Letters of credit (L/Cs) can feature in a groundbreaking scheme introduced by the Namibian authorities to encourage millers to build grain silos.

The scheme aims to mitigate the risk of the lack of sufficient storage capacity during bumper crop years for farmers in Namibia's so called maize triangle.

Public private partnership

The initiative involves the Ministry of Agriculture, Water and Forestry setting aside six million Namibian dollars (N$6 million) for subsidising bank interest for millers constructing additional silos in the maize triangle, in which Otavi, Tsumeb and Grootfontein are located.

In this public private sector partnership, the ministry's funding matches private sector investment of N$6 million, which means that a total of N$12 million of funding is available for constructing additional storage capacity.

Registered millers

In this scheme, an approved registered grain miller will own and manage the silo, repay the capital and only 25 per cent of the interest of the loan, while the Namibian Agronomic Board (NAB) will pay the remaining 75 per cent over a 10-year period.

Preconditions include being a registered miller with the NAB and the ability of a miller to raise the funds required to buy maize to fill the silo.

Alternatively, millers could prove their ability to fund silo development by putting up an L/C or providing a silo certificate.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.\