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Bank throws weight behind the tourism industry
Development Bank of Namibia (DBN) Acting Head of Investments, Hellen Amupolo says the Bank is throwing its weight behind the tourism and hospitality industry, as one of the most important contributors to Namibia’s economy.
Amupolo points out that although the industry measures itself on aggregate earnings and employment, this does not fully reflect the depth of its impact on the wellbeing and socio-economic impact on families and communities. Tourism and hospitality, she says, has a deeper human truth, and needs to deploy to rebuild the gains that it has made.
Although the industry has come to a halt in the face of Covid-19, it needs to prepare for recovery now, rather than later. She explains that competition for the global tourist dollar will become fiercer as the recovery progresses and Namibia needs to be well-placed as an attractive destination.
The Bank has already taken measures to preserve its borrowers in the industry with repayment holidays of N$33.8 million. These repayment holidays are valid until November 2020, and the cost of recapitalized interest is being reduced by five-year extensions of loan periods.
Amupolo says that the barometer of recovery has to be accommodation, which is the basis for any further economic activity in the industry. Without bed occupancy no secondary activity will take place, including vehicle rentals, activity operations, tourism related retail and hospitality in the restaurant sector. Accommodation will also have a secondary impact on wholesale, manufacturing, transport and logistics as well as business services.
In light of this, she urged accommodation facilities to prepare preliminary business plans, and assemble pre-Covid cash-flow statements and balance sheets. By developing in advance documents required for applications for finance, qualifying enterprises could potentially reduce delays in project implementation. She invited interested parties to contact the Bank to find out about application requirements.
Talking about recovery, Amupolo said the Bank will be closely watching activity in the SADC, and hoped that a travel bubble would emerge between countries, particularly with continued relaxed quarantine requirements for South African inbound travel over December, if feasible. However, she said that she expects the recovery to be uneven, with gradual international recovery.
In light of this, she said diversity of markets is important to make up for lockdowns in different international markets. She also said that in the long-term the industry could seek finance for facilities to cater to special interests and potential longer stays. Focused facilities for special interests, she noted, are more likely to attract tourists. The more focused the market, the bigger the potential given the current uncertain environment, she explained.
On the topic of preservation of the industry, Amupolo suggested that larger enterprises consider using DBN finance to buy shares in smaller tourism and hospitality enterprises that are vital to the tourism and hospitality network.
She illustrated the concept with an example of a large accommodation establishment with a reliance on a specific service provider. By ‘buying’ a small partial shareholding, the larger accommodation industry could preserve the service provider, capacity for the recovery and strengthen its balance sheet. If the smaller enterprise failed without the support of the ‘buy-in’, however, this would reduce the competitiveness of the larger establishment.
On the topic of general finance offered by DBN, Amupolo said the Bank offers a range of products, however it excels at structured finance tailored to milestones of the project. She also added that the Bank provides grace periods to enable borrowers to grow their turnover before beginning to pay.
Although the recovery will gather momentum, it is better to lay plans in advance and be prepared for different scenarios, Amupolo concluded, urging the tourism and hospitality industry to contact the Bank.
Bank finances three classrooms for school
Development Bank of Namibia (DBN) has donated a block of three classrooms valued at N$457,000 to Sakaria H. Nghikembua Primary School in Oshikunde Constituency in Eenhana. The school, with 152 learners, has been challenged by a shortage of classroom facilities.
Speaking about the Bank’s donation, and its involvement in education, DBN CEO Martin Inkumbi said that the Bank values education and see it as fundamental for the development and progress of the human race. He explained that the Bank has a scorecard for development impact of projects that it undertakes, and that education was highly rated on the scorecard.
Inkumbi expressed pride in the Bank’s track record of developing educational facilities. Among the large businesses and infrastructure projects DBN has financed over the years, there is a strand of finance for private schools as well as donations for public sector schools and educational initiatives.
