Business urged to offtake private equity to lessen cash flow problems … as banks get cautious with credit
With business cash flows currently under pressure, repo rate high and banks cautiously extending credit, businesses have been urged to break from traditional borrowings and embrace private equity for growth.
“Although credit has been limited, there are other alternative instruments in the market that I would encourage business people to explore more such as private equity which provides capital for business growth,” says managing director for NamPro Fund Kaunapaua Ndilula.
She adds, “But that obviously imply that as business people, we have to think about business ventures that are more contributing to growth and get out of the comfort zone under which we have been doing business in this country.”
Last year was characterized by a downward trend in terms of consumer and business credit, although experts expect the situation to normalize this year.
“Given the influence of the government as a contributor to the economy, of course the nock-on effect to business’ ability to generate the necessary cash-flow has strained their ability to service their facilities ad plans.”
“That obviously makes banks more cautious in terms of granting credit. But I think, just linking to the experience of 2017 and the challenges that we are facing, these are the opportunities that allows entrepreneurs to do things differently,” says Ndilula.
The public sector dominates an estimated 60% of the entire economy, with business thus having long fed through the umbilical cord that links into state coffers.
“I think if we compare ourselves to many other economies where growth has been significant, a number of those economies are growing higher despite much more challenging circumstances than in Namibia,” she says.
In which sectors have credit been extended in 2017?
“If I should speak of the subsector in which I am involved, which is an alternative fund class, venture capital and other forms of debt, we have had a dampened year but we have not been bad at all. With special focus in the SMEs sector, we have positioned ourselves very well and we have actually performed and provided growth capital to SMEs,” she says
However, Ndilula admits that growth was mild yet on the positive in terms of extension of debt as well as equity investments.
“We’re actually going to be celebrating soon a billion-dollar lending towards the SMEs sector. So there are opportunities to finance.”
“There are entrepreneurs that I think are robust enough and seeing the investment opportunities that they need to capitalise on. I think its’ really for people to understand where to go for what kind of credit and to apply their own assessment on what you need, what type of fund you need,” she concludes.