GUIDELINES REVISED IN JUNE 2020

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Or Guidelines | Page 1
Guidelines | Page 2
GUIDELINES
REVISED IN JUNE 2020

SENILEDIUG
Contents
1 BACKGROUND | Page 4
2 PRIMARY OBJECTIVES | Page 5
3 GUIDING PRINCIPLES | Page 6
4 ELIGIBLE ACTIVITIES | Page 8
5 PRODUCT LINES | Page 8
6 FORM OF FINANCIAL ASSISTANCE | Page 8
0202 ENUJ NI DESIVER
7 CRITERIA FOR ASSISTANCE | Page 9
8 LEVEL OF ASSISTANCE | Page 10
9 OTHER PRODUCTS | Page 13
10 FEES | Page 14
11 OTHER SPECIFIC REQUIREMENTS | Page 15

Guidelines | Page 3
1 BACKGROUND
1.1 The Government of Botswana is committed to citizen economic empowerment.
This is evidenced by the various programmes and policies that have been put
in place since Independence to encourage citizens and citizen companies to
participate in the mainstream of the economy. These initiatives are outlined
in the various National Development Plans and other policy pronouncements.
Although they might not have been referred to as citizen economic
empowerment policies or entrepreneurial development programmes they
are, for all intents and purposes, solid citizen empowerment programmes.

1.2 The Government established the Citizen Entrepreneurial Development

Agency (CEDA), in response to the recommendations from both the National
Conference on Citizen Economic Empowerment (NCCEE), held in July, 1999
in Gaborone and the 4th Evaluation of the Financial Assistance Policy (FAP)
which was completed in May 2000. Both reports of the NCCEE and the
FAP Evaluation called for support for business development to promote
citizen entrepreneurship, which was found lacking among a large majority of
citizens. NCCEE also recommended that the citizen economic empowerment
schemes be consolidated and the financial assistance be provided as loans.

1.3 Some of the existing citizen economic empowerment schemes include:

Young Farmers Product, CEDA Credit Guarantee Scheme (CCGS),
Entrepreneur Mortgage Assistance, Venture Capital Fund (VCF) and the
Citizen Entrepreneurial Development Agency (CEDA) loan.

1.4 All these programmes have been operating in isolation with varied guidelines.
This makes coordination and monitoring of performance of the various
programmes cumbersome. It is on this premise that the new set of guidelines
governing CEDA are developed. This will bring the different citizen economic
empowerment programmes (including other business development services
and products, such as insurance) under one umbrella and focus efforts to
deal with the real financial constraints affecting the development of citizen
businesses and citizen participation in the economy, as a “One Stop Service
Centre”.

1.5 The Government is desirous of implementing a framework that recognizes

CEDA as an empowerment entity with different financing products to address
different needs and opportunities to the advantage of citizen enterprises.

1.6 CEDA will further foster entrepreneurship through financing projects which
will not be ordinarily funded by other institutions such as commercial banks.
These guidelines thus represent a consolidation of different products under
CEDA.

Guidelines | Page 4
1.7 CEDA is aware that other factors such as market access, access to
technology, weak entrepreneurial skills represent major constraints to the
development of citizen businesses. CEDA would continue to work towards
addressing these constraints. Other stakeholders whose support is critical to
the success of the development of citizen businesses and to the achievement
of the CEDA mandate include the central government ministries and local
authorities, parastatal organisations and other public entities through their
procurement budgets.

1.8 It is expected that CEDA will access the money markets in putting together
financing packages for qualifying business ventures, specifically for large
scale venture capital projects.

2 PRIMARY OBJECTIVES
The objectives of CEDA are as follows:

2.1 The provision of funding for the development of competitive and sustainable
citizen owned businesses and joint ventures operating both within and
expanding outside the country.

2.2 Proactively initiate and coordinate the provision of funding packages from
sources other than government such as DFI, international agencies,
institutional funds, venture capital funds, and the commercial banking sector.

2.3 The assisted businesses, enterprises and citizens must contribute towards
the objectives of economic diversification, employment creation, citizen
economic empowerment, and poverty alleviation through development of
sustainable citizen enterprises.

2.4 Foster citizen entrepreneurship and empowerment through encouragement

of local entrepreneurial culture through funding.

2.5 Promoting the development of vertical integration and horizontal linkages

between citizen enterprises and primary industries through effectively
pursuing the business opportunities associated with the exploration and
exploitation of natural resources.

