February is a bad month in the history of Namibia; this year’s month of love has pushed the struggling “Air Namibia” over the edge and into liquidation. Namibia celebrates its 31st independence next month, something the country will do without a national airline to its name.
What could have gone wrong?
The COVID-19 pandemic has impacted firms by reducing demand for their products and services, disrupting the supply of inputs and tightening the provision of credit. Air Namibia has not been spared the troubles. During the first lockdown, business travel worldwide came to a standstill and companies like Air Namibia who depend on generating revenue through flights were badly affected. This pandemic is like nothing we’ve ever seen before. We hope it ends soon.
Recruiting too many people
Parastatals unlike private companies are a bit difficult to run, it gets even more difficult when you are managing a big group of people. The cost of hiring a new employee is nothing compared to what you can expect to pay later. Air Namibia had 644 employees in total. Given the type of company that Air Namibia is, it would mean, all these employees were entitled to health coverage, workers compensation insurance and retirement benefits. A benefits package such as that increases the company’s expenses, but it may also reduce turnover somehow. On the other hand, a big group of people is very hard to manage and it may be difficult to measure their performances. If you look at the well-perfuming parastatals e.g. MVA Fund or NAMFISA to mention a few, they hire very few people and they are almost very easy to manage as opposed to 400 or more employees.
In the early 2000s, Namibia’s economy was growing rapidly. The government had enacted economic and monetary reforms and divested holdings in some state-run companies, allowing the private sector more room to breathe. Inflation, a chronic problem in Namibia was dramatically reduced. Foreign investors poured into the country, eager to catch a portion of our expanding economy. The future seemed promising. But since the government started bailing out parastatals, everything changed and somehow our economy fell with it.
Today, our economy is in shambles, unemployment and debt are massive, and powerful politicians are being investigated for involvement in the largest scandals of fraud and corruption in the country’s history. It’s bad, and these are factors that affected companies like Air Namibia. The parastatals should learn how to make it on their own.
Accumulating too many debts
An estimated amount of more than 8 billion Namibian dollars ($547.16 million) was spent on Air Namibia alone over the years by the government. This amount does not include the N$104 that the company owes to the Belgian company. This means the company has been struggling and instead of just borrowing, they should have come up with easier strategic plans to revive the company’s financial status. A few examples would be: Not recruit for a certain period of time, cut employee’s benefits (rebates for example), put pressure on the board, increase tickets rates and be hard of financial records (audits, proper financial checks.)
When a company of such magnitude closes down, everything else falls on leadership. That could mean that over the years, the company increased spending, deficits, and debt. They increased the minimum wage even when the company was not being profitable, maybe it is “social justice”, but there is no social justice when a company is running on a loss. In their act of good governance, the company kept on hiring, hiring and hiring without any plans of profit maximization. Our advice is essentially the opposite of Jim Collin’s suggestion in his book Good to Great of “getting the right people on the bus.” I believe it is equally critical to make certain that the bus is operating correctly before anyone gets on.
Whether you’ve been laid off, forced to take early retirement, or seen contract work dry up, losing your employment is one of life’s most stressful experiences. Even though the country has a high rate of unemployment, we feel more for the Air Namibia employees who are sent home. The government’s effort to pay their 12-months salaries is a great idea that we need to be grateful for. However, no one knows whether these basic measures will be enough to rescue or revive Air Namibia. Truthfully, the damage has been so extensive on the country’s economy and the lives of individuals; it may take decades for the country to recover.