…Bureaucracy impedes SME growth
By Hilary Mare
LOCAL emerging commercial bank have raised concerns that bureaucratic conditions characterising the Namibian regulatory and operation climate have not only limited their chance of competing in a level playing field but succumbed them to a slow death.
With the Bank of Namibia (BoN) highlighted to be at the centre of this discourse, trickle down effects have further diminished the growth prospects of the SME sector which on a large scale depends on emerging banks for their borrowing needs at affordable premiums and more attainable conditions.
Subsequent to this, Confidente is reliably informed that the central bank has over the years protected the interests of established commercial banks at the expense of emerging ones.
By their own admission, some players in the commercial banking sector will move to compel authorities to transmit policies that change the structure of the economy and this would not overlook the need to harness the potential for transformation among those institutions that are catalyst for broad-based economic empowerment.
It is out of this realisation that the south African government has now moved to transform the financial services sector. This exercise is intended to confront and correct the anomaly and contradiction whereby, the South African central bank is privately owned. Apart from assisting in the establishment of ABSA, the south African central Banks major responsibility is to protect the four private banks and use the regulatory framework to keep the new entrants out. In the Namibian scenario despite BoN being owned by the government it is quite obvious that the institution follows the path which appears to have been prescribed to it by it’s the South African Central Bank before independence. It is such subtle structures which impede economic growth of our countries and are the reasons why after 25 years of independence ANC, EFF, SAPC have always identified the enemy as ‘white minority capital’. It is such influence which on one hand makes the regulatory framework and activities in the financial services sector appear normal while on the other hand government is totally handcuffed to provide credible platforms that can deliver and empower its people.
Already, there is tremendous theoretical and empirical evidence establishing the link between financial sector development and economic growth and development.
In this regard, Metbank Group Chief Executive Officer who also sits on the SME Bank board, Ozias Bvute had this to say:
“It takes more than just financing to build a sector. As the technical partner to Government it is our job to balance the dual role of the bank, that is, the ordinary role of a commercial bank which is to make profits for the shareholder; and the specialist role of a Development Finance Institution. For us, micro-financing is not only a market segment but the focus of the bank. Unfortunately we have received many mixed signals which act as barriers to our ability to fulfil our mandate.
“As a foreign partner, we spend more time being persecuted. What justifications are there for the Immigration Department to do a spot check on foreign staff in front of customers except to cause embarrassment and scepticism about our right and ability to be part of the banking ecosystem in Namibia? There is a subtle but effective form of xenophobia that seeks to entangle and frustrate from the various arms of authority. The motives for this are unknown to us.
“Government of Namibia has invested money in SME bank, we on our part have also invested money in the bank. We have built a very strong and credible institution on all fronts technically and otherwise, but there continues to be efforts from outside to frustrate all this work in order to make it fail.
“This is not the opportune time for belligerence. The need of the hour presently is to strengthen the bank by empowering it with operational flexibility be it in the area of recruitment, or in differentiation on core capabilities”.
The founder and CEO of the Trustco Group Holdings, Quinton van Rooyen in view of this discourse confirmed that it is challenging to set up a bank in Namibia.
He said the more established banks have dominant shareholders in neighbouring countries who have the technical skills to assist their counterparts which is an advantage to them.
But newer entrants, he said, have challenges to acquire the correct skill levels in the local market and have to develop all their products locally whereas the counterparts import skills, products, systems, etc. from neighbouring countries. Foreign banks manage 90 percent of Namibian’s wealth.
“It is challenging to establish a bank,” he said.
“Bank of Namibia should consider matching local deposits to local borrowers and directing that all local deposits should remain in banks in Namibia, and not in South Africa, which is currently the case.
“New entrants have to comply with all BoN regulations that the established banks took many years to master and new entrants are expected to comply across all areas immediately. We as Namibians should compete in the framework that has been established or stay out of the industry,” said Van Rooyen.
A local economist who affirmed this view but refused to be named said that despite the distraction of bureaucratic red tape since it opened its doors, nobody understands the entrepreneurial mindset better than SME Bank.
“Most entrepreneurs struggle to raise finance for their businesses and use alternative fund raising avenues like borrowing from shylocks. This obviously stifles businesses because if you are borrowing at 10 percent or greater a month – unless you are dealing in drugs or other illicit activities – such a business will not survive.
“If Vision 2030 isn’t put on steroids, if the expectations of the Bank of Namibia are not harmonised with the mandate of the SME Bank for example, if policy inconsistencies must be nipped in the bud, if the twin issues of investor policy and HR aren’t addressed decisively and urgently, the most likely scenario is one of decay. SME Bank will not be able to deliver on its mandate leaving the government with the continuing challenge of delivering to this sector. It will further undermine Government’s credibility and seriousness to deliver empowerment and economic emancipation to its people. This will invite bigger numbers of disgruntled and dissatisfied protests into our streets,” he said.
Asked about the challenges pertaining to the regulatory environment, Josephat Mwatotele, who is the CEO of Pointbreak Group which holds a majority interest in EBank Limited, said that they are not able to provide a comment “considering the current circumstances where we find ourselves as Ebank”.
See imbedded box for responses from the Bank of Namibia on the issues.
Confidente. Lifting the Lid. Copyright © 2015