deduct the repayment of loans by SSFs to Agribank at some of the projects results in the SSFs defaulting on the Agribank loans, which results in the government as guarantor paying for the loans.
It therefore recommended that the MAWF in consultation with Agribank must insert a clause in the tripartite agreement specifying the repayment of Agribank loans in case of death and breach of contract by SSFs.
It also said that small-scale farmers at all of the State’s Green Scheme projects, with the exception of the Hardap project, have been not paying the required lease fee in accordance with the leasehold agreement, which means more loss of income for Government.
This is partly because the MAWF, under which these projects are run, has not undertaken the valuation of its Green Scheme projects (with the exception of the Mashare project in the Kavango Region, and the Hardap project) in order to determine a lease fee for the SSF plots.
The ministry should therefore ensure that the projects are valued in order to recommend the appropriate lease fees for the SSF plots, it noted.
The report further added that the MAWF should ensure that the Green Scheme policy makes provision for the payment of lease fees by the SSFs, and the specific lease fees should be specified in the leasehold agreements for each Green Scheme project.
The Green Scheme policy as revised and adopted in December 2008 provides guidance and a legal framework on the implementation of Green Scheme initiatives.
According to the report, non-performance by the service providers on profit-sharing agreements resulted in the ministry taking over the management of projects such as the Etunda project in the Omusati Region and the Shadikongoro and Uvhungu-Vhungu projects in the Kavango Region because these projects were not profitably managed.
Projects such as the Orange River Irrigation Project and Etunda and Ndonga-Linena projects incurred losses consecutively for the financial periods 2008 to 2011, whereas the Mashare project only incurred losses once.
As a result, this lead to Government not receiving a profit share (Government 40 per cent and the service provider 60 per cent) considering efforts in terms of investment such as land, farm infrastructure, implements, machinery and equipment provided by the ministry.
The report further stressed that only one of the seven projects created a project reserve account for the sustainability of project assets as required by the Green Scheme policy of 2008, adding that as a result, the projects which did not create reserve accounts will continue to rely on the ministry's budgetary support.
The Green Scheme Projects are owned by the Namibian Government through the MAWF, and are aimed at encouraging the development of irrigation-based agronomic production in Namibia in order to increase food production.
This is meant to contribute to the national agenda for food self-sufficiency and food security, as well as job creation.