Call 061 290 8000
- Home
- Business
Business (80)
What is given, gets given back. Jerome Mutumba on mutual responsibilities of lending and borrowing.
In the wake of emerging calls for write-offs of loan repayments for small and medium enterprises issued with the purpose of enhancing Namibia’s development, economic activity and prosperity, DBN Executive for Marketing and Corporate Communication Jerome Mutumba, has amplified important aspects of mutual responsibility for lending and borrowing, which must be factored into the concept of development finance.
Mutumba explains that there is a distinction between finance for development and commercial finance. Finance for development will be allocated with the goal of supporting and enhancing economic activity, while commercial finance in the main will have the goal of achieving returns for the lender, without the natural preoccupation to impact development. Both, however, will have the prerequisite of returns on capital, in order to sustain their operations. In the event of loans which are not repaid, both development and commercial finance will fail.
In making the choice between sources of commercial or development finance, the borrower will envisage the same outcome, regardless of the source of finance: a viable enterprise that will be a source of financial growth and income. The choice of lender, on the other hand, may influence the terms of the loan in favour of the borrower. A development finance institution (DFI) may, for instance, accept a greater degree of risk, offer capacity development services to borrowers and offer flexibility on repayment.
In order to qualify for a DFI loan, the borrower has to recognise the goals of development finance, and ensure that she or he can fulfil those requirements. The first cut decision of development finance will be a clear indication that the borrower can satisfy the terms of the loan. If not, the borrower will not be able to satisfy the DFI’s development goals, such as employment, development of capital, economic activity and other factors.
As a lender, the DFI will have the additional consideration of its own sustainability. It has the moral, patriotic and economic obligation to preserve its own capital, as well as collect interest, which will be used to sustain and grow its operational capacity, by providing more loans to a greater number of borrowers. What is given, gets given back, Mutumba emphasizes. In case of DBN, the Bank endeavours to recover all public money that it lends out.
Mutumba also points out that as the benefits of development finance are allocated from a common national resource, with the broader goals of development impact that extends beyond the owner and the DFI. Both the lender and the borrower must hold themselves responsible.
However, Mutumba says when enterprises do experience difficulty, this is rapidly identified by the Bank, at which stage the Bank will approach the borrower to examine the source of the business challenge and try to rectify the situation, rather than immediately call up the debt and recover it through a legal process.
He illustrates the point using the Covid-19 measures implemented by the Bank. Once the impact of Covid-19 became clear the Bank rapidly implemented repayment holidays and extended loan repayment periods to reduce the monthly debt burden on SMEs as well as tourism and hospitality borrowers. It subsequently launched Covid-19 Business Recovery Loans.
Mutumba concludes by saying that when the Bank has in a few instances experienced difficulty with loans, it is often as a result of a number of factors, but mainly attributable to a lack of administrative skills and capacity from the side of the entrepreneurs. The Bank, he says, has taken steps to rectify this with the implementation of a Mentoring and Coaching Unit which provides capacity building in the form of mentorship and coaching, through a network of experts in various fields on business management.
Development Bank of Namibia opens expanded office in Walvis Bay, Erongo
Development Bank of Namibia has inaugurated its expanded office in Walvis Bay on 14 February 2022. The office is expected to serve towns in the Erongo region as well as some entrepreneurs and enterprises in the Kunene region.
In his opening address, Chairperson of the DBN Board of Directors, Sarel van Zyl, described Erongo as a very important region for economic activity. It holds the Port of Walvis Bay, one of the most significant points of entry to Namibia. It is also an important hub for intra-regional trade. It is a major source of industrial and commercial output, and of course, is a very popular tourism destination, not only for local and regional tourists, but also for international visitors from all over the world. Through its economic activity, Erongo supports a large concentration of Namibia’s population, all of whom are beneficiaries of development.
