Report highlights SME tender dilemma

Namibian small and medium enterprises (SMEs) face an uphill battle in securing tenders, a new report states. The obstacles include competition with large companies, limited knowledge and difficulty obtaining financing. The report, titled ‘Assessing the Scope of Procurement and the Relevance of Procurement Finance for SMEs in Namibia’, was released in Windhoek recently. The research was conducted to highlight the struggle of SMEs in getting work from the public sector, parastatals and the private sector. With regard to the public sector, the report says the open bidding process of public procurement procedures presents a serious challenge for SMEs, who at times struggle to meet specific tender specifications. “A lack of transparency and accountability throughout the procurement procedures may lead to an inequitable distribution of contracts,” the report reads. It adds that public entities sometimes struggle to process payments on time and this causes cash-flow problems for SMEs. Government tenders amounted to N$13.9 billion during the financial year 2012/2013 - more than double the N$6 billion during 2010/2011, the report says. During 2012/2013 only 26% of tenders were awarded to companies in the category of SME/BEE while companies owned by non-Namibians won 31% of the contracts. Researchers believe that some SME companies might have failed to apply for SME status and could have been awarded government tenders under the category “Namibian”, which accounted for 37% of the contracts. When it comes to tenders invited by parastatals, the report states that pre-qualification requirements such as bid bonds often act as barriers to SMEs. “Collateral required to secure performance bonds and to allow for adequate working capital to commence with contracts has been raised by SMEs.” The report also highlights limited understanding of parastatals’ procurement policies and procedures as a contributing factor to SMEs losing out on tenders. Between 2010 and 2013 parastatal contracts were issued to SMEs in construction, stationery supplies, electrical services, cleaning services, maintenance, repairs, promotional items and supply of computer items. “The Government Institutions Pension Fund (GIPF) awarded contracts of a total value of N$14.2 million to SMEs during the period 2010-2012. “The highest allocation of N$11.5 million was spent on construction; while the lowest amount of N$180 000 was spent on cleaning services.” According to the report the Social Security Commission (SSC) awarded contracts worth N$5 million to 20 SMEs during the same period. The SSC spent N$1.4 million on building renovations and N$1.3 million on IT equipment contracts. Trust The researchers found that large private companies lack trust in SMEs’ ability to deliver due to a perceived lack of skills. “The SMEs surveyed in the study indicated a perception that most tenders in private companies are concluded through closed bids, making it difficult for newly established SMEs to access these tenders.” However, the study adds that this notion contradicts the responses from private companies which preferred open tendering. Although the private sector awarded contracts for cleaning, catering, stationery, repairs, maintenance, security and construction to SMEs, the most technical contracts and those requiring expertise were outsourced to large companies, locally and internationally. The study was a joint research project commissioned by the Namibian Procurement Fund, supported by the Ministry of Trade and Industry, the Global Compact Network Namibia and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the German government. WINDHOEK ELVIS MURARANGANDA