Private Briefing May 2023
No. 122 | Year XI
The May 2023 Private Briefing addresses “nearsourcing” on two levels. The first can to a significant extent be identified in the RAS program for entering the supply chains of multinationals, while the second level is one of the aspects of the largest support programme for female entrepreneurship in the region, EBRD Women in Business, which in its ninth year is setting new records in terms of financial and non-financial support models. We also analyse the support for the development of tourism through loans from the Ministry, while the support for farmers comes in the form of grants for equipping livestock farms, as a capital-intensive long-term activity, with special challenges.
Ministry of Tourism: Improved Offer Through Loans
> The Ministry of Tourism announced a programme of loans for the development of tourism through increasing the level of tourist facilities, increasing the quality and expanding the portfolio of tourist services, raising the level of competitiveness and increasing employment. Support is provided in the form of loans from the Development Fund, with the eligible beneficiaries being agricultural holdings, entrepreneurs and micro businesses entitled to the loan amounts starting from 500,000 dinars, or 2 million larger legal entities, assuming that the users are registered for activities in the field of tourism.
> Purposes include a complete set of needs for the formation or improvement of the tourist offer, so the funds can be used for the construction, arrangement and reconstruction of hotel and other accommodation facilities, restaurants and sports, recreational and entertainment facilities, for the restoration of rural facilities and their conversion into tourist facilities, procurement, reconstruction and adaptation of floating objects. Furthermore, support is provided for the improvement of marketing of the domestic hospitality offer, design and preparation of production of souvenirs, construction of tourist infrastructure and regulatory compliance improvement. Loans are approved with annual interest rate of 1%, indexed in EUR, with repayment term of up to 72 months after the grace period of 12 months, or 24 months for investments in the construction of tourist infrastructure. Annuities are quarterly, and acceptable collateral includes promissory note, mortgage on real estate or a guarantee from a commercial bank. Credit support is approved in the amount of up to 50% of the total value of the project, while working capital can amount up to 20% of the total loan.
> The program provides financing essential business improvements in tourism, under favourable conditions. However, between applying and obtaining the loan, there is a segment of preparation of plans and projections, formalized through the requirement to provide an adequate business investment plan along with other documents. The first step on that path is the timely preparation of documents, which implies either adequate management or up-to-date and reliable externalized accounting as a basis for fitting all the necessary elements into a sustainable business plan that will enable entrepreneurs and SMEs to take full advantage, i.e., the low cost of funds and long-term maturities offered. Both externalized bookkeeping support, and support in making the right decision on investment and financing of fixed assets that will enable the business development basics improvement, and working capital that will enable smooth continuous operations, can be significantly facilitated with the help of advisors with practical experience in bookkeeping and also the creation, implementation and management of projects and plans.
EBRD and Commercial Banks: Support for Women Led Businesses in Permacrisis
> After nearly five years, Private Briefing again analyses one of the longest-running and certainly unique support programs for companies managed by women, aimed primarily at their economic empowerment, called “Women in Business”, organized by the EBRD. The program is implemented through a number of financial institutions in the region, and is supported by a unique advisory support package, providing a whole range of opportunities for strengthening and developing business and thus forms a unique blended instrument for comprehensive support. The current form of the programme was developed through a pilot phase, and brings an attractive model of special financial support for businesses managed by women, available through financial institutions throughout the region, complemented by special models of access to knowledge, skills and business networking opportunities, in the form of seminars, webinars, business networking opportunities and workshops, as well as advisory support provided by the EBRD.
The reasons behind WiB programme primarily lie in clear statistical indicators, which say that businesses run by women add up to only about 30% of the total number of business entities in the region, with share in the total turnover volume of about 20%, while the total share of financing attributed to them is just 10%. In the pilot phase and current second phase of the programme, which is well underway, the programme provided tens of millions of euros of financial support for thousands of women-lend businesses, while the targeted seminars, workshops and experience
exchange events as support activities provided, have resulted in programme indicators significantly above benefits of individual beneficiaries. Encouraging the establishment, growth, development and financing of women led businesses therefore can clearly contribute to the better use of the resources of national economies and GDP growth, but also brings a special note of inclusion within the overall business environment. All of that makes WiB unique support model for development support, in both the pandemic and altered new reality.
The signals of recovery during 2021 and 2022 were soon replaced by a new reality, titled “Permacrisis”, designating a combination of all the previous ones, burdened by inflation, energy uncertainty, interrupted supply chains and a very challenging situation on the labour market. Business sentiment surveys that we conduct continuously testify that the best results were not achieved by companies that focused exclusively to defence and cost reduction, nor those that ignored challenges and entered into unpredictable risks, but those which adapted to the crisis and after protecting fundamental resources, recognized the new reality and took advantage of the emerging opportunities. This is exactly the current situation for companies from the Western Balkans region, which have a chance to change economic paradigms in a significantly altered reality, in which the key pillars are “resilience” and “nearsourcing”, or the replacement of distant suppliers, primarily from the Far East, with those from the region, which can allow them to gain better positions in the market.
> In addition to financial support, as well as access to knowledge, WiB, like most of the EBRD’s small business support programs in the region, also carries with it strong advisory support, provided by consulting firms specially selected by the EBRD. Support begins with an initial analysis of the situation according to a standardized model and further includes a whole series of elements such as the establishment of a quality management system, marketing strategies, or even a completely new business structure, all depending on the specific needs of the user. Support continues during the implementation period based on best practices and experiences in order to ensure the best results. Glenfield is one of the most experienced consulting firms with leading expertise and proven results in supporting SMEs, including the EBRD WiB Programme in the areas of finance, sales and management. We have provided support to numerous clients through tailored projects and we are open to putting our experience at the service of users and supporting them in their efforts to build themselves as new champions in the current business climate within the framework of a significant support package which program brings. Contact us for a free initial analysis and evaluation of the needs for improvements.
