THE Basotho Enterprises Development Corporation (BEDCO) appointed Idia Penane (IP) its chief executive officer in February this year. The former Lesotho Revenue Authority’s chief planning and modernisation officer, Ms Penane, says when she was appointed, she realised that the organisation was now out of touch and needed rethinking to ensure that it responds to the country’s needs. Lesotho Times business reporter Bereng Mpaki recently sat down with Ms Penane and below are excerpts from the interview.
LT: In what state did you find BEDCO when you joined in February this year?
IP: Maybe I should first of all start by explaining what the mandate of BEDCO is because many people do not know what it is all about. BEDCO’s mandate is to develop Basotho enterprises by assisting in their establishment, promotion and growing them.
Historically, there has been a lot of entrepreneur capacitation focused on dressmaking and handicrafts like woodwork. So, when I came in, the corporation was on the verge of finalising its new strategic plan and I had an opportunity to contribute to it.
Unfortunately, the organisation has not been able to effectively carry out its mandate to date because of its limited focus on woodwork and tailoring among others.
Yes, these may have been relevant when the organisation started out in 1980 but overtime, there has been a challenge that the organisation is not moving with the times. It therefore, subsequently started losing relevance and credibility in terms of carrying out its mandate.
I also found the organisation in dire need of a turnaround, especially at a time when the government struggling in terms of revenue and economic development. In Lesotho, the public sector is the one that contributes more to the economy than the private sector and that means BEDCO is not doing its work effectively. The small business sector is normally regarded as the major driver of the economy.
LT: What plans do you have to change this situation?
IP: What I found presented an opportunity for us to look at ourselves especially now that there is the Coronavirus (Covid-19) and see how we could address the anticipated tax revenue decline and also say how do we work on turning around the economy?
My vision entails ensuring that BEDCO regains the credibility that it has lost. The idea is to ensure that BEDCO starts impacting in the development of the micro, small to medium enterprises (MSMEs) sector to alleviate poverty among other things. It is one thing to say we have trained so many entrepreneurs but the impact is what counts. We must train entrepreneurs and afterwards witness them graduating into larger businesses.
There is also an urgent need to turnaround and transform the organisation. Financial sustainability is one of the major challenges that have affected the organisation’s ability to effectively carry out its mandate and this has to be addressed if BEDCO is to be rescued.
LT: Doesn’t BEDCO get a government subvention?
IP: BEDCO is partially financed by the government and has a lot of commercial property it collects rentals from. Some of our sources of income are rentals and most of our estates house MSME’s free of charge. We may need to start charging rent to generate more income.
Government coffers are drying and we must become financially independent to relieve some of the financial pressure from the government. The government cannot afford to sustain us forever, especially considering that we have a huge asset base around the country that we must ensure starts bringing in money.
LT: The government has set its priority sectors among them agriculture, tourism and creative industries, manufacturing and technology. What is BEDCO doing to encourage investment into these sectors?
ID: Our new strategy is aligned to the National Strategic Development Plan (NSDP II’s) priority areas. This year we are going to initiate a project in agriculture to address the needs of MSMES in that sector. If you look at the statistics of the FinScope study, agriculture is the second largest contributor among MSMES.
So, we will have projects over the strategic plan period to address the priority sectors of the NSDP II starting with agriculture for poverty reduction and improving food security.
LT: What needs to be done to address the challenge of access to finance for MSME’s?
IP: This is not a unique challenge to Lesotho but the rest of the sub Saharan Africa, and to address it, we must consider the factors behind it.
Most of the time, you will find that business start-ups are unable to meet the financing requirements to access funding. There is also inadequate support like business plan writing for enterprises to satisfy some of the financiers’ requirements.
Most of our banks have dedicated divisions for small enterprises but there remains a gap in terms of financing small enterprises. Their rationale is that start-ups are risky investments.
This is where BEDCO comes on board. We must assist them with how to draw proper business plans that are bankable. We must also provide assurance to the bank that after they have given a loan to a small entrepreneur, we will be there to take them through our enterprise incubation programmes.
There are partial credit guarantee schemes administered in the Ministry of Small Business Development, Cooperatives and Marketing. This is a financing option but I think many people are not aware of it…
We have recently developed an access to finance strategy looking at non-traditional mechanisms of financing. These include equity financing, e.g. somebody comes to buy 30 percent of your business and invests to assist with acquiring the necessary business assets or to scale up.
Another way of financing is invoice factoring. For instance, I am a start-up and have an order to deliver but do not have the means to finance it. I should be able to sell my invoice to somebody to get the money I need.
In other countries they use crowd sourcing where many people can each contribute say M10 to finance a start-up business. This is normally being done for charity purposes but it can also work to raise finance to fund business enterprises that have no other ways to raise it.
Philanthropy is another area that is an opportunity for financing businesses. The biggest risk is whether the money will be used for its intended purpose or something else that will collapse the business. This is where we must come in to ensure that the money is used for its purpose and there is business growth.
LT: Do you think we have the requisite creativity to promote entrepreneurship in Lesotho?
IP: Those who study behavioural sciences will tell you that there are people who are naturally followers. Then there are trendsetters. It looks like the majority of people who want to start businesses in Lesotho are typical followers and not leaders.
We are considering an entrepreneurship promotion programme targeting the inherent cultural challenges in our society that we can tap into to change the thinking.
We are also considering pooling some of the ideas together. For instance, if it’s a car wash business, we can look at the other related services that we can link together like providing inputs for the car wash. This creates a value chain in the car wash business.
Another consideration is bringing in successful businessmen like Sam Matekane to mentor small entrepreneurs and share with them how he made it.
LT: What do you think our education system is playing in promoting entrepreneurship?
IP: We were trained at school to be employed and the education system needs a massive overhaul in terms of educating people to become employers instead of being employees. Our education must incline learners towards their ultimate careers and train them from an early age.