Promotion of Business Advisory and Economic Transformation Services

Project description

Title: Promotion of Business Advisory and Economic Transformation Services (ProBATS)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Namibia
Lead executing agency: Ministry of Industrialisation, Trade and SME Development, Ministry of Finance
Overall term: 2018 to 2021

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Context

Namibia inherited a dual economy upon achieving independence in 1990. In 2017, Namibia's per capita income of 5,230 USD places the country in the World Bank Group's upper-middle income country classification. Despite that, the Namibian economy is plagued by the challenges of low economic growth, a high poverty, inequitable distribution of wealth and income, and high unemployment.

In order to improve this situation, there is a need to promote economic development, local value addition and private sector investments.

However, companies who wish to do business in Namibia face several challenges. The small size of the local market makes it relatively difficult for companies to achieve economies of scale. In addition, Namibia faces the competition of the regional economic power South Africa, which is also its most important trading partner. Access to finance is difficult for companies in Namibia, as the number of providers of financing for MSMEs is comparatively low. In addition, there are no financial products that meet the needs of MSMEs. Moreover, Namibia's comparatively good general conditions in the form of legal certainty, stable democratic structures and sound monetary and fiscal policies are currently being overshadowed by various challenges, such as the downgrading of international rating agencies due to uncertain budgetary situations.

All the challenges highlighted above lead to a situation where companies in Namibia cannot realise their growth potential in order to contribute to the overarching Namibian Vision 2030 which describes “a prosperous and industrialized Namibia developed by her human resources”. It emphasises “the welfare of the people, aiming at human development, equitable and balanced growth, with a growing industrial sector, modernised agricultural sector, and an enabling macro-economic and political environment”.

NDP 5 puts a special focus on industrialisation in the sense of structural transformation and diversification of the economy. This includes increasing the value addition to existing products and industries and developing human capital through education and skills.

Objective

The conditions for entrepreneurial activity and companies in Namibia to realise their growth potential is enhanced.

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Approach

The project has two components: 

  • Private Sector Promotion aims to implement growth strategies for selected industrial sectors as well as ensuring that business development support services are improved in a needs-based way. The growth strategies developed in the previous measure for selected sectors are being implemented in this project.
  • Financial Systems Development promotes access to finance for MSMEs. In doing so, existing financing constraints for small businesses are addressed by implementing the Namibian Financial Sector Strategy together with the Development Bank of Namibia, the Bank of Namibia and the Namibia Financial Institutions Supervisory Authority. The project also works on improving financial sector regulation as well as promoting financial literacy for MSMEs.

Both components aim to strengthen the participation of MSMEs in the formal financial sector in terms of improved customer information, creditworthiness and user behaviour. It also improves the supply of financial services and, more generally, customer protection, including transparency in the financial sector.
The two measures of private sector promotion and financial system development are utilised in a complementary way, on the one hand to improve the institutional framework of the financial system and access to financing in a user-oriented manner and, on the other hand, to align and make business services available to existing needs. Improved access to advisory and financial services, regulatory and legal adjustments in the financial sector and in the institutional environment of private companies promote the trade of Namibian companies.

Results

  • Dialogue formats between the private sector and representatives of public institutions were established for the implementation of the sector strategies under the Growth at Home Strategy. 
  • An electronic monitoring system for measuring the implementation of the Growth at Home Strategy was established enabling MITSMED to receive up-to-date information about all businesses in Namibia.
  • Business registration processes were simplified with the introduction of an online registration process with the Business and Intellectual Property Authority (BIPA).
  • New kiln technologies for the charcoal industries were developed, the cosmetics industry improved export capabilities with the support of sequa’s Import Promotion Desk (IPD) and through various visits to international trade fairs, exploration and showcasing. 
  • The gemstone industry developed a “fair gem” initiative where stones are being cut, polished and processed solely in Namibia.
  • Under the “Pitching for Business Funding” program, more than 160 MSMEs in four regions were trained on financial management, of which 40 received a total of 18,000 USD for starting or expanding the best business ideas. 
  • The project supports the Development Bank of Namibia to implement the SME Financing Strategy, with the development of a Credit Guarantee Scheme, the Mentoring and Coaching Program to be accessible for the public by the end of 2019 and the improvement of the venture capital ecosystem in Namibia.  
  • The Financial Literacy Initiative held Start-up Festivals in three regions, reaching more than 1000 start-ups, MSMEs and potential new businesses with financial education interventions. 
  • The One-Economy Foundation is assisted by the project, to introduce a collateral-free group loan scheme for MSMEs that otherwise do not have access to formal funding.