The unmistakeable iTowers is a symbol of modernisation and economic development in Botswana. A host to businesses, hotels and government offices, the iTowers speak of the country's ability to rise in all aspects of socioeconomic development with grace.
In order for such economic development to be achieved there must needs be the empowerment of the smallest business owner in capital, fair play on the world stage of enterprise, and also a boost from start-up. To boost small enterprises before and during start-up there is need for a catalyst, an economic enabler; such is what the Ministry of Investment, Trade and Industry (MITI) has provided in the LEA/CEDA Project Facilitation Fund.
Imagine, if you will, as a start-up, when you produce good quality products, sell to a limited market, yet know that you can supply to more, but the actual transforming from your SMME status to large scale requires planning and strategy development whose skills you do not possess. And, imagine that at some point you then get the chance or courage to learn about business development, create a business plan, draft business proposals for investment, then you apply, only to be told "your business is not bankable".
Most businesses that have not received investment in Botswana, small, medium, or large scale, has been due to the fact that they were somewhat deemed "unbankable", and these have been increasing and the pile is now significant that it affects growth of the national economy. The conversation of global economic contribution by Botswana cannot be spoke before that of the equal participation of the smallest of enterprises in Botswana.
There are tens of thousands of SMMEs in Botswana, and Africa, that suffer stunted growth of their businesses because there is no facility that acts as a catalyst for such a transition. Not so for Batswana anymore, as the Project Facilitation Fund is now here.
SMME Development in Botswana
The Ministry of Investment, Trade and Industry (MITI) endeavours to create a conducive environment for the promotion of Investment and development of Sustainable Industries and Trade, with a view to diversifying and growing the economy, creating wealth and employment, so that there is prosperity for all. The Ministry is prioritising entrepreneurship and the advancement of Small, Micro and Medium-sized Enterprises (SMMEs) as the catalyst to achieving economic growth and development as well as economic diversification. To effectively contribute towards attainment of this vision, the Ministry has refocused its implementation approach and initiatives through a three-pronged Apex model; the SMME Development, Investment Promotion and Export Development. One of the core initiatives under the SMME development Apex is to develop and provide pre-project funding for high impact projects in the SMME space on a grant basis. The Project Facilitation Fund is an outcome of the collaboration between Citizen Entrepreneurial Development Agency (CEDA) and the Local Enterprise Authority (LEA) to achieve the SMME Development Apex.
At the launch of the Fund in May 2019, the Minister of Investment, Industry and Trade, Hon. Bogolo Kenewendo, expressed her desire, says "Government considers citizen economic empowerment a vehicle which can address development challenges that our country is facing today. This include poverty, unemployment and income inequality. It is for this reason that economic growth and diversification remain priority for our country. Government will therefore continue to address challenges that impede economic growth, especially for the SMMEs and implement initiatives geared towards broadening the economic base."
The Need: LEA and the Enterprising SMME
In 2016/2017 the Local Enterprise Authority received only 1,473 business proposal applications for funding, and not all of them received the funds. Before analysing the number of approved or not approved, just the fact that there were this small number of applications is reason enough to justify the need to help Batswana to at least pass the fear or lack of knowhow of applying for investment capital. With the aid of a start-up catalyst, the number of bankable projects will increase, and the ripple effects felt in employment creation, and economic development.
Risk, Credibility and Bankability
Projects that are not bankable are so not because they are not viable, but most of the times are so because they have too much risk, and are low on credibility. Picture a business idea that you are developing, and it not being approved for investment is just because like an unprepared artist, came to the stage for performance without being well dressed for the occasion, exhibiting fear, and packed with stage clatter. That is how most unapproved investment proposal appear to funders. Credibility is an important factor in receiving funding, as the funders need to be assured of placing their funds in people and processes that actually bring a return on investment. All risk must be matched with adequate rewards, but to know and accept the proposed rewards, the plan or proposal must detail such and present it in a bankable manner.
The Project Facilitation Fund
The aim of the fund is to facilitate high impact start-up or existing businesses; to develop and submit bankable business proposals to prospective financiers such as LEA, CEDA or commercial banks. To contribute to the Government`s commitment to implementing progressive ‘Doing Business Reforms” by insulating the SMME sector from impediments of the legal and regulatory environment; and to reduce the regulatory burden and transaction costs of projects to ensure that their costs structure remains manageable. To de-risk projects and facilitate activities required to progress projects through their development stages up to bankability; and to engender a more agile ‘go to market’ strategy on the part of projects by increasing their absorptive capacity for regulatory requirements.
The Project Selection Criteria include Development Impact, Start-Up & Existing Business, Citizen Owned, must be an SMME, Registered LEA Client, National Priorities, and Sector/Strategic Fit. The types of transactions covered by the fund include Start-ups or green fields, Early stage investing, Expansion capital, Joint Ventures, Mergers and acquisitions, Restructuring and turnarounds, Management buyouts and buy-ins.
The Funding Terms
The minimum size of the funding is P5, 000 and with the maximum amount of P200 000 to be disbursed contingent upon size and nature of the project per the selection criterion. The fund will be based on a grant-loan contributory arrangement, with client expected to contribute 50% of the cost outlay in the form of a loan or paid up capital where feasible. For repayments, loans from P5, 000.00 to P50, 000, 000 will not exceed 12 months, and loans from P50, 001 will not exceed 60 months. Grace period for funds will not exceed 48 months and no interest would accrue during the grace period.
Priority Sectors
You may ask, Which sectors are covered by the Fund? Priority will be given to Agro-processing, Manufacturing and Tourism, however other sectors will be considered if they meet the high impact criteria.
Advisory Services and the Impact of the Fund
The Project Facilitation Fund is a boost to an industry that many African countries do not place importance on – the financial advisory services industry. Advisory services are what most entrepreneurs need in order to penetrate, grow, and expand their businesses profitably. With the Fund, the advisory services industry will grow in Botswana, and create a consultative culture within the economy.
A well-advised entrepreneur is a profitable entrepreneur, and so, a well-advised collection of enterprises means a well-advised economy. This Fund can actually be the beginning of a boom in listings on the Botswana Stock Exchange, or even creation of an SMEs Stock Exchange of Botswana and more.
Source: LEA, CEDA, MITI
