South African youth are taking charge of their futures and starting their own businesses. From selling clothing, ready-made meals, and flowers, these businesses are popping up and are being run by young South Africans. Amid all these successful businesses, some youth still struggle because of a lack of funding and knowing how to apply for youth funding.
In South Africa, most youth-owned businesses are not successful because they cannot get funding. According to the Department of Small Business Development, early-stage entrepreneurial activity currently stands at 8,9% for South African youth.
To combat this low statistic, many funding initiatives have been developed with a focus on helping the youth succeed in business.
In this article, we explore how to apply for funding and where to get youth funding for your business.
1. Youth Challenge Fund
The Youth Challenge Fund (YCF) is a youth start-up support programme intended to stimulate the establishment and growth of youth-owned businesses, promote digital skills, and grow the economy. It also supports job creation.
The fund provides funding for youth-owned businesses that meet the following criteria:
- You must be between the ages of 18 and 35 years.
- Your business must be registered with the Companies and Intellectual Property Commission (CIPC) and with SARS and UIF.
- Your business must be 100% South African owned.
- You must be involved in the day-to-day operation and management of the business. You also need to have at least one full-time employee involved in daily operations and management. This employee can be the main shareholder or a key staff member.
- Be prepared to participate in business development support and mentorship (pre and post funding).
- Your business must be a commercially viable, sustainable and feasible business idea.
To apply for YCF funding, register your profile on the Sefa portal and download the checklist to help guide you through your application. For more information, contact the YCF on (+27)12 748 9600 or e-mail helpline@sefa.org.za.
Note: The YCF does have a list of exclusions. If your application falls into any of them, you will not be considered for funding.
2. IDC: GRO-E Youth Scheme
The Industrial Development Corporation (IDC) is a government financial institution set up to promote economic growth. The Gro-E youth scheme is to encourage youth entrepreneurship and creation of jobs.
To qualify for the Gro-E youth scheme, you need to meet the following criteria:
- Be a South African or permanent resident.
- Be between the ages of 18 and 35 by the time of approval.
- Youth shareholding in the business should be at least 26%.
- There must be youth operational involvement in the business.
- You can be a start-up or be part of an expansion within South Africa.
- Cost per job of up to R 800 000 for the duration of funding (calculated using total project cost).
- You must meet the BBBEE requirements of the IDC (level 4 or have a plan to get it within 24 months).
- Your contribution will be determined by your financial capacity and the cash flow of the business.
Note: When applying for the Gro-E initiative, you will also need to be part of the youth pipeline development programme. This is to help the youth be prepared to run their businesses.
3. Umsobomvu Youth Fund
The Umsobomvu Youth Fund was developed to help youth entrepreneurs start and maintain their businesses. It provides funding in the form of loans and vouchers. Additionally, it helps youth access business support.
To apply for the fund, you must meet the following criteria:
- Be a South African citizen from a previously disadvantaged community.
- Be between the ages of 18 and 35.
- Have a good business plan for your new business or have an existing business.
- Present proof of residential address and your ID.
- Be willing to undergo a credit check.
- Showcase that your new or existing business will be able to repay the loan.
Note: The Umsobomvu Fund is also open to women of any age.
To get funding, call the Umsobomvu Youth Fund on (+27)86 009 6884. From there you will be directed to a loan officer who will help you fill out the application form. Additionally, you can visit one of the Umsobomvu Youth advisory centres.
These funding platforms are all government funded in partnership with private lenders and corporations. They are not the only option, others include angel investment network Jozi Angels, Launchlab and the SAB Foundation Funding.
Which fund you go for, depends on your funding needs and if you can pay back the loan amount. Don’t wait too long, find the right funder and grow your business today when you apply for youth funding!
For more information on youth funding, take a look at our Guide to Youth Funding. While you’re at it, book an appointment with one of our experts on our advice page, for more in-depth business help.