Douala, Cameroon
Since the takeover of Eneo by Actis in 2014, the company’s new management team has faced significant challenges. Most notably, the company struggled to find sufficient funding to invest in the improvement of Cameroon’s energy distribution infrastructure after the government imposed an electricity tariff cap which prevented Eneo rising prices to finance its projects.
In an effort to tackle this, Eneo looked internally, reviewing its working capital practices to see if it could internally fund these projects. However, Eneo found that its suppliers, many of whom are SME’s, were often unable to pay on time or accept longer payment terms because they struggled to access financing to support their working capital. The company was therefore stuck and left looking for a solution.
To resolve these challenges, Citi proposed a supply chain finance solution which would result in supply chain stability and lead to a timely resolution of the relevant projects that have critical and direct impact on the local electricity supply.
Through the implementation of the solution with Eneo, Citi brought an innovative solution to the market that enables both the bank and private companies to participate indirectly in the Government of Cameroon’s efforts to support the financial inclusion of small and medium-scale enterprises (SMEs) sector in line with International Monetary Fund (IMF) recommendations for Cameroon.
The IMF’s recommendations, as part of the ‘Extended Credit Facility Supported Programme’, aims to restore Cameroon’s fiscal and external sustainability and unlock job-rich, private sector-driven growth.
Eneo, in collaboration with Citi, have implemented a truly innovative solution that has delivered a wide range of benefits. Indeed, apart from the immediate advantages of improved efficiency and cost savings for Eneo, this solution has helped facilitate access to credit for SMEs, at a very competitive rate and without any guarantee or insurance required, as the bank can rely on Eneo’s strong credit profile.
Today, suppliers can access early payment (reduction in trade cycle by circa 60-90 days) on their invoices with Eneo at one-fifth of the average rate prevailing for such client segments on the local market.
Citi has played a strong and active role in the implementation of this first-class solution, leveraging the power of its network and working side-by-side with Eneo on the on-boarding of suppliers located in different regions of Cameroon. The impact on the local economy is quite sizeable, as over 2,000 suppliers will benefit from this solution.
By dealing with the key challenges faced by local suppliers, the solution has improved Eneo’s relationships with these businesses and enhanced the company’s own efficiency. In addition, this solution supports the government’s programme to boost financial inclusion for SMEs and addresses structural obstacles to competitiveness and economic diversification.
This unique approach could be replicated in other sectors and countries where access to funding and financing is a challenge for SMEs and local businesses.