Guest Contributor | Jul 25, 2017 | 0
Efficiency must guide industries to expand despite volatility
The current key concern for entrepreneurs, and project managers engaged in infrastructure, is the volatility of the rand. In terms of local enterprise this has an impact on US dollar denominated imports of raw materials and technology. The greatest impact is on consumer electronics, machinery and equipment, white goods and automotive categories.
In the current climate, there are also excellent opportunities for entrepreneurs in the export sectors and those producing import substitutes, as well as for infrastructure.
The best opportunities are summed up by the Growth at Home strategy, which envisages an ongoing process of import substitution. Namibian consumers have a set of needs which is determined primarily by exposure to products many of which are imported. Each imported product, particularly those that are for household consumption, represents an opportunity for a manufacturing enterprise. At present there are definite opportunities in foodstuffs and garments. The actual list is far longer.
Any aspiring manufacturer should just take a walk through a local mall to spot the obvious opportunities.
Development of a stronger manufacturing base goes hand in hand with the need for a stronger transport and logistics sector. As Namibian regions develop, there is a requirement for transport to those regions. Almost each month, there is a report of a new mall or retail outlet opening in one of the regions. Each of these outlets represents an opportunity to satisfy the need for transport and logistics.
Tourism can be a major beneficiary of Rand volatility. As the rand weakens against the US Dollar, foreign travel becomes more expensive, so travel within Namibia becomes a better option. There is a particular opportunity to harness this during the low season. At the same time, the weakening of the Rand makes Namibia a far more affordable destination during the high season. The combination of the two points to the possibility of expansion of capacity at this point.
Capacity, efficiency and operating capital
The Development Bank is typically associated with start-ups, however it has a strong track record of finance for expansion, and the bank believes that in light of the opportunities offered by the Growth at Home approach, there are definite opportunities for expansion of capacity, particularly of existing manufacturing enterprises.
Combined with this, there is also the opportunity to invest in greater efficiency to achieve better economies of scale. This should be considered in light of the trade-off between gains in economies of scale and the cost of assets. One particular strategy may be to acquire existing plant in the SADC region to offset the US Dollar cost of new assets.
In addition to asset finance, the Development Bank also has a track record of financing operating capital to give enterprises the head start that they need in start-up operations or in expanding them.
Southern African trade
One of the under-explored opportunities lies in the realm of trade within the SADC. As the cost of international imports, and transport and logistics mounts, the opportunity for regional trade, particularly from manufacturing enterprises, grows. The opportunities are best for existing enterprises, but start-ups can take a longer-term view as well.
DBN optimism and support
The Development Bank is optimistic about prospects for enterprises going ahead. Although the global economy is volatile, Namibia has sound mechanisms to protect it from the worst impacts of global downturn, and a wealth of opportunity in the Growth at Home approach. The bank is confident that finance for enterprise now can hold dividends for all in the medium to long-term.
It provides finance on highly favourable terms, and encourages entrepreneurs to approach it with their business plans. The bank’s doors are open.