Since its early inception, Van Zyl continued, the Bank has been actively engaged in finance for the region. Early projects included Aqua Utilities to semi-purify water for Walvis Bay, as well as cranes for NamPort. The Bank has also made extensive investments in the Erongo tourism and hospitality industry.
He said the Bank recognized the the need for operational capacity in the region by opening an office in 2014, and to address expectations of substantial growth, the Bank has now developed this larger office.
Officially inaugurating the office, Walvis Bay Mayor, Trevino Forbes, described Walvis Bay as a microcosm of Namibia, pointing to its tourism and hospitality industry, transport and logistics as well as manufacturing and light industry.
However, he pointed out that Walvis Bay also reflects poverty experienced in Namibia. He said there is a need for a balanced approach to development. In order for development of enterprises and infrastructure to be of value, the initiatives also have to be of value to the residents in the vicinity, in this case Walvis Bay.
He went on to describe the needs of Walvis Bay that would improve the socioeconomic wellbeing of residents, especially expansion of residential areas to Farm 37 to alleviate population pressure in Kuisebmond and Narraville. The expansion, Forbes said, should include provision for medical, educational, commercial and recreational facilities.
He called on Development Bank to assist with development of the town, and pledged Council accountability and integrity in dealings with the Bank.
Talking about Development Bank activity in Erongo, DBN CEO Martin Inkumbi said the region is the second largest beneficiary region after the Khomas Region, however factoring in finance for the NEF strategic fuel storage facility of N$4.2 billion, the region received the highest amount of finance in Namibia.
Inkumbi concluded by saying that the Erongo office also receives some visitors from the Kunene Region, and is planned to serve as a future base for visits to //Kharas and Hardap.
Hellen Amupolo to head Investments Department
Previously Acting Head of the Development Bank of Namibia’s (DBN) Investments Department, Hellen Amupolo, has been formally promoted to Head of the Investments Department.
Since joining the Bank in 2008, Amupolo was instrumental in establishing the Ongwediva branch, and she played leading roles in developing pioneering financing models for renewable energy and delivery of land and affordable housing through public private partnerships (PPPs).
Amupolo’s career trajectory at the Bank began with the position of Business Analyst. As she progressed, she became Northern Regional Portfolio Manager, then Senior Portfolio Manager: Infrastructure and Utilities. Just prior to her appointment to the Head position, she held the position of Senior Investments Manager. Before joining DBN, she held the positions of Acting Chief Economist for the Ministry of Fisheries and Marine Resources and Market Analyst for South Africa Breweries.
Amupolo is a Chartered Development Finance Analyst who holds a Bachelors in Economics from the University of Namibia and a Masters in Development Finance from the University of Stellenbosch. Amupolo’s training includes exposure to a number of structured finance and investment banking interventions during her banking career.
Talking about the role of the DBN Investments Department, Amupolo said it finances large scale enterprises with annual turnover exceeding N$10 million and infrastructure. Infrastructure, whether for energy generation and distribution, water, telecommunication and transport infrastructure creates the necessary base on which large corporate and SME enterprises can anchor their economic activities.
Key focal areas for the Investment Department include transport and logistics, tourism and hospitality, and manufacturing, areas identified in NDP5 as critical for growth of the Namibian economy. The Department also finances initiatives that address structural needs of the economy, such as privately owned solar power generation, and sociological issues such as provision of serviced land and affordable housing.
Going forward, Amupolo said the Bank is consolidating finance for renewable energy and water infrastructure under its climate adaptation facility. The Bank is also investigating new financing programs, and announcements would be made if and when they become feasible.
In addition to her role as Head of DBN’s Investments Department, Hellen Amupolo also serves as Chairperson of the Investment Committee of Momentum Metropolitan Namibia, sits on the Board of the Roads Authority where she serves as Chairperson of the Audit Committee, and she is a member of the Ministry of Finance Public Private Partnership Committee and Review Panel for Public Procurement.