In addition to the donation for Sakaria Nghikembua, the Bank also made a substantial donation towards a school hall for Romanus Kamunoko Secondary in Rundu, upgrading of hostel facilities and repairs to a school damaged by flooding. The Bank has provided finance for a number of privately operated pre-schools, schools and tertiary institutions.
Inkumbi said the learners of Sakaria Nghikembua and schools like it have a special significance for the Bank. Although the school is challenged by its lack of facilities, its learners are its future assets. The profile of the school indicates that approximately 90 percent of the learners face socio-economic challenges, Inkumbi pointed out.
Although Development Bank is dedicated to leveling the playing field for all Namibians, the Bank also sees a future for Namibia in people who learn to overcome their challenges.
Many people who rise above their obstacles and difficulties emerge on the other side as well-rounded individuals. They develop problem solving skills and become resilient to difficulties. People such as these return to serve and develop their communities, and become an important part of the future prosperity of Namibia, Inkumbi concluded.
In addition to its donations to education and educational initiatives, DBN also uses its corporate social investment activities to make impacts on poverty alleviation, community health and wellbeing, general skills development, the business environment and environment and biodiversity management.
Environment and social management secures long-term financing outcomes
The global need for sustainability is widely communicated, says Development Bank of Namibia Head of Risk and Compliance, Saima Nimengobe. The ongoing unfolding of climate change, as well as advocacy for fair social impacts highlight the imperatives that face entrepreneurs, governments and economic planners.
She says however that many pay lip service to the practice of sustainability. This is driven by the vast scope of the need and the collective nature of the responsibility, which enables players to shift responsibility to others who are perceived to be willing to take meaningful action. It is also motivated by the assumption that cutting corners will reduce costs.
The counter to this is to understand the hidden costs and risks that arise from environmental and social management (ESM) avoidance, and factor these into due diligence and governance of financing covenants. Financing which avoids elements of ESM is a risk to the provider of finance as well as the enterprise, says Nimengobe. By refocusing on risk and potential cost, the requirement for ESM adherence can be properly evaluated and understood in operational and accounting terms.
The first point Nimengobe makes is that ESM avoidance has licensing implications. The field of ESM in Namibia is primarily governed by the Environmental Management Act No 7 of 2007 and its regulations and the Labour Act No 11 of 2007 and its regulations. These are augmented by regulations of local authorities.
At the outset, all three make licensing conditional on preliminary adherence, however all provide for withdrawal of licenses and clearance certificates in the event of infractions of ESM conditions. This is the trigger for a sequence of events which could have severe financial implications, Nimengobe points out.
The most obvious implication is a halt to operations. In the case of an enterprise the impact will be felt in loss of revenues. In the case of infrastructure or an economic project, the outcome and revenue streams will be delayed. In both instances returns to the provider of finance will either be delayed or placed in jeopardy.
The immediate impact is also a set of costs that adds to expenditure. Although a fine may be seen as a limited cost for a mature and profitable operation, it may be significant and restrict a new or tenuous operation. In addition to this direct cost, there may be additional legal costs associated with the administration of a legal action and further fines if culpability warrants it. Rehabilitation of environmental and / or social damage becomes a vital further cost. The cost of insurance may also increase. If the fault was in the equipment or processes, corrective measures and potential capital investments will also add to the expense.
In the event of the enterprise or project resuming, it may also face licensing reluctance and rounds of inspections which may further delay resumption of operations.
At a more fundamental level, the enterprise is likely to lose market share. This can take place along the entire value chain. Suppliers may seek other opportunities and partners. Retailers, resellers, customers and consumers may respond negatively. Finally, competitors may step into market gaps further challenging the enterprise.
Nimengobe also notes that enterprises and projects that have been culpable of ESM failures will face reluctance from providers of finance.
Nimengobe advises providers of finance to develop ESM as a formal risk mitigation measure for their own sustainability as well as that of their borrowers, on whom repayment depends. Nimengobe also counsels inspections of enterprises, which might be carried out by a dedicated function in the organisation or by outsourced consultants. This, she says will also be a safeguard against inadvertent gaps in ESM adherence.
