One of the major issues of Small and Medium Enterprises is lack of funds. There exist various platforms where SMEs can benefit from funds but they are unaware of it. One such institution is the African Solidarity Fund (ASF). The Director of Communications and Marketing of the African Solidarity Fund Vidur Ramdin enlightens us about the fund, how can SMEs benefit from it and how to tap into the African market.
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The ASF is a real catalyst of investment as it promotes the financing of investment project. It had a social capital of FCFA 150 billion. Its objectives are to facilitate financing of projects and participate in the fight against poverty among member nations. It promotes public and private investment financing and assists in mobilizing funds. Currently, 14 African States namely Benin, Burkina Faso, Burundi, Central African Republic, Côte d’Ivoire, Gabon, Guinea-Bissau, Mali, Mauritius, Niger, Rwanda, Senegal, Chad and Togo are members of the ASF.
According to Vidur Ramdin, as at 31 December 2016, the cumulative intervention in providing guarantees amount to FCFA 373,063 billion touching nearly 262 projects in 13 of the 14 member states. “Through our mechanisms and schemes, ASF has intervened in several prestigious projects of its member States namely, construction of university complex of the Superior School of Commerce and Business Administration, Escale 1 in Niger, construction of Oasis Hotel in Kigali, Rwanda, development of the airport of Lomé, Togo, construction of a modern hospital, KIRA Hospital Burundi, creation of a plant for the extraction and refining of palm oil and palm kernel oil in Benin, among others.”
Different schemes available for SMEs and business persons in Mauritius
Vidur explains that there are various schemes for Mauritius as well but many SMEs and business persons are unaware of them and do not benefit from them. He lists the different schemes available for Mauritian entrepreneurs:
Product 1: Individual Guarantee
- Bank loan guarantee and Fundraising guarantee
- Bank loan guarantee: through this mechanism, the ASF offers a risk-sharing service to credit institutions in the context of financing granted to companies, in particular, small and medium-sized companies. In the light of this, the maximum coverage value of the ASF is fixed at 80% of the outstanding capital liabilities of the financing.
Product 2: Portfolio Guarantee
Via this element, the ASF delegates the decision of granting its guarantee to the Bank, based on a budget line and after the pre-qualification criteria have been defined.
Product 3: Refinancing for the extension of loan terms
Refinancing scheme through which the ASF allows on one hand, companies to enjoy an extension of the loan period in order to make repayment terms bearable and, on the other hand, credit institutions to grant financing on an appropriate period with regards to the constraints linked to the structure of their resources.
Product 4: Interest rate subsidies
It exclusively involves public funding mobilised by Member States of the ASF and their Divisions.
Product 5: Financing arrangement
In this way, the ASF uses its expertise to provide assistance to companies of Member States, in particular, small and medium-sized companies, for the coverage of their financing needs. As such, based on the information available from the developer, the ASF draws up a briefing note respecting the highest standards which it submits to banks and looks for financing.
Product 6: Third party fund management
For various reasons, some funding bodies may delegate the management of their funds to the ASF, on the basis of specifications on which the two (2) parties have agreed.
Products or services needed in Africa
The Africa trade is dominated by diverse natural resources that the continent enjoys in abundance, says Vidur Ramdin. He recalls that trade varies from one country to another. “Countries such as South Africa represent the higher side of the spectrum whereas regions such as Burundi have the least trade volumes. A majority of African countries are underdeveloped and therefore, rely heavily on foreign aids to survive. Africa trade is, therefore, a representation of extremes.” He emphasises that Western/Central African Countries needs investment in areas such as ICT, Medical and health sector, Hospitality, Training as well as the FMCG sector. This will fit Mauritian entrepreneurs and investors (being bilingual) well as most of these countries are francophone ones. Eastern African Countries are fast developing and to me the financial sector, Bio Farming, Textile sector and Education sectors are emerging & are the ones to look up to.
Knowing the African Market
Mauritius has always wanted to tap into the African market. Vidur Ramdin explains that, with an impressive economic growth of more than 6%, rising middle-class consumer, huge deposits of mineral resources and vast expanse of arable land, Africa’s potential cannot be ignored. “No doubt, the rate of return on investment in Africa is higher than in any other developing countries. Also, I should say, the Government of Mauritius has made a laudable attempt (Budget 2017) in reducing the tax on exports revenues from 15% to 3%. But business in Africa is not for the fainthearted and investment on the continent cannot be planned in the same way as business in the Western world; it really demands a completely new mindset.”
Vidur Ramdin highlights the numerous possibilities in many areas for large as well as SMEs of Mauritius in the black continent:
- The manufacturing sector in Africa is at its growing stage and with a market of about one billion people; the continent has the potential to become a manufacturing success.
- Agribusiness such as processing of maize, sunflower and soybean; fish and sea product process; fruit juices and beverages, special tea manufacture; fertiliser manufacturing.
- Energy and power generation such as joint ventures and consortiums in the field of solar panel and solar water heaters; bioethanol and biofuel.
- Africa offers a lot of business opportunities in the tourism, ICT, finance & legal services, healthcare and insurance.
He states that the major difficulties for SME’s are accessibility to these growing African Markets. “They lack knowledge and information on these markets. We have the expertise but who will direct them towards the emerging economies? How and what are they going to export, costs of export and transportation? Are the companies aware of the facilities and benefits, if any, available for export? Has any market research been carried out on the potential for SME’s? Are there any partnership facilities between Mauritian & African Blocs like SADC, COMESA, and CEDEAO? Are there any Air Connectivity issues, especially with the West African countries? Is there any FAQ’s to facilitate the Mauritian companies to reach the African Market?”
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