Bank concludes investigation into alleged fraud
The Bank announces the formal closure of investigations and subsequent disciplinary inquiries which emanated from the widely reported alleged infractions in allocating finance. Seven DBN employees were placed on administrative leave during April of 2020 in order to make way for unhindered investigations on the alleged misconduct.
After the protracted commissioned processes of investigations and subsequent disciplinary inquiries, which were outsourced to external parties to ensure impartiality, the Bank is happy to inform that the matter has now been finalized and suspended employees have since returned to work.
The Bank holds its employees to high ethical standards in the execution of their work and the necessary systems and processes are in place to manage employee conduct.
The Bank encourages its stakeholders to report alleged fraud or corruption involving DBN staff, clients or potential clients. An anonymous call be done through the confidential external channel which protects whistleblowers. Email tip-offs to dbn@tip-offs.com, or call 0800 290 800 (toll free on landlines and mobile devices).
Bank launches climate adaptation facility
The Bank has announced a facility to finance climate change adaptation, bolstering its long track record of finance for beneficial environmental and social initiatives.
Explaining the facility, DBN CEO Martin Inkumbi said it provides an affordable and tailored financing solution for climate and environmentally friendly projects. The Bank has previously financed low-carbon renewable energy generation, water reclamation for industrial use in Walvis Bay, water storage in Neckartal Dam and reclamation initiatives.
Inkumbi said that finance for climate adaptation is important, and there is a range of affordable financing instruments for such business projects.
The Bank, he said, has already pioneered financing models for renewable energy, and is now setting its sights on, energy and water use efficiency as well as mitigating the effects of rising temperatures.
On the topic of water, Inkumbi said that the Bank has been financed large scale water infrastructure such as Neckartal Dam and Aqua Utilities which semi-purifies water for industrial use at Walvis Bay. However, he said that in the face of prolonged droughts, there is an opportunity for enterprises to invest in water efficiency. Investing in technology and processes that are energy and water efficient reduces the amount of energy and water consumption per output for a business, which lowers production and or operational costs and improve profitability.
Although water efficiency will not alleviate drought, it can lead to improvements in enterprises bottom lines, in addition to preserving the environment.
Inkumbi urged enterprises to examine their energy and water usage and costs, and develop innovative methods to reduce their water usage and associated costs.
He added that the Bank has experience in water reticulation for local authorities and PPPs but said there was still scope for further development in terms of water recycling, reclamation and storage in abattoirs.
On the topic of rising temperatures, Inkumbi noted that there is a twofold cost. The first cost is the cost of cooling facilities, and the second cost is the cost of mitigating health issues caused by rising heat. The cost of cooling facilities adds to the cost of an enterprise. It also places a burden on power generation. By constructing plants and facilities with heat dissipation in mind, these circumstances can be mitigated.
He extended the benefits of energy efficient housing developments, explaining that incorporating heat dissipation would reduce the cost of running a household as well as improve the health of its residents. This, he said would dovetail well with the Bank’s finance for affordable housing projects.
Asked about how the facility would benefit enterprises and initiatives, Inkumbi said that there is an understandable reticence to finance projects with unfamiliar financing outcomes. This was the case when DBN pioneered finance for privately owned renewable energy. The Bank however de-risks innovative projects with extensive due diligence on innovation and absorbs, manages and learns from its risks. In this way, the Bank hopes to pioneer finance for climate change adaptation that will make Namibia more sustainable.
Inkumbi concluded by calling on engineers, architects, consultants and project managers to lean more towards energy and water efficient designs, and for businesses to approach the Bank for finance. Although you may have reservations about pitching new technologies and techniques, the Bank will give them consideration for finance if you can demonstrate their feasibility.
CEO Martin Inkumbi moots national equity fund for recovery
The onset of Covid-19, 18 months ago, has led to vulnerability on the part of some enterprises. Development Bank of Namibia (DBN) CEO Martin Inkumbi suggests that one solution can be found in equity finance through a national equity fund for qualifying enterprises currently experiencing headwinds, but with potential for future growth prospects.