By developing strong relationships based on understanding of ESM, Nimengobe concludes, outcomes and projections can be secured for both financiers and borrowers.
Robert Eiman takes reigns of SME Finance
Seasoned veteran of business finance, Robert Eiman, has taken over the reigns of the Development Bank of Namibia (DBN) SME Finance department. The move to place the Department under a Head follows the Bank’s resumption of SME activities in 2018. The department was previously managed by Acting Head, Hellen Amupolo, who is now Acting Head of Investments.
Talking about his mandate, Eiman said his priority will be to sustainably grow the Bank’s SME portfolio. He will also manage the skills-based facility for young professionals and artisans which is housed in the SME function, as well as the apex micro-lending facility. The apex micro-lending facility makes capital available for micro-lenders with a beneficial development impact to lend onwards to the public.
Eiman said that the operational emphasis will be to strengthen due diligence on applications. He noted that the recession and the Covid-19 pandemic has shown that it is vital that applicants show the best possible prospects of success. This he added will secure the financial wellbeing of owners, as well as their employees. He also pledged to find ways to speed up application assessments, however he cautioned applicants to ensure that their documentation is complete as incomplete applications would lead to delays.
Asked if there was a recipe for success, Eiman answered that there was no single winning formula for SMEs as each is unique. For this reason, each business must do their own application and not rely on consultants or readymade business plans that do not acknowledge the differences between businesses.
He said there are several characteristics of successful SMEs, the first of which is a rigorous approach to accounting and financial management. SMEs, Eiman explained, are fueled by accounts and debt obligations. Rigorous financial administration he said, enables SMEs to meet their obligations and not fall behind in payments. Unpaid bills place financial pressure on SMEs, and this leads to failure.
The second characteristic of success, Eiman enumerated, is for owners to budget their salaries, rather than making drawings against the business account. When the owner draws from the business account she or he is making a withdrawal from a vital reserve against periods of diminished cash flows. That reserve, he said, can also be deployed if the owner has the opportunity to grow or diversify the business.
The third characteristic Eiman drew attention to is partnerships rather than sole proprietorships. He illustrated the value of a partnership with the example of a highly skilled tradesman. The tradesman, Eiman explained, would be excellent at his craft but might not have the necessary business skills or the time to learn them. By partnering with a skilled business administrator, the tradesman could secure the future of his business with strong administration, as well as make more time to use his craft. In this way, partnering not only strengthens the business, but also grows it.
Asked about businesses that experience difficulties, Eiman said the aim of strengthened due diligence is to ensure that businesses financed by DBN have strong prospects of success. However, he acknowledged, the Bank will, at its own discretion, do what it can to assist businesses facing challenges. He motivated this with the Bank’s approach of securing businesses for the long term, rather than immediately taking possession of collateral.
Two of the remedies at the Bank’s disposal, are debt restructuring, and mentoring and coaching to build knowledge and capacity.
Robert Eiman was formerly Acting Head of Investments at DBN. His experience in the field of SMEs is augmented by experience as Head of SMEs at FNB Namibia. He holds an MBA (UNAM) and various certificates from the Institute of Bankers.
Innovation on the menu with Omboga powdered spinach soup
Development Bank of Namibia (DBN) has celebrated the culmination of its support to 2018 Innovation Award winner VNA Foods at the launch of the fledgling food company’s production facility in Windhoek. VNA won the Innovation Award for a proposal to manufacture packet soup, ‘Omboga’, from spinach.
DBN provided an extensive range of support activities that included recipe development, testing and refinement as well as barcode acquisition to enable the company to gain shelf space in local retailers. VNA also received grant funding which enabled it to begin operation.
Speaking at the launch of the production facility, DBN Head of Business Strategy, Heike Scholtz, said the Bank views innovation as a set of transformative activities which can take place in various sectors. She pointed to utilization of local resources and developing efficiency and economies of scale as particularly important.
The impact of innovation, Scholtz said, is that Namibia will become less dependent on imports and potentially create a basis for export trade. She added that developing efficiency makes Namibia more competitive as a national economy.
