The Development Bank as financial instrument to obtain the objectives and goals of Vision 2030

1. The Development Bank as financial instrument to obtain the objectives and goals of Vision 2030 a presentation by Gottlieb Hinda, Portfolio Manager at the sixth Economist Business Forum Windhoek, 13 July 2004

2. Development finance DBN & Vision 2030 Issues of analysis Gap classification Development Bank products and opportunities Interest rates Other initiatives Framework

3. Development finance: is the process of using programme enhancements to make undoable deals, bankable Development finance: a definition

4. All projects to be financed undergo credit analysis Projects that initially pass the credit test without enhancements are eligible for conventional financing Those that fall short are engaged, using programme enhancements to become bankable Project characteristics

5. Uncertain cash flows Too little collateral Inadequate business management experience Interest rate risk Excessive overhead costs High transaction cost Characteristics of deals in development finance - examples

6. Promoting long term sustainable investment Promoting development Promoting poverty alleviation Promoting job creation in formal and informal sector Supporting previously disadvantaged individuals Promoting trade, both nationally and internationally Add value to local and imported resources Promoting entrepreneurship Reasons for assistance to marginal businesses

7. Vision 2030 provides a policy framework for long term national development The Development Bank places emphasis on long term finance instruments; infrastructure, private sector development The Bank also supports marginal businesses through its Special Development Fund This is in line with the endeavour to improve the quality of life as expressed in Vision 2030 DBN & Vision 2030

8. Vision 2030 seeks to create wealth in financial, social and environmental terms The Development Bank of Namibia’s primary objective is to contribute to economic growth and social development through - infrastructure development - enterprise growth - economic empowerment - job creation and - improvement in finance delivery DBN & Vision 2030

9. “Working to achieve sustainable development is a complex and challenging undertaking … because it requires new thinking, new integrated approaches, new partnerships, and new evaluation systems.” H.E. Dr. Sam Nujoma DBN & Vision 2030

10. DBN’s approach towards partnership arrangements, evaluation systems and ways of doing business, are a reflection of this expression “Seeing what everybody has seen and thinking what nobody has thought” Albert con Scent-Gyorgyi Specialised analysis associated with development loans viability (credit analysis) w.r.t cash flow, collateral and management gaps analysis if project fails credit analysis Critical issues of analysis

11. Debt coverage ratio Loan to value Cash flow rate If project falls short, we look at enhancements Credit analysis (continued)

12. Return gaps or financial risk (gearing, exchange rate, inflation, ability to repay) General business risk or gaps (competition, pricing, market share, government regulation) Management risk or gaps (experience, depth, track record, strategic planning, corporate governance) Gap and enhancement analysis

13. Extension of debt maturities Interest rate subsidies (outside sources e.g. donors) Subsidies (outside sources) Tax credits (Government) Blended financing Return gap enhancements

14. Cash flow risk - strategy is to stabilise income and/or expenses e.g. fixed contracts/tender to supply larger clients, off take agreements. Collateral risk - guarantees, grants, increased use of equity contribution General business gap enhancement

15. Technical assistants - specialised institutions in training and capacity building - local or foreign experts Exchange visits Incubators – for SME support Management gaps

16. Infrastructure Finance (municipal, parastatal, SPV) average N$20 million Sector Based Project Finance N$3 million - N$20 million DBN core products

17. Local authorities and utilities Business within Namibian borders Equity / own contribution of 10% or higher Collateral (as per project specifics) Average – N$20 million Maximum 20 years Infrastructure Finance

18. Funding for private business in the industrial and services sectors Viable start-up business with exceptional potential for sustainability Expansion of existing business Equity / own contribution of 10% or higher 60% of funds are targeted at previously disadvantaged individuals Loan size: N$3–N$20 million; maximum term: 10 years Sector Based Project Finance

19. Products under development: Short Term Finance N$250 K - N$3 million Trade Finance N$250 K - N$2 million Bridging Finance N$250 K - N$3 million Special Development Fund

20. Rates are project specific Market related, reflecting - cost of funds - risk premium - administration and funding margin - commitment fees (where applicable) Fixed or floating rates Interest Rates

21. Linkages with development partners: Local, regional, international Development Finance Institutions (ADB, DBSA, KfW) Further linkages with Government, parastatals, commercial banks, private sector companies, NGOs, donor agencies Corporate partnerships On-lending via commercial banks and other intermediaries SME support initiatives Co-funding arrangements Other initiatives

22. “Wealth needs to be thought of in financial terms, in social terms and in environmental terms. Only when all three forms of wealth are in stable to positive production will sustainable development be achieved.” Vision 2030 Policy Document “The object of the Bank is to contribute to the economic growth and social development of Namibia and for the sustainable promotion of the welfare of the Namibian people” DBN Act, 2002 DBN & Vision 2030

23. Thank you