Advancing additional loans to borrowers, even as temporary relief measures, is not always a solution that works for all struggling businesses impacted by Covid-19.
The financial sector has deployed a raft of measures to reduce enterprise vulnerability due to Covid-19. These include, among others, repayment holidays, grace periods, additional finance for operational costs and extension of repayment periods to offset the monthly cost of interest to the enterprise.
These measures are only effective when the depressed economic cycle lasted for a short period of 6 to 12 months. In the case of a protracted depressed economic cycle that we are seeing now, these measures are proving ineffective, if not detrimental to the long term sustainability of enterprises.
A national equity fund would add to the financing toolkit, provided the equity investments or debt to equity conversions are made on pure business and economic merit, and on the potential viability and recovery of an enterprise. This requirement is paramount.
Ideally, this equity finance vehicle, says Inkumbi, should not be taking a permanent shareholding, but should enable the original shareholders to repurchase their shareholding as the enterprise recovers and grows, or to onboard new shareholders depending on the preferences of the existing shareholders.
Inkumbi adds that the arrangement should allow the national equity fund to intervene or recommend managerial and / or operational methods to strengthen governance and improve business growth. However, he says, the ideal will be to allow existing enterprise shareholders the independence to manage their business and turn it around through their own business acumen, learnings and experience.
On the topic of capitalizing an equity fund, Inkumbi says that the requirement will be substantial, and suggests pooling of funds in a national vehicle. If such a National Equity Fund is capitalized with borrowed funds, e.g. private sector bonds issued to capitalize the fund, and repaid by taxpayers over time, this will be in exchange for equity in Namibian companies that will continue to grow in value over time.
The important and imminent benefit of a national equity fund intervention however, is saving Namibian enterprises from collapsing during the current depressed economic cycle, preserving current and future employment and sustaining economic growth.
Inkumbi says over the last 18 months, four broad categories of borrowers are notable in the DBN portfolio.
The first category consists of borrowers who experienced headwinds prior to the onset of Covid-19 due to the economic slowdowns. These borrowers had their challenges compounded by the onset of Covid-19. These challenges included stiff competition, lack of demand, unaligned operating costs and price structures and poor business management. These borrowers have generally been facing a downhill and imminent foreclosure, and it is normal and acceptable that an unviable business will close down. Only Good Business is Good for development.
The second category consists of borrowers who were similarly challenged, but were able to service their debts, albeit remaining persistently in arrears on their repayments.
The third category consists of borrowers who were successful and were able to service their debts, but were challenged by the onset of Covid-19 lockdowns, which hampered business activities and revenues.
The final category consists of those enterprises who benefit from inelastic, constant demand and turnover despite Covid-19. These enterprises typically benefit from contracts and / or tenders.
Inkumbi points to the second and third category of enterprises as being the most likely beneficiaries of a national equity fund.
Inkumbi says that the recovery will not be instant, but that in the medium to long term, Namibia and its enterprises can emerge into a period of growth, provided that their economic capacity is preserved. The medium-term vision of equity finance will, potentially accelerate the outcome.
Although the economic waters are choppy, with all hands on deck, the vessel can make progress with equity finance, Inkumbi concludes.
Bank donates equipment to Covid-19 clinic
Development Bank of Namibia has donated N$88,000 worth of medical equipment to Robert Mugabe Clinic. The equipment consists of a sterilizer machine, 8 mobile hospital curtains, 10 oxygen regulators and a medicine trolley. This donation adds to prior Bank donations of N$1,4 million to manage Covid-19.
Speaking at the donation ceremony, Development Bank of Namibia CEO Martin Inkumbi said the Bank is an entity that is committed to Namibia in good times and in times of difficulty, such as the Covid-19 pandemic.
The Bank, he said wants to contribute to saving lives and preserving people’s health. For this reason, DBN decided to support Robert Mugabe Clinic with health equipment and consumables to aid the clinic in assisting those Namibians affected by the virus and seeking healthcare at the clinic.
