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Small is beautiful. Jerome Mutumba, on informal and micro enterprise.
The recent focus on empowering informal and microenterprise is a necessary affirmation for further development of Namibia’s economy. Development of new market spaces, as well as ongoing management of and upgrades to SME parks as good omens for the future.
An examination of Namibia’s recent enterprise history shows three broad origins of enterprise start-ups. The first is the local start-up, typically an informal or registered, regulatory compliant micro-enterprise. The second is a South African adjunct, an enterprise which complements the South African parent. The third, most rare form is an international start-up.
Of the three the informal or formal micro enterprise is arguably the most productive for Namibia. A survey of large Namibian enterprises points to the local, micro origination of many of Namibia’s best-known brands and companies.
The roots of the successes and sustainability of these enterprises lie in their small, relatively low-cost beginnings, the persistence of their owners in learning, adapting and diversifying. Thus, by example and inference, to develop large, economically significant, and sustainable Namibian enterprises, a wide base informal or formal micro enterprises must be fostered.
However, the value of the progression from an informal enterprise to a large formal enterprise is difficult to predict, especially given that there will be attrition of the informal enterprises in particular.
The economic value of informal and micro enterprises becomes more apparent when evaluated according to current development needs.
Firstly, informal enterprise is a major employer. According to Tangeni Shindondola, Director of the Dynamic Informal Traders' Association (DITA), as reported in The Namibian newspaper of 15 February 2022. She goes on to note that informal enterprise becomes an employment provider in the event of retrenchments.
Firstly, informal enterprise is a major employer. According to recent findings by the International Labour Organisation (ILO), as reported in the Namibian pf 6 September 2022, 56% of Namibia’s workforce in employed in the informal sector. According to Tangeni Shindondola, Director of the Dynamic Informal Traders' Association (DITA), as reported in The Namibian newspaper of 15 February 2022, informal enterprise becomes an employment provider in the event of retrenchments.
Secondly, informal enterprise is known to be a sole form of income for many households, or augments household incomes, particularly where those households are in poverty or on the verge of poverty.
Thirdly, informal and microenterprises are important elements of the value chain as off-takers and distributors of goods and services. This is true of goods and services produced by large and medium sized enterprises, with attendant impacts on formal enterprise revenues and employment. Informal and micro enterprises also generate network business on a peer level, creating their own ecosystem.
To reap longer term benefits from the informal and micro enterprise sector, activities need to be viewed and planned in four phases.
Firstly, nascent informal enterprise needs to be nurtured and enabled. Secondly, those informal enterprises with potential need to be encouraged to transition to formalised, registered, regulatory compliant microenterprises. Thirdly, microenterprises need to be nurtured to the activity level of SMEs. Finally, the most successful SMEs need to graduate to larger enterprises.
What is obvious is that the process of growth of informal and micro enterprises requires support and inducements.
The first inducement is a welcoming approach to start-ups. This requires liberalisation of the regulatory environment for informal enterprises, and removal of early barriers. Although regulation is required, that regulation should be exerted gradually, post start-up on the basis of impact on the community as well as the level of activity of the informal enterprises.
A second phase will be required to induce formalisation of the informal enterprise to become a fully-fledged micro enterprise, including full regulatory compliance.
The shift from informal enterprise to registered microenterprise entails costs which must be offset, including taxation and regulatory costs. To reduce the immediate burden, the enterprise will be required to grow, which will come at an expense. This can be offset with short-term bridging finance for stock and regulatory costs, and longer-term mezzanine finance to grow the asset base. This might be paired with concessional interest rates and use of assets financed as collateral.
What is also apparent is that formalisation requires an augmented skill set to manage finance in a borrowing environment, as well as administer the regulatory aspects. This can be addressed with mentoring and coaching of the type envisaged by the Bank of Namibia’s SME Financing Strategy.
What is implicit to a policy that nurtures informal and microenterprises is the need for a suitable agency to administer and coordinate finance, and mentoring and coaching.
The further benefits of an agency of this nature are that it will set the standards for services, and act as a control against predatory providers of microfinance. In addition, it may become a reference point for conducive regulatory practices. Finally, it may become a repository of knowledge and a brains-trust for the informal and microenterprise sectors.
