During 12 months, leading to end of March 2020, the Development Bank of Namibia approved a total of N$1.138 billion in finance, compared to N$682.1 million in the 2018/19 period.
This confirms that demand for DBN finance increased during the last financial year despite a recessionary climate. This, said CEO Martin Inkumbi, is perfectly illustrated by the fact that the Bank was able to grow the number of start-up approvals to 36 enterprises, compared to 21 enterprises the previous year.
However, Inkumbi cautioned that while the Bank is heartened by the new approvals and the economic activity they represent, it is focusing on 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.
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, supply of radiography and x-ray equipment and construction of premises for a legal firm.
Approvals for manufacturing amounted to N$130.7 million, while notable projects include manufacturing of gypsum products as well as a plant for recycling plastics to be used in packaging.
In terms of regional 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 those with duration of three 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.
SME lending
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.
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 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,” read a DBN statement.
An additional N$500 million facility is expected to be announced for the 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 concluded.