The importance of financial support for the manufacturing sector

The CEO of the Development Bank of Namibia (DBN), Martin Inkumbi, reiterated the Bank’s support for the manufacturing sector. The Bank is currently engaged in a campaign to boost the sector with financing, and is reaching out to existing manufacturers with expansion plans and potential manufacturing start-ups.

He said greater consumption of locally made products is needed to develop the local manufacturing sector, adding that charity starts at home, and to boost the sector, both public and private procurement policies and practices should. give preference to products that are produced locally.

This has benefits such as creating local jobs, and also improving the country’s balance of payments. The costs of cheaper imported products can be much higher to the Namibian economy than the market price of that product when lost employment opportunities and the drain on the balance of payments are taken into account. Local value chains should therefore be developed by purchasing and consuming locally produced goods wherever possible.

Inkumbi said the Bank believes the manufacturing sector can benefit from opportunities through import substitution, in line with NDP5 and the Home Growth Strategy. By seeking and exploiting opportunities, Namibian manufacturers can progress towards achieving economies of scale.

This will also be reinforced by the ambitions of manufacturers to penetrate regional markets. Regarding regional markets, Inkumbi said that although South Africa and Angola are experiencing recessionary economic environments, there are opportunities in other countries in the SADC region. Economic contraction is a cyclical phenomenon and the upward trend in growth resumes over the long term.

He further stressed that a viable manufacturing company will have the opportunity to increase production in the future and encourages entrepreneurs who plan to launch them now rather than delaying at the expense of future productivity.

In addition to the DBN financing applied to local start-ups and expansion, Inkumbi noted that the Bank also does the trade finance offer. Regional expansion can be a costly exercise, but with the availability of capital for expansion, cross-border ambition must be seen as an investment in long-term returns.

Speaking of the Bank’s support for manufacturing, Inkumbi said the Bank’s lending terms are competitive for manufacturers. However, the Bank has broadened its own philosophy to encompass support in the early application phase as well as after borrowing.

In some cases where the Bank identifies a strong potential for development impact, it will benefit from expertise and financial support for studies and knowledge gathering through the Project Preparation Fund (FPP). The objective of the PPF is to ensure the viability of the project and to seek ways to mitigate the risks before borrowing.

The Bank also provides access to a network of professional consultants who assist in capacity development after loans. This can be used to develop skills, or to streamline and strengthen operations for the benefit of the borrower.

Speaking widely about access to finance for manufacturers, Inkumbi said manufacturing companies face challenges in achieving the optimal funding mix. The DBN experience indicates that manufacturing firms with higher equity in the funding mix tend to do better than those funded solely by debt capital. Manufacturing companies need a longer period to break even, given the complexity of their environments and the need to secure markets for their products.

The Bank may also, at its own discretion, recommend a repayment holiday for manufacturers on interest, principal, or both, depending on the needs of the borrower, the cash flow of the project, and the factors that emerge from the demand assessment.

Speaking about the indirect benefits for commercial sources of finance, he went on to say that a strong manufacturing base will improve the economic ecosystem, and this will also improve the long-term prospects for the financial sector, which is a good reason for all. financiers to support manufacturing companies. DBN will consider financial syndication to spread the risks.

This, however, must be supported by local procurement policies and practices, and financiers should encourage this among their own customers, in effect creating procurement networks centered on the encouragement and policy of the capital provider.

Speaking directly to manufacturers, Inkumbi said the bank has a solid track record of financing the manufacturing sector, which includes cement, food processing, plastics manufacturing, printing and agribusiness. Since its inception, the Bank has provided N $ 1.15 billion in financing to the manufacturing sector.

Manufacturing requires vision and ambition, and the Bank recognizes this and has started engaging local manufacturers to better understand their challenges in raising capital. Manufacturers with ambition and plans should take advantage of the Bank’s open door and expect more, Inkumbi added.

2021-11-17 Journalist

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