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Home » News » News » Youth firms owe Gov’t P400 million

Youth firms owe Gov’t P400 million

Publishing Date : 06 September, 2017

Author : AUBREY LUTE

The Ministry of Youth, Sport and Culture Development opened applications for the Youth Development Fund on 3rd July 2017 and the move is certainly going to shoot the loan book to over P500 million.

 

With the Ministry already grappling with numerous bad apples, oversight bodies have called for more creativity and purpose in the Youth Development Fund, an improvement that the Ministry has promised to bring in this round of applications. At the Public Accounts Committee meeting last year June, Kago Ramokate, the permanent secretary in the Ministry had indicated that Government was not aware as to how much was owed.

 

This year, the results of a 2015/16 tracer study paint a heavy loan book, punctuated by bad debts. Tati East Legislator, Samson Guma Moyo blasted the Youth Development Fund calling it policy of appeasement, warning that it will collapse Government.

 

The fund ceiling for individual applications is P100 000.00. Funding is in the form of 50% grant and 50% interest free loan. Funding usually covers Micro and Small Scale Projects; P500.00 –P100,000.00 per project and; A special consideration is occasionally made to fund Youth Industries up to P450,000.00.  All projects fund under the YDF should be conceptualised, initiated and implemented by eligible Youth who shall be prepared to be involved in its running on a full-time basis.

 

Following a tracer study conducted in 2015/2016 it was discovered that the number of projects funded between 2009/2010 and 2014/2015 financial years stood at 5655. The study also revealed that the actual number of businesses traced was 4517 representing (85.8%).
 

In terms of loan repayments the results of the study show that 1205 businesses which 26.7% service their loans and 3188 businesses accounting for 70.6% do not service their loans. However within the businesses that do not service their loans, 1103 were businesses on grace period accounting for 24.4% and therefore not expected to be servicing their loans yet. The study indicated that only 2085 businesses representing 46.2% were not serving their loans as expected.
 

The study indicated that since inception P23, 235, 870 of P422, 828, 748 owed by the beneficiaries was collected leaving a balance of P399, 592, 878.00 still outstanding.  “Out of the 4517 businesses visited, 3756 (83.2%) of them were operational, leaving 753 that were non-operational representing 16.7%. A further scrutiny into the financial performance of those that were operational revealed that 751 (20%) were making profit; 1418 (38%) were at breakeven; while 1291 (34%) were ailing or loss making.
 

In his latest submission, the Ministry’s permanent secretary, Ramokate observes that projects funded after the tracer study have not yet reached maturity period, as a lot of funding goes to agricultural projects which mature after 18-36 months.
 

Last year June the Public Accounts Committee (PAC) branded the Youth Development Fund a ‘Cash Cow’. Members of the PAC asked the Ministry of Youth, Sport and Culture to consider suspending the Youth Development Fund (YDF) in order to develop essential frameworks necessary for the success of the programme. It came to the attention of the PAC members this week that the YDF programme is now a cash cow and projects are financed in a haphazard manner without clearly outlined objectives.
 

And indeed, Ramokate had acknowledged that government has no investment and monitoring framework that guides the fund; neither do they monitor successful beneficiaries. He had no idea of how much beneficiaries owed government through the same initiative. The PAC generally views YDF as a good program and suspending the YDF would not mean stopping it for good, but for some time while necessary measures that will ensure that government gets value for its money are being put in place.
 

YDF was established during former President Festus Mogae’s tenure as an empowerment program aimed at promoting active participation of youth in the socio-economic development of the country. It also aims to encourage the out-of-school, marginalised and unemployed youth to venture into sustainable and viable income generating projects.
 

Other objectives include promoting the development of competitive of sustainable and growth oriented citizen owned youth enterprises. The program also aims to reduce rural-urban migration by making it attractive to start growth-orientated enterprises at rural areas. It was also envisaged that it will create sustainable employment opportunities for young people through the development of sustainable projects.
 

Youth who benefitted from other Government Economic empowerment schemes such as but not limited to these; the Out-of-School Youth Grant,Financial Assistance Programme (FAP), KBL Kickstart and Citizen Entrepreneurial Development Agency may be considered for funding upon submission of proof to the effect that they sustain their project operations over time and that prospects of expansion are attractive. It is a very expansive funding initiative because youth who have benefited from LIMID and other poverty eradication schemes can be funded provided that they will be operating the same line of business.

 

The repayment periods for the loan component shall be as follows: Up to P50,000.00 shall not exceed 36 months; From P50,001.00 to P225,000.00 shall not exceed 60 months. While the grace period for the loans is up to 36 months.

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