Talking about VNA, Scholtz said the product improves self-sufficiency as well as food security in Namibia. She noted that the ability of VNA to source its raw material locally strengthens agricultural livelihoods, and adds to the growing ecosystem of agri-enterprises. She also pointed out that VNA will add to the stock of enterprises in the manufacturing, and reiterated that growth of manufacturing is one of Namibia’s goals for the future economy.
She said it was significant that VNA was launched and is led by young entrepreneurs. DBN has assigned a high degree of importance on supporting and financing young entrepreneurs as a resource for the future of Namibia’s economy.
On the topic of the risk of innovation, she said innovative enterprises need support to manage and absorb their risks if they are to become sustainable, She called on to adopt finance for innovation, based on the principle that a project which is made bankable through derisking becomes a potential financing resource for the future.
She urged local distributors and retailers to add the product their selection and promote saying that the wholesale and retail sector can only become fully sustainable if it incorporates Namibian products in its offerings.
Talking about prospects for the company, Valde Leonard of VNA said the company has identified the commercial value of Namibian cuisine. He said VNA will embark on a contract harvesting/supply program with local Namibians and will focus on growing its product line in the short-term.
Leonard concluded by advising innovators to see the positive and make a lasting change empowers both innovators and the world around themselves.
Unique 2019 Innovation Award winner makes strides
Winner of the Development Bank of Namibia (DBN) 2019 Innovation Award, Pulsar Electronics, is making strides with a DBN enterprise development and support package that is securing the future of its award winning business proposal.
Pulsar’s innovative product, known as GridX, offers the twofold benefits of an electricity management device that enables enterprises and households to manage their electricity usage remotely, as well as being a Wi-Fi router.
Pulsar has obtained a patent for GridX that covers both types of functionality. The device is unique globally. Says Kamati Hasheela of Pulsar, this specific implementation of these technologies has not been carried out anywhere else in the world.
Of particular importance to the panel of judges on the DBN Innovation Award was the ability to manage electricity consumption. Namibia has an electricity deficit, and by providing a means to assess and manage consumption, electricity savings can be improved.
As a meter, GridX offers power producers, distributors and users the ability to collect information through wireless technologies such as 4G, 3G, and fiber. For home users, the GridX user will be able to remotely transmit their electricity tokens to the meter and remotely turn geysers on and off to make substantial electricity savings.
Homes using GridX will also have internet access, as well as a local area network (LAN) that allows internet access for multiple devices in the home. Power producers and distributors that are exploring internet access as an addition to their business models will be able to benefit from this.
GridX is attracting interest in the region, and Pulsar has signed co-development partnership agreements with local start-ups in Angola, Botswana, and Zimbabwe. The company is leveraging technical expertise in the SADC to collaboratively produce a solution that is customized for regional needs. A pilot programme is expected to prove the benefits of the device.
Pulsar has been placed on the DBN Mentoring and Coaching Programme and work is progressing.
Although global events caused various delays in the project supply chain, the project is on track to complete the functional prototype and bankable business plan in the second half of 2020. The team has finalised development of the electronics and started regulatory approval procedures with STS in South Africa.
Pulsar is receiving Development Bank support to finalize product development, optimize the cost of production, develop and execute a product marketing plan, develop a product revenue model, and to assist in the creation and presentation of product packaging.
In August 2020, Pulsar went on to win the Namibian Nations of the Entrepreneurship World Cup, a competition to bring together startups from 190 countries to compete on an international stage. Pulsar will represent Namibia in the finals held in Riyadh Saudi Arabia later this year. It is also seeking additional capitalization to bring the product to market.
Hasheela’s advice to innovators is to prioritize creating a team of individuals based on merits and competency in the task that they will be contributing to the project. An idea is great but means very little without the team to carry out the implementation, he says.
Hasheela concludes by thanking the Development Bank of Namibia and local partners, who through their early assistance have been able to support the development process of the device.
