Confronting the COVID 19 impact on Zambian SMEs

Businesses play a critical role in a country’s economy not only for the jobs they create but also for their positive social and economic impact. Sadly, the COVID 19 pandemic exposed most of them to several challenges, including logistical issues, disrupted supply chains, restrictions on international travel, which resulted in decreased normal operations and revenues. Given the financial pressures, jobs were lost and this had a ripple effect on people’s income and standard of living.

At such a critical time when businesses lacked cash reserves to weather the economic downturns, access to financial support was paramount to help businesses sustain operations and prevent job losses. It is for this reason that Prospero launched a Debt Relief Fund, a facility that was created to provide affected businesses with a combination of capital and grant funded technical assistance to help them navigate the crisis.

The fund deliberately had a repayment holiday of six months and a repayment period of up to 48 months to give the businesses enough room to pay back without being pressured. Interest rates were concessional and indexed to the local commercial interbank lending rates.

The fund was only open to Zambian registered SMEs, with a particular focus on women-led SMEs or SMEs with large proportion of female employees, or particularly serving the needs of women consumers to reduce financial vulnerabilities women entrepreneurs face.

The facility ensured that only businesses whose operations were materially affected by the pandemic benefitted from it, this was done through an intense pre-screening and due diligence. Loans worth ZMW 6.8 million were disbursed to a total number of 17 Zambian businesses. To date, over 350 jobs have been sustained through this facility.

One of the recipients of the Prospero Debt Fund is Travium Supplies, a company that processes and packages honey in sachets and glass jars for distribution to local hotels, lodges and restaurants.

“During the pandemic, demand for our products began to rise, putting a strain on the company’s working capital and cashflows. Prospero’s debt fund really improved our ability to purchase enough raw materials to meet rising demand,” says Chileshe Chewe Christine, CEO- Travium Supplies.

Another business supported is Shais Foods, a Lusaka based agro processing and packaging company focusing on indigenous grains such as Finger Millet, Sorghum, Cassava and Vitamin A Orange Maize Meal.

“The fund helped us to source more raw materials and expand the availability of our products. Our distribution increased and this allowed us to stock many supermarkets, particularly the neighboring supermarkets in Lusaka,” says Mirriam Nalomba Chipulu, Founder- Shais Foods.

Lwenshi Limited, a company that rents earth moving equipment to mines, faced liquidity constraints due to delays in receiving payments from its clients as mineral exports slowed.

“In 2020, COVID 19 had a devastating effect on our business in terms of cash flow as our main clients had challenges paying us. We supplied core services to the mining and construction industry and had existing contracts which we had continued serving, this meant more operational and maintenance costs were incurred,” says Kelvis Kasonkomona, CEO- Lwenshi. “Prospero’s Debt Fund helped us reposition ourselves, retain our staff and since then, we have continued to grow as a business.”

Overall, all the businesses supported used the funds to cushion the external shocks from the Covid-19 disruptions, which had a negative impact on the business’ ability to adequately cover operational costs such as employee salaries, wages, office rent, and any other day-to-day operational costs, taking a burden off their shoulders.

It is notable that the fund created an opportunity for businesses to thrive under harsh conditions, increased productivity, which eventually contributed to the growth and development of the Zambian economy.

Prospero will continue supporting Zambian businesses in order to drive profitable and inclusive growth for Zambia.

Written By: Mirriam Musonda- Outreach and Knowledge Management Officer

Email: [email protected]