Inkumbi pointed out that as part of its corporate social investments, the Bank has already donated N$1.4 million to the national effort to manage Covid-19. The donation to Robert Mugabe Clinic is a further effort to manage the pandemic.
Thanking the Bank for the donation, Khomas Regional Director Tomas Ukola said the medical equipment will be essential tools in health worker's COVID-19 toolbox to save more lives and provide quality healthcare, which is the pinnacle of any healthcare system.
Talking about the impact of the donation on Robert Mugabe Clinic’s operations, Sister Justina Hamunyela said that like all other Covid-19 facilities in the country, the clinic has been experiencing numerous challenges that include inadequate oxygen regulators and floor meters, oxygen supply and other medical equipment.
She said the donation by the Development Bank of Namibia came at opportune time when the clinic is overwhelmed by numerous patients experiencing signs and symptoms consistent with Covid-19 and higher demand for oxygen in the face of the threats of hospitalization and death.
The donation, Sister Hamunyela said, will go along way in facilitating timely treatment of patients, improving staff morale, enhancing productivity and efficient service by the clinic's frontline health care providers.
Standard Bank joins Credit Guarantee Scheme, offers 60% collateral reduction for qualifying SMEs
Standard Bank Namibia has announced that it has partnered with the Credit Guarantee Scheme (CGS) to provide collateral cover of 60% for qualifying SMEs applying for finance from participating commercial finance institutions.
Standard Bank’s Enterprise Direct Manager, Felicia Jooste said the bank has a genuine desire to see SME’s grow and thrive in difficult economic conditions.
“We are determined to help our small and medium businesses navigate these difficult prevailing conditions, hence the reason we joined the Credit Guarantee Scheme.”
She added that SME’s are the lifeblood of the economy and employ thousands of people across various sectors. “We have undertaken various initiatives to support our SME’s and we found the CGS to be an additional and worthwhile undertaking to participate in, not only to help them grow as companies but also to help them grow the country’s economy and by so doing alleviate a number of our social challenges,” Jooste noted.
Launched in August 2020 by Minister of Finance Ipumbu Shiimi, the CGS provides collateral cover of 60% for qualifying SMEs that apply for finance from participating commercial finance institutions.
The CGS caters for SMEs with viable business plans that lack collateral to obtain loans. Commercial finance institutions require collateral to preserve their capital in the event of businesses being unable to repay their loans. By insuring credit granted to qualifying SMEs, the Scheme substantially reduces the collateral requirement for qualifying SMEs by 60%.
SMEs that may qualify for the Scheme are identified by the participating financial institution in terms of their own assessment of the bankability of the business plan.
Seeded with N$98 million from the Government and the Bank of Namibia, the CGS is operated as a smart partnership between Development Bank of Namibia (DBN), Namibia Special Risks Insurance Association (NASRIA) and the participating financial institutions.
Talking about the CGS, DBN CEO Martin Inkumbi says that he hopes to see all financial institutions lending to SMEs joining the scheme. He points out that national policy is striving to develop economic activity in Namibia through establishing a conducive environment for SME startups and growth.
Martin Inkumbi talks about economic approaches to reduce inequality
To reduce inequality we firstly need to create value in our economy, which requires an increase in real gross domestic product (an increase in GDP, less inflation) of our economy. Only when the economic cake is continuously expanding, will there be a possibility for every Namibian to get a slightly bigger piece or even better, to give vulnerable citizens proportionally larger slices.
Generally individuals will invest and work hard to increase their fortunes in an environment that is open, transparent, fair and that encourages meritocracy. Growing the economy requires us to create and maintain such an environment. A value creating and expanding economy will present the best opportunities for employment creation. It can generate more resources for social infrastructure such as housing, education and health care, which can be provided by both the private and public sectors.
A growing economy allows the State more capacity to support and care for the more vulnerable citizens, because firstly, more tax can be collected and, secondly, an expanding economy generally creates more employment opportunities, thus reducing the number of vulnerable citizens.
