Businesses are slowly recovering from the losses brought about by disruptions from the Covid -19 pandemic lockdowns. The Development Bank of Namibia believes that the recovery process will still take time before businesses start to operate at normal levels.
Head of Marketing and Corporate Communication, Jerome Mutumba notes that the debt servicing is still one area that a number of businesses are yet comfortably able to deal with, but some are slowly getting there.
“Regrettably, there are businesses that simply had to shut down for good, and the only option for lenders to such business is liquidation of assets held as collateral of loans advanced. The recent increase in fuel prices and the resulting inflation is eroding consumer spending power and this is not helping with the recovery.
Again, SME businesses are most impacted, as the input costs and operating costs have gone through the roof, without a corresponding increase in business revenue,” Mutumba observes.
The pandemic saw the DBN put in place payment holidays for the tourism and hospitality sector, and for SMEs to immediately reduce financial stress on these enterprises most affected by Covid-19 and support their sustainability in the short to long term.
The bank took a number of actions to mitigate the impacts of Covid-19 on the businesses that saw the provision of a moratorium on both interest and capital for a period not less than six months to SME clients.
“There were also several cases where a longer moratorium was entertained but that depended on the circumstances evaluated at that time. In addition, SMEs were also offered an option of extension on the loan repayments by up to two years,” he points out.
Businesses in the tourism and hospitality industry were granted a full moratorium on both interest and capital from 1 March 2020 to 30 June 2022. “However there is also a final moratorium on capital only from 01 July 2022 to 30 September 2022. Like in the case of SMEs, an option of tenure extension was also available for a period of up to two years,’’ Mutumba explains.
In terms of the response to the moratoriums, DBN figures indicate that the majority of the businesses took up the offer as these terms and conditions assisted them to operate with relative ease under tough economic conditions.
Mutumba clarifies that Covid-19 relief loan programme have recently been transformed into a business recovery loan with a low fixed interest rate and a term of 36 months or less.
“The new relaxed and broadened qualifying requirements are enabling more businesses to qualify than under the previous dispensation. The envisaged uses of this loan are for businesses to recoup lost levels of productivity through the purchasing of productive assets, introducing new products and services or implementing measures to prevent the impact of future economic shocks.” The Bank of Namibia hosted a ‘Mapping Namibia’s Post-Covid Economic Recovery,’ seminar early this year, which advanced key strategies to address challenges impeding Namibia’s economic recovery. According to the seminar, COVID-19 hit Namibia harder than its peers and South Africa because the country was already in a prolonged recession when COVID-19 hit the economy. As a result, the entire economy experienced significant contraction and a slow recovery, particularly in tourism and manufacturing.