05 Sep 2024

 The Public Procurement Act, 2021 provides for mobilisation funds to contractors for works, services and supplies through advance payment as provided for under Regulation 110 of the Public Procurement Regulations, 2023, Minister of Finance, Ms Peggy Serame has said.

She told Parliament on Wednesday that if an advance payment was determined to be appropriate and in line with best practice an advance payment security was required as stated in bidding documents.

She, however, said an advance payment may with the approval of an accounting officer be made without providing advance payment security if it was a requirement in line with industry practice or there being a special circumstance backed by justifiable reason.

Minister Serame said all advance payments were recovered from any subsequent payment due to the bidder in equal installments over a period not exceeding 50 per cent of the period of a contract including in Small Medium Micro Enterprises (SMMEs).

She said mobilisation funding had to be applied for to the Accounting Officer by those awarded tenders, including SMMEs. 

The minister said the Procuring Entity had to specify in the bidding document whether mobilisation funding would be provided so that bidders could indicate their need. She said discussions relating to mobilisation funds were held after award with the successful bidder and should form part of the contract.

Additionally, the minister said government introduced Government Purchase Order (GPO) financing service also known as Deed of Cession in 2012. 

She said it was meant to facilitate companies awarded government tenders/contracts to access finance from non-banking financial institutions.

Minister Serame observed that there were only five factoring companies registered with Non-Bank Financial Institutions Regulatory Authority (NBIFIRA) to facilitate the Deed of Cession in 2012 but had since increased to 56 to date hence providing SMMEs with wider access to alternative financing.

She said SMMEs especially start-up businesses could benefit from that facility as some often did not have the required financial track record or collateral to access credit from financial institutions, hence the GPO was used as collateral.

Ms Serame said the facility gave SMMEs access to timely credit assistance and at the same time gave the financier the needed assurance that payment would be made directly to them which effectively minimised risk on their part.

She said the existing arrangement was not perceived as a hindrance because SMMEs that were awarded civil or construction works could negotiate for payment of mobilization fee while those issued with GPOs for other services could be considered for funding under GPO financing facility provided by the Ministry of Finance.

Ms Serame said the ministry has therefore been proactive in an effort to assist SMMEs in that space. 

Ms Serame observed that mobilisation funds for SMMEs was instrumental in fostering entrepreneurship, driving economic growth and nurturing innovation hence the introduction of GPO financing and the availability of avenue for a negotiated mobilization fee.

She said that was to address acute challenges faced by local companies which failed to execute government projects due to cash flow constraints. 

Ms Serame said SMMEs benefited a lot from the facilities as they often did not have the required financial track record or collateral to access available credit in the market.

She said mobilisation fee was currently incorporated in the payment system through the above stated facilities. 

The government, she said always encouraged private sector to upgrade their risk management programmes to be able to offer contract financing services which would reduce dependence on government while all local non-bank financial institutions were encouraged to register with NBIFIRA to be able to offer GPO financing.

Minister Serame was answering a question from Member of Parliament for Gaborone Central, Mr Tumisang Mangwegape-Healy on whether there was any dispensation for SMMEs to be assisted with payment mobilisation funds after they had been awarded government tenders or issued Request for Quotations (RFQs).

Mr Healy also wanted to know how it was processed or applied for and which industries were covered.  

He also wanted to know whether the minister was aware that SMMEs needed mobilisation funds and if she did not see the need to incorporate that dispensation into the current payment system. ENDS