Small businesses big impact: Boosting SMEs to drive economic growth

In the face of a recovering economy, soaring inflation, and high interest rates, small business owners in Namibia are navigating challenging times. Now more than ever, supporting Small and Medium Enterprises (SMEs) is imperative, given their significant contribution to the Namibian economy.

It is estimated that there are over 40 000 SMEs in Namibia, supporting the livelihoods of more than 200 000 people and contributing approximately 12% to the country’s GDP. These enterprises, defined as having between 1 and 100 employees and an annual turnover of up to N$10 million, are a source of innovation and job creation, particularly in rural areas where formal employment opportunities are limited.

Having assumed the role of Head of SME Banking at Nedbank Namibia in June 2023, Sam Ikela highlights the bank’s alignment with the government and the broader financial services industry’s vision to support the economy’s recovery from the COVID-19 pandemic.

‘With the spotlight increasingly on the SME sector, widely acknowledged as a pivotal driver for recovery, we’re committed to supporting its resurgence,’ Ikela emphasises.

A significant hurdle hindering SME growth globally is the surge in inflation, exacerbated by the lack of access to finance. During the fourth quarter of 2023, more than half of US-based small businesses cited inflation as their biggest challenge, underscoring the pressing need for financial support and stability in the SME sector.

‘The trend is similar locally,’ says Ikela. ‘Tailored lending solutions and fast-tracking of application processes could provide a crucial lifeline to cover operational expenses such as salaries, rent, lease agreements, and contracts with suppliers.’

He highlights two key initiatives supporting SMEs: the SME Economic Recovery Loan Scheme, a government-backed initiative in partnership with local banks, providing N$500 million to SMEs for improved financial access, covering operational expenses like salaries and rent. Additionally, the Credit Guarantee Scheme, NASRIA offers 60% collateral cover after a successful assessment of an SME’s bankability and lack of collateral.

As an industry partner, Nedbank Namibia supports these initiatives and is expanding its financing portfolio within the SMEs market, offering a wider array of tailored financial products.

‘One issue we’ve identified is SMEs looking to level up and take on bigger jobs, such as tenders, but lacking the capital to do so,’ explains Ikela. ‘Our contract financing solution has emerged as a viable option, providing businesses with funds against tender documents, purchase orders, or project agreements,’ elaborates Ikela.

Certainly, while improved access to finance addresses a significant challenge, it is just one part of the equation for businesses. Given that Namibia’s digital population has exceeded 51%, it has become imperative for SMEs to accommodate an increasingly tech-savvy consumer base.

Moreover, the implementation of the African Continental Free Trade Area (ACFTA) in January 2021 presents a significant opportunity for Namibian businesses. This agreement has expanded the African e-commerce ecosystem, potentially enabling SMEs to reach approximately 1.2 billion people. Consequently, local SMEs will be able to sell goods and services to participating member countries on more favourable terms.

‘In response to these developments, the Nedbank has introduced Avo Supershop, an e-commerce platform that enables SMEs to market their products and services online,’ says Ikela. ‘This initiative aims to assist businesses in capitalising on the opportunities presented by the ACFTA and the growing digital landscape.’

With the burgeoning opportunities for growth, managing risks becomes increasingly crucial for SMEs worldwide, yet it’s often overlooked. According to a survey by Wakefield Research, 90% of small business owners worry that their companies might not have enough insurance coverage. This concern is echoed by Ikela, noting local SMEs’ lack of preparedness for disasters, especially highlighted by the COVID-19 pandemic, which resulted in over 800 business closures.

By focusing on the collective effort to support SMEs, stakeholders like Nedbank Namibia aim to be a trusted financial services partner, providing the support and confidence that businesses need to scale, innovate, and maintain their vital role in the economy.