The Cameroon electricity company ENEO now has minority state ownership after its 2014 partial takeover by Actis. But the company has been suffering financially because of a number of challenges. These include the need to make substantial investments to bring electricity to more of the central African country’s people, explained Brigitte Konso Epse Yanda and William Bayemi.
Moreover, ENEO’s small and medium-sized suppliers were under considerable financial strain, which ENEO itself could not alleviate. Other issues related to restrictions on raising long term finance and a government-imposed electricity tariff. Manual and cumbersome payment processes added to the list of challenges.
But ENEO has a number of core values and it was not acceptable to pay suppliers late. Citi approached ENEO to discuss the use of supply chain finance as a way of relieving the financial burden on suppliers while also ensuring that this did not impose additional strain on ENEO. This also helped bring to completion a number of projects that had a direct positive effect on local electricity supply.
Suppliers proved very keen to join the programme which enabled them to get access to finance at much more favourable terms.
At this stage, just 83 suppliers have enrolled onto the programme, out of 4,000 active suppliers. The challenge is to streamline payment processes so the programme can be scaled up and so payment delays are reduced.
In fact, ENEO had to move slowly and carefully so that the scheme wouldn’t be swamped by enthusiastic suppliers, and so it did not communicate widely to suppliers about the SCF programme. Payment processes are slow and cumbersome with lots of signatures required. It is a challenge to move them all to electronic processing. Suppliers chosen to join the SCF programme were invited on the basis of individual suppliers who told ENEO that they were in particular difficulties because of payment from ENEO.
Now, 90% of spend is now on standard payment terms, which were extended from 60 days to 90 days. And suppliers on the programme can be paid within 48 hours of uploading their invoices, rather than the 90 day time period previously. Suppliers can also track their invoice status.