By Mathias Haufiku and Tileni Mongudhi | 20 August 2020
THE national insurance company’s board wants to give its managing director Patty Karuaihe-Martin a salary hike and about N$1,1 million in incentives.
This is despite questions being raised by the finance and public enterprises ministries on the proposed new contract of Namibia National Reinsurance Corporation (NamibRe).
The situation has also led to a fallout among board members, with those opposing the increment sounding alarm bells as they feel it is generally excessive considering the size of the company. Others are of the view that the current economic troubles do not allow for such steep increases.
NamibRe board chairperson Liberta Kapere, on Tuesday, refused to comment on specific details regarding Karuihe-Martin’s contract, saying “information pertaining to remuneration is confidential”.
Finance minister Iipumbu Shiimi, also refused to discuss details: “The issue was recently discussed by the board and the minister. The ministry is seized with the matter to find a solution,” he said.
Although some board members oppose the increment, it is understood the majority of them are pushing for it – allegedly because of Karuaihe-Martin’s performance in growing the company in her first five year years.
Her contract expired last year and was renewed with new terms and benefits, which are subject to negotiations.
Official documents show that when she joined NamibRe in 2014, her salary was N$1,2 million a year but had grown to N$1,7 million by the time her contract ended last year.
Company sources attributed the N$500 000 increment to inflation adjustments.
The new contract, if approved, will start her at the same salary level. NamibRe will further pay Karuaihe-Martin N$700 000 as a signing bonus. She will also get a contract payout (golden handshake) of over N$440 000 when her term ends in 2024.
The NamibRe board is facing legal and administrative hurdles because the paralastatal is classified as a Tier 1 SOE, whose chief executive must earn a maximum of N$1,1 million per year.
In an attempt to circumvent the limitations set by its classification, the parastatal applied to the public enterprises ministry for a reclassification.
Public enterprises minister Leon Jooste confirmed receiving the application but said his ministry was still evaluating it.
The Namibian understands that Shiimi and Jooste expressed concern over the proposed contract.
Former finance minister Calle Schlettwein authorised the reappointment of Karuaihe-Martin in August 2019.
Schlettwein at the time directed the board to ensure that the MD is paid in accordance with parastatal salary regulations.
Karuaihe-Martin is currently being paid according to her old contract.
Shiimi approved the new offer for Karuaihe-Martin in a letter to Kapere, dated 1 July 2020.
He, however, retracted that letter five days later and issued new directives.
Shiimi said he retracted his initial letter because “we learnt of a letter from the Ministry of Public Enterprises, expressing concern regarding certain provisions of the contract”.
Sources said Shiimi stumbled upon a letter from Jooste to Schlettwein in February 2020.
Shiimi directed that her bonus (13th cheque) must be deducted from her salary whereby a predetermined amount is deducted monthly from the remuneration package as a saving and paid out as a single amount annually.
“Noting that the MD and senior management are already paid 40% above the 90th percentile, this trend is not welcomed at all and is not commonly applied to senior executives,” said Shiimi.
As for the performance bonus, the finance minister also expressed dissatisfaction with the conditions saying they are too vague and the percentage to be paid is not indicated.
“Most of the key performance indicators for the MD at the moment are not at strategic level.
Thus I recommend for the board to review them and include them in the annual performance agreement of the MD,” he said.
Shiimi also instructed the board to remove the retention bonus clause in the contract because “it is not part of the public enterprises remuneration guidelines”.
The contract also proposes that the MD be paid five months’ remuneration for each year of completed service.
“This proposal is not acceptable. The industry practice is 30% of the total cost to company.
We have also not come across any practice in the PE industry where a CEO/MD is paid gratuity for every year completed,” Shiimi said.
The contract also provided for Karuaihe-Martin to have 34 days annual leave, yet other executives at the company are only entitled to 30 days’ leave per year.
Jooste refused to comment on the stand-off, stating that his ministry does not get involved in contract negotiations since that is the board’s domain.
“The act is very clear when it comes to remuneration and SOEs are not allowed to remunerate beyond the guidelines,” he said on Monday.
Supporters of the new contract said the board was rewarding Karuaihe-Martin for transforming the company since joining in 2014 and wants to retain her.
The board was trying to find a balance between the regulated salary structures and attracting talent.
Financial figures from NamibRe indicate that she grew the company by 284% since taking over in 2014.
The figures state that the company’s income grew from N$156 million in 2014 to N$600 million by March 2020.
Its asset base more than doubled from N$201 million in 2014 to N$541 million in 2020 and so have net profits grown from N$25 million in 2014 to N$48 million in 2020.
Since she took over the reins, the company stopped having qualified or adverse audit opinions, which characterised it prior to 2013.
Karuaihe-Martin managed to grow the company despite not having monopoly and the private insurance companies resisting the enforcement of a 1998 legislation compelling them to cede 12,5% of every contract worth R100 000 to be reinsured with NamibRe.
* This article was produced by The Namibian’s Investigative Unit. Send us tips via your secure email to [email protected].