On July 16th 2020, His Excellency Dr MEK Masisi, launched the revised Citizen Entrepreneurial Development Agency (CEDA) Lending Guidelines and Requirements. These guidelines were a revision of the guidelines that were launched and approved in 2008. Since then the Botswana economy has changed drastically and this necessitated a revision of the guidelines to ensure they are still relevant to the market and clients.

These Guidelines have taken an even bigger sense of importance in the past year. As they were being developed, we have since seen the calls for Economic Transformation taking centre stage in national discourse. The new guidelines therefore will be very central and relevant for pushing national priorities like Citizen Economic Empowerment, import substitution and most recently needing to reduce the country’s dependence on its neighbours for trade. Contrary to popular belief Covid19 was not why these guidelines were reviewed but it has thrust them squarely in the limelight and made them more important going forward with the Economic Recovery and Transformation Plan.

So what are the main changes to the guidelines?

First and foremost the loan limits are much bigger. The Small and Micro loans have been merged and grown from a maximum of P300,000 to P1 million, medium sized from maximum of P4 million to P10 million and large from maximum of 30 million to P50 million. These have now also increased the lengths of the loan with small going up to 7 year, with medium and large both going up to 20 years. These are both welcome changes as the bigger limit accounts for change in prices in the last decade and the longer loan periods reduces the instalments and hence pressure on the business in daily business.

Another major change has been to the interest rates charged. As market rates went down, CEDA’s fixed loan was proving to be uncompetitive with banks so the new guidelines have now adopted a market rate risk based pricing of prime minus 1.5% for small prime (5.75%) for both medium and large size loans. We also see a change from owners equity contribution of 15% down to 10%. Whilst a lot of Batswana would like to see this requirement removed, it is extremely necessary to show commitment from the owner to their project.

The most significant change has to be the security aspect. Previously the expectation was for the owner to put up immovable assets as security to the equivalent of the loan. This has been changed to the owner rather pledging their personal surety i.e. the owner committing to be personally liable if the company cannot pay. Whilst this removes the personal liability protection provided by companies being (Pty) Ltd, it does make it a lot easier to ensure you get funding. The complications only arise if you default on your loan. For most entrepreneurs this is a risk most will be willing to take.

Another major aspect now added to the current guidelines, is that CEDA will take the social impact of projects into consideration when funding. Therefore projects which promote economic inclusion based on their geographical location, number of jobs they create and opportunities to vulnerable groups like youth, women and the disabled will qualify for potentially a preferential rate or reduced security requirements. This is in line with the NDP11 objective of increasing socio economic participation in the country.

The last very important change is that preferential interest rates will be applied to applications that fall into one of the following special sectors: Agriculture, Manufacturing, Construction, Energy, Tourism, Mining, Creative Industry and Technology. These special sectors were chosen after research and alignment with national priorities in diversifying the economy and growing jobs in those areas.

Agriculture

With the push for food self-sufficiency, it is important that funding be directed at projects that improve Botswana’s current situation. This sector will also include agro processing and downstream value adding activities.

Manufacturing

In line with the country’s efforts at encouraging export led growth, this sector was included to try and encourage more activity in this area and grow its share of GDP and assist in creating employment.

Construction

This would encourage Batswana to participate more meaningfully in the construction industry especially in property and its related sectors.

Energy

With the need for self reliance and citizen economic empowerment highlighted by energy and fuel shortages in the past few months, this sector is imperative for Batswana to play a much larger role in going forward.

Tourism

With the increasing disgruntlement with the minimal citizen participation, this industry is included to empower Batswana to get involved in all aspects of the tourism industry. This includes accommodation but also goes to value added activities like transportation like boats and helicopters. Batswana should consider buying equity in existing operations using CEDA.

Mining

This industry is important because of the value of the individual jobs created with it being the highest average employer in Botswana. Whilst the industry is mature, participation by local companies is still at an early stage. This special consideration will allow Batswana to participate in early stage mining and also in support work for existing mines.

Creative industry

The creative industry has been earmarked as one with great potential and currently under explored. This covers cultural and artistic sectors like advertising, graphic design, music, film and tv etc. This consideration is to provide funding to grow that sector to its full potential.

Technology

Similar to the creative industry, with the national push to change to a knowledge based economy, technology takes centre stage in also enabling the country to leapfrog into the 4th Industrial Revolution and allow for Digital Transformation of services and companies. Investment in local companies will ensure the transformation is not led by foreign companies.

In conclusion, at a high level it is clear that these CEDA guidelines were written taking into consideration the current realities and national priorities of Botswana. As a fundamental element in any business ecosystem, the funding aspect of the ecosystem looks sufficiently covered in this respect. It is now for the other market players to step forward and improve on human resource skills and market access that will allow for Botswana’s diversification efforts to be realized.