CHEMA CHEMA FUND: WHAT YOU NEED TO KNOW
Designed to enable financial inclusion and aid growth in the informal sector businesses through provision of short-term loans, the Chema Chema Fund has been embraced by many.
Launched on Friday April 5th in Maun, many informal sector traders didn’t waste time as they flocked to the Local Enterprise Authority (LEA) offices on Monday for commencement of their registration.
Administered by both LEA and Citizen Enterprenuerial Development Agency (CEDA), the fund starts with an initial capital of P500 million for this financial year. With the local informal sector playing a key role in creating wealth for individuals and employment, the sector is faced with various challenges, among them a lack of capital as commercial banks shun them.
Therefore, all the available informal sector businesses such as food vendors, hair salons, and hawkers stand a chance to benefit from the fund. While the loan application will be dependent on the sector and nature of the business, the minimum funding is P15 000, with P50 000 being the maximum.
Payable in a period of 6-12 months, the loans have favourable terms, with a onceoff interest of 2.4 percent. Targeting informal sector entrepreneurs, small business owners, women and youth entrepreneurs, for one to be eligible for funding, they should not be formally or permanently employed. Those employed should be earning under the bracket of P48 000 per annum.
With the local economy struggling with slow diversification, value chain development, creation of jobs in the formal sector, the informal sector has been at the forefront in creating alternative jobs and improved livelihoods. Contributing 3.2 percent towards the Gross Domestic Product (GDP), the informal sector employs approximately 191 000 people in Botswana, majority of them being women.
Speaking to Voice Money on Monday, LEA Chief Digital Officer and Project Lead for Chema Chema Fund, Onkabetse Moatlhodi, said the first of registration has been a challenge though they aim to ensure that beneficiaries are assisted within the stipulated 24 hours time frame.
“The fund is in two parts, which is registration of business and individual. The reasons for this is to ensure we have citizens in our list because that is the requirement. From there, we profile businesses and classify them and screen further to check if annually the tax returns meet the threshold and, after the filtering process, that’s when we know who are the real beneficiaries of the fund. We also train confirmed applicants in business management skills for the success and sustainability of the business. Post training and mentorship, that’s when applicants can get their loans and start or expand their business operations. We don’t end there, but monitor them and ensure that the loan is used for the business and not for personal gain,” said Moatlhodi.
With 15 LEA branches around the country, Moatlhodi said in the first weeks it’s going to be difficult to fast track the process due to high applications. “Of course, the first days, it’s going to be very slow and Batswana need to be patient because our resources are not enough to process applications for this huge number of applications fast. But, at the end of the day, we don’t want a situation where these people will have to abandon their businesses to come to our offices to queue for long hours, which would cause them to lose money. We don’t want that, that’s why we encourage them to do online registration and soon we will be embarking on a journey to go to Main Mall, BBS Mall, where most of the informal sector operators are found to register them through our agents,” he said.
However, a look into the Chema Chema fund indicates that from the allocated budget, the fund can only assist 10,000 people, provided they take the maximum loan of P50,000 while the minimum of P15,000 per allocation can yield close to 33,000 successful applicants. When this publication visited the LEA offices in Gaborone on Monday, it was thronged by multitudes who came to register while many others were turned back.
“I was here around 7am in the hunt for Chema Chema and I was among those who were able to be assisted. I have experienced hardships in life as an unemployed youth so I earn a living through food catering. I have been doing that on a small scale, however, the fund gave me an opportunity to get a financial loan and expand my operations. If I’m successful, I want a place of operation where my customers can have access to me without any difficulty and at least employ five people,” said 24-year-old
Atlang Baithuti of Moshupa village.
Another applicant, who braced the cold wet weather conditions on Monday to queue for assistance, Atlang Garegae of Thamaga, told this publication that she arrived at the offices way before 7am. “I arrived here from Mmopane around 0650hrs but, by 3pm, I was still waiting to get my chance at being assisted. We were told there was no network. The reason why I took interest in the fund is because I was retrenched at work so now I have a chance to do my business full-time because I’m a hairdresser and I did that part-time even when I was working,” said the 25-year-old.
Chema Chema couldn’t have come at the right time. Just last month, the Minister of Finance, Peggy Serame, announced that there were approximately 42,000 graduates who were roaming the streets and looking for employment. In addition, the latest figures by Statistics Botswana indicate that the youth labour force increased by 10.5 percent between Q4 of 2022 and Q3 of 2023 from 471,139 to 520,582.
“Youth unemployment rate went up by 0.9 percent point over the period from 33.5 to 34.4 percent,” reads the report.
Meanwhile, experts have expressed concerns at many forums that graduates do not possess the skills that the market requires, and have recommended that vocational education is the way to go instead of white-collar jobs. At last year’s Labour Conference organised by Institute of Labour and Employment Studies (ILES) in Gaborone, speakers said that small businesses in Botswana are unable to survive the first five years because of poor planning, lack of patience, and poor understanding of the business one is pursuing.
While it is still early to predict the outcome of the Chema Chema programme, majority of applicants are likely to go for sectors such as catering, ICT services, which are appealing to the youth, and probably few in agriculture, the latter, which is labour intensive and requires land, water, and expensive equipment. This year has
been declared a drought year, and crop or vegetable production will not be an option for many.
Statistics further reported that the nominal Gross Domestic Product for the fourth quarter of 2023 was P61,8 billion compared to P65 billion registered during the previous quarter.
“This represents a quarterly decrease of 4.9 percent in nominal terms between the two periods. During the quarter under review, Public Administration and Defence became the major contributor to GDP by 17.9 percent, followed by Wholesale & Retail Trade at 12.3, Construction at 12.1 and Mining & Quarrying at 10.2 percent”.
Real GDP for the fourth quarter of 2023 increased by 1.9 percent compared to the 5.5 percent growth registered in the same quarter of the previous year.
Meanwhile, Dean of Faculty of Business Studies at the University of Botswana, Professor Jolani Pansiri, welcomed the initiative, saying many business ideas are failing to take off because many people do not have capital to start. He said the youth should take advantage of the Chema Chema Fund and pursue their business dreams.
However, he expressed concern that the target group of people earning below P48k per annum may be unable to raise the funds needed to qualify for the maximum amount of P50,000.00.
“Other challenges why small businesses fail is the lack of market, duplication of businesses and poor managerial skills. We are likely to see some people struggling to repay their loans after they had spent their profits,” he said.
He said the applicants should be able to demonstrate market potential for their business ideas, adding that the bigger ones will definitely be forced to comply with other requirements such as health regulations, and Environmental Impact Assessment requirements among others.
By Tuesday late evening, LEA reported that it had received around 12,700 applications online.
By Tuesday late evening, LEA reported that it had received around 12,700 applications online.