Josef Kefas Sheehama
The Bank of Namibia and the Ministry of Finance and Public Enterprises have re-launched the SME Economic Recovery Loan Scheme on 2 February 2023 with a share capital of N$500 million. The first scheme was launched in November 2020, but failed due to stringent qualifying criteria and the lack of well-represented information across the 14 regions.
The re-launched SME Economic Recovery Loan Scheme is a revamped programme, and is designed to provide small and medium-sized businesses access to government guaranteed loans to help their businesses recover from the impact of Covid-19, among other things.
We should understand that the lockdown has reduced economic activity significantly.
Supply chain disruption has caused SMEs to face a longer cash conversion cycle. SMEs also need to continue paying recurrent costs for its business continuity, such as office rental costs and salaries to their employees.
As a result, SMEs are incurring losses and delaying debt payments. Some SME’s shut their doors, and unemployment increased. The SMEs’ immediate financial needs have been sharply increasing to minimise the negative impacts of business disruptions and retain employment, as well as take precautionary measures for the uncertainty.
SMEs provide some form of employment and incomes to 160 000 people, representing approximately one-third of the nation’s workforce. In terms of full-time employment, this sector currently employs about 60 000 people. In Namibia, the majority of SMEs are mainly found in the retail sector, selling foodstuffs and household products, with no real value-addition activities in most cases. Therefore, the contribution which small businesses can make to national economy and wealth-creation need to be recognised by the government from the beginning, and be considered as part and parcel of the economic development process. The need for a simplified business registration process that can lead to an increase in the number of businesses registered in Namibia cannot be over-emphasised.
As an independent economic and business researcher, I want to take a moment and thank the Bank of Namibia and the Ministry of Finance and Public Enterprises for a great job by relaunching the SME Economic Recovery Loan Scheme. Furthermore, to access the loan scheme, SMEs can apply through their banks such as Bank Windhoek, First National Bank, Standard Bank and Nedbank. The purpose of the scheme is to enable banks to provide cheaper credit to SMEs so that they can recover, restore and invest in the future. The banks will be facilitating a loan amount from N$50 000 to N$10 million, based on the SME’s balance- sheet and subject to the banking institution’s credit assessment, according to the Bank of Namibia.
The loan amount is linked to the current prime lending rate, which is 10.50%. However, the Bank of Namibia proposed a prime lending rate minus 50 basis points. For example, prime minus 0.50% at today’s rates means 10.50% – 0.50% – an effective rate of 10% interest. If the repo rate goes up by 0.5% and the banks increase prime by 0.50% as well, that loan would still be prime minus 0.50%, but would have an effective rate of 10.50% (11% – 0.50%).
Henceforth, the SME Economic Recovery Loan Scheme will focus on the businesses with a turnover of not more than N$60,000,000.00 per annum. All financial institutions around the world can only provide funding to registered and well-directed businesses that are to return the borrowed money and realise their intended goals and objectives. Thus, every country in the world has its laws that it requires to be complied with, regardless of a person’s status or class. Laws are a set of regulations that are usually documented, such that everyone, whether a citizen or a visitor of any kind, must comply with.
The partnership and collaboration can go a long way in creating a strong and better economic recovery. The SMEs owners need to keep proper financial information. Your bank will not extend facility if you cannot provide annual financial statements and cash flow projections. It is impossible to run a business without recording financial information. Good financial information allows one to get a
clearer picture of a company.
Therefore, the government that adopts a shared value mindset, generating economic value in a way that also produces value for society by addressing its challenges, will be positioned to sustain, compete and thrive in domestic markets. Private-public collaborations that show clear benefits for business and society are an important ingredient to restore trust in government. Moreover, it is important for all governors, councillors and mayors to come to the party. They are not elected to be office-bound. Innovation, creativity and agility need to be cherished and celebrated. They need to provide SMEs with valuable expertise and guidance, and help businesses develop leadership skills and build strong teams. Equally, mentorship and coaching programmes can also foster innovation and entrepreneurship, contributing to a dynamic business environment. Against this background, there is a need for an SME information centre to be established across all 14 regions, specifically to provide information to the SMEs on developments relating to market movements, latest developments, and to assist in linking SME operators to service providers at affordable rates.
Thus, it is crucial that regional leaders integrate the informal economy issues into the overall youth development issues, rather than isolating the youth and the informal economy.
Across all regions, SMEs do more than create employment. They are also engines of economic growth and social development. SMEs contribute more than 12% of GDP, and some global estimates put this figure as high as 70%. This contribution varies across sectors, and is particularly high in the service industry, where SMEs account for 60%. SMEs are a vital lifeline in a country, as they represent the grassroots that keep the local economy going by encouraging growth, employment and income.
In conclusion, SMEs are a vital engine in the Namibian economy. They drive growth, create employment and spearhead innovation. They can leverage their agility to design and incubate new technologies and business models to build a better future.
SMEs have the potential to become large corporations, and need to continue on their path to growth and prosperity. It is imperative, therefore, that efforts to protect SMEs move with speed and decisiveness, not only to cushion the worst of the impacts of the crisis on livelihoods, but to help ensure a swifter recovery for the broader economy.
Therefore, the relaunch of the SME Economic Recovery Loan Scheme will help ensure government continues to provide much-needed finance to SME’s across all 14 regions, creating jobs and driving economic growth.