Promotion of Business Advisory and Economic Transformation Services (ProBATS)

Project description

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

Context

Although the World Bank classifies Namibia as a "Higher-middle-income Country" in 2017 with a per capita income of 5,230 US dollars, the country is in an economically difficult situation. In 2017 and 2018, the Namibian economy recorded negative GDP growth rates of 0.95 per cent and 0.1 per cent, respectively, continuing in 2019. Local value added is low, Namibia's raw materials are exported unprocessed, while finished products and consumer goods are imported. The unemployment rate was 33.4 per cent in 2018 and 46.1 per cent for young Namibians between15 and 34 years old. In addition, there is an extremely unequal distribution of income and wealth, whereby 13.4 per cent of the Namibian population live on less than 1.90 US dollars a day.

The promotion of economic growth through local value creation and private investment is necessary to improve the situation. Companies wishing to become active in Namibia currently face several challenges. There is a weak domestic demand due to the low volume of the local market and a large geographical expansion. In addition, Namibia is in direct competition, within a Customs Union (SACU), with South Africa's industrialised economy, which is also its most important trading partner. Access to finance is difficult for enterprises in Namibia because the number of financing providers for micro, small and medium-sized enterprises (MSMEs) is comparatively small. In addition, MSMEs only have limited access to financial products that meet their needs. Namibia's comparatively good framework conditions for investments in the form of legal certainty, stable democratic structures and sound monetary and financial policy are currently overshadowed by various aspects, such as the downgrading of Namibia's credit rating by international rating agencies, the discussion about NEEEF (New Equitable Economic Empowerment Framework) and land reform, or the withdrawal of the Schwenk Group with the sale of Ohorongo Cement.

Against this background, companies in Namibia have difficulties in exploiting their growth potential and contributing to the over-arching Namibian development plan "Vision 2030", which describes a "prosperous and industrialised Namibia" developed by its "human resources", emphasising the "well-being of the people" and aiming for "equitable and balanced growth, with a growing industrial sector".

In line with Vision 2030 and the Promotion of Competitiveness of the Namibian Economy (ProCOM) support, the industrial policy (2012-2030), the implementation strategy "Growth at Home" (2015-2020), the Namibian financial sector strategy (2011-2021), the SME financing strategy (2018-2021), the policy to promote MSMEs (2016-2021) and the current National Development Plan NDP5 (2017-2022) have been formulated in recent years. The National Development Plan 5 places particular emphasis on industrialisation in the sense of structural change and diversification of the economy. This includes increasing the added value of existing products and sectors and developing human capital through education and training.

Objective

Businesses in Namibia realise their growth potential.

Approach

The Promotion of Business Advisory and Economic Transformation Services (ProBATS) programme is a joint Namibian-German technical cooperation project for sustainable economic development with its partner ministries, the Ministry of Industrialisation, Trade and SME Development (MITSMED) and the Ministry of Finance (MoF). It is the follow-up project to the ProCOM project. While ProCOM supported the Namibian government in the development of various policy and strategy papers, ProBATS focuses on the implementation of these strategies in the field of private sector development and the development of financial systems in order to promote business growth and the associated increase in employment and income.

The project consists of two components:

(1) The promotion of the private sector aims to implement growth strategies for selected industry sectors and to ensure that business development support services are improved in line with needs. Furthermore, the Namibian Investment Centre (NIC) is to be supported in attracting additional investments in the private sector. The growth strategies for selected sectors developed in the predecessor project ProCOM are implemented in this project.

(2) The development of financial systems promotes access to finance for MSMEs. Together with the Namibian Development Bank (DBN), the Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory Authority (NAMFISA), existing financing bottlenecks for small enterprises are eliminated in line with the financial sector strategy. In addition, the project is working on improving the regulation of the financial sector and promoting financial competence for MSMEs. Further efforts are being made to improve consumer protection, including transparency in the financial sector. The two components of private sector promotion and financial system development will be used in a complementary manner to open up access to financing opportunities for the implementation of sector growth strategies as part of the Growth at Home strategy and to improve the bankability of MSMEs through improved support services.

Results

Establishment of dialogue formats between the private sector in selected value chains and representatives of public institutions for the implementation of sector strategies. In particular, the following results are to be highlighted:

  • Development and introduction of new, efficient and environmentally friendly technology (pyrolysis) to increase capacity, efficiency and sustainability in the production of charcoal;
  • Improving the export capability of the cosmetics industry and participation in international trade fairs, sales exhibitions and conferences;
  • Preparations for resumption of game meat exports to the European Union (EU);
  • Development of a "Mine Stone" initiative with a series of gemstone products whose added value lies entirely in Namibia and which also addresses transparency and sustainability.
  • In addition, ProBATS has established an electronic system for mapping, managing and tracking the implementation of the Growth at Home strategy, which enables MITSMED to receive and provide up-to-date information on all its past and ongoing business support activities.
  • Company registration processes have been digitised and accelerated through the introduction of an online registration process with the Business and Intellectual Property Authority (BIPA).
  • The Namibian development bank DBN, supported by ProBATS, has started implementing the SME financing strategy, with the loan guarantee programme and the mentoring and coaching programme to be open to the public by the end of 2019.
  • The Financial Literacy Initiative organised start-up festivals in three regions and reached more than 1,000 start-ups, MSMEs and potential new companies with financial education.
  • Pitching for Business Funding trained more than 160 MSMEs in financial management, of which 40 received 256,000 Namibian dollars in total to launch or develop the best business ideas.
  • The project supports the One-Economy Foundation in developing and introducing a collateral-free group loan for MSMEs that otherwise have no access to formal financing.