THE suspension of the Youth Development Fund (YDF) by the Central African Building Society (Cabs) will severely dampen and undermine efforts to curb unemployment and delinquency among youths, analysts have said.
Cabs MD Kevin Terry told the Parliamentary Portfolio Committee on Youth, Indigenisation and Economic Empowerment last week that the fund which targets youths between 18 and 35 years, has underperformed with a 78% default rate.
Cabs, a subsidiary of Old Mutual, is the disbursing agent of the US$10 million YDF which the parent firm availed as part of its compliance with the indigenisation and empowerment laws.
Terry said lack of business management skills was the main reason for the high default rate as most youths were allocated funds without having undergone any capacity building programmes.
The fund was launched two years ago and had disbursed US$5 million to fund 3 600 projects.
Cabs was not the only financial institution to reveal the shortcomings of the fund for youths. CBZ Holdings Ltd CEO Never Nyemudzo said the default rate for its youth facility was 45%.
Defaults were mainly by beneficiaries in the cross border, manufacturing and poultry business, Nyemudzo revealed.
Indigenisation minister Francis Nhema condemned youths who have defaulted on loans at a youth seminar in Bulawayo last year.
"All those who have not paid back these loans, we are watching you. What kind of youths are you, to run away after accessing the loans is not a wise thing to do," said Nhema at the seminar.
At the same gathering Nhema's deputy Mathias Tongofa told youths that the fund was not a donation but a bank loan which should be repaid.
In an interview with this paper in May, Tongofa revealed that the ministry was working with its monitoring and evaluation team to recover debts owed by youths to the Cabs for empowerment projects.
Economist Godfrey Kanyenze said there was need to review the Doing Business indicators first before embarking on the funding of youths.
"It is not just a matter of funding away the problems," Kanyenze said. "It is a structural problem and we need to undertake Doing Business reform. You cannot have company closures and then help set up tuckshops in the same environment."
He said the high default rate was a damning indictment on the selection process of the youths to benefit from the fund.
Kanyenze said there was need for proper records of beneficiaries as well as avoiding being partisan in giving out loans.
He pointed out that one "can't just pick someone from the streets" and give them funding to start a business.
Kanyenze added that the YDF should be handled by relevant stakeholders and not involve politicians. He said economic recovery was crucial if the programme to fund youths is to bear fruit.
He said: "there is no substitute to economic recovery. You cannot deal with youth challenges before you deal with the constraints of doing business."
Zimbabwe Youth Council executive director Livingstone Dzikira is one of the stakeholders in the establishment of the YDF .
He said the suspension of YDF is necessary as it would allow them to "stocktake."
"We have some of our members who sit in the trust and participated in making the decision (to suspend the fund)," Dzikira told businessdigest on Tuesday. "The idea was to take stock. We need to restrategise to make the fund grow."
He refused to call the high default rate alarming.
"It is not alarming. Youths have just shown what happens when you do not give them skills, when you do not monitor them," Dzikira said. "It should be not be interpreted as failure to do business."
He added that the process of stock taking would be finalised by the end of this month with the fund back in operation next month.
Dzikira said they are working on models that will not only help them supervise loans given to youths, but attract other banks to inject money into the fund.
The youth fund was set up to support income generating programmes to help buffer youths against the country's economic constraints charecterised by a severe liquidity crunch and high unemployment rate.