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Monday 21 January 2019
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Hengari’s ‘JV’ spree

Namibia Wildlife Resorts’(N- WR) Managing Director, Zelna Hengari has ignored the concerns of three cabinet ministers who expressed concern over a joint venture agreement between NWR and the Swapo-linked, Sun Karros. Since be- coming MD in 2014 NWR has entered into PPP agreements which some ministers feel could adversely affect its operations.
Finance Minister Calle Schlettwein in 2015 warned that NWR’s plan to enter into a joint venture with Sun Karros to setup up ‘glamorous tented camping’ could adversely affect its balance sheet because it poses poten- tial conflict or competition to NWR managed facilities.
While government is championing Public Private Partnerships, there are concerns that NWR recent scurry to enter into PPP agreements could adversely affect its operations.
This view is held by Finance Minister Calle Schlettwein who in 2015 warned that NWR’s plan to enter into a joint venture with Sun Karros to erect ‘glamorous tented camping’ could adversely affect its balance sheet, because it poses potential conflict or competition as far as NWR managed facilities is concerned.
Schlettwein at the time proposed that NWR should roll out the project on its own.
Hengari however maintains that glamping will not cannibalise NWR’s existing products as they are aimed at different market segments. Under the deal that was concluded in June 2018, Sun Karros will provide and build luxury tented camps and luxury camping at Daan Viljoen Game Reserve, Hobas, Sesriem, Namutoni, Okaukuejo and Waterberg and deliver services to NWR and in turn NWR will make available assets, services and workforce to Sun Karros.
There are also fears that the NWR/Sun Karros venture could be at the expense of NWR, especially if tourists move from the NWR facilities to the JV facilities and thereby reducing the income of NWR.
In Sesriem for instance, The Pa- triot can confirm that construction works are already underway and that the new facilities are being setup just metres from the NWR managed site. According to the joint venture agree- ment, the Sesriem facilities will be handed over to NWR after 30 years.
Schlettwein, in a letter seen by The Patriot, wrote to Environment and Tourism minister Pohamba Shifeta, expressing concern that “NWR is putting up its most lucrative sites for PPP instead of the sites which are struggling.”He questioned why NWR would prefer to share potential revenue with PPP partners instead of embarking on this project alone.
The country’s head of treasury also wanted to know why NWR needed Sun Karros to execute this project and what the distinct business prop- osition is that Sun Karros is putting on offer.
“We understand the project only requires N$25 million to start, what prevents NWR to acquire those funds and start the project with 100% share- holding given the lucrative return on investment expected?” queried a concerned Schlettwein.With NWR already in a PPP with Sun Karros for Daan Viljoen, Treasury further questioned the motive for entering into another agreement with the same company without giving an opportunity to the rest of the market.
“This is more profound given that Sun Karros does not have distinct ex- pertise in this kind of business. It rais- es questions as to how and on what basis Sun Karros has been selected for this PPP agreement,” he said.
NWR is however maintaining that the joint venture is sound and it presents no threat to NWR managed facilities. According to the JV, the agreement is a “mutually beneficial business relationship”.Economists have over the years called for complete reforms of the SOE sector, with many commenting that the economy is in the doldrums because SOEs, like NWR, are not generating profits which it would in turn relay to the shareholder as dividends.
There have also been claims that many SOEs that have entered into PPPs have been short-changed by the private sector.
NWR’s reticence over the concerns by Treasury is a classic example of how SOEs have over the years taken matters into their own hands, some- times even ignoring the advice of the shareholder.Such acts reflect the schism at the heart of government, where Treasury calls on SOEs to find innovate ways to become financially independent, yet some firms have used that call to pursue their own agenda. Schlettwein said the PPP model should only be considered when government or SOEs are unable to take the financial exposure on its balance sheet and would like to transfer the risk to the private sector which has distinct advantages in managing the risk and also the operational risk in terms of efficient execution.
“In this case, we are of the view that the financial exposure of N$25 mil- lion as initial capital requirement is quite negligible and does not require the involvement of a private operator. If one takes a closer look at this ini- tiative, it is not clear as to why NWR need Sun Karros with no special initiative in this type of a venture in order to roll out this project … what prevents NWR to acquire those funds and start the project with 100% share holding given the lucrative return on investment figures,” said Schlettwein.
Schlettwein said the 50/50 share- holding “remains questionable”.With the most significant contribution in the NWR/Sun Karros deal being the location and facilities of the sites offered by NWR, Schlettwein said it is not clear how the initial capital requirement of N$25 million of Sun Karros has been derived.
He also stated that the proposed shareholding does not reflect the true value addition of NWR to the venture.
“We need to find a way of attaching fair value to the contribution of NWR and renegotiate the shareholding ac- cordingly,” he said.But despite these concerns expressed by Treasury in 2015, NWR nevertheless went ahead and struck a deal with Sun Karros in June 2018.An NWR insider said:“ The situation is very acute and it seems management is just quick to enter into JVs without reading the fine print and also disregarding the potential impact some agreements have on the sustainability and stability of the company.”




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