DEMAND for financial assistance from the Development Bank of Namibia (DBN) increased in the 12-month period ending March 2020 (2019/20) despite the recessionary climate.
According to Martin Inkumbi, the bank’s Chief Executive Officer, the situation is perfectly illustrated by the fact that the institution was able to grow the number of start-up approvals to 36 enterprises as opposed to 21 enterprises in the same period last year.
During this period ending in March 2020, the Bank approved a total of N$1,137.8 million in finance as opposed to N$682.1 million in the previous year.
He indicated that the largest approvals by sector were allocated to land servicing (N$442.9 million) for servicing of 5,040 erven on 228.8 ha. Business services received the second-largest allocation of approvals with N$177.0 million. The business services sector consists of enterprises that provide secondary support to business operations and tenders. High-value allocations were approved for transport of goods, supplies of electrical equipment, the supply of radiography and X-ray equipment and construction of premises for a legal firm.) Approvals for manufacturing amounted to N$130.7 million. Notable projects include the manufacturing of gypsum products as well as a plant for recycling plastics to be used in packaging.
In terms of the geographic distribution of the Bank’s loan allocation for the 12-month period ending March 2020, Khomas received N$476.7 million in approvals followed by Oshana with N$138.3 million and Erongo with N$110.8 million. Enterprises with a footprint spanning two or more regions received approvals of N$185.4 million.
Approvals for the period are projected to create 1,693 temporary jobs and 8,130 new permanent jobs. The Bank defines permanent jobs as jobs with a duration of 3 years or longer. The large number of permanent jobs is due to the high number of ongoing jobs required to service land at the Ongos Valley Development.
In 2019/20 the Bank approved N$279.3 million for SMEs. Approvals of N$150.9 million went to business services followed by construction with N$67.4 million. Regionally, //Karas received the largest share of allocations in the amount of N$78.8 million. Khomas received N$45.4 million in approvals and Erongo received N$33.9. SME projects with a national footprint were allocated N$30.7 million in approvals.
Based on the approvals, SMEs are projected to create 645 new, permanent jobs and 928 temporary jobs. These jobs are included in the employment impact noted above.
The way ahead
Preliminary figures for the first two quarters to September of 2020/21 show the expected adverse impact of Covid-19 and risk-aversion on demand for SME finance and tourism and hospitality finance. However, aggregate approvals for the first two quarters stand at N$593 million.
Prominent approvals for the first two quarters of the current financial period ending March 2021 include N$200 million for housing, N$46 million for land servicing, and N$252 million to bolster meat processing, which supports the cattle farmers and is a significant exporting sector. SME approvals at N$50 million reflect the cautious approach of the sector in the face of the covid-19 pandemic which has dampened consumer demand. No approvals were made for tourism and hospitality, which indicates that entrepreneurs in this sector are very cautious and not expanding their businesses at the moment.
Inkumbi cautions that although the Bank is heartened by the new approvals and the economic activity they represent, it is focusing on the preservation of economic activity, and recovery for existing Bank clients with a raft of measures that includes the Bank’s repayment holiday for SMEs and tourism and hospitality. The Bank will also consider repayment holidays for non-SMEs and enterprises outside the tourism and hospitality sectors based on the merit of each case.
An additional N$500 million facility is expected to be announced for Covid-19 relief in the first quarter of 2021. This is in addition to the N$500 million made available by the Ministry of Finance, to be offered by commercial banks.
The Bank is committed to financing Namibian economic activity, and will take all feasible measures to ensure its health, Inkumbi concludes.