Ceda New Guidelines - July 2020
Ceda New Guidelines - July 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.
1.4 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”.
1.6 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.
2.6 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;
2.14 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.
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
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.
6.1 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.
6.7 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.
7.1 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:
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.
7.3 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).
8 LEVEL OF ASSISTANCE
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.
Guidelines | Page 10
from time to time an interest equivalent to prime lending rate minus
3% per annum will be charged
i. Personal surety
ii. Security over assets financed
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.
i. Personal surety
ii. Security over assets financed
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
8.3.5 Repayment Period: The repayment periods for loans are as follows;
8.3.5.2 Loans from P5, 000,001 to P10, 000,000 will not exceed 240
months (20 years)
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.
8.4.1 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
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
8.4.4 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..
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
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.
11.4 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
11.5 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.
11.9 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.
11.16 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.
Guidelines | Page 16
NOTES
Guidelines | Page 17
NOTES
Guidelines | Page 18
NOTES
Guidelines | Page 19
Toll Free Number: 0800600253
| www.ceda.co.bw
)
T : +267 297 6234
F : +267 297 625
Guidelines | Page 20