Last year The National Youth Development Agency (NYDA), Industrial Development Corporation (IDC) and the Small Enterprise Finance Agency (sefa) launched a R2.7-billion Youth Fund aimed at creating millions of sustainable jobs.
The partnership is a commitment among the three agencies to prioritise youth employment and skills development, and is in line with the Youth Employment Accord, a series of social pacts intended to help achieve the New Growth Path goal of five million new jobs by 2020.
Financial and business support for youth enterprises
Sefa has set aside R1.7-billion for the fund, with IDC contributing the remaining R1-billion.
At its launch last year, Khathutshelo Ramukumba, CEO of the NYDA urged young people to apply for funding in the production sector.
“We want more young people to enter the space of manufacturing because we want these young people to be industrialists of tomorrow,” he said.
The partnership is designed to provide young people between the ages of 18 and 35 years with the necessary financial and business support to help them establish, or expand their business, with the aim of creating sustainable jobs.
Entrepreneurs can apply for finance from either of the three, depending on which agency will be the most relevant in meeting their financial needs.
We take a look at the offerings of each of these funds in relation to the Youth Fund.
1. NATIONAL YOUTH DEVELOPMENT FUND
About the NYDA: The NYDA is a South African youth agency aimed at creating and promoting coordination in youth development matters.
Grant amount – Enterprises should require more than R 1 000.
Structure of the grant – Grant can be used for working capital or asset finance for individuals, co-operatives and community development facilitation projects.
Lending criteria – Youth between the ages 18 and 35 years with the necessary skills, experience; with the potential skill appropriate for the enterprise that they conduct or intend to conduct. They must be willing to run the business on a full-time basis, operate either informally or formally; generally recognised as micro-enterprises (e.g., street traders, vendors, emerging enterprises). They also must have a profit motive and are commercially viable and sustainable.
Non-financial support – Mentorship, the NYDA voucher programme, access to market linkages, an entrepreneurship development programme and youth co-operatives development programme.
2. INDUSTRIAL DEVELOPMENT CORPORATION
About the IDC: A national development finance institution set up to promote economic growth and industrial development.
Loan amounts – A minimum of R1 million with a maximum of R1 billion per project will be allowed.
Lending criteria – Start-up businesses, including funding for buildings, machinery and working capital for businesses operating in South Africa.
Existing businesses can also apply for expansionary purposes. Over 50 percent ownership by persons under 35 years of age.
Businesses must demonstrate economic merit and have prospects of acceptable profitability to be able to service their obligation.
Broad-Based Black Economic Empowerment certification from an accredited verification agency, where applicable.
Priority sectors – Green industries (renewable energy, energy efficiency and waste management and recycling), agricultural value-chain, manufacturing activities (clothing, textiles, pharmaceuticals, plastics and chemicals), strategic high-impact projects (logistics industrial infrastructure, mining value-chain, tourism and high-level services, media and motion pictures, knowledge economy (ICT, and biotechnology).
Structure of loan – Funding is available at prime less 3 percent to businesses that create jobs efficiently at a cost of not more than R500 000 per job. A minimum of R1 million with a maximum of R1 billion per project is allocated. The funding is available over five years or until the scheme is exhausted, whichever occurs first. Reduced loan pricing is available for five years, after which normal IDC pricing applies. The funding period is structured to meet the cash flow needs of the business. Appropriate capital and interest payment holidays are applied depending on the financial needs of the business.
Non-financial support – The IDC assists businesses with capacity building, where needed.
3. SMALL ENTERPRISE FINANCE AGENCY (SEFA)
About Sefa: A joint venture and a consolidation of various funds including the Apex finance fund, KHULA and a contribution fund coming directly from the Industrial Development Corporation (IDC).
Loan amount – Maximum loan amount of R5 million.
Lending criteria – Businesses must show economic and financial viability (demonstrated or potential), must operate within the borders of South Africa. The fund only offers debt financing no equity instruments.
Priority sectors – Funding is offered to businesses owned by young entrepreneurs in the following sectors: green industries, agricultural value-chain (agro-processing and primary agriculture (cash crops only), manufacturing, small mining value chain (mineral beneficiation), tourism, information technology and retail and wholesale of product.
Structure of the loan – There are no prescribed security requirements, and no prescribed minimum for owner contribution. This is determined by the financial capacity of the entrepreneur and the cash flow profile of the business. Repayment period are structured to meet the cash flow needs of the business.
Non-financial support – Capacity building support is offered where needed.
All information from the Sefa official website.