Development Bank of Namibia, by design, is intended to finance large enterprises in the first place, as well as SMEs. It does however provide finance through its Apex microfinance facility for qualifying microfinance providers. In this way, the Bank currently complements the development impact of microlenders.
As much as Namibia’s future depends on policy-based lending to finance renewable energy, serviced land, affordable housing and young entrepreneurs, it will also need to develop policy-based stimulus for informal enterprises and microenterprises.
CEO Martin Inkumbi to depart Bank, August 2023
The Board of the Development Bank of Namibia (DBN) has announced that Martin Inkumbi, the CEO of the Bank, will step down from his role in August 2023, at the end of his current second five-year tenure, and he did not seek reappointment after serving ten years in the role.
The Board has since commissioned the commencement of the recruitment process to ensure a seamless transition at the time of Martin’ departure.
During the intervening period, the Board will seek a potential successor in a transparent manner with the assistance of the external recruitment agency. The new candidate CEO will be identified and brought on board for a couple of months to shadow Martin Inkumbi during the remaining stretch and familiarise themselves with the Bank and ensure continuity.
The Board, through its chairperson, Sarel van Zyl, has expressed gratitude to Inkumbi for his distinguished service in leading the Bank and shaping its operations.
Inkumbi joined the Bank in 2006, and progressed through the ranks to be appointed Acting CEO in November 2012. His appointment as CEO was confirmed in August 2013.
On Inkumbi’s assumption of the role of Acting CEO in 2012, the Bank’s balance sheet stood at N$2.03 billion. In 2021, the balance sheet stood at N$9.47 billion.
In addition to growth, Inkumbi has been instrumental in effectively shaping the Bank’s structure and operations.
Among others, Inkumbi has led development and implementation of DBN’s risk management framework, as well as restructuring the Bank’s operations to encompass an SME Finance Department, and Investment Department and a Portfolio Management Department to manage borrowers, post-lending. In addition, he led implementation of the Bank’s Treasury unit and listing of the N$2.5 billion bond programme on the Namibian Stock Exchange.
N$8 million for rural youth enterprise
Development Bank of Namibia (DBN), Head of Marketing and Corporate Finance, Jerome Mutumba has announced that the Bank has provided N$8 million to finance 28 rural youth enterprises. A DBN cheque was handed to Deputy Minister of Sport, Youth and National Service to kickstart the 28 start-ups at ceremony officiated over by the Prime Minister, Hon. Saara Kuugongelwa-Amadhila.
Find out more about finance for young entrepreneurs, here...
Speaking about the significance of the initiative, the Prime Minister said the 28 enterprises are part of a wider initiative to provide funding to 121 rural youth enterprises. She said funding for youth enterprises is an important component of Namibia’s goal to achieve sustainable development, under the Fifth National Development Plan (NDP5). The Prime Minister added that the project aims to create 1,210 new, sustainable, permanent jobs.
DBN’s initial involvement consisted of business management training, for 407 young people from the 121 rural youth enterprises, an exercise that involved technical support to the tune of N$1.2 million. This exercise also involved helping the youth identify potential business ideas in their constituencies and developing business plans for such.
Subsequently the Bank has made available to the Ministry of Sport, Youth and National Service, N$8 million to finance the start-up of the 28 enterprises.
Speaking on behalf of DBN CEO, Martin Inkumbi, Head of SME Finance Robert Eiman said the Bank sees threefold value in the initiative.
Firstly, the Bank has as one of its goals provision of finance for young entrepreneurs. The programme is expected to be a seed for the future of Namibia’s economy. Youth enterprise will be the pool from which it draws its future prosperity and employment creation.
The initiative complements existing Bank programmes that provide skills-based finance to young professionals, young artisans and finance for other young entrepreneurs through its SME Finance and Investments departments.
Secondly, the Bank believes that rural enterprise is critical to the future of Namibian prosperity and food security. The fact that the beneficiaries are from rural constituencies will add to attainment of development impact in rural areas.