2.6 Promote the consolidation of citizen firms, amalgamations and joint ventures
as a means of growing the size of citizen business enterprises to enable them
to compete more effectively with larger foreign owned companies.

Guidelines | Page 5
2.7 Where appropriate, finance the establishment of Citizen Businesses in
foreign markets to enhance their international competitiveness;

2.8 Support entrepreneurship development by exposing citizen entrepreneurs to

a whole range of possible business financing packages including opportunities
in the money markets and institutional investors;

2.9 Promote citizen economic empowerment through assisting to finance the

acquisition of foreign owned businesses, or shares. In such businesses the
entrepreneur (s) should be an active part in the management and operations
of such businesses in an entrepreneurial role and not as a non-participating
investor.

2.10 Improving access to international markets through cooperation including

joint-ventures with foreign investors and investment in those markets through
equity and credit guarantee schemes.

2.11 Foster youth enterprises in business through effective pursuit of opportunities

in all sectors of the economy.

2.12 To provide mentoring, technical assistance and other appropriate support to

CEDA funded enterprises.

2.13 To retain citizen investment in commercial/industrial property sectors and

land.

2.14 To address the problem of access to finance by the SMMEs due to their
inability to meet security requirements of commercial banks and other
financial institutions through credit guarantee.

3 GUIDING PRINCIPLES
Citizen Entrepreneurial Development Agency (CEDA) is guided by the
following principles;

3.1 Promote ease of entry into business by citizens of Botswana by tilting the
playing field in their favour.

3.2 Promote viable genuine citizen businesses both within and outside the country
that will benefit the economy of Botswana in a meaningful way.

3.3 Act commercially in all cases which will include understanding the needs
of business at various phases of its development which might include
restructuring and refinancing the business and as a last resort foreclosure;

Guidelines | Page 6
3.4 As a rule, CEDA will only assist business ventures that are owner operated
and where the entrepreneur takes an active role in the management
and operation of the enterprise rather than in a non-participating role as
an investor. CEDA reserves the right to waive this requirement, if in its
assessment, proper management and experience to be put in the business
are satisfactory.

3.5 The need to position local enterprises to deal with challenges posed by
globalisation as well as take advantage of its opportunities. They would have
access to new markets and source raw materials from anywhere in the
World. Therefore, local firms should be prepared to face competition from all
over the World and to compete in global markets;

3.6 The need to specifically focus on the development of viable, sustainable citizen
owned business enterprises, through the provision of finance and of risk
sharing.

3.7 The growth of the service sector provides challenging opportunities for
entrepreneurs with the need to produce quality service at competitive prices
to ensure sustained growth and employment creation in the country.

3.8 The need for technological support through acquisition and partnerships to
gain competitive advantage by creating value, extending reach into foreign
markets in particular and competing with large organizations on a level
playing field.

3.9 The need for cost effectiveness by local businesses in order to manage new
and complex external relationships to gain flexibility over foreign firms.

3.10 The need for niche marketing, which gives the opportunity to local businesses
to successfully compete against foreign firms by identifying niche markets in
the international market place.

3.11 The need for business to adapt to change and to meet market needs.

3.12 Fund the re-structuring or re-financing of a business enterprise where

appropriate and where the underlying business operations are sound and
the enterprise is a potentially viable and sustainable entity.

3.13 Foreclose on irredeemable business entity as a last resort in order to protect

the assets of CEDA.

Guidelines | Page 7
3.14 CEDA will not provide financing for speculative investment where the investor
is not directly involved in the management and operations of an enterprise.

4 ELIGIBLE ACTIVITIES

4.1 CEDA provides financial assistance for all viable citizen enterprises and joint
ventures in all activities of the economy

5 PRODUCT LINES

5.1 The following products shall be offered by CEDA:

i. Loans
ii. Equity
iii. Credit Guarantee for short term and long term instrument, letters of
credit, etc.
iv. Entrepreneur Mortgage Assistance
v. Financing packages and lines of credit involving both in-house CEDA
funds and funds from the money markets, institutional investors or
from facilities made available by external partners;
vi. The discounting/factoring of invoices to assist the cash flow of citizen
businesses.

5.2 These products are subject to review and could change as and when need
arises. The specific details of each product are available at CEDA offices.