Bank settles first bond
Development Bank of Namibia (DBN) has announced that it has settled DBN20, the first bond that it issued under its N$2.5 billion Medium-Term Note Programme listed on the Namibian Stock Exchange.
The bond matured on 4 September 2020. Settlement of the bond went smoothly and successfully. At maturity it had 38 bondholders (37 Namibian entities and 1 foreign entity).
The issuance of DBN20 in September 2017 marked the first time that the Bank formally approached Namibian capital markets to raise funding and deepen the capital market.
Since issuing DBN20, the Bank issued another three bonds (DBN20A1, DBN20B and DBN23) which raised a total of N$500 million for lending to financially viable, environmental, and socially acceptable projects with developmental impact.
DBN20A1, DBN20B and DBN23 are the first and only amortizing bonds issued and listed on the Namibian Stock Exchange. This demonstrates the Bank’s ability to honor its debt obligations as they become due, having successfully honored the capital repayments on these amortizing bonds to date.
Since listing its N$2.5 billion Medium-Term Note Programme in July 2017, the Bank is currently the fourth largest issuer on the Namibian Stock Exchange outside of the Namibian Government and the largest issuer in the SOEs category on the Namibian Stock Exchange.
The DBN has a long-term issuer default rating of BB and national scale rating of AAA(zaf) by Fitch ratings. This rating is equal to the rating of the Government of the Republic of Namibia.
Young artisan finance for Mekemo Trading fills automotive engineering gap
Development Bank of Namibia (DBN) has unveiled Mekemo Trading, a mechanical and automotive services provider, as a recipient of skills-based finance for young artisans.
The Bank’s skills-based facility for young artisans and professionals is designed to enable aspirant entrepreneurs with professional or artisan qualifications, but with limited or no collateral, to embark on the course of entrepreneurship. It also enables young entrepreneurs with emerging businesses to expand. The Bank defines young entrepreneurs as aged 36 and younger, but will, in exceptional circumstances, accept applicants aged up to 40.
Acting Head of SME Finance Hellen Amupolo said Mekemo is an excellent example of what DBN set out to achieve with skills-based finance for young entrepreneurs.
Operated by Rens Mekemo Shilongo, aged 33, Mekemo Trading provides automotive services including mechanical services, spray painting and panel beating for cars, trucks, buses, farm implements and mining and construction equipment. Located in Katutura, the company currently employs four mechanics and two panel beaters. Rens Shilongo has an NQF3 level qualification in automotive engineering.
Talking about the impact of Mekemo, Amupolo said the enterprise checks the boxes on an ideal skills-based youth enterprise. She noted the enterprise services a number of businesses. She explained, that with a shortage of vocational skills to drive industrialization, finance for young artisans is geared to make skills that are in short supply available to a spread of enterprises.
Amupolo added that Mekemo has a track record, which shows entrepreneurial maturity and this is the likely basis for long-term sustainability and growth. She also said, that with six employees, Mekemo fulfills the need for youth entrepreneurs to create employment.
Mekemo will use the finance to purchase tools and equipment, which will enable it to expand and strengthen operations, as well as for working capital.
Commenting on his experience with Development Bank of Namibia, Rens Shilongo said the experience was very good. He hopes that the company will grow to become a large enterprise and that it will have many employees.
Talking about the Mekemo, Amupolo said the company showed willingness to put in the work necessary to develop a successful application for finance, and has shown viability. She said that if young entrepreneurs apply, but business plans are not viable, the Bank cannot lend. The Bank is socially responsible, and will not lend if repaying the loan will impoverish the borrower and her / his family.
On the topic of collateral, she reiterated that DBN accommodates young entrepreneurs with lower levels of collateral or no collateral to offer. She went on to point out that assets financed by the Bank can also be used as collateral.
Amupolo called on potential youth borrowers to visit the Bank’s website (www.dbn.com.na) and familiarize themselves with the Bank’s requirements. Once applicants are familiar with the requirements and have downloaded the applications, contact the Bank to find out how the application can proceed, she concluded.
