SME procurement is limited to small projects - report

New research on the need, scope and relevance of SME procurement in Namibia proves larger corporates are still a long way from trusting smaller local companies with significant work-loads. While SMEs are typically contracted in order to supply goods and services such as cleaning, catering, stationary provision, repairs and maintenance, it has mostly been government walking the talk in efforts to give smaller businesses a hand-up. This is according to the NamPro Fund Procurement Study launched yesterday, commissioned by the Namibia Procurement Fund (NamPro Fund) and the University of Namibia (Unam), with support from the German development organization GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH). The study claims about N$780 million worth of tenders were awarded through government’s Targeted Intervention Programme for Employment and Economic Growth (Tipeeg) in the 2012/13 financial year, about N$316 million worth of which was awarded to SMEs. That represents about 40.42% of the total of tenders awarded. In the case of large private companies though, these were found to often have internal procurement policies and procedures in place, where previously disadvantaged status, local ownership and female ownership are often considered higher priority determinants than mere SME status. Reporting back on the study findings yesterday, Unam lead researcher Dr Nelago Indongo further cited a strong discrepancy between what SMEs consider their needs, versus local financial institutions’ perception that they are currently fulfilling these. The report finds that banks offer several financing options to SMEs, including term loans, overdrafts, property and asset financing and installment sales, but that SMEs only utilise a few of these products. “There is a need to reduce this variance in view, through a solutions-based approach of funding SMEs. This can only be achieved with government support interventions, such as the establishment of a national enterprise development programme,” Indongo said. According to the study, financial institutions indicated that low turnover on bank accounts, unfavourable credit histories, and general lack of skills, training and experience in business, currently make it difficult to extend credit to SMEs. Other impediments to dealing with smaller local companies include the informal nature of many of these, the fact that they lack the means to make their own financial contribution to capital needs, and a lack of appropriate collateral to offer. The most popular forms of collateral for SMEs in Namibia at present, are said to be fixed property, followed by savings and investments, company equipment and insurance instruments. In terms of funding SMEs, the Development Bank of Namibia (DBN) is said to be leading the pack, followed by FNB Namibia, Bank Windhoek, Standard Bank Namibia and Nedbank Namibia.