The consoling news is that bad times do not last forever, says Development Bank of Namibia’s Head of Marketing & Corporate Communications, Jerome Mutumba. This he says in reaction to the prevailing tight economic conditions in the domestic economy.
Although it calls for cautious optimism given the marginal improvement shown in the quarterly economic performance as indicated by NSA recently, potentially, better macroeconomic conditions lie ahead. However, Mutumba points out, the fact that recession is cyclical means that it will reoccur, and enterprises must be prepared.
Talking about the impact of the recession on the Bank’s enterprise customers, Mutumba says a large number of borrowers have emerged in good condition, due to their sound business administration and accumulation of savings in their enterprises, however some experienced difficulties.
Those that have experienced difficulties, Mutumba notes, are entrepreneurs who withdrew earnings from their enterprises for immediate personal gratification, rather than using their earnings to save, acquire productive assets and diversify.
The money spent on a luxury car for personal use, Mutumba stresses, comes at a cost to the enterprise.
In the first case, money spent on personal luxury reduces savings which could be used to sustain the enterprise during lean periods. Secondly, those enterprises that did not acquire productive assets now have to rent equipment or outsource processes, eroding vital income streams. Thirdly, lack of revenue applied to diversification makes entrepreneurs dependent on activity in a single sector, rather than being able to spread risk.
Further explaining the point of diversification, Mutumba illustrates it with the impact of the recession and fiscal consolidation on the construction industry. Once the number of tenders was reduced, those contractors who had no other sources of income ran into difficulty. Those that diversified had second sources of income with which to sustain themselves and their activities in form of cross subsidization.
Talking about recessionary strategies for enterprises, Mutumba says, the starting point has to be critical examination of the budget and the cash flow projection. Although the immediate reaction of enterprises may be to cut back rapidly, this should be considered in light of medium to long-term loss of capacity and competitive capability.
Instead, Mutumba suggests, spending cuts should preserve the ability to compete by reducing non-essential expenditure. Meaningful reductions might include reducing equipment rental, and overtime as well as placing restrictions on non-essential expenditure such as travel and entertainment.
He also suggests that enterprises negotiate with suppliers and customers to ensure win-win outcomes that are informed by the need for all to be sustainable in challenging situations.
However, Mutumba also adds that there are opportunities for enterprises to lay the ground for growth during recession. Those businesses that maintain their market share and competitiveness will benefit from plans laid during the recession.
It is an unfortunate fact that some enterprises will lose ground or even close, and that creates opportunities for others to grow once the recessionary period lifts. The enterprise which emerges from recession is inevitably leaner and better suited to its purpose, and so can be expected to be more competitive.
Talking about DBN’s support to borrowers during recession or in the event of challenges, Mutumba says that the Bank seeks to ensure the sustainability of its borrowers. Subject to the Bank’s risk guidelines, the Bank will attempt to be accommodate and allow its borrowers to recover and attain financial health.
He points out that where enterprises show a strong measure of development impact, as well as the clear prospect of returning to financial health, the Bank may at its own discretion restructure debt.
In addition, the Bank also provides support in the form of mentorship through independent experts, in order to ensure capacity. In the past, the Bank has also provided capacity for strategic interventions to ensure the operability of enterprises with a high development impact.
The precondition for this support, Mutumba says, is a willingness to cooperate with the Bank and disclose challenges.
The lessons of lean times may be difficult to absorb, but with good business administration and a long-term approach to business growth, enterprises can proceed with confidence. The Development Bank will be there to provide support and help, where needed, Mutumba concludes.
The Development Bank of Namibia (DBN) has provided an additional N$150 million for Erongo RED. The amount is being used to finance additional second phase electricity distribution requirements for the Swakopmund mass housing development, and for the waterfront.
Erongo RED previously used N$250 million from DBN to finance its first phase project to upgrade aging distribution infrastructure to Walvis Bay.
