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Business Reporter
GOVERNMENT has embarked on an extensive fact-finding mission to ascertain how beneficiaries of the Youth Fund used their loans as well as coming up with a new model aimed at reducing the default rate, a Cabinet minister has said. Youth Development, Indigenisation and Economic Empowerment Minister Cde Christopher Mushohwe said his ministry was in the process of consulting various stakeholders with a view of obtaining their input in coming up with a new model for the Youth Fund.
He said this at a ground-breaking ceremony to mark the construction of a Vocational Training Centre in Umguza on Thursday.
The Youth Fund, which targeted youths between 18 and 35 years was temporarily suspended by Government at the beginning of this year due to high loan default rate estimated at 90 percent.
A subsidiary of Old Mutual, CABS, was the disbursing agent of the $10 million Youth Fund which the parent firm availed as part of its compliance with the indigenisation and empowerment laws. The fund was launched two years ago.
“CABS are telling me that they are sitting on a 97 percent repayment failure and this is what I’m trying to verify. I want to go through all the provinces, have a look at both the projects and those who were the beneficiaries and find out if they are doing nothing on their projects.
“If you talk about a 97 percent repayment failure then there must be something wrong. Either there must be something wrong with the lending model or the area of training (in that we are not giving them the relevant training to embark on the chosen projects) or it may be because the youths that we said must benefit did not use the money for the projects,” he said.
Cde Mushohwe said his ministry was going to meet Ministers of State for Provincial Affairs, political, business and traditional leaders in all the provinces in an effort to come up with a tangible and comprehensive Youth Fund.
“The way we were disbursing the money probably contributed to that failure but when we complete the consultations with the “real” leaders on the ground in all provinces then we will be able to say the consensus is on this model of lending.
“We want to do it as quickly as possible because I must go back to the banks who are now sitting on my neck because they want their money but I want to verify if their claim is correct. We need to reconcile what we are seeing on the ground with what they (banks) are saying. Once we do that then we can come up with a model that ensures we empower youths.”
He said another option of disbursing the fund was through channelling it into a certain economic sector or industry from which a big number of youths might be employed.
“If we come up with one big project, province by province, based on comparative advantage of that province is it not better than dropping $500 in someone’s pocket? What project can be done with $500?
“I am sure if we are to come up with projects like that the banks will not have difficulties in lending even more money even other business partners from outside can come and support us.”
He said not all of the $10 million Youth Fund was exhausted as some of the provinces partially used their $1 million allocations while others exhausted it.
“Some of the provinces have not taken much of that $1 million for example Matabeleland North and South and Bulawayo have not exhausted but there are provinces which have taken a greater chunk and some have exhausted and surpassed their allocation.
“But the banks are saying even though there are some provinces which have not exhausted there are no prospects of repayment. Let us have what we have paid repaid first but I said to them no let’s look at whether their claims are correct.”
According to CABS the total number of approved beneficiaries for the Youth Fund was 3 601 with an approved amount of $5 179 708 and of the approved amount, $4 925 173 was disbursed with an average loan size of $1 438.
He also said with many graduates roaming the streets in search of jobs without relevant experience and skills that empower them to be relevant to the job market or to become job creators, the option of vocational training may be worth the venture.
“VCTs are so important because these are centres that are built precisely to impart skills to the youth and women in the majority of cases. The reason why all the efforts of Government to try and empower the youth have not resulted in tangible projects on the ground is precisely because we have not given them enough pertinent and relevant skills before they embark on the project.”
Umguza District ward nine councillor Mrs Sibongile Mnkandla said the construction of the VCTs would immensely benefit youths in the district and the Matabeleland North Province as a whole to acquire requisite entrepreneurial skills.
“The setting up of a VCT in Umguza and the province as a whole was long overdue. We have a number of school-leavers who are unemployed and these can benefit by getting the requisite training to start various businesses,” she said.
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