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(Bloomberg) — South Africa will on Friday start offering loans from a 2.5 billion rand ($135 million) Youth Fund aimed at supporting small businesses, part of a push by the government to tackle one of the world’s highest unemployment rates.
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Nearly half of South Africans between 15 years to 34 years are unemployed, according to Statistics South Africa. The fund aims to address this by supporting high-potential small and medium enterprises, National Youth Development Agency Deputy Chairperson Bonga Makhanya said in an interview.
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The initiative, spearheaded by the NYDA and set to be announced by Deputy President Paul Mashatile, is designed to shift the agency’s model from offering small grants toward making larger, equity-based and loan investments in enterprises owned by young people.
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“For the longest time, the Youth Fund existed in legislation but was never operationalized,” said Makhanya. “We’re now repositioning the agency away from micro-grants and toward investing in youth-owned companies that are growing and showing real potential.”
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Unlike previous NYDA programs that offered grants of as much as 250,000 rand, the new fund will invest between 750,000 rand and 2 million rand, depending on the business case. Financing will consist of a mix of loans and equity stakes.
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“We want to invest in youth-owned SMEs that can grow into sustainable enterprises — the kind that could one day list on the JSE,” Makhanya said.
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The NYDA is capitalizing the fund with 1.2 billion rands of its own reserves and provincial contributions, including commitments from KwaZulu-Natal, Mpumalanga and Gauteng.
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It’s also courting partnerships with the Industrial Development Corp., Development Bank of Southern Africa, Public Investment Corp., and several mining companies that have expressed interest in co-funding youth ventures as part of their enterprise development programs.
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The fund will target sectors including renewable energy, mining, agriculture, industrial manufacturing and processing.
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“In the past we’ve funded many informal businesses in retail and micro trade,” Makhanya said. “Now we’re deliberately moving into strategic sectors that drive growth and industrialization, the spaces where young people need that extra push to break in.”
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