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Banking, Currency & Exchange Control

 

Banking
Namibia’s banking sector has been dominated by the four commercial banks; FNB Namibia, Standard Bank, Bank Windhoek and Nedbank (formerly Commercial Bank). The central bank, Bank Of Namiba (BON) recently refused to allow Absa to buy at least 70 per cent of the shares in Capricorn Investment Holdings (CIH), holding company of Bank Windhoek. BON’s rejection of the N$1,5-billion deal means that Bank Windhoek remains the only wholly owned Namibian bank in Namibia. The reason, according to Governor Ipumbu Shiimi of BON being; if the merger would have been approved, it would have pushed foreign shareholding in the local banking sector up from 65 per cent to nearly 80 per cent.

Currency
Until September 1993 when Namibia introduced its own currency, the Namibian Dollar (N$), the South African Rand was also the currency of Namibia. The Rand still remains legal tender, and the two currencies are traded at parity subject. However, a service charge of 10% is levied by South African Banks when the N$ is converted to the South African Rand in that country. After independence Namibia remained part of the Southern African Rand monetary area (known as "the Common Monetary Area" or the "CMA") which comprises Namibia, South Africa, Swaziland and Lesotho, and the exchange control regulations pertaining to that area are applicable to Namibia. There is no intention to depart from the CMA.

Exchange control:

  • to ensure the timeous repatriation into the Namibian banking system of all foreign currency acquired by residents of Namibia, whether through transactions of a current or a capital nature; and
  • to ensure that foreign currency outflows are for legitimate purposes only and in the best interest of Namibia as a whole, and less for the individuals concerned.


Exchange Control is administered by the Bank of Namibia under powers delegated to it by the Minister of Finance and the Treasury, in whom responsibility for this matter is vested.

Although inward investment is relatively unrestricted, it is advisable to note that Exchange Control is complex. More important the fact that it is relatively easy for foreigners to invest in Namibia. It is highly recommended that non-residents investing in Namibia consult a reputable lawyer, accountant or authorised dealer (bank) for advice. The rules governing exchange control in Namibia stipulates that all funds brought into the country by a non-resident to acquire fixed property within the country may be repatriated at any time.

Exchange Control in Namibia falls under the control of the Minister of Finance and the Treasury who have delegated the administration thereof to the Bank of Namibia who, in turn, have appointed the commercial banks as Authorised Dealers in foreign exchange.

The purpose of control is to ensure the repatriation into the Namibian banking system of all foreign currency acquired by residents of Namibia, whether through transactions of a current or a capital nature and further to ensure that foreign currency outflows are for legitimate purposes only and in the best interest of Namibia as a whole.

The control regulations are also applicable to non-residents [person (or legal entity) whose normal place of residence, domicile or registration is outside the Common Monetary Area (Namibia, the Republic of South Africa, Lesotho and Swaziland)].

The regulations deal with local financial assistance to non-residents in particular. This assistance refers to the lending of currency or granting credit to foreign investors. It also refers to any local borrowing, leasing, and loans extended to a company of which 75% or more is owned by foreigners.

This ratio has now been doubled. In the past, a foreign investor could only borrow 50% of his/her capital funds locally. The rationale for this requirement is to ensure that a foreign investor introduced a reasonable amount in respect of capital funds, without too much dependency on local borrowing.

Non-residents purchasing a property in Namibia are nowadays not restricted as much and the best would be to consult the applicable bank to enquire about the maximum percentage of the purchase price that may be borrowed and which percentage of the funds must be brought into the country by the purchaser. These funds must also be transferred from a recognised foreign bank to a bank in Namibia. The total amount that may be borrowed is at the discretion of the commercial bank offering the loan.

A non-resident must open a “non-resident” account at a Namibian commercial bank to facilitate loan repayments. This account would normally be funded from abroad or from rentals received on the property purchased, subject to the bank holding the account being provided with a copy of any rental. Non-residents who are in possession of a valid Namibian work permit/permanent residency are considered to be residents for the duration of their work permit and are therefore not subject to borrowing restrictions placed on non-residents without the necessary permits.