6 FORM OF FINANCIAL ASSISTANCE

6.1 CEDA will provide financial assistance in the form of loans at subsidized
interest rates. This is meant to be a soft window for citizen entrepreneurs
wishing to start, acquire or expand business operations.

6.2 CEDA will, through the equity component, provide risk capital to citizen owned
projects and joint ventures between citizens and foreigners and to buy into
existing businesses. This will help relieve the equity capital constraint, which
affects most citizen investors. CEDA will support medium and large ventures
through the equity component.

6.3 CEDA will focus specifically on the development of viable, sustainable youth
owned projects, through the development of entrepreneurial skills and
access to funding.

Guidelines | Page 8
6.4 CEDA would provide entrepreneurial, management skills, training and
mentoring services to its beneficiaries, to equip them with requisite skills for
running businesses thereby enhancing prospects for success.

6.5 CEDA will, through the Entrepreneur Mortgage Assistance mitigate the
process by which citizen investments in land and commercial/industrial
properties facing foreclosures by lending institutions are easily acquired
by non-citizens. This would be by stepping in, upon application, to buy equity
in citizen owned investment facing foreclosure, provided they meet laid
investment criteria.

6.6 CEDA will allow citizen owned business experiencing management or

technical problems to bring in joint venture foreign partner to inject capital in
such an operation.

6.7 CEDA will provide access to finance by offering guarantees, letters of credits
and performance bonds to, among others financial institutions, on behalf of
SMMEs who could not meet the security required by commercial banks and
financial institutions.

6.8 CEDA will provide financing for consolidation of loans only in cases where it is
evident that the consolidation will add value through expansions as opposed
to outright re-financing of loans.

7 CRITERIA FOR ASSISTANCE

CEDA products are available to:

7.1 Citizens 18 years and above for both start-up and expanding businesses

7.2 The purchase of equity share capital in existing registered foreign owned
businesses. This will include:

7.2.1 Risk capital finance to enable businesses to acquire other

businesses.

7.2.2 Management buy-outs and/or the acquisition of businesses or

shares in existing businesses which are majority foreign owned
through the financing of the acquisition of shares from the foreign
shareholders.

Guidelines | Page 9
 7.2.3 Loan finance or combination of both loans and equity, depending
on the financial viability as well as funding requirements. These are
also subject to the promoters of the proposed large scale projects
making a contribution from their own resources of not less than
10% of the project total cost. CEDA will take a minimum 26% and a
maximum of 49% equity stake in the supported businesses up to a
limit of P50 million.

7.2.4 Business finance packages involving internal CEDA resources and

financing from commercial sources, other financing agencies both
from within and from outside Botswana.

7.3 Citizens and joint ventures between citizens and foreigners under the equity
component. This invests directly in a company by subscription of new shares
(equity partner).

7.4 Citizen owned businesses with an annual turnover of up to P20 million.

Assistance would be in the form of guarantees, letters of credit and
performance bonds.

7.5 Citizen owned businesses facing foreclosure and seeking to re-finance

mortgage loans for land, commercial and industrial property in exchange for
share of equity in their businesses.

7.6 Viable expansions to existing registered majority owned citizen businesses in

all sectors of the economy.

8 LEVEL OF ASSISTANCE

8.1 Micro Scale Projects:

8.1.1 The support for projects under this category is reserved for 100%
citizen owned projects.

8.1.2 Loan Limits: The minimum size of the loan is P500 and the maximum
is P300, 000 or a combination of financing products as appropriate.

8.1.3 Interest Rate: An interest rate equivalent to the prevailing Bank

Rate per annum will be charged on loans

8.1.4 However, for special sectors (currently manufacturing, mining,

construction, energy, technology and innovations, agriculture,
creative industry and tourism) as may be selected by the Board

Guidelines | Page 10
 from time to time an interest equivalent to prime lending rate minus
3% per annum will be charged

8.1.5 Repayment Period: The repayment periods for loans up to

P300, 000 will not exceed 84 months (7 years)

8.1.6 Security/collateral requirements

i. Personal surety
ii. Security over assets financed

8.2 Small Scale Projects:

8.2.1 The support for projects under this category is reserved for 100%
citizen owned projects.

8.2.2 Loan Limits: The minimum size of the loan is P300, 001 and the
maximum is P1,000, 000 or a combination of financing products
as appropriate.

