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Change the world

22/02/2023

In 2013, the National Youth Development Fund (NYDA) shifted from supporting prospective entrepreneurs through loans to grant funding as a means to stimulate economic activity and reduce youth unemployment.

With about R100m doled out in almost 10 years, did the policy switch only become a welfare burden or is it playing an important role in addressing the crisis in the province?

Unpacking her doctoral thesis, economic effect assessment of the national youth development agency grant funding in the Eastern Cape, Dr Asanda Fotoyi argues that it has succeeded and highlights some of the challenges faced by budding entrepreneurs.

“In the period under review in the Eastern Cape, the NYDA funding yielded positive social returns,” Fotoyi said.

While many cost-benefit analysis methodologies could be used to measure success, variable methods all showed a positive net outcome, she said.

“In essence, the investment in youth businesses was economically viable.”

Fotoyi was speaking during a webinar hosted by Nelson Mandela University recently.

Her six-year study from 2014 focused on 253 respondents, of which 92% were still in business at the time of its conclusion.

There was a positive response from all the respondents, Fotoyi said.

“However, they all highlighted that the agency needed to support in the growth phase.”

Despite these being going concerns, Fotoyi said there was still hesitance from the private sector to fund the expansion or growth phase of such businesses.

Most of the grants (77%) provided were used for capital expenditure.

Additionally, she said entrepreneurs needed assistance in accessing markets. “The most important thing is to improve youth businesses’ access to markets.

“This is the main challenge highlighted by respondents.

“The NYDA can improve this by providing innovative marketing and sales pitching, as well as public procurement; improve their methodology for businesses in expansion phases,” she said.

The study also highlighted that women were still receiving less support.

About 44% of the respondents were females.

“They need to actively target female-owned businesses and provide support to grow them,” she said.

Female businesses were concentrated in retail, accommodation and catering, as well as personal services, while men had business in services such as construction, logistics, agriculture, energy and water sectors.

NYDA chief executive Waseem Carrim said the findings were consistent with their own research.

“When we did our first evaluation in 2015, we would have seen about 40% of the businesses succeed, whereas now we see about 80% of youth businesses succeed beyond two years of operations.”

Carrim said the success of the NYDA model had also led to similar funds being used by other state organs.

“Provinces now have their own funds based on the NYDA model,” he said.

Ganesh Rasagam, a private sector specialist with the World Bank Group, said the assistance provided by the NYDA proved there was a market failure in capital allocation which may need to be solved through policy.

“What is the problem there? “Why are banks not lending to young people who have credible business models?

“Is it a question of risk, and then, should government create mechanisms to allow banks to finance these entrepreneurs,” Rasagam said.

This article appeared in the Weekend Post (South Africa) on 18 February 2023, written by Ntsikelelo Qoyo

Contact information
Dr Asanda Fotoyi
Lecturer
Tel: 041 404 4117
Asanda.Fotoyi@mandela.ac.za