Thirdly, the Bank is seeking to finance agri-processing, an offshoot of manufacturing, as well as agri-industry which supports agriculture. The agricultural roots of many of the enterprises that will benefit from this initiative will foster secondary value adding to agriculture.
Development Bank has provided the technical capacity to initiate the programme as well as the funding. The disbursement and administration of finance for the 28 enterprises will be managed by the Ministry of Sports, Youth and National Service.
Jerome Mutumba concludes by urging young entrepreneurs to approach the Bank with sustainable business plans to apply for finance as SMEs or to apply for skills-based finance for young artisans or young professionals.
Bank explains finance for agri-industry and processing
Head of Marketing and Corporate Communication, Jerome Mutumba, has clarified the DBN's role and participation in agricultural finance, stressing that finance for direct agricultural investments is a mandate held by Agribank, but that Development Bank can provide finance for agri-enterprise.
Find out more about finance for agri-enterprise, here...
Explaining DBN’s definition of direct agriculture, Mutumba says it entails finance for land and agricultural inputs. However, agri-enterprise, he says consists of adding secondary value to agricultural operations, as well as resource transformation of agricultural produce. Development Bank will consider finance for agri-enterprise.
Mutumba goes on to split the Bank’s finance for agri-enterprise into three distinct fields.
Firstly, he says agri-industry is enterprise activity that manufactures products to support agriculture, such as fertilizers and feeds. This category might also include professional services to agriculture, such as veterinary services, welding and fabricating, and mechanical repairs, he continues, alluding to the Bank’s skills-based finance for young professionals and artisans.
Secondly, agri-processing consists of transforming and marketing the products of stock farming and horticulture, with finance for items such as mills, feedlots, abattoirs, dairies, processing facilities and transport and logistics assets.
Thirdly, he points to the Bank’s climate adaptation facility. Infrastructure financed under this facility might include solar power, water storage and water distribution for larger agricultural enterprises.
The Bank has a strong track-record in the field of agri-enterprise, including finance for abattoirs, feed lots, dairy production and milling plants. The Bank sees agri-enterprise as a growth area, Mutumba quips.
Talking about the Bank’s rationale for participation in the field of agri-enterprise, Mutumba says that Namibia has prioritised food security since its inception through manufacturing, as well as long-standing support to commodity level processing such as milling, for instance.
Mutumba says that with the supply chain crisis as well as current pressure on grain and oil used in food preparation, support to agri-enterprise is more important than ever before. Given Namibia’s challenge to substitute grain and cooking oil production, it has become all the more important to find means to stimulate the production of local foodstuffs that can be used as nutritional substitutes for imported agricultural commodities.
Given the reported waste of approximately 45% of horticultural foodstuff due to a shortage of processing and packaging, he adds, finance for value adding through manufacturing, and transport and logistics can also enhance food security.
At the same time, he acknowledges the challenges faced by smaller farmers, but says the Bank advocates that networks of small famers establish companies, in which they are shareholders, to spread collateral and owner’s contribution requirements, as well as to ensure that consistent and sufficient supply of produce is available.
Mutumba goes on to say that with Agribank’s finance for direct agriculture, the Namibia Agronomic Board’s Market Share Promotion mechanism to drive local horticultural supply chains, and Development Bank’s finance for food manufacturing, the country has a strong basis for enhancing its own food security. There is a sound institutional environment that supports agriculture.
If you are in the field of agri-processing, or any form of value addition to agricultural produce, and have a viable business plan, approach Development Bank to see how we can support your growth, Mutumba concludes.
French development agency collaborates with DBN to fund economic research initiatives
French development agency, Agence Française de Développement (AFD) and Development Bank of Namibia (DBN) have signed an agreement in terms of which AFD will provide €300,000 (about N$5,020,000) in grant funding for two DBN research programmes; investigating opportunities in the fields of affordable housing and the development of Namibian women entrepreneurs. The agreement was signed by DBN CEO Martin Inkumbi, H.E. Sébastien Minot, French Ambassador to Namibia, and Bruno Deprince, AFD Regional Director for Southern Africa.
