Windhoek Observer Reports: Civil Servants to Benefit from Loan Deduction Reduction
The Ministry of Finance has announced a significant change for civil servants, particularly teachers and police officers. Starting this Friday, loan repayment deductions from their salaries will be reduced by 2%. This adjustment comes after a legal dispute regarding the fairness of the 2% surcharge previously deducted from employees' salaries.
The High Court recently dismissed an urgent application to hold Finance Minister Ericah Shafudah in contempt of court, ruling that the surcharge was unfairly imposed on workers. The court's decision paves the way for the ministry to recover the surcharge directly from microlenders, who hold the deduction codes. This move aims to correct an earlier practice where employees bore the burden of the surcharge.
The Ministry of Finance argues that the reduction is a necessary correction, ensuring that civil servants are not unfairly burdened. However, this decision has sparked controversy, as it directly impacts the operations of microlenders like Entrepo Finance, which has been a deduction code holder since 2013. The company claims that its business relies entirely on the PDMS (Payroll Deduction Management System), and nearly half of its loans are used by civil servants for education-related expenses.
The ministry's plan to discontinue deduction codes could save approximately N$11.5 million per month and ensure compliance with labor laws, including affordability limits under the Microlending Act. However, this move has raised concerns about the future of the PDMS and the potential disruption to the operations of microlenders.
The legal dispute continues, with the High Court scheduled to hear a review application in March 2026. Until then, the system will operate under government management, and the ministry is working to address discrepancies in data submitted by deduction code holders. This development highlights the ongoing challenges and controversies in the management of payroll deductions in Namibia.
