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New Fund – the holy grail of developing entrepreneurs?

A potential diffuser to a ticking time bomb.

The state of affairs in our country’s socio-economic space paints a bleak picture for the future. Poverty, inequality, unemployment and a lack of access to game-changing opportunities are what define life for millions of young South Africans.

These problems are a like ticking time bomb waiting to go off. As we have witnessed in the media, the youth of our country have the ability to organise themselves into massive groups and stage violent protests if their needs aren’t met.

When people stop believing in the possibility of achieving success and a better life, then something has gone very wrong in our society.

The current youth unemployment rate in South Africa is sitting at more than 40%, with a huge chunk of this group having given up on finding jobs or trying to start their own businesses, simply because there are not enough opportunities to help them get to where they need to be.

So how do we diffuse this ‘ticking time bomb’? One of the potential answers to this could be the newly established Youth Entrepreneurship Fund (YEF), launched this week at Constitutional Hill in Johannesburg, by the founder of the Big Break Legacy television reality show, Ezra Ndwandwe.

The YEF will cater for youth entrepreneurship, and according to its founder, there is no other fund that gets young people to contribute to a minimum payment scheme which provides a sizeable grant to start a business.

The YEF has partnered with the National Youth Development Agency, the Youth Innovation Entrepreneurship Development Institute, and fund managers, Edge Growth, to assist with management of the fund.

Ndwandwe explains that YEF will provide formal and informal training for young people that will assist them in preparing their business models and business plans, as well as themselves, in order to be both market- and investor-ready.

According to Ndwandwe, young people will be required to choose the capital amount that they need to start their business, and then contribute to the fund over a 12-month period.

These are the three options available to them:

  1. Platinum Option: A R500 contribution over 12 months to gain access to funding worth R1 million.
  2. Gold Option: A R333 contribution over 12 months for funding of up to R500 000
  3. Silver Option: A R166 contribution over 12 months for funding of R100 000

 

While the contributions are made over a year, entrepreneurs will be involved in workshops and training sessions tailored to assist in the development of a business case and model, which will be assessed for funding readiness, says Ndwandwe.

Once the requirements have been met, the grant will then be made available and the person can access products and services to the value of the package option. In addition, the grant is not expected to be paid back, so it’s a once-off thing.

The reasoning behind this is that, at the end of the process, the person who received funding will be required to employ at least two young people as part of the enterprise that they have started.

For too long, financial assistance from major banking institutions in South Africa has been largely inaccessible to many entrepreneurs. In addition, many fear failure, and that if their business does not do well, there will be major repercussions, as they will have to pay back money that they do not have, often getting blacklisted in the process.

What this initiative aims to do is minimise the risk of this happening by providing support – a year of this sort of support can go a long way in ensuring that people are ready to enter the business world.

What is also significant about this programme is that a friend, relative, employer or even members of the community or church can sponsor someone to go on the programme in order to get funding for their business idea.

Furthermore, a student can join the initiative after completing their matric, while studying at a tertiary institution. A medical student, for instance, can complete their degree already having the right tools and knowledge to start their own practice.

The initiative looks good on paper, but whether such an ambitious plan is feasible or even sustainable, is the question, especially when there is no return on investment at the core of its operation. Only time will tell.

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