Speaking about the research, Martin Inkumbi said the institution is not just a source of finance but also a knowledge bank and brains trust for development of economic activity. Although the bank may have financial and administrative capacity, development impact depends on the ability to bring the financial resource to bear in knowledgeable and effective manner.
He went on to express his gratitude to AFD, French ambassador Sébastien Minot and the Republic of France.
Inkumbi also explained the need for research.
In terms of low-cost housing, the Bank will seek to understand market impediments to developing low-cost housing schemes, means to incentivise construction of low-cost housing schemes and appropriate financing products to individuals to purchase such properties.
In the field of women entrepreneurs, is investigating dedicated finance and required support programs for women entrepreneurs. Research will strengthen DBN’s impact by creating market profiles of the women segment, developing tailored products as well as understanding barriers to economic inclusiveness.
Speaking at the signing ceremony, the French ambassador to Namibia, Sébastien Minot said to be honoured to witness a new step for the Franco-Namibian cooperation. Although AFD has been active in Namibia since 1998, it is the first time that a project will be conducted in cooperation with DBN. He is looking forward to engaging new opportunities that will strengthen the ties between the two countries. Minot insisted on France’s commitment to target through cooperation essential challenges and sustainable development goals as SDG 11 on sustainable cities and communities and SDG 5 on gender equality. In 2021, the French Embassy to Namibia has initiated the Fem-Tech project was created to support and develop innovative Namibian female tech entrepreneurs.
As AFD counts developing the access to affordable housing and women empowerment among its strategic priorities, the delegation is excited about contributing to that new project. Bruno Deprince, Regional Director of AFD for Southern Africa, also insists on the future of this partnership as the results of the financed studies and analysis could help developing new financial products to address the identified needs within the project.Agence Française de Développement is looking forward implementing the results while being at the side of its new partner.
Bank finance adds an additional 20 MW to renewable generation
Development Bank of Namibia (DBN) has signed an agreement to provide N$193 million to finance a new solar power generation plant, near the Kahn substation in the Namib Desert. The plant will feed 20 MW into Nampower’s Kahn substation, from where it will be distributed to households and industrial consumers.
Anirep Aussenkjerr Solar One, a start-up company, was the recipient of a 25-year tender to produce power for Nampower. The company consists of two local partner companies, Anirep Solar and Aussenkjer Energy Investments. Anirep is listed on the Namibian Stock Exchange.
The solar plant, 40 km from Usakos, will be developed by HopSol Africa, also a local company.
Talking about the importance of solar power for Namibia, DBN Head of Marketing and Corporate Communication, Jerome Mutumba pointed out that according to National Statistics Agency (NSA) figures for February 2022, local production of electricity stood at 65 362 but imports from the Southern Africa Power Pool stood at 255 286 MWh.
Mutumba said that these figures were a snapshot of the current need to substitute imports. He said that viewed over the short, medium and long-term local generation was highly variable due to the fact that Namibia’s largest power generation facility, Ruacana Hydroelectric Power Station is dependent on fluctuating levels of the Kunene River.
He illustrated the impact of the levels of the Kunene River by saying that in July 2021, power production from Ruacana Hydroelectric Power Station fell by 87.5%.
Mutumba then said that this decline points not just to develop local power generation, but also to the need for stable sources of generation, such as solar.
Fluctuation in generation leads to fluctuations in costs which have an impact on Namibia’s deficit as well as on the medium to long-term costs of industry as Nampower and regional distributors have to adjust their costs. By stabilising power generation, he said, Namibia can become a more attractive destination for investors seeking opportunities in Namibian industrialisation.
On the topic of privately-owned solar generation facilities, Mutumba said that independent power producers (IPPs) are an ideal means to promote economic inclusiveness. Currently, a small solar power plant can conceivably be financed over a period 10 years. With an offtake agreement of 20 to 25 years and a stable purchasing regime over an additional 10 to 15 years, this leaves an enterprise resource that can be maintained, expanded or diversified.
Mutumba concluded by saying that solar generation has benefits all round and urging all stakeholders to approach the Bank to examine business models and potential for future projects.
