Saturday, May 21, 2022

CEDA manufacturing portfolio hit by increasing default rates

The Botswana manufacturing sector, especially projects funded by CEDA, is facing a decline, it was revealed this week.

James Moribame, Head of Property and Manufacturing division at the agency, said a host of factors, including the recession, have seen the sector declining and promoters finding it difficult to repay their loan commitments to the agency.

“In the prior year, our repayments were 80 percent, but now we are on an average of 60 percent which is a significant decline looking at the financial point of view,” said Moribame.

The CEDA manufacturing division has P85 million in active portfolio with an investment averaging P640, 000 per project funded.

The projects funded run across sectors in mining and quarries, milling, bakery products, textiles, tannery, furniture manufacturing, welding products, non metallic products manufacturing, agriculture based manufacturing, brick molding and juice production.

There is no dominant sector with only the seasonal milling business accounting to 11 percent of the portfolio followed by brick molding at 10 percent.

CEDA is concerned that it is now receiving less bankable proposals and an increase in collapsing businesses.

But Moribame acknowledged that the sector is in rough patches because it did not have a clear foundation.

“You came to the playing field without necessary platform and obviously the road has been rough,” he told owners of projects funded by CEDA.

The difficulties faced by the promoters include working capital difficulties and the market with companies tending to be mono product offerings as opposed to leveraging on production and producing more than one product.

“If you look at the (country’s import bill), the manufacturing sector should be bigger than this,” said Moribame, adding that P12 million of the import bill was spent on importing polymer glass.

“We should be looking at what this country needs so that we venture into that business. The demand is driven by government and it is important to know what is needed in the market and provide that,” he added.

CEDA is concerned that the industry tends to concentrate on one product as it is the case with sorghum milling.

Petrus Sebina, Business Advisory Services Manager at CEDA, said customers require a higher quality of product at a lower price.

There have been concerns that Botswana producers supply the market with goods of less quality compared to their counterparts from South Africa. An example that is normally given is that of the horticultural and vegetable products.

Sebina advised that in order for manufactures to meet challenges and remain competitive, they must understand the business trends driving the global economy, find the niche in which they can be competitive and capitalise in the enablers of information technology.

“Success in global value chains has been based on specialisation, which often involves the early application of research and technology. Manufacturers can benefit from sharing services, resources and knowledge with similar companies,” advised Sebina.

“Clustering- which entails geographic concentrations of inter-connected companies, specialized suppliers and service providers- supports specialization and creates critical mass to attract investors and purchasers.”

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