In the first quarter of 2013, the Development Bank of Namibia (DBN) approved loans valued at N$ 75.8 million, primarily in the construction and manufacturing sectors.
Acting DBN CEO, Martin Inkumbi, said that the bulk of approvals, 66.6 per cent was allocated to SMEs, and 33.4 per cent was allocated to larger enterprises. In monetary value, this translates to N$ 50.5 million for SMEs and N$ 25.3 million for larger loans.
Approvals were dominated by road construction and maintenance falling under the construction sector, and the manufacturing sector. The high level of approvals for road construction reflect the national priority assigned to road infrastructure and road maintenance.
"Namibia’s road network is one of the best on the continent and DBN’s contribution towards the upkeep of road infrastructure is in recognition of the economic importance of this type of infrastructure for trade and communication," said Inkumbi.
Approvals were allocated as follows:
Construction N$ 31.5 million
Manufacturing N$ 13.6 million
Wholesale, retail trade and repairs N$ 9.8 million
Health N$ 7.9 million
Business services N$ 7.2 million
Education N$ 5.0 million
Transport & communication N$ 0.6 million
Hotels & restaurants N$ 0.2 million
In terms of regional spread, projects in the Otjozondjupa Region received the highest amount of approvals. The regional spread of loan approvals for the first quarter was as follows:
Otjozondjupa N$ 14.7 m 19.4 per cent
More than one Namibian Region N$ 14.0 m 18.5 per cent
Khomas N$ 12.0 m 15.8 per cent
Karas N$ 8.0 m 10.6 per cent
Erongo N$ 6.6 m 8.7 per cent
Ohangwena N$ 4.2 m 5.5 per cent
Omusati N$ 4.1 m 5.4 per cent
Oshana N$ 4.1 m 5.4 per cent
Oshikoto N$ 2.1 m 2.8 per cent
Caprivi N$ 1.1 m 1.5 per cent
Kavango N$ 0.3 m 0.4 per cent
Omaheke N$ 0.1 m 0.2 per cent
Approvals are expected to have impact on 1,222 jobs, of which 255 will be new, 853 temporary and 114 existing. The temporary jobs are created in construction mainly.
The approved loans have a 92 per cent Previously Disadvantaged Namibian (PDN) component, and 24 per cent of the enterprises are owned by women.
Loans of N$ 30.9 million were approved in the tertiary industry and N$ 44.9 million in the secondary industry. No loans were approved in the primary industry.
Biomass project holds promise for environmental sustainability
One of the projects approved in the first quarter, Omuriro Biomass Investments, will harvest invader bush for the production of wood briquettes that will be marketed as Namib Eco-Logs locally and abroad.
Approximately 26 million ha of Namibia’s total land area of 82.4 million ha suffers from bush encroachment, which not only reduces the productive farm land, but also puts severe pressure on the country’s water resources. Restoring the natural vegetation will also have a positive impact on farming and tourism.
Omuriro Biomass Investments is set to create 25 semi-skilled and skilled jobs in Okahandja, and the project can be replicated in other rural settings.
The final product of Omuriro Biomass Investment will mainly replace hardwood among domestic users, which is estimated to be more than 1 mn tons p.a. in Namibia. The same biomass in different formats such as wood chip pellets and bio-coal will help reduce the reliance on burning fossil fuels in industrial boilers and in power stations.
Briquettes from Namibian invader bush compete favourably with other renewable energy sources, especially as fuel for coal fired power stations. It is expected that the market will grow as a reliable supply of wood briquettes becomes available.
Otjozondjupa, Ohorongo Cement and Cenored in spotlight
Every quarter, DBN provides information on projects approved since its inception, in three of the country’s regions. With only the Otjozondjupa Region remaining, the focus is on this region for this announcement.
Loans amounting to N$ 249.3 million were advanced in the region since inception.
Most of the financing in the Otjozondjupa Region is concentrated in the manufacturing and energy sectors, with advances to Ohorongo Cement and Cenored leading.
DBN holds a ten per cent stake in Ohorongo Cement. Ohorongo is a world-class cement plant with a capacity of 700,000 tonnes per year, and job creation potential of 300 permanent jobs. Employment during the construction phase amounted to 1,500 workers over a two year period.
In addition to 300 permanent employees required for full production, it has a multiplier effect of between five and seven, meaning that an estimated 2,000 job opportunities will be created through secondary businesses and second round effects.
Increased export figures will result in improved balance of payments, and the national tax revenue will expand.
The secure supply of high quality cement will allow Namibia to undertake major strategic projects in the civil, mining and energy sectors.
The Bank believes that Ohorongo Cement will set new production benchmarks in the country, through its application of environmentally friendly technology and involvement of local farmers in meeting the plant’s energy needs. Ohorongo Cement has opted to use invader bush as a source of fuel.
CENORED is a regional electricity distribution company based in Otjiwarongo that has been in operation since 2005. It provides electricity services to communities in the Kunene and Otjozondjupa Regions, with shareholding split between NamPower, the Regional Councils, and the towns in its area of operations.
Since 2011, CENORED has embarked upon an aggressive low-income electrification drive, connecting more than 2500 informal households to the electricity network at a cost of N$ 21 million. The low-income electrification initiative is based on the company’s belief that the provision of electricity is an indispensable means of assisting households out of poverty. CENORED CEO Mburumba Appolus said, “There can be no meaningful socio-economic development without electricity.”
The DBN extended a facility of N$ 15 million to CENORED for working capital.
DBN status assessed at end of Q1 2013
The Bank's loan book stood at N$ 1.364 billion at the end of March 2013.
During the first quarter, N$ 110 million was repaid against disbursements of N$ 65 million. As one client settled their N$ 27 million loan earlier than anticipated, this had an impact on the loan book and reduced the loan book size.
The overall loan book target for 2013 is N$ 1.7 billion. The Bank remains confident that it will be able to grow the book to meet the target over the remaining three quarters.
DBN’s net loan book represents outstanding capital of all the loans extended since the start of the Bank, less provisions or amount of loans whose recovery is impaired.
The impairment ratio stood at 7.6 per cent. The impairment ratio is indicative of higher risks assumed by development banks compared to commercial banks.
The implementation of the new provisioning model as determined in the new Credit and Investment Policy of the Bank is now expected reduce the impairment ratio.
The Bank's newly strengthened Workout & Recovery Unit will assist customers falling in the impaired loan category to find solutions to current cash flow challenges.
Commenting on this strategy, Martin Inkumbi said, "Our objective is to assist fledgling entrepreneurs to make long-term successes of their businesses, so we adopt a patient approach that provides assistance, although this does mean that we have to accept a higher degree of temporary impairments. In the field of development banking, impairments do not necessarily equate to bad debts or losses."
In its 2013 to 2017 strategic plan, the DBN identified the manufacturing, tourism, transport, and logistics sectors as focus areas because of the sectors’ ability and potential to create employment and value addition to Namibia’s overall socio-economic development.
The DBN’s portfolio in the target sectors, since inception, is as follows:
Manufacturing: 21 per cent Tourism: 15 per cent;
Transport and logistics: 9 per cent.