Finance and public enterprises minister Iipumbu Shiimi has issued a directive that will allow businesses that have been awarded procurement contracts to enter into cession agreements with third-party financiers.
The directive, issued on 30 August, will allow suppliers, contractors, and service providers to pay these financial institutions after the completion of procurement contracts.
This follows a significant number of registered Namibian enterprises having been identified as experiencing challenges while accessing funds to execute contractual obligations when awarded bids by public entities.
Ministry spokesperson Wilson Shikongo says the directive aligns with the ministry’s commitment to promoting economic inclusivity and driving sustainable growth.
“The key objective of this directive is to empower small and medium enterprises (SMEs) with increased access to funding and strengthening of economic growth by actively supporting the growth of local SMEs,” he says.
SMEs Compete chief executive Danny Meyer says there have always been challenges in accessing funding from banks in a collateral-based lending environment, as well as slowness in processing funding applications.
“Public procurement contract cession is not the panacea, but helps tackle the lingering challenge as a payment guarantee mechanism opens the door for additional funding options for credit lines secured from suppliers of goods and services,” he says.
Meyer says the market remains wide open for funding institutions with a project-based lending focus in a security-based dominated lending environment.
Namibia Investment Promotion and Development Board executive director of micro, small and medium enterprises (MSME) development Dino Ballotti welcomes the directive and says it means that access to finance for approved work is further unlocked, enabling even more MSMEs in our ecosystem to benefit.
“Delivery of quality and timely work remains the onus of the contracted entities. However, this directive will provide tangible means for entrepreneurs to deliver and benefit from the opportunities previously not permitted,” he says.
However, the Namibia Local Business Association (Naloba) disagrees that this directive would solve the financing constraints faced by SMEs.
“Just imagine you want to start a business that needs capital of N$100 000 or N$1 million. You have undergone a full credit policy cycle which is almost not possible, especially for our local business people. Let us harmonise these requirements to meet our local concept to achieve economic growth,” says Naloba spokesperson Marius Nangolo.
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