Over the last few decades there has been growing recognition for the need to untap Africa’s abundance of resources. Of course financing projects has often proved a challenge with risk assessment criteria often prohibitive. With increasing frequency, the solution has come from sources like the Development Bank of Namibia (DBN).
DBN is a national development finance institution established by an Act of parliament in 2002. The Bank is 100 per cent owned by the government of the Republic of Namibia and is established for the purpose of contributing to the economic growth and social development of Namibia by providing finance in support of key development activities in Namibia.
“The Bank’s main activities include appraising enterprises and economic projects and financing those with potential to succeed and thereby enhancing economic activities in Namibia. The Bank lends money to both public enterprises and private enterprises including small and medium enterprises,” describes Martin Inkumbi, the Chief Executive Officer, who has worked for DBN for the past 8 years.
“In short, what DBN does, is to support Namibia’s economic development by mobilising financial capital and using such financial resources to finance enterprises and economic projects in Namibia,” he continues.
Providing the funding to develop economic enterprise is of course a challenge in risk management and Inkumbi says that DBN has 4 primary objectives: to mobilise financial and other resources from private and public sectors, both locally and internationally; to channel the aforementioned resources into economic projects of national importance; to facilitate the participation of private sector and communities in economic development; and to assist with the development of the local money and capital markets.
“I consider DBN a catalyst and a key role player in the development finance space in Namibia, but working together with other development agents to promote economic growth and social development,” he states.
The Bank evolved out of the Development Fund of Namibia, which was the main development finance arm of the government of the Republic of Namibia up until 2002. Although the DBN Act came into existence in 2002, it was only in 2005 that actual lending activities commenced.
The Bank grew from humble beginnings with a loan book of about N$90 million in 2005 to a loan portfolio just over N$ 2 billion by end October 2014.
“Throughout this period, the Bank has been capitalised by the Government as the single shareholder and no debt capital has been raised to date. This will however change soon, as DBN will be raising some debt capital to complement the government equity contribution to meet the ever growing demand for development finance capital,” says Inkumbi.
During the same timeframe, the bank has seen its staff complement grow from 8 people to 72 over the past 10 years. Not only has the number increased, but also the Bank’s capacity to execute the broad mandate of the Bank.
“I must commend the shareholder, the government represented by the Minister of Finance and the Bank’s Board of Directors, for successfully nurturing the Bank during these formative years,” Inkumbi staes.
“Our priorities and goals are always set with the Bank’s main objectives mentioned above in mind.
“The common phrase we use in the Bank is “financing economic development in a sustainable manner”. We firmly believe that economic development can only be achieved if the Bank’s lending activities are themselves sustainable. This requires that the Bank firstly selects and finances only viable economic projects and secondly that it renders the necessary support to such economic projects and enterprises and improve their chances of success.
“Therefore, the long term sustainability of the Bank’s own operation is a priority. But it is equally important that DBN remains relevant as a development finance institution, i.e. it must accept a certain appropriate level of risk, commensurate with its mandate as a development Bank,” he adds.
Of course in many ways the best measurement of DBN’s effectiveness is in the success of the projects it has funded, as Inkumbi emphasises:
“Every project that contributes to economic growth, employment creation and or import substitution is important. Even SME enterprises, collectively they make a huge contribution to employment creation. They provide livelihood to families and communities.
“But some of the projects we are proud to have made a contribution to are the Ohorongo Cement factory near Otavi in northern Namibia. It’s the only cement producer in the country using local materials found in abundance in the Otavi area. Its products have to a significant degree substituted cement imports, and the factory has created direct and indirect employment opportunities.
“Omburu Sun Energy (Pty) Ltd, a local independent power producer, using solar power technology is another project, we have recently supported. It will be injecting some megawatts into our national power grid.”
The list of projects the Bank has supported over the years is long and these projects ranges from local authorities financed to provide public infrastructure, to abattoirs and meat processes and enterprises in transport and logistics, tourism, retail and manufacturing.
Inkumbi explains that partnership is at the heart of each venture:
“We have worked and benefited in many ways from co-operations with local, regional and international development institutions. DBN has for example co-financed projects in Namibia with both the DBSA and the Industrial Development Corporation (IDC) of South Africa. We actively seek and cherish mutually beneficial partnerships.”
A prime example of partnership put into practice, has been the bank’s financial support of the Walvis Bay Salt Holdings, which resulted in a N$ 30 million loan in 2010, which enabled the business to construct a salt refinery plant with a capacity of 12 metric tonnes of refined salt per hour.
The company states: “Walvis Bay Salt Holdings is a salt operation with two subsidiaries – Salt & Chemicals, a mining operation and Walvis Bay Salt Refiners, a manufacturing company. Salt & Chemicals produces crude salt by way of solar evaporation of sea water which it sells to Walvis Bay Salt Refiners. Walvis Bay Salt Refiners in turn processes the crude salt into finished products being chemical grade salt and general purpose grade coarse salt. The products are mainly exported to Southern and West African countries. The DBN funds will be used to construct suitable premises to house the refining plant and sufficient warehousing for the finished product, as well as the plant and equipment required for processing the crude salt into a fully refined product.”
“In development finance, partnerships enable the pooling of financial resources to meet the need of a large development projects. Partnerships allows for the sharing of risks, by enabling many financiers to only contribute portions of the debt capital required. Partnerships assist with capacity building, especially for smaller and young institutions like the DBN,” Inkumbi says.
The global economic crisis brought home many realities of financing and forced just about every financial institution around the world to take stock of its procedures. Inkumbi says that there remain challenges, but is optimistic for the future:
“The main challenge for DBN in my view is to balance the need to be sustainable and to remain relevant as a DFI. Sustainability requires applying prudent lending criteria and somewhat stringent lending processes. On the other hand, the Bank needs to accept a relatively high degree of credit risk to make a difference as a development financier.
“We are optimistic about the prospects for the Namibian economy. Construction activities are high, which is always a positive indicator. The challenges of potential energy shortages, backlogs in transport infrastructure and housing are presenting opportunities for entrepreneurs as well as for the Bank. Therefore, I am expecting the Bank to make further investment in the aforementioned sectors over the next 18 months.
“Internally, we will focus on improving our operating efficiencies, risk management capabilities and building partnerships with development partners,” he concludes.