HOW TO GROW YOUNG EN­TREPRENEURS

With R4.5bn set aside for young South Africans who have the po­ten­tial to cre­ate jobs, the IDC is open for busi­ness, writes Cai­phus Kgosana

CityPress - - Business -

South Africa has the low­est lev­els of youth en­trepreneur­ship in the south­ern African re­gion and on the rest of the con­ti­nent, de­spite the coun­try’s mas­sive youth un­em­ploy­ment prob­lem.

The In­dus­trial De­vel­op­ment Cor­po­ra­tion (IDC) is de­ter­mined to change this. Its De­vel­op­ment Im­pact Sup­port Depart­ment (DIS) has em­barked on a drive to en­cour­age more young en­trepreneurs, es­pe­cially those that are fo­cused on man­u­fac­tur­ing, to knock on its doors to get sup­port for their start-ups or to ex­pand their ex­ist­ing busi­nesses.

Stu­art Bartlett, head of DIS, says the de­vel­op­ment fi­nance in­sti­tu­tion set aside R4.5 bil­lion to in­vest in youth busi­nesses over five years, the ob­jec­tive being to cre­ate a new co­hort of young peo­ple that can get into in­dus­tries that have the ca­pac­ity to cre­ate em­ploy­ment and un­lock op­por­tu­ni­ties.

One of the ma­jor chal­lenges the team has en­coun­tered so far has been find­ing enough young peo­ple with ex­pe­ri­ence and skills to en­ter the man­u­fac­tur­ing sec­tor.

“Youth very of­ten don’t have this type of ex­pe­ri­ence in man­u­fac­tur­ing, the fi­nance or the net­works of the old boys’ club. They haven’t been given the op­por­tu­nity to gain ex­pe­ri­ence in the sec­tor. They are mov­ing more into re­tail, ser­vices and sim­i­lar in­dus­tries where com­pe­ti­tion is stiff.”

Bartlett says most youth en­trepreneurs tend to grav­i­tate to­wards light man­u­fac­tur­ing, tech­nol­ogy and tourism.

“These are the new types of in­dus­tries that are kick­start­ing the fourth in­dus­trial revo­lu­tion. The youth are more tech savvy and knowl­edge­able in these sec­tors, but we also want to en­cour­age and as­sist them to ven­ture into man­u­fac­tur­ing.

“As the IDC, we are de­ter­mined that if we are go­ing to start mak­ing an im­pact in in­dus­tri­al­is­ing the coun­try, we need to deal with the is­sue of youth un­em­ploy­ment.”

To make the cor­po­ra­tion more ap­peal­ing to young peo­ple, it launched the Gro-e-Youth Scheme.

This scheme has de­signed prod­ucts and terms that are suited to bud­ding young en­trepreneurs.

Mzwa­bantu Nt­langeni, who is also a de­vel­op­ment spe­cial­ist in the same depart­ment, says they have also come up with ad­di­tional sup­port pack­ages to as­sist youth-owned busi­nesses that are in­vest­ment ready.

The Youth Pipe­line De­vel­op­ment Pro­gramme is a an­other busi­ness sup­port pack­age that helps young peo­ple be­come in­vest­ment-ready by re­mov­ing any ob­sta­cles in their path.

“Say a busi­ness plan qual­i­fies for funding, there could be a con­di­tion that re­quires them to spend money first to be­come in­vest­ment-ready.

“Let’s say in or­der to op­er­ate a fac­tory they first need to un­der­take an en­vi­ron­men­tal im­pact as­sess­ment (EIA). We know that this ex­er­cise is not cheap.

“This pro­gramme sub­sidises the young per­son at a 50% ra­tio to get this EIA done, and this money can be re­paid at the end of the loan term,” he says.

His col­league Daniel van Vu­uren adds that the ob­jec­tive was to cre­ate an en­vi­ron­ment that would not in­tim­i­date young peo­ple, and this they did by put­ting in place a process that would take them by the hand and pro­vide them with guid­ance from the mo­ment they walk through the door un­til those who are suc­cess­ful re­ceive funding and sup­port.

To as­sist young en­trepreneurs that are ap­ply­ing for the first time, Bartlett’s team works closely with the Pre-In­vest­ment Busi­ness Cen­tre, which is where all new ap­pli­ca­tions for IDC funding are re­ceived and as­sessed.

“We have worked to change the per­cep­tion that young peo­ple may have had in the past that the IDC is a bridge too far for them.

“What we are now say­ing is that the IDC is open for busi­ness, in­clud­ing pro­vid­ing sup­port to youth-owned busi­nesses.

“Young peo­ple need to ex­pe­ri­ence that when they walk through our doors,” Van Vu­uren said.

This means helping them by un­der­stand­ing their ideas, then tak­ing into ac­count their back­ground and skills, and helping them com­pile a ba­sic busi­ness plan. Then guid­ing them on what sec­tors the IDC is in­ter­ested in funding and helping them struc­ture their busi­ness pitch to make it more at­trac­tive for funding.

Through the Gro-e-Youth Scheme, youth-owned en­ter­prises (those with a 50%-plus youth own­er­ship) and youth-em­pow­ered en­ter­prises (those with be­tween 25% and 50% youth own­er­ship) are of­fered fi­nan­cial pack­ages that are tai­lored at an interest rate of up to prime mi­nus 3% on the cap­i­tal amount.

What they of­fer to qual­i­fy­ing youth en­ter­prises is not just a fi­nan­cial pack­age, says van Vu­uren, but post­fund­ing busi­ness sup­port as well.

He said the de­vel­op­men­tal man­date of the IDC, es­pe­cially in such a dif­fi­cult time when the coun­try has been hit with credit down­grades and is in the midst of a tech­ni­cal re­ces­sion, is to in­ject more cap­i­tal into the econ­omy and cre­ate jobs.

“We want to see youth en­ter­prises cre­at­ing jobs. Youth un­em­ploy­ment is al­most 60%. We are ex­pe­ri­enc­ing a youth bulge and most of these youths are unem­ployed … it’s dan­ger­ous. We want to see youth en­ter­prises cre­at­ing jobs at a cost of two jobs for ev­ery R1 mil­lion that we in­vest.

“It is not dif­fi­cult to achieve in these in­dus­tries, es­pe­cially for mid-level jobs,” he says.

Nt­langeni fur­ther pointed out that the Na­tional De­vel­op­ment Plan en­vis­ages an econ­omy that should cre­ate 11 mil­lion jobs by 2030.

For this to hap­pen, he says, South Africa has to cre­ate 50 000 small and medium en­ter­prises be­tween now and then. This re­quires the econ­omy to grow by a stag­ger­ing 20% a year un­til 2030, some­thing that is ex­tremely dif­fi­cult in the cur­rent eco­nomic cli­mate.

That is why the IDC, and its co­op­er­at­ing part­ners, are ex­pected to play a big­ger part in helping the coun­try to grow its econ­omy.

PHOTO: EL­IZ­A­BETH SEJAKE

HELPING HANDS Daniel van Vu­uren, Stu­art Bartlett and Mzwa­bantu Nt­langeni are the youth en­ter­prise team at the In­dus­trial De­vel­op­ment Cor­po­ra­tion

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