Specific action plans, will include expanding agriculture to increase the proportion of locally grown food in Namibian's consumption basket. This requires an overhaul of the entire value chain from production, logistics to market shelf space.
I also think we should pay more attention to expanding the services sector. For example international private universities and healthcare centres in beautiful places such as Swakopmund and Henties Bay, with the foreign market as their target markets can complement the tourism industry. This requires targeting specific international investors in these sectors and bringing in the required skills. An expanding services sector increases consumption demand, which creates opportunities for the primary and secondary sectors.
The main challenge for Namibia in my view is skills, both technical, management and technological capacity rather than financial capital, which can be sourced internationally if one can present a viable investment proposition.
I think we need a targeted strategy to attract investment with a strong focus on bringing in the required skills and technology, capitalizing on the very attractive quality of life Namibia's environment offers. Our development plan must have a strategy to leapfrog some of the challenges we have such as the shortage of skills and technology. The focus should be on game changing investments, as opposed to those that will merely crowd out Namibian entrepreneurs. In time, Namibia can claw back on the skills gap.
Bank stands behind transport and logistics sector
The transport and logistics sector can benefit from Development Bank of Namibia (DBN) finance in two phases, says Jerome Mutumba, the Executive responsible for Marketing and Corporate Communication. The first phase is to weather the Covid-19 pandemic until the vaccine rollout. The second is to grow apace with the growth of economic activity driven by the African Continent Free Trade Area (AFCFTA).
Talking about the Bank’s first phase interest in the sector, Mutumba says the Bank is currently prioritising preservation of the existing sector through Covid-19 financing measures, which have included repayment holidays for SMEs, and that now extend to the Covid-19 Business Relief Loans. The business relief loans provide three or six months operating capital, depending on the need of borrowers.
The sector, he says, has been severely affected by lockdowns, however it is vital to preserve capacity to ensure the current movement of goods as well as for the future.
Mutumba urges existing transport and logistics enterprises to make use of the recently launched Covid-19 Business Relief Loan to address operating challenges, where necessary.
Talking about start-ups, Mutumba says although in some instances the current economic environment could appear as an uphill for potential new enterprises, the Bank will consider applications from new enterprises with sound business cases.
Looking beyond the vaccine rollout, Mutumba points to the beacon of AfCFTA, which, he says, will incrementally enhance demand for transport and logistics as Namibian enterprises begin to take advantage of enhanced opportunities for production and efficiency. This, he says will be driven by demand for Namibian goods, as well as reduced trade costs, particularly in the Sub-Saharan Africa (SSA) region, but potentially further afield.
Although fleet immediately springs to mind in connection with future trade opportunities, Mutumba urges enterprises in the sector to consolidate and strengthen capacity with fixed assets such as cold storage and freight consolidation facilities. The positioning of Namibia as a transport hub in the SSA region, and ongoing policy development and implementation justify the development of fixed assets with a long-term view.
In terms of transport operations, Mutumba adds that the Bank supports contracted arrangements with contract-based finance as well as performance guarantees.
Talking about participation and inclusiveness in the sector, he says the Bank can also provide finance for management buy-ins. Mutumba notes that management buy-ins are a means to both strengthen the capital base of the enterprise as well as provide new capacity for the enterprise.
Buy-in capacity, Mutumba says, may also strengthen the fortunes of interdependent organisations. He uses the example of an enterprise producing, retailing or wholesaling goods buying into a transport and logistics enterprise. The producing enterprise can secure its transport and logistics need through this diversification of its interests while also benefitting from additional operations of the transport and logistics enterprise, while the transport and logistics enterprise can secure itself and expand with the additional capital.
The Bank, Mutumba concludes, stands firmly behind the transport and logistics sector. He calls on enterprises to approach DBN to begin developing a financial roadmap for their futures.
Find out more about DBN finance for transport and logistics, here...
