Bank Aims at Boosting Economy

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By Mbatjiua Ngavirue WINDHOEK The government created the Development Bank of Namibia (DBN) to finance large infrastructure projects in the country in order to stimulate economic growth and reduce the need for costly foreign loans. These infrastructure projects are often quite mundane and unglamorous, with the result that people often do not give the DBN the credit it deserves for the work it is doing. Not surprisingly, it is quite difficult to create excitement and buzz around the laying of sewerage and water pipes, construction of power lines or financing of harbour and telecommunications infrastructure. Activities such as these can nevertheless have a decisive influence on the level of economic activity and growth in 0the country. The DBN’s predecesssor from pre-independence days, The Development Fund of Namibia dispersed only N$90 million in loans in its entire 18-year existence (1987-2005). The DBN granted loans of over N$100 million in its first year alone, and its total loan approvals to date are around N$200 million after only two years in existence. If the bank continues injecting money into the local economy at this rate, it is likely to have a lasting impact on the economic landscape. DBN’s chief executive officer, David Nuyoma, is a veteran of investment planning, having previously worked for many years at the Ministry of Trade and industry, Namibia Development Corporation (NDC) and the Investment Centre. In an interview recently, in which he spoke about the bank’s mission, Nuyoma said he wished Namibia had created an institution such as the DBN as early as 1994. He felt that DBN might have had the same kind of economic impact enjoyed by the Industrial Development Corporation of South Africa, the Development Bank of Southern Africa and the Botswana Development Corporation. “Its impact might have been tremendous if created earlier. Nevertheless, everything has its time. Our time is now, and we are totally committed to making a difference,” Nuyoma enthusiastically stated. Like most bankers, Nuyoma is normally very unemotional, but he is very passionate when talking about the role he wants the DBN to play in the country’s economy. The idea of creating the Development Bank of Namibia dates back to the mid-90s when the government was looking at creating an institution that would support sustainable economic programmes. “The thinking was that it would act as a catalyst in the economy by mobilizing financial and other resources from the private and public sectors – nationally and internationally,” Nuyoma says. The Development Bank of Namibia Act of 2002 provided the legal framework for establishing the DBN, with the bank officially launched on April 29, 2004. The bank’s total share capital is just over N$500 million, or half a billion Namibian dollars. Of this amount, it inherited N$200 million from its predecessor, the Development Fund of Namibia, while the remainder came in the form of a direct injection from the sole shareholder in the bank, the Namibian government. Nuyoma says there are several different aspects to the role the DBN wants to play in the economy. One function it provides is to complement the private financial services sector by providing them with the necessary “comfort” to become involved in certain types of projects. He says experience has shown the DBN that commercial banks, and other private institutions, are not keen on “bulk infrastructure” projects, for example, for local authorities. By bulk infrastructure, he means providing newly developed municipal land with services such as roads, sewerage, water and electricity. When the local authority sells the plots to private individuals, however, the commercial banks are then very eager to lend money to people to either build or buy homes on the land. The bank’s role in such cases is to provide the necessary confidence for secondary development to take place, and act as a catalyst for development. Before the creation of DBN, financing for bulk infrastructure depended on either government grants or external financing. The aim of the DBN’s support for bulk infrastructure projects by local authorities is to provide them with a revenue-generating capacity. “That is because local authorities’ ability to provide services to their residents is dependent on activities which make that council sustainable,” Nujoma says. As an example, he mentioned the 2ÃÆ’Æ‘ÀÃ…ÃÆ”šÃ‚ 000 erven the DBN has developed in Oshakati, adding another 2ÃÆ’Æ‘ÀÃ…ÃÆ”šÃ‚ 000 ratepayers to the town’s revenue base. “That has an impact on two levels, because it also provides families with shelter and a better quality of life. We see it as a very profound intervention that can empower communities directly,” he explained. The other main area of activity for the bank is lending money to Namibia’s national utilities to support expansion and renovation of the country’s national infrastructure. Examples of this type of project would be if Nampower, for instance, wants to extend the electricity grid between Karibib and Omaruru or if Namport wants to make improvements to one of its harbours or Telecom to its telecommunications network. For bigger projects, DBN has to provide financing in conjunction with other financial institutions. A good example of this was the recent N$30.5 million loan to the country’s second mobile phone licence-holder, Powercom. “We see this as a Greenfield project that will have a national development impact by providing nationwide telecommunications services,” Nuyoma notes. The N$30.5 million is, however, probably only one-tenth of the total financing Powercom needs to construct its mobile phone network. “We provided the seed money, and we will be comfortable with other financial institutions providing the remaining financing needed,” he added. Similarly, in the case of the Ongopolo copper mine the DBN provided bridging finance. At the time, the company required a short-term financial injection to allow it to secure an equity partner that could take the project forward. “When Weatherly International took over, we felt we had fulfilled our role and we pulled out,” he notes. There is a secondary category of support provided by the DBN, aimed at business promoters with projects that can contribute to Namibia’s economic growth. Nuyoma, however, says the DBN’s primary function of supporting infrastructure development preoccupies the bank with 80 percent of its resources and time.