The government’s planned suspension of the Deduction Code from 30 November 2025 is expected to disrupt Letshego Namibia’s business model, which relies heavily on Deduction at Source (DAS) loans, according to Institutional Researcher Kara van den Heever of Simonis Storm.
Van den Heever said 110,607 loans were originated via DAS in the 2024 financial year, representing N$5.2 billion, or 96% of Letshego’s total loan book.
“A substantial share of this is attributable to government employees, Namibia’s largest employer,” she said.
She noted that DAS has historically reduced default risk and given Letshego a structural advantage. “This advantage may now be challenged,” she said.
Two scenarios could play out, according to Van den Heever.
“First, affected clients could be migrated to a debit order repayment structure. This would materially increase Letshego’s administrative burden and is likely to result in an increase in non-performing loans, as the default risk now rests more heavily with the lender,” she explained.
This outcome , she said, would directly impact Letshego’s main revenue driver and could force a repricing of risk by the market.
Alternatively, she said, Letshego may absorb the costs of running the deduction system to preserve the current model.
“This approach could help maintain asset quality but would introduce new costs to the business. The key question becomes whether the issue is the principle of DAS itself or the government’s willingness to bear its administrative costs.”
DAS loans dominate Letshego’s portfolio, making up 96% of the total loan book in 2024, compared with 3% for affordable home loans and 1% for personal loans.
Despite the looming uncertainty, Van den Heever pointed out that Letshego delivered strong interim results for the six months ended 30 June 2025, with interest income up 20.9% year-on-year to N$548 million, and net profit rising 24.6% to N$249 million.
She said the performance was “notable given the challenging macroeconomic backdrop for banks, shaped by the ongoing interest rate cutting cycle”.
Simonis Storm currently maintains a HOLD rating on Letshego Holdings Namibia, with a potential downside of 2.9% for 2025.
Van den Heever said this stance is “driven solely by fundamentals and excludes the impact of the Deduction Code suspension due to a lack of clarity”.
She highlighted that Letshego remains the top-performing stock on the NSX year-to-date, up 32.8%, with the highest dividend yield at more than 14%.
“We commend management’s commitment to returning value to shareholders, with a dividend payout ratio of 94%. However, without consistent growth in retained earnings, the company’s intrinsic value remains capped in the medium term,” the researcher said.
Van den Heever also warned of other risks.
“The Bank of Namibia’s potential move to narrow the prime-repo rate spread could pressure net interest margins, while regulatory intervention to cap interest rates of up to 22% could materially erode earnings potential.”
She further pointed to a 16.5% year-on-year rise in collection fees as a sign of rising overdue and late repayments.
On the outlook, Van den Heever said Letshego’s “flexible lending model remains well positioned to gain traction as consumers increasingly seek adaptable financing solutions”.
She added that its recent partnership with MTC provided an additional revenue stream and stronger exposure to the fast-growing fintech sector.
