Home » Business » Default Rate Calls for Tighter Controls [editorial]

YOUTH, Indigenisation and Economic Empowerment Minister Christopher Mushohwe disclosed a shocking statistic last week.

He said 92 percent of youths who received Government loans to start businesses were unable to pay back. This is a staggering failure rate by any reckoning.

Vice President Emmerson Mnangagwa told the same event that youths, that is Zimbabweans below the age of 35 years, constituted 77 percent of the population.

They faced numerous challenges such as unemployment, underemployment, poverty, HIVAids and drug abuse, the VP said.

It is against this background that we find the default rate on loan repayments lamentable.

The loans are supposed to be disbursed as part of a revolving fund to help youths start their own enterprises.

This is in line with Government’s overall black economic empowerment policy in which youths are a top priority.

They are the most energetic members of society and carry the nation’s future.

It is, however, clear that there is something wrong either with the funding model or vetting process. And we cannot rule out the scourge of corruption in which some projects are funded on the basis of who one knows rather than on the merits of the proposal.

That said, we believe there should be more stringent screening processes for business proposals than has been the case hitherto. The proposal must pass the necessary business criteria before it can be expected to deliver. That means carrying a party card or connection to senior party member cannot be criterion.

There must also be a skills audit and evidence of commitment to the long-term viability of the project. That calls for a hands-on check on business plans. Unfortunately, technology has made it easy for the most illiterate buffoon to come up with a fantastic business plan without the slightest intent of putting it into operation.

There have been many reports in the past of youths borrowing money for a project only to divert it to consumption, like buying a personal vehicle which doesn’t produce anything. The result is a failure to repay the loan and this destroys the whole concept of a revolving fund.

Often these rogues still manage to receive more money. One way to minimise defaulting would be for the financing authority to identify youths with shared interests to embark on a group project than giving them money individually.

This should help not only by providing a pool of skills and talents and but also a control mechanism.

It should be easier in the end to deal with a group than chasing after delinquent individuals. Moreover a group is likely to behave in a more responsible manner than an individual because of the different levels of personal commitment.

But what is even more important is that this high default rate speaks to the calibre of people our education system produces. It harks back to the overall debate and on-going review of the education curriculum. It makes a g case for compulsory national youth service which was agreed at the Zanu-PF congress in December last year.

It tells in a few words of a debilitating national malaise that Zimbabwe is an illiterate nation contrary to legend. It says Zimbabwe is producing people who can’t run the simplest of business. We are a nation of perpetual job seekers, hence the high number of unemployment and sometimes unemployable graduates flaunting useless degrees and ready for hire by foreign sponsored non-governmental organisations.

Instead the informal sector is dominated by non-degreed retrenchees who have skills but are very poorly funded.

This is where Government should be directing its resources. It cannot continue to fund consumption, to give scarce resources to people who cannot endure a bit of sacrifice while their project matures.

Zimbabwe is a nation of consumers, Government should fund only those who want to produce. That is what Minister Mushohwe should focus on from now.

Source : The Herald

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