The imminent advent of the long awaited Lesotho National Development Corporation’s (LNDC) M20 million Supply Chain Finance facility is set to boost the production and export capacity of local firms.
The facility was created to provide access to credit finance to facilitate the development of Basotho-owned enterprises.
It will be made available to companies any time from now after the LNDC conducted a sensitisation workshop for stakeholders last week.
The facility consists of three solutions one of which is invoice factoring, where the LNDC buys up to 80 percent of the value of an outstanding invoice of a firm at a prime linked rate, thereby addressing the problem of cash flow.
A firm qualifies as Basotho-owned provided that at least 75 percent of its shares are owned by Basotho.
Contract financing will involve the LNDC helping firms to raise up to 70 percent of the capital needed to execute a secured contract. The LNDC will also issue a pre-approval letter on behalf of a firm seeking financial backing for the purposes of competing in a specific tender.
LNDC Domestic investment Manager, Semethe Raleche recently told this publication that the facility was informed by the observation of the struggles of local firms in securing credit finance, which often stifled their contribution to economic activities.
“You would find that a firm that has secured a contract to perform a certain job for a client is unable to deliver because it does not have the necessary working capital,” Mr Raleche said, adding, “So, supply chain finance was designed with a view to helping local businesses with working capital”.
The LNDC has set aside M20 million to support the facility which targets business startups as well as existing enterprises across all sectors of the economy.
Mr Raleche further stated that beneficiary firms would not be restricted to supply their services to local buyers, but they would be allowed to cater for regional and international clients.
“For example, if the Edcon Group want to manufacture certain clothing items, that merchandise can be manufactured here by our local manufacturers with assistance from the facility while the buyer will be based outside Lesotho.
“We intend to leverage more on the export capacity of our local enterprises since this is important for foreign currency earnings. We are a net importer and that means we use all our foreign currency to import and at some stage those foreign currency reserves will be depleted. So we need to increase our capacity to generate foreign currency.”
He said they had also availed the facility to build an export capacity that was locally owned as opposed to the current scenario where it was foreign-owned.
He said a memorandum of understanding (MoU) would soon be signed between the LNDC and all the private and publicly owned buyers in order to establish the terms of engagement.
Interested enterprises are encouraged to register with the LNDC in order to facilitate operationalisation of the facility. They need to submit their founding documents in order to register.