The City of Windhoek says it is working on a long-term proposal to write off debt for pensioners and interest for all residents.
This comes after the Katutura Residence Committee handed over a petition in which they expressed dissatisfaction, amongst other things, with the City’s debt collection process.
“The City is currently working on a proposal to write off debt for pensioners and interest for all residents. However, this process must be executed cautiously to ensure long-term sustainability,” Deputy Mayor of the City of Windhoek Magdalena Lombardt said on Tuesday.
The City has a cumulative debt of N$1.2 billion, of which N$255 million was accrued by pensioners.
She, however, maintained that despite objections from the grouping, debt management company Redforce will continue to collect debt on the City’s behalf because it makes more financial sense.
“The City charges 20% per annum on arrears, while Redforce charges 10% on amounts paid. Prior to the appointment of Redforce, clients’ accounts were handed over to attorneys for further debt collection,” Lombardt said.
The Deputy Mayor also explained that the City accumulated debt because of legal fees charged by lawyers even though the amount in debt had not been recovered, thus making a loss.
“Those accounts handed over for legal collection to external attorneys, accumulated vast amounts of debt, which placed a significant financial burden on the City and the clients since the attorneys charged legal fees even if they had not collected the amount from the defaulters,” Lombardt said.
Lombardt said Redforce claims only 10% on actual payment received by Council while the previous collection process proved to be costly, with little to no financial benefit to the City or the client. The decision was then made to appoint Redforce to collect debts on behalf of the City.
“It should be noted that no pensioners’ residential properties accounts are handed over to Redforce, and there is no interest charged on accounts handed over to Redforce for all residents, apart from the collection fee of 10% of each payment made,” Lombardt said.
As of 31 March 2022, the City of Windhoek’s total outstanding debtors amounted to N$1.2 billion, of which N$929 million was in arrears.
City of Windhoek’s cumulative losses for the past 10 years were said to amount to N$3.2 billion after it recorded a N$480-million loss for the 2021 financial year.