In closing, Amupolo said that although the Bank recognizes that many youth entrepreneurs have vision and ambition, it is the responsibility of the skills-based applicant to show through business planning and cash flow projections that the business will survive and be able to repay its loans.
Finance Minister opens Credit Guarantee Scheme for SMEs
Finance Minister Hon. Iipumbu Shiimi has announced the commencement of the Credit Guarantee Scheme for SMEs. The scheme will provide collateral cover of 60% for qualifying SMEs applying for finance from participating commercial finance institutions.
The rationale behind the Credit Guarantee Scheme is that there are SMEs with excellent prospects for success and viable business plans, but lacking the necessary collateral to obtain loans. Commercial finance institutions require the security of collateral to ensure that their capital is preserved in the event of an SME being unable to repay their loans. By insuring credit granted to qualifying SMEs, the Scheme substantially reduces the collateral requirement for qualifying SMEs.
Talking about the scheme, Minister of Finance, Hon. Shiimi announced that it would be a smart partnership between Development Bank of Namibia (DBN), Namibia Special Risks Insurance Association (NASRIA) and participating financial institutions.
The smart partnership will be funded with N$98 million seed capital from the Government of the Republic of Namibia and the Bank of Namibia.
Minister Shiimi said SMEs will have to apply for business loans at participating financial institutions. Upon being assessed as bankable and only lacking collateral, the SME can be considered for collateral cover of 60% of the principal loan amount.
To date, the scheme will be available from First National Bank of Namibia (FNB). A second financial institution has been approved for participation in the scheme, but will only be able to make the scheme available once contractual matters are finalised. More financial institutions are expected to adopt the Credit Guarantee Scheme in the near future, once they have more fully considered their participation in the scheme.
Talking about implementation of the scheme, Development Bank of Namibia (DBN) CEO Martin Inkumbi said the scheme is designed to provide widespread accessibility to SME borrowers, and so participation was offered to private sector lenders such as FNB and others.
He added that SMEs will be assessed in line with the participating financial institution’s credit (business loan) risk policies and procedures.
Asked why the scheme was not offered through DBN, Inkumbi said the Bank already offers relaxed collateral requirements, and that a wider spread of financial institutions offering the scheme would enable the smart partnership to reach more SMEs.
The scheme will be underwritten by NASRIA Ltd., a key partner for the participating financial institutions while DBN provides expert support during the adjudication of claims.
Peter Grüttemeyer, Board Chairperson of NASRIA Ltd. said the Credit Guarantee Scheme was declared as a special risk to be underwritten by NASRIA Ltd. NASRIA Ltd was established when the short-term insurance industry and the Government joined forces in 1987. Its mandate is to provide special risks insurance cover and to bring about social and economic changes.
Minister Shiimi said that collective efforts from all stakeholders will ensure that the challenges that the SME sector faces are addressed effectively, including overall inclusive economic growth and social development in Namibia, particularly during this seriously challenging times of economic downturn and COVID.
He went on to urge all stakeholders to join hands in the quest to collectively and innovatively contribute towards the enhancement of sustainable development of Namibia.
In conclusion, Minister Shiimi encouraged SMEs to make a good use of the facility to be innovative and to take a long-term view of their business, while focusing on the set key business objectives.
Development Bank donates N$1.4 million to Covid-19 Disaster Relief Fund
The Development Bank of Namibia (DBN) has donated N$1.435 million to the Covid-19 Disaster Relief Fund, initiated by the Office of the Prime Minister.
Speaking about the donation, DBN CEO Martin Inkumbi said, although the Bank is primarily involved in financing for economic development, it views the lives of Namibians as being of incalculable value, and so used its CSI budget with the intent of preserving lives by contributing to the Disaster Relief Fund.
In addition to its donation, the Bank has also announced measures to provide relief to SMEs and the tourism and hospitality sector.
Inkumbi acknowledged and expressed gratitude to other entities and individuals making donations to the Fund or through their own initiatives. We are in this together, and by working together, we will emerge stronger, he concluded.