Covid-19 relief loan helped to preserve 950 Gondwana Collection jobs
A Development Bank of Namibia (DBN) Covid-19 Business Relief Loan has helped to preserve approximately 950 jobs by providing finance of N$53 million to pay salaries of employees of the well-known tourism and hospitality operation, The Gondwana Collection.
The 950 employees are distributed among 28 accommodation establishments and companies that make up the group.
Although a recovery of the Namibian tourism and hospitality sector was expected in 2021, this did not materialise due to the continued impact of Covid globally and especially the emergence of the Omicron Covid-19 variant, and the subsequent red listing of Namibia and other countries in Southern Africa. The sector now hopes that, on the back of very positive current and especially future bookings the sector will begin to recover in 2022.
At the height of the Delta phase of Covid-19 infections, Gondwana committed to, as far as responsibly possible, preserving its workforce and their income. Among measures the group undertook, management has taken substantial salary cuts, and other employees have also accepted salary cuts. Other measures to reduce costs included tightening of work schedules, overtime restrictions, leave schedules and operating with skeleton staff where possible.
Talking about the loan, Development Bank Executive for Marketing and Corporate Communication, Jerome Mutumba, expressed admiration for the manner in which the group and its staff operated as a collective. Cuts to income have preserved employment and income thus far, but none of this would have been possible without individual commitment to the shared interests of the group, he said.
Talking about prospects for the tourism industry, Mutumba said DBN is doing everything in its power to preserve the industry for the future. This includes a moratorium on repayments for existing Bank customers in the tourism and hospitality sector, restructuring of loans and extending the Covid-19 Business Relief Loans to new customers.
The investments that the Bank is making in the sector, through its loans, recognize the historic contribution of tourism to the Namibian economy but, more importantly, the need to preserve capacity for the future, Mutumba pointed out.
Mutumba said that DBN is an agency that assesses its loans in light of longer-term results, and that it considers the sustainability of its investments. Be it a smaller enterprise or a large enterprise, projects financed by DBN are expected to be sustainable well beyond the term of the finance.
However, he also said that the Namibian economy must be rebalanced to shed reliance on a few highly productive sectors. In this regard he said that although tourism and hospitality must be preserved, manufacturing and transport and logistics must be further developed. Not only will this make Namibia more economically self-sufficient, but it will also improve the attractiveness of Brand Namibia for foreign direct investment in future.
The Development Bank’s Covid-19 Business Relief Loan is supported by capitalization from KFW, Development Bank of Germany. Mutumba concluded by thanking KFW for their contribution to preserving the Namibian economy.
Finance for young professional doctor boosts Rundu health
Development Bank of Namibia (DBN) has provided finance for MedRundu Health Centre, a new health facility, operated by a young professional, Dr Vincent Kambinda. MedRundu used the finance for equipment, supplies and working capital.
Speaking about the importance of the facility, DBN Head of Marketing and Corporate Communication, Jerome Mutumba, said although Rundu and its surrounding areas form the second largest Namibian population centre, with a populace estimated to be in excess of 90,000, health services consist of approximately of only sixteen general practitioners, one state hospital and one private hospital.
The relatively few service providers and doctors, places residents of Rundu at a disadvantage in terms of the World Health Organisation recommended norm of one doctor per 1,000 head of population. Says Mutumba, the addition of just one doctor, under the circumstances, significantly alleviates pressure on the pool of medical skills available in the region.
He goes on to say that the shortage of local skills can lead to circumstances in which patients forgo medical treatment, which has wider costs in terms of lost productivity or social burdens on families who have to provide care for ailing family members. The alternative, he adds is that patients have to travel further afield at their own expense, which may also place pressure on public sector medical facilities.
The Bank has a long history of finance for medical facilities and professionals, which includes finance for Ongwediva Medipark, two providers of radiological and diagnostic services, one of which was assisted under the Bank’s Innovation Fund, as well as several pharmacies.
Talking about finance for young professionals, Mutumba says the facility is proving fit for purpose. The role of young professionals, he continues, is to provide business and social services that foster sound socio-economic and enterprise environment.
In addition to this, young professionals are nurtured financially by the Bank with the expectation that they will form part of the future pool of entrepreneurs to come. He points out that their earnings are also the basis for future investments in the economy.
