Bridging Capital Is Vital for SME Sector

LACK of access to finance, particularly bridging capital for small and medium enterprises in Namibia, remain major obstacles, but a small fund management company has in the past four years been making a difference for over eighty SMEs, disbursing some N$400 million to help them grow.

The Namibia Procurement Fund (NamPro) provides bridging finance for SMEs that have secured supply contracts and construction projects but lack the financial capacity to execute the contracts. Through a tripartite model, establishing a relationship with the contracting party – like government ministries, parastatals, large private companies, local authorities or development institutions -, the contracted SME and NamPro, execution success is ensured.

NamPro recently secured an N$50 million loan facility from the Development Bank of Namibia for capital aances to SME’s. Earlier on in 2010, it received N$160 million from the Government Institution Pension Fund (GIPF) through a special purpose vehicle (SPV) agreement. The GIPF found NamPro’s business model appealing as it broadened access to finance in Namibia.

Kauna Ndilula, previously SME National Manager at Bank Windhoek, established the Namibia Procurement Fund in 2010.

STARTING

NamPro’s Fund Manager is owned by Business Financial Solutions (BFS), a wholly-owned Namibian company, South Africa-based Transafrica Capital (TAC) and Enterprise Fedha Finance Company (EFFCO), owned by the Southern African Enterprise Fund (SAEDF) registered in Botswana.

Ndilula set up BFS in 2008. “I recognised the need for more flexible support tailored to SME needs – of both a financial and business development nature, Ndilula told The Namibian. “Through the NamPro Fund, we offer service and supply contract finance, also called working capital finance or operating finance when SMEs won a contract but need to acquire plant and machinery and bridging finance whilst awaiting contract proceeds.” Available funding ranges from N$100 000 to about N$5 million.

However, it does not stop there. “Many entrepreneurs coming to us for the first time lack administrative skills like managing cash flow, investing in the appropriate levels of operational capacity, face human resource challenges and distinguishing a personal from a business account. We thus coach our clients in these areas and provide training and business support,” says Ndilula.

“We consider ourselves catalysts as we accompany them on their growth path and provide guidance and support. If necessary we bring in external experts to provide the required capacity development. This includes semi-retired or retired experts via Germany’s Senior Expert Service who work on a voluntary basis.”

Many SME clients that were previously unbankable and could only obtain capital from NamPro have in the meantime been able to obtain bank loans or those previously banked are now able to attract larger credit facilities from their banks.

“We recognise the various growth stages an SME undergoes, from inception to rapid growth, capacity growth and market diversification,. Later on, the consolidation stage kicks in leading to maturity of a company and possible exiting,” says Ndilula.

MBA

Ndilula holds a Masters Degree in Development Finance from the University of Massachusetts and an MBA from Stellenbosch University.

Before setting up the SME division at Bank Windhoek in 2003, Ndilula was Executive Director of the Namibia Development Foundation, which supported export-oriented SMEs via the African Development Foundation of the US.

Her experience in the SME sector has been valuable when she set up NamPro.

Asked how it is for a woman in a male dominated SME environment and her clients ranging from engineering, construction to earthmoving and plant hire companies, Ndilula says it is not always easy. “Women in general must work harder to prove they can do the job. I would also like to see more women in the entrepreneureal space and becoming clients of NamPro.”

The NamPro Fund has a staff of 12 the gender balance is exactly 50:50. With NamPro’s board of seven trustees, the picture looks different. Chairperson Derek Wright and four other trustees are men Ndilula and Evangelina Nangula-Hamunyela, MD of Engen Namibia, are women.

NamPro has also commissioned the multi-disciplinary research centre under its director Nelago Indongo of the University of Namibia (Unam) to conduct a study about SMEs and the relevance of procurement financing. Germany’s GIZ and the Ministry of Trade and Industry (MTI) supported the study. The results were published in July.

STUDY

It found that an average contract awarded to SMEs by Government had a value of N$5 million, while parastatals awarded contracts for N$3,5 million average and private companies averaging N$2,3 million.

“The lack of a definition for the term ‘SME’ limits targeted intervention required to include this sector more dynamically in the economy,” the study report noted.

The Namibian has learnt that the MTI is currently reviewing its SME Policy. In addition, the much anticipated Procurement Bill will be reintroduced in parliament soon. The Bill was tabled in late 2013 but was withdrawn again, as a need for more consultations was identified. The Procurement Bill regulates more local participation with regard to goods and services Government institutions are required to place g emphasis on SME participation. “This is a development welcomed by NamPro,” says Ndilula.

Source : The Namibian