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.

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.

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...