The National Audit Office has raised concerns over the Ministry of Finance’s decision to extend an on-lent loan of D582.32 million to the National Water and Electricity Company without conducting or documenting the required credit risk assessment.
The finding is contained in the National Audit Office’s 2025 audit report, which identified weaknesses in the government’s management and monitoring of loans provided to state-owned enterprises.
According to the auditors, the Ministry of Finance failed to provide evidence showing that NAWEC’s ability to repay the loan had been assessed before the funds were extended. Such an assessment is required under the Public Finance Act to determine the financial risks associated with government lending.
“Henceforth, the Ministry of Finance should conduct credit risk assessments before extending loans as stipulated in the Public Finance Act,” the auditors recommended.
The report also revealed broader weaknesses in the monitoring of on-lent loans, including inadequate supervision of repayments and limited oversight of projects financed with borrowed funds.
Auditors found that state-owned enterprises did not submit several important documents required under the government’s lending framework. These included audited financial statements, reports explaining how loan proceeds were used and updates on the implementation of projects financed through the loans.
The audit further noted that the State-Owned Enterprise Commission had not submitted the monitoring reports required by the Directorate of Loans and Debt Management.
As part of its examination, the National Audit Office requested progress reports on projects funded through government loans. However, auditors said they received documentation only for the NAWEC JAM Project and a Cisco project.
The lack of information, according to the report, limited the auditors’ ability to assess the progress, performance and value for money of other government-financed projects.
The National Audit Office recommended that the Directorate of Loans and Debt Management establish stronger systems for tracking loan repayments and monitoring the implementation of projects financed through on-lent government funds.
It also called on the Ministry of Finance to enforce the government’s on-lending policy more effectively to ensure that state-owned enterprises account for borrowed funds and comply with reporting and repayment requirements.
The findings raise questions about whether sufficient safeguards are in place to protect public resources when the government borrows money and subsequently lends it to financially challenged public enterprises.
