Development Bank of Namibia (DBN) CEO, Martin Inkumbi, has announced that the Bank is prioritising infrastructure and business projects which are aligned to the pillars of the Harambee Prosperity Plan (HPP).
The priority infrastructure areas, to which the Bank may contribute with finance, are energy, water, transport and ICT. The Bank will consider projects in these areas, promoted by private entrepreneurs, through public private partnerships (PPPs), as well as public institutions such as SOEs.
He illustrates the difference by pointing to finance for Erongo RED to secure power supplies at the coast as an SOE, and finance for Omburu Sun Energy as a utility owned and operated by a private sector entity.
Inkumbi says the prioritisation is not a shift away from the Bank’s focus on key sectors identified by National Development Plan 4 (NDP4), but an additional focus for the Bank. The Bank will continue to provide finance for larger enterprises, with annual turnovers of more than N$ 10 million, in the key NDP4 sectors of manufacturing, transport and logistics, and tourism.
He adds that the Bank’s historical track record closely matches the requirements of HPP. The Bank, Inkumbi says, has been active, since inception, in HPP priority areas such as social progression (the 3rd Pillar of HPP) through financing the delivery of serviced land and housing, and improvement and expansion of education and health services, through finance to private educational institutions and private medical services providers.
Talking about other aspects of transformation entailed in HPP, Inkumbi says although the Bank seeks returns to sustain its activities through repayment of finance with interest, as well as capital preservation through the requirements of collateral and /or guarantees, it also contributes to socio-economic transformation through its corporate social investment programme without expectation of returns.
Asked about financial sustainability in light of the current realignment of fiscal resources by the Government, Inkumbi says the Bank is one of the agencies that can fill the temporary gap in provision of finance, provided that projects are in line with the focal areas of HPP.
He goes on to say that project planning and implementation timelines, justify immediate contact with the Bank. The Bank has its own processes and expertise for assessment of large scale infrastructure. By approaching DBN early, project initiators can ensure that financial resources are available, when required, and that the Bank can assist with risk mitigation with the experience that it has developed through financing multiple large-scale projects and enterprises over the years.
Inkumbi concludes by saying that the Bank provides access to services not just in Windhoek, but also in the hub economic centers of Ongwediva and Walvis Bay. He encourages project initiators to make use of DBN’s open doors to further Harambee with projects that fall within the Prosperity Plan’s focal areas.
Be seated for development. The Development Bank of Namibia (DBN) recently donated 215 chairs to Schlip Primary School in the Hardap Region. The Bank has financed numerous schools at primary and secondary levels. It also provided finance for the International University of Management, IUM. Where possible, the Bank makes social investments in education as well. Speaking at the handover, the Bank’s Public Relations Officer, Di-Anna Grobler said that when the Bank makes donations of this nature, it gives without expectation of repayment, but it expects a return in the improvement of educational outcomes.
Namibia is currently facing multiple economic challenges. Drought, in some parts of the country, volatile commodities markets, the changing market dynamics of our neighbors, Angola and South Africa, and a temporary period during which government spending priorities are being realigned are some of the uphill scenarios facing the country. In such a dampened economic environment the challenges facing enterprises are to sustain and strengthen assets and equity on balance sheets, and sustain operations.
It is in times like these that entrepreneurs and business promoters ought to take stock of their circumstances and map out a sustainable growth trajectory for their enterprises. The Development Bank of Namibia (DBN) advocates sound business administration. Strong administration is the basis for disciplined spending, and servicing of debt and other commitments. If commitments are not met, and if the administration is not sound, enterprises run the risk of losing capacity in a manner which will place them in difficult situations to offset their financial obligations in the medium to long-term.
This particularly includes robust cashflow forecasting and tracking to enable entities to identify challenges in advance and respond appropriately.
Cutbacks on unnecessary expenditure are a first response to circumstances, but must preserve operational capacity as well as the strategic assets in which an entity has invested. Ill-considered cutbacks will reduce the capacity of the enterprise with immediate effect, and will also have a long-term impact on viability.
Unless the enterprise has developed a cash reserve, growth should be a secondary consideration, and approached with caution. The primary consideration should be capital preservation and retention of current capacity.
Strong relationships with existing customers will be an asset. Although the first instinct of the entrepreneur will be to maximize profit, the soundest approach is to offer value and understanding in order to preserve existing cashflow.
The same applies to business-to-business (B2B) transactions and relationships. Supplier networks should leverage their understanding of shared outcomes and offer one another, value in order to preserve the viability of the B2B network.
In order to preserve and even strengthen capacity, DBN encourages equity participation transactions between enterprises where cash flow is required. In this manner, enterprises with strong reserves can grow their balance sheets, while enterprises that have underdeveloped reserves can build their own balance sheet.
This approach must be considered on a long-term basis, rather than as a short-term measure to bridge gaps. In addition to the long-term nature of the equity transaction, the Bank advocates common purpose of the enterprises and complementary corporate philosophy and management skills and capacity.
In this regard, DBN may consider financing of equity participation, which may include management buy-outs to leverage capacity of employees.
In terms of infrastructure, the current national investor initiative proposes to place the development of infrastructure, and its operation, in the hands of public private partnerships (PPPs) or purely private entities. The Bank will consider financing of particularly operating capital for Namibian holders of equity, where the entity is engaged in the development and servicing of projects identified in terms of the initiative.
One of the Bank’s underlying strategies is to preserve the development impact of its customers, not just in terms of physical outputs, but also in terms of capacity for employment.
In this regard, DBN advocates close cooperation with its customers. Where a customer may be experiencing challenges to cashflow, the Bank will advise on mitigation measures. The Bank has a track record of providing turnabout strategies for its customers with the help of pooled consultants, and also has an operational function to draw on proven external advisory and mentoring capacity for larger enterprises.
The Bank encourages customers to approach it for mitigation measures, where appropriate, as additional debt or delayed repayment compounds repayment commitments in the long-term.
Although the Bank understands that there are challenges, these challenges can be overcome with sound administration and prudent approaches on the part of enterprises, as well as close cooperation with the Bank on mitigation measures where these are required.