Talking about the need for the loan at the signing ceremony that took place on 24 May 2018, DBN Chief Executive Officer, Martin Inkumbi says high quality power supply to the Erongo Region is of national importance. He motivates this by explaining that Erongo is currently a major transport and logistics gateway to Namibia by virtue of the port of Walvis Bay. Mining, another major industry, also underscores the importance of the region, and its contribution to the economy. He adds that the region is also a major attraction in terms of tourism, which contributes to the national revenue.
He goes on to say that economic activity in the region is dependent on electricity. Without suitable distribution infrastructure, the region will not be able to attract additional enterprises and grow.
Speaking about the individual use of the finance, Inkumbi says that distribution of electricity to families and individuals in affordable housing is a basic necessity for socio-economic wellbeing. Viewed in an economic light, Swakopmund must be able to attract and retain employees, in order for new enterprises to open and existing enterprises to grow. In this way, the upgrade to the distribution network will have an immediate impact and will secure the future.
On the topic of the waterfront development, Inkumbi says it has created jobs during its construction phase, as well as permanent jobs, in addition to being a locale for enterprise. In order to attract commercial investment, Swakopmund, and Erongo RED, have to show demonstrate their commitment to providing enterprise, and investors, with the necessary infrastructure.
Inkumbi goes on to say that although the Bank is widely known for financing renewable sources of energy such as Omburu Photovoltaic Park and the Ombepo Wind Farm, the Bank is also committed to financing the infrastructure for traditional sources of energy.
Where there is sufficient energy, there is an environment that is conducive for enterprise, as well as for acceptable standards of living, he explains. The combination of infrastructure and enterprise are fields which the Bank actively nurtures with finance, and the Erongo Region is a good example of how finance can stimulate development and economic activity. The Bank has approved loans of more than N$4.6 billion to the Erongo since its inception
Inkumbi concludes by urging other regions to approach DBN with plans for infrastructure. The Bank, he says, has the capacity as well as the mandate to provide finance for growth.
The Development Bank of Namibia (DBN) has strengthened its fraud reporting mechanisms, says Senior Manager: Corporate Commu- nication, Jerome Mutumba.
In terms of improved fraud reporting, the Bank has outsourced its reporting channels to local auditors Deloitte. This step was taken to ensure that potential whistleblowers feel that they can report fraud in a neutral environment. Says Mutumba, the Bank has become aware of the global phenomenon that whistleblowers are wary of making reports for fear of victimization. In order to adhere to global best practices, and in adherence with the new Whistleblowers Act of 2017, the Bank has adopted the new mechanism.
The benefits of the new system are that whistleblowers can report anonymously, in a neutral environment. This applies to the public who may believe that DBN resources are being misused, as well as to staff within the Bank.
Says Mutumba, the Bank is both ethical, and holds itself accountable for capital placed under its stewardship. In light of this, the Bank is taking proactive steps to prevent misuse of its funds. Not only is fraud reporting expected to expose attempted fraud, but it will also deter it by creating an environment that is hostile to abuse
On the topic of the types of fraud that the Bank is alert to, Mutumba says there are three forms at stake.
The first is corruption, which commonly consists of bribery, conflicts of interest, illegal gratuities (kickbacks) and economic extortion in which a service is withheld before payment is received.
The second is asset misappropriation, which consists of theft or misuse of assets, including cash. This might also include fraudulent disbursements or misuse of payments received from the Bank.
The third is statement fraud, in which a borrower or potential borrower understates or overstates assets in order to present a false ap- pearance which can influence treatment of applications and management of accounts after borrowing.
Mutumba goes on to say that the potential for fraud is well-managed by the Bank’s Risk and Compliance function, as well as with checks and balances during the application process. He adds that during the application process, assessment of proposals is done by three independent committees. Post borrowing, accounts are monitored for deviation from terms. In addition, various functions of the Bank observe borrowers and enterprises in situ.
The Bank is determined to hold itself accountable, and to achieve this, it will continue to review its mechanisms and adopt best practic- es as they become apparent, he says.
Mutumba concludes by calling on any member of the public who has evidence of any form of fraud perpetrated against the Bank to use the anti-fraud communication channels. More information on reporting can be found at www.dbn.com.na