8.2.3 Interest Rate: An interest rate equivalent to the prevailing Bank

Rate per annum will be charged on loans

8.2.4 However, for special sectors (currently manufacturing, mining,

construction, energy, technology and innovations, agriculture,
creative industry and tourism) as may be selected by the Board
from time to time, an interest equivalent to the prevailing prime
lending rate minus 3% per annum will be charged

8.2.5 Repayment Period: The repayment periods for loans up to

P1, 000 000 will not exceed 84 months (7 years)

8.2.6 Security/collateral requirements

i. Personal surety
ii. Security over assets financed

8.3 Medium Scale Projects:

8.3.1 The support for projects under this category is reserved for 100%
citizen owned projects.

8.3.2 Loan Limits: The minimum size of the loan is P1,000, 001 and the maximum
is P10 million or a combination of financing products as appropriate.

Guidelines | Page 11
 8.3.3 Interest Rate: The prevailing prime lending rate per annum will be
charged on the loans

8.3.4 However, for special sectors (currently manufacturing, mining,

construction, energy, technology and innovations, agriculture,
creative industry and tourism) as may be selected by the Board
from time to time, an interest equivalent to the prevailing Bank Rate
per annum will be charged

8.3.5 Repayment Period: The repayment periods for loans are as follows;

8.3.5.1 Loans from P1,000,001 to P5,000,000 will not exceed 180

months (15 years)

8.3.5.2 Loans from P5, 000,001 to P10, 000,000 will not exceed 240
months (20 years)

8.3.6 Security/collateral requirements: For special sectors (currently

manufacturing, mining, construction, energy, technology and
innovations, agriculture, creative industry and tourism), and as may
be selected by the Board from time to time, security requirements
will be as follows

i. Personal surety
ii. Security over assets financed

8.3.7 Security will be mandatory for loans over P5, 000, 000 with the
exception of special sectors as per 8.3.6.

8.4 Large Scale Projects:

8.4.1 The support for projects under this category will be extended to
either citizens owned companies or joint ventures with foreign
investors/technical partners

8.4.1.1 Loan Limits: The minimum size of the loan is P10, 000, 001 and
the maximum is P50 million or a combination of financing products
as appropriate.

8.4.1.2 Security: Security will be mandatory for loans over P10, 000, 000
with the exception of special sectors as per 8.4.1.3

Guidelines | Page 12
 8.4.1.3 However, for special sectors (currently manufacturing, mining,
construction, energy, technology and innovations, agriculture,
creative industry and tourism), and as may be selected by the Board
from time to time, security requirements will be as follows

iii. Personal surety

iv. Security over assets financed
v. Additional security requirements may be discounted based on

a) Job creation
b) Economic diversification
c) location

8.4.2 Interest Rate: The prevailing prime lending rate per annum will
be charged on the loans other than for those identified as special
sectors

8.4.3 For special sectors (currently manufacturing, mining, construction,

energy, technology and innovations, agriculture, creative industry
and tourism), and as may be selected by the Board from time to
time, an interest equivalent to the prevailing Bank Rate per annum
will be charged to the loans

8.4.4 Repayment Period: The repayment periods for loans shall not
exceed 240 months (20 years).

8.5 Grace period: this will not exceed 48 months and no interest would accrue
during the grace period

9 OTHER PRODUCTS

9.1 Credit Guarantee for short term and long term instruments, letters of credit,
performance bonds, invoice discounting etc..

9.1.1 The rate to be charged instruments at 9.1 will be determined by the

Board from time to time as per the fees schedule published.

9.2 Entrepreneur Mortgage Assistance: There shall be no restrictions on the

number of shares to be bought by the Agency. The Agency applies for diluted
shareholding, without any prejudice on absolutely diluted shareholding.

Guidelines | Page 13
9.3 The equity component: provides finance or a combination of both loans and
equity, depending on the financial viability as well as the funding requirements
of the project. However, the loan shall be extended on commercial terms with
interest rates charged at prime commercial linked rates depending on the
risk associated with the project up to a maximum of P50 million for a period
not exceeding 20 years.

