REBOOT: Profit losses have sparked a plan to restore power and profitability at Nored. Photo: Contributed
REBOOT: Profit losses have sparked a plan to restore power and profitability at Nored. Photo: Contributed

Nored reveals extent of financial woes

Nikanor Nangolo
Nored says it is grappling with severe financial strains, prompting the development of a turnaround business strategy focused on stabilising its finances.

The electricity distributor's liquidity issues, declining profits and inability to meet financial obligations have culminated in widespread power outages, impacting both the southern and northern regions.

Rehoboth, Mariental and Gibeon in the Hardap Region and Tses in //Karas as well as the Oshana, Oshikoto, Omusati, Ohangwena, Kavango East, Kavango West and Kunene regions were affected after Nored failed to meet a NamPower payment deadline last year.

During the launch of the turnaround strategy in Rundu yesterday, Nored's senior manager for finance Christoph Aimwata highlighted the urgency for change to secure the utility's financial stability and improve service delivery.

"Declining profits and liquidity challenges brought us to a critical juncture. There was even a point where we could not meet our financial obligations, leading to a supply cut-off that plunged parts of northern and southern Namibia into darkness last June. That incident was a wake-up call that we needed to do things differently."



Liquidity prioritised

Nored's new strategy prioritises profitability, operational efficiency and liquidity. "Our objective is to operate at a 100% profitability basis while targeting a gross profit of 30% and an operating margin of 10%. This is critical to ensuring Nored can sustain its mandate while also delivering quality service to our customers," he said.

"Our goal is for each customer to experience no more than two power interruptions per month, each lasting no longer than five hours," Aimwata said, adding that the utility plans to cap operational costs at 55 cents per kilowatt.

"These measures are part of a broader effort to streamline operations and improve customer satisfaction. Nored has implemented new controls to minimise technical losses and reduce theft, particularly through faulty electricity meters. We are aiming for less than 10% in total losses."

He added that liquidity remains a central focus in the turnaround plan.

“We’ve set a target current ratio of 1.5, meaning our current assets should be sufficient to cover liabilities at this rate, with an asset ratio of 1:1 for stock. Given our past challenges, this ratio is essential for financial resilience."



Balance

Deputy prime minister and minister of works and transport John Mutorwa sounded an urgent call for Namibia to balance essential service costs, warning that water and electricity are not luxuries but basic rights that must be accessible to all.

"A balance must be struck. Though I am not directly responsible for these utilities, as a member of the Cabinet, I see value in discussing whether government subsidies could help make water and electricity affordable for ordinary citizens. Water, like electricity, is essential; these resources support life and well-being. These questions form part of the turnaround strategy aimed at addressing such challenges, and it’s not enough to ignore the realities on the ground."

He added that water, road infrastructure and other essential services are all under pressure due to population growth.

"This situation sends a message not only to the town and regional councils, but also to the entire government about the need to accelerate rural development and develop potential growth points in new towns. I've seen similar figures not only for Rundu, but also for Gobabis. Gobabis, the regional capital of the Omaheke Region, like Rundu, is the main town for essential services in the area. People rely on Gobabis for their basic needs, just as they do with Rundu and, to some extent, Katima Mulilo, the regional capital of the Zambezi Region," Mutorwa said.



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Namibian Sun 2024-11-22

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