SME sector looking up

With adequate support structures in place, economists say that SMEs have the potential to anchor Namibia’s industrial base at the same time creating the much-needed employment.

First National Bank of Namibia (FNB) economist Martin Mwinga said that SMEs could be supported through tax havens, marketing support and offering training.

Mwinga cited the example of South Africa which precludes the upcoming businesses from paying taxes if the business has an annual income of less than N$500 000.

The South African government also offers a training grant to upcoming entrepreneurs at the same time assisting with the marketing of SMEs manufactured goods.

Mwinga said government, which has all along been bending over backwards to attract foreign direct investment (FDI), was now realising the potential of SMEs to form the backbone of the country’s economy.

The focus on bigger projects had resulted in SMEs being left on the backburner.

“The focus from the government all along has been on attracting FDI which is not forthcoming but now there is a growing realisation that SMEs are the future of this economy,” Mwinga said.

Mwinga, who also delivered an hour-long seminar on ‘planning personal and business finance’ at an SME Expo held in Windhoek on Wednesday, said that agriculture is one area in which SMEs can realise their potential.

“Agriculture has great potential, 90 percent of the food in this country is imported and we need to support these SMEs to enter into agriculture, these could also reduce the country’s dependence on imported food,” Mwinga said.

Concern was also being raised that financial institutions are dishing out money to SMEs without offering critical technical support.

The shift has however changed with banks such as the Development Bank of Namibia (DBN) taking the lead in assisting SMEs.

Almost all of the financial institutions in Namibia now have units, which deal with SMEs.

DBN recently announced a special development, which focuses on SMEs to key sustainable projects and programmes of developmental importance.

Support can take the form of lines of credit managed by intermediate financial institutions such as commercial banks, direct lending and provision of working capital, DBN says.

DBN offers up to N$3 million working capital to entrepreneurs on a project-by-project determined interest rates.

“The focus has been on FDI but the trend has shifted to domestic savings to have locals investing in their own country, which makes the future of SMEs very bright indeed,” said Danny Meyer, director of SMEs Competitiveness Consultancy.

Meyer, an economist by profession said that the concept of outsourcing, whereby big corporations award procurement tenders to upcoming businesses, was gathering momentum in the country.

“Large corporations are outsourcing most of their businesses to SMEs and this is one way for these small companies to access the market, increase their cash flow and expand,” Meyer said.

Expanding SMEs was one way Namibia could avoid its risk exposure to South Africa, Mwinga said.

He said that Namibia has become too dependent on South Africa, whose companies are in every facet of the country’s economy.

“At one stage the relationship will come to and end and we might collapse. Moreover, too much of South African companies are destroying our small businesses. We need to build our own industry to be able to compete with South Africa,” Mwinga said.

October 2006
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