10 FEES

10.1 In line with common practice, CEDA may charge fees for certain services
it renders, in order to effect partial cost recovery. The quantum of fees
is determined by the Minister of Investment Trade and Industry on the
recommendation of the CEDA Board of Directors from time-to-time. Fees
may currently be levied for the following:
i. Issuing of letters of support/guarantees in respect of
procurement-related transactions.
ii. Commitment fees in respect of medium and large loans.
Such fees are levied for approved lines of credit which
remain undisbursed for various reasons.
iii. “Facility fee” component associated with invoice discounting
transactions, revolving credit facilities
iv. Appraisal fees, for medium and large transactions, to
partially recover the costs associated with specialist/
technical appraisal of transactions.
v. Loan Application Handling Fee for medium and large loans
vi. ITC enquiry
vii. Called-Up Guarantees
viii. Early settlement fees
ix. Monitoring fees for medium and large loans
x. Appeal Fees for medium to large loans
xi. Any other fees as may be determined by the Board from
time to time as part of cost recovery

Commitment fees cover the costs incurred in order to keep

undisbursed portions of loan facilities available.

Guidelines | Page 14
11 OTHER SPECIFIC REQUIREMENTS
11.1 The objectives of CEDA require a framework for specific requirements from
citizens accessing the funds from CEDA. The overriding principle in the
specific requirements is to identify and nurture a committed entrepreneur
with a viable and sustainable business idea.

11.2 Business Proposals: To access assistance under the CEDA Fund applicants
are required to submit business proposals and the projects need to
demonstrate viability. Promoters are therefore required to submit a detailed
business proposal.

11.3 Security: Security will be as shown by the different classes of loans as detailed
above. However, the Board of Directors of CEDA shall have the authority to
set and vary security requirements from time to time.

11.3.1 Security requirements may be discounted for people with disabilities,

youth and women in line with the risk profile of the project.

11.4 Licenses: Promoters are required to secure the necessary licenses and
permissions for the proposed project as required by law prior to funds
disbursements.

11.5 Premises: Promoters are required to secure necessary land and premises
from which the project is to operate prior to funds disbursements

11.6 Evaluation of proposals: All project proposals will be evaluated to determine

viability and justification for funding in line with the CEDA regulations.

11.5 Viability: Viability is evaluated according to the following criteria but not limited
to; (a) management, (b) market, (c) projected profitability, (d) sustainability,
and (e) anticipated growth of the business and economic impact.

11.8 Agreements: Promoters of approved projects are required to sign a loan or

shareholders agreement with CEDA or other financiers as appropriate after
having met all conditions of approval. The business plan and loan appraisal
report documents form part of the agreement

11.9 Compulsory Reporting: Regular reports are required of all approved projects.
The reports are to be produced for the duration of the loan to a standard
acceptable by CEDA as may be determined by the CEDA Board from time to
time, depending on the nature of the project. The cost of the reports shall be
borne by the promoter.

Guidelines | Page 15
11.10 Willingness to be guided: The project promoters must demonstrate
willingness to be guided and developed as entrepreneurs both at pre and
post funding.

11.11 Number of Loans: The number of loans that an individual qualifies for will be
determined by the total potential exposure of that individual as outlined in the
CEDA Credit Policy.

11.12 Management: The project should be full time owner-managed. CEDA reserve
the right to waive this requirement, if in its assessment, proper management
and experience to be put in the business are satisfactory.

11.13 Project Location: The location of the project must be suitable for the business
to be carried out.

11.14 Fronting/Misrepresentation: There will be stiff penalties for fronting/

misrepresentation of any kind as set by the Board of Directors of CEDA
from time to time, which could include prosecution should it be discovered
that the project being funded or to be funded is or was not effectively citizen-
owned and citizen controlled, or fronting for another citizen, on application
for assistance.

11.15 Contributions: Promoters or project sponsors are required to contribute

towards the project cost as equity or owner’s contribution to show some
commitment and confidence in the project as well as to lighten the burden
of repayment. The contribution may be in cash or in kind or a combination of
both. In the case of equity funding contribution is as per the conditions set
out in this document.

11.16 Repayment periods: will remain at the discretion of CEDA according to the
nature and size of the loan and projected cash flows but shall not exceed 20
years.

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Toll Free Number: 0800600253
| www.ceda.co.bw

Tsheko Road (Next to Standard Chartered

Bank and Behind Centre Lodge), Old Mall
Palapye, Botswana

Macheng Mall, Plot No. 158, Unit 7

Along P. O. Box ,131 Hukuntsi Botswana

)
T : +267 297 6234
F : +267 297 625

Guidelines | Page 20