SDA: Support in Utilizing “Nearsourcing” Trend
> Now already traditional Serbian Development Agency (SDA) programme supporting local businesses to become a part of supply chains of multinational companies, was launched at the end of the May this year, and given the macroeconomic trends which suggest that the “nearsourcing” is one of the major opportunities for local companies to more actively join global trends and internationalize their operations, it seems to be arriving just in time.
The programme provides co-financing of activities on preparation and introduction of improvement of business performance, following the requirements of multinational companies, which is a necessary step to enter their suppliers’ chains. General eligibility criteria assume that the applicants have ISO 9001 implemented and that their dominant activity is in the sectors of car industry, machinery and equipment, metal, rubber and plastics processing, production of home appliances and parts, production of electrical and electronic systems and elements.
Additional criteria assume that the applicants’ products belong to the group of direct or indirect raw materials in the value chain of multinationals. The applicants are required to employ at least 15, and to have a minimum of 35 million dinars of income and assets. The budget of the programme is 50 million dinars for reimbursement of costs in various amounts by areas of support, including interventions such as investing in material assets, investing in intangible assets, consulting support, as well as support in establishing cooperation with multinationals.
The actual areas of support include investments in the material resources, such as industrial robots, autonomous robots and cobots, automation, digitalisation and optimisation equipment, as well as advanced systems and equipment for phased and final product quality, and investments in upgrading production facilities. The programme also supports non-material assets investments including quality systems certification according to the specific value chains requirements, and development and implementation of production optimisation software. In addition to the material assets, the programme also supports non-material improvements, such as consulting related to the production processes optimisation, implementation and improvement of corporate governance, strategic. operational and HR management, market research and reporting. Also, programme supports establishing cooperation with multinationals, including the reimbursement of costs of field inspections of business performance, annual listings on interactive partner platforms and general liability insurance premiums. Consulting support includes the optimization of production and business processes, the introduction or improvement of corporate governance, the introduction of rules, procedures and reporting related to ESG factors, the preparation that precedes the implementation of field insight into business performance by internationals or the introduction of quality systems according to the requirements of standards that are specific to value chains in terms of this program, as well as the preparation of a business development plan, alignment with the requirements of the green industry. The available funding includes the costs of field insight into business performance, the costs of annual listing on reference interactive platforms, the costs of independent exposure at an international supplier fair, as well as the entire range of insurance costs.
> Unrelated to the moment, in which the programme is implemented, entering the value chains of multinationals, for the beneficiaries, along with predictable demand also facilitates income planning and consequently, investments in fixed assets and equipment, and also planning and implementing internal development. The cost of it is to a significant extent amortized by this programme. On the other hand, expert advisory support for introducing or improving of strategic and operational management, corporate governance and HR management are the topics in which Glenfield has vast experience, significant results and masters the best practices in SME sector, which allows us to adapt them precisely to the applicants’ business specifics. Contact us for a free assessment and support for applying for this excellent programme of long-term capacity increase, with evident benefits in terms of resilience and business results, as a consequence of strengthening and internationalisation of business.
Provincial Secretariate: Grants for Equipping Farms
> Regular, ongoing support programmes for farmers are a regular topic in the Private Briefing, as they represent a more than significant aspect of the predictability and planning necessary for successful and sustainable development. One of these is the Call for grants for equipping livestock farms in Vojvodina, announced by the Provincial Secretariate for Agriculture of Vojvodina.
The goal of the Call is to increase the efficiency, competitiveness and sustainability of production on farms in the province, which includes grants for the development of cattle, pig, sheep farms, goat and poultry farms, as well as for the purchase of equipment for milking, cooling and storage of milk, fertilization, preparation, handling and distribution of concentrated and bulk fodder. Furnishing facilities includes a wide range of
purposes, ranging from specialized equipment for breeding and animal care, through equipment for sorting and packaging, to fences and farm and animal control systems. The budget of the programme is 85 million dinars, whereby the amount of individual grants is up to 60% of the value of acceptable investment costs. Grant amounts range from 100,000 to 2 million dinars.
> Investments in livestock production are characterized, among other things, by a usually longer payback period compared to farming, viticulture or vegetable growing, and to some extent also fruit growing. The time of breeding and fattening of animals is longer than the time of plant development, and therefore, the process requires greater investments, but it also comes with greater risks, both operational and market ones due to long-term price volatility. In this context, any financial support that reduces the expected costs of investments in fixed assets, and that simultaneously reduces financial exposure and allows for a greater reserve of capital for the amortization of potential costs or reduced income as a result of market risks, can represent a key difference between sustainable development and operating at the border, or below the break-even point. If we add to that that animal farming is an activity that involves long-term planning, support in making decisions at the right time has strategic importance for producers, and the sector as a whole. Bearing all that in mind, it is clear that this, as well as other programs of regular incentives, despite a significantly smaller volume of support than the main programs, represent a very important piece in the overall mosaic of support for the development of individual and small farmers and farms and that it therefore deserves every recommendation, since that it is a significant element of long-term business sustainability
| KEY ECONOMIC INDICATORS | May - 23 | |
|---|---|---|
| 1 | Annual inflation | 15.10% |
| 2 | Reference interest rate | 6.00% |
| 3 | Unemployment rate | 9.20% |
| 4 | Average net salary - RSD | 85,485 |
| 5 | Average pension - RSD | 37,807 |
| 6 | Exchange rate RSD/EUR | |
| On the last day of the month | 117.2719 | |
| Average exchange rate for the month | 117.2831 | |
| 7 | Exchange rate RSD/USD | |
| On the last day of the month | 106.4560 | |
| Average exchange rate for the month | 107.0652 | |
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