On the topic of financing amounts, Mutumba notes that early career-stage professionals and artisans generally require lower amounts to establish their enterprises. This has the effect that the amount of debt finance used becomes more affordable, and in turn, the enterprises become more sustainable.
The win, he concludes, is mutual. On the one side, the Bank empowers youths venturing into entrepreneurship. On the other side, the Bank and the nation receive exceptional development impact for every dollar invested.
DBSA and DBN fast-track TransNamib with N$2.6 billion
Development Bank of Namibia (DBN) and Development Bank of Southern Africa (DBSA) have confirmed a loan of about N$2.6 billion finance for TransNamib.
The loan will be used for remanufacturing of rolling stock, acquisition of new rolling stock, modernisation of the TransNamib Workshop, upgrading of signalling equipment, including spares and associated equipment.
DBN and DBSA have a long-standing relationship that is governed by a Memorandum of Understanding. The Memorandum enables both Banks to jointly participate in the financing of infrastructure projects in Namibia.
During the 2019 Investment Summit, in Windhoek, DBN and DBSA jointly pledged N$8 billion towards infrastructure development in Namibia. Among this was the pledge of about N$2.6 billion towards TransNamib.
According to Martin Inkumbi, the CEO of DBN, the success of Harambee Two places emphasis on the positioning of rail as a catalyst for growth of economic activity.
The DBSA Head of SADC Coverage, Davies Pwele, further emphasised, in line with DBSA’s mandate of regional integration, that the repositioning of TransNamib as a logistics hub comes at a critical time when the SADC rail network needs to gear itself to respond to the Africa Continental Free Trade Agreement (ACFTA) which is now in effect.
The partnership between DBN, DBSA and TransNamib is a testimony of what can be achieved in the delivery of critical infrastructure, starting from financing of feasibility studies to investment, Pwele concludes.
Young artisan finance opens door for Erongo welder
The Development Bank of Namibia (DBN) facility for skills-based finance has provided finance to Muudhigu Investments CC. The company, operated by young artisan, Ndeenda Mbungu, offers welding services in Walvis Bay, Swakopmund and Arandis. Services include metal fabrication, pipe welding, tube brazing, cast iron welding and sheet metal welding.
Aged 28 at the time of application, Mbungu satisfied the requirements for young artisan finance with an NQF3-level certificate in metal fabrication from Okakarara Vocational Training Centre, as well as the necessary experience in full time employment prior to starting his own business.
He uses outsourced accounting services to assist him with management. In addition to his own employment in the company, his permanent workforce consists of a welder, a handyman and a general worker. Mbungu expects to employ temporary employees on a needs-basis as his business grows.
Mbungu and Muudhigu Investments represent the ideal borrower on many levels, says Jerome Mutumba, DBN Executive for Marketing and Corporate Communication.
There is a perception, Mutumba says, that an effective enterprise requires large amounts of capital at start-up. However, Muudhigu shows that with grit, determination and innovation, a business can be established with lean capital structures. In the case of youth enterprise, although expectations are often high, the reality is that larger loans often impose a significant debt burden on the young.
The high repayment can have the unintended effect of reducing profits to the enterprise and owner, which actually restricts financial growth and enterprise savings, counter to the intent and best-interest of the borrower.
In Muudhigu’s case, he continues, borrowing less and rationalising on assets and working capital has placed Mbungu in a better position to approach the future as his monthly repayments are lower.
On the topic of the enterprise environment, Mutumba says that Walvis Bay is a hub for industrialisation. Providing an artisanal skill such as welding enables multiple enterprises to make use of the skill. He notes that at the expert level that Mbungu has attained through certification and experience, various companies that might have competed to hire Mbungu can now share his expertise by contracting Muudhigu Investments.
Talking about the rationale behind the skills-based facilities for artisans and professionals, Mutumba emphasises that although Namibia needs to develop enterprise now, it also has to consider the future of economic activity.
Investments in youth and their empowerment as entrepreneurs are one of the best ways in which we can express our hope to expect more from the future, he concludes.
