Opinion – The price of a FMD repayment holiday

A repayment holiday can be the difference between a viable agricultural business surviving a shock and a temporary cash-flow crisis becoming a permanent closure.

But relief must be understood for what it is.

A holiday postpones a payment.

It does not make the underlying obligation disappear.

That distinction matters as Namibia implements the Bank of Namibia’s Determination BID-42 in response to Foot-and-Mouth Disease (FMD) and El Niño-induced climatic conditions.

The determination gives banks a framework to assist eligible farmers and businesses across the agricultural value chain whose income or cash flow has been materially affected.

For a performing loan, the ordinary moratorium under BID-42 is a holiday on principal repayments for up to 24 months, following a documented bank assessment.

Contractual interest may continue to accrue unless the bank and borrower agree otherwise in writing. Penalties, default interest and charges arising solely from the moratorium are prohibited, although disclosed administration and necessary third-party costs may apply.

The future burden can be substantial. Consider a N$100 million loan. FNB Namibia and Nedbank Namibia currently publish a prime lending rate of 10.75 per cent.

If neither principal nor interest is paid for 24 months and unpaid interest compounds monthly at that rate, about N$23.9 million is added, taking the balance to roughly N$123.9 million.

At prime plus two percentage points, or 12.75 per cent, the balance would reach about N$128.9 million.

If N$123.9 million were then repaid over five years at 10.75 per cent, the monthly instalment would be about N$2.68 million and total payments over those five years about N$160.7 million.

Those figures are illustrations, not a prediction of any particular loan. Contracts calculate interest differently, rates may change, and a borrower who services interest during the holiday will face a lower balance.

BID-42 also does not require accrued interest to be capitalised.

Capitalisation would depend on the bank’s proposal and the written agreement.

The calculation nevertheless shows why a principal holiday can move pressure into the future if interest continues to compound.

BID-42 contains an important safeguard. It requires burden-sharing and a no-borrower-worse-off test. The bank must show how the arrangement leaves the client no worse off at the end of the moratorium, taking account of the rate, fees, instalment and total cost of credit compared with the original terms.

Every offer should therefore disclose what is deferred, how interest is calculated, whether it will be paid or capitalised, the revised term and instalment and the total repayment in Namibia dollars.

The stakes extend far beyond a bank balance. The Namibia Statistics Agency recorded 88 277 people in agriculture, forestry and fishing in 2023, or 16.1 per cent of employed Namibians.

The agriculture minister reported in April 2026 that livestock primary production supported more than 45 000 direct jobs and export and processing facilities another 12 000 technical roles.

Meatco alone employed 772 people at the end of its 2024/25 financial year. Each disrupted producer also affects workers, households, transporters, veterinary services, suppliers, abattoirs and retailers.

Temporary relief is necessary, but Namibia’s climatic risk is permanent. Producers need a financing architecture designed for repeated drought, erratic rainfall, disease and market interruption rather than a succession of emergency moratoria.

Government, development-finance institutions and commercial banks should establish a standing Agricultural Climate Resilience Facility.

It should provide partial credit guarantees and an interest buy-down or rate cap for investment in water security, rangeland restoration, fodder storage, solar pumping, biosecurity and climate-smart production.

Funding could blend public resources with climate-finance capital, while private banks continue the credit assessment and carry a defined share of the risk. Namibia should also scale agricultural risk insurance.

A national risk pool, supported by transparent public premium subsidies, could use rainfall, grazing or other independently verified indices to trigger fast payments before producers exhaust working capital.

The crop-insurance pilot developed under Namibia’s CRAVE climate resilient agriculture project offers a base that can be expanded and adapted for livestock. Finally, support should be triggered earlier.

Agreed drought and animal-health indicators should automatically activate concessional working capital, fodder and marketing support and temporary interest assistance before viable accounts become distressed.

Loan structures should also match production cycles, allowing seasonal or annual repayments and longer tenors for resilience investments.

Relief after a shock is costlier than preparedness before it.

BID-42 can provide breathing space during an exceptional disruption. It will work best when its immediate protection is paired with full cost disclosure and a permanent system that helps producers absorb Namibia’s next climate shock without converting today’s relief into tomorrow’s debt burden.

****Albertus Aochamub is the interim chief executive officer of Meat Corporation of Namibia (Meatco). He writes in his personal capacity. ***

The post Opinion – The price of a FMD repayment holiday appeared first on New Era.