Suppex Capital Advisory, a Lusaka based transaction advisory firm focused on deal origination, deal structuring and private placements has announced today that that it served as exclusive transaction advisor to A-Plus Management Services on a K10 million transaction. The K10million which has been secured from a local fund manager will enable A-Plus to meet its obligations under a contract to upgrade agriculture feeder roads stretching across Luapula and Northern Province.
The transaction demonstrates that the potential of local contractors can be unlocked through improved access to capital, giving them scope to compete with foreign firms in various sectors such as construction. The type of funding secured for A-Plus could be the catalyst for local businesses to undertake projects and complete them without stoppages due to lack of finances.
Announcing the transaction in Lusaka, Suppex Principal Advisor Lang’a Mweene said the deal is evidence that financial innovation could unlock the potential of local businesses in the country.
“This deal is a key milestone for Suppex and more so for local enterprises that are in need of financing but continue to face challenges based on the financing model in the country. We believe we are setting a precedent for similar deals for Zambian companies, which typically struggle to access funding from the market,” he noted.
Mweene added that more local enterprises looking for financing can benefit from a flexible, personalized service in Zambia. He said that Suppex’s aim is to help companies to secure financing that is tailored to their specific needs. To help meet those goals the firm offers to review proposals for financing, establishing their viability, advise on most suitable structures, reduce deal related costs and ensure that enterprises meet the requirements for bankability that financiers are looking for.
“There is evidence of a continued growing unmet demand for structured financing solutions in Zambia, particularly as the current financing options remain too complicated and restrictive for most enterprises. Innovation in the way financiers and enterprises are matched is where we’re well positioned.”
Mweene adds that one of the challenges faced by local businesses is the limited bank structures that offer one size fits all solutions.
“Different companies have different needs and require some level of structuring to enable them meet their goals. For most local companies, commercial banks and Micro Finance Institutions (MFI’s) who tend to charge predatory rates, are their only options. Most offshore players are looking for minimum deal tickets beyond what most locals can accommodate. The typical minimums for offshores are around $20m. We help the companies to access funding at better rates for much lower amounts that they can actually carry,” he says.
The funding will see A-Plus execute road works under a contract for the maintenance of agriculture feeder roads stretching across Luapula and Northern provinces. The funding structure is both affordable and flexible tailored to address the peculiarities of this type of project for which typical commercial bank financing is ill fitted.
And commenting on the transaction, Peter Majula CEO and Chairman of A-Plus Management Services says that with proper financing in place, local contractors have the capacity to deliver projects on time in Zambia.
“This transaction has helped us in making sure we have timely delivery of the project. Half the time we have situations where you’re given a contract and the contract employers fail to make an advance payment and you get stuck,” notes Majula
He adds that as long as local contractors do not mobilise in time and in between the execution, funds run out and they have to wait for the contract employers to pay. This sees contractors incurring additional costs and resulting in the projects being unprofitable.
“If you have full financing in place, it makes it easier in terms of project costs because you do not have idle time on site. Foreign contractors have a pool of funds supported by their banks and government. They have this advantage of mobilising in time and have appeared to be better contractors than local ones. With money, local contractors would perform just as well. What is a key challenge here is the financing,” he says.