Peo to relax loan conditions as SMEs default

Brian Benza
Staff Writer | Wednesday July 15, 2009 00:00

Speaking in Phakalane near Gaborone on Tuesday, the Chairperson of Peo, Sheila Khama, said the global economic recession had led to shrinking markets for Peo beneficiaries, hence their working capital problems.

'Like most businesses, the Peo joint ventures have suffered from (a) weaker demand for goods and services as people are just not consuming as much as they used to,' Khama said.

'In spite of the recession, 75 percent of the companies are still profitable, although the rate at which working capital has been lessening is worrying.

As a result of the cash flow constraints, we have noticed that about 80 percent of the companies have defaulted on repayments and a few of them are most likely to fold up.'
She was speaking at a Peo-sponsored seminar for Small and Medium Enterprises (SMEs) themed 'Managing Risk Through Difficult Times.'

Khama said Peo was now investigating the best ways of salvaging its investment or part of it from the affected companies.

Thus far, Peo had decided that instead of pumping in fresh capital into the struggling companies, it will relax conditions for the different facilities extended to the beneficiaries.

'We are of the view that these SMEs do not need further funding,' she said.

'All they need is some breathing space as they are not generating enough revenues at the moment.

We are in the process of renegotiating our loan conditions (to) result in lower interest rates or longer repayment periods.'

Peo, which was established in 1997, has to-date disbursed P36 million to SMEs in a bid to give momentum to the sector increasingly seen as a potential driver of Botswana's economic diversification efforts.

Of the P36 million, P8 million was in the form of equity while P28 million was in loans.
According to Khama, Peo, which is a Debswana and De Beers partnership, has funded 60 SMEs which have created 1300 jobs, making SMEs one of the largest private sector employers in the economy.

'In 2008, the 60 companies paid a total of P9.2 million in wages and salaries, while P8 million was paid (to the) government in the form of income taxes,' she said.

Over the past 12 years, 58 percent of Peo-funded businesses have been successful while 65 percent of them have successfully divested from the equity funder.

Meanwhile, the Minister of Trade and Industry, Neo Moroka, who officially opened the seminar, has urged SMEs to form joint ventures which are bound to be more successful than going it alone.

The minister acknowledged the importance of SMEs to the economy and commended Debswana and De Beers for supporting them. 'Debswana and De Beers are a perfect example of good corporate citizenship,' Moroka said.