Covid-19 has opened doors for the Namibian manufacturing sector, says Hellen Amupolo, Acting Head of Investments at Development Bank of Namibia (DBN). During the height of the Covid-19 lockdowns there were gaps in the imported product selections available to Namibia. This was partially due to reduced demand, but also due to reduced production activity in territories from which Namibia imports goods.

The absence of imported goods creates opportunities which may be filled with locally manufactured goods. This situation will continue, at least in the short-term, Amupolo adds. Until an effective vaccine is made available in Namibia, the gaps can be expected to persist. Namibian manufacturers should identify gaps in their subsectors which most often represent opportunities and exploit them where possible.

Amupolo acknowledged challenges facing manufacturers but said circumstances are ideal for small, agile manufacturers or existing manufacturers seeking to extend lines of products or manufacture new products. However, she cautioned that the viability of manufacturing initiatives will depend on fundamental business principles such as sound marketing for visibility, confirming offtake agreements and financial discipline and management with a long-term view.

She drew on the DBN experiences and illustrated her point with an industrial products manufacturer that had a viable product but failed to obtain commitment from its market before launching its manufacturing operation. As a result the organisation was not able to sell, and shut down shortly after launch.

The first step, Amupolo emphasized, is to survey the potential market and ensure that it is receptive. Where possible, manufacturers should obtain commitment in advance or at least an expression of interest from offtakers that tend to be sceptical for new products or businesses. She extended this to the field of distributors as well. Manufacturers who rely on a value chain that does not end with direct sales to the market need to obtain commitment from retailers and wholesalers before launching their initiatives.

Amupolo went on to urge potential small manufacturers of consumer goods to investigate new channels such as online sales. In the wake of Covid-19, a number of e-commerce websites have emerged and are still emerging. If a spread of these websites cannot absorb the full capacity of a production run, they offer a valuable opportunity to test products in the market.

She also said that manufacturers should consider their positioning in retail and associated point-of-sale. Although numerous Namibian products are launched, a number of them fail to stand out among South African products. With this in mind, Namibian manufacturers must budget for investment in packaging and merchandising, ensuring the business has capital support to sustain the entire value chain.

Talking about promotion in media, Amupolo said advertising should also consider low-cost mediums such as social media, or rationalising media at launch. The cost of fully fledged communication campaigns can be prohibitive for new, small manufacturing initiatives.

On the topic of finance, Amupolo said DBN is prioritising manufacturing as one of the key National Development Plan sectors. She said that the Bank has a range of short to long-term products to enable manufacturing. She added that the Bank can also provide finance for smaller production runs with contract-based finance as well as bridging finance.

We throw our weight and financial capacity behind the manufacturing sector. What we want to see is a successful upsurge in Namibian manufacturing. The Bank’s doors are open, and we are waiting to hear from manufacturers, Amupolo concluded.

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.

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.

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.