The finance minister, Professor Mthuli Ncube recently indicated that the government has set aside funds to be channelled towards startups. This is in a bid to stimulate and enhance activity in the tech innovations and startups space. This is a worthy commitment because the progression of nations in this 21st century is heavily anchored on that. This commitment was comprehensively covered in the 2020 National Budget. This shows how the government is coming to terms with the fact that youth inclusion and participation in economic development is paramount. I will touch on some of the things pertaining to this subject matter that were highlighted in the 2020 budget plus other related issues.
National Venture Capital Fund
It is interesting to note that the government has decided to set aside a national venture capital fund. Even more interesting is the fact that it is specially earmarked for young Zimbabweans. The National Venture Capital Fund was explained in the 2020 budget as follows:
“In order to increase economic opportunities and participation by Zimbabwean Youth in national development, the National Venture Capital Fund will be capitalised in both local and foreign currency, to incorporate financing start-up projects of our youth with preference being given to targeted areas in the context of the Local Content Strategy. On its part, Government, through the 2020 Budget is committing aside ZWL$500 million for this Fund. The Fund will provide affordable loans to young entrepreneurs including those engaged in production, that way encouraging them to be job creators and not job seekers. This marks the launch of the ‘Presidential Youth Entrepreneurship Programme’ to drive entrepreneurship among the Youth.”
So that is the entrepreneurship side where funds have been set aside for young people coming up with startups. Another area that the government is going to be prioritising is employment creation for the youth. Now, you must understand that this is also an important driver for youth entrepreneurship – I will explain why a bit later on. First, let us look at one of the ways in which the government is going to create employment for young people.
Youth Employment Tax Incentive (YETI)
The government shall enact the said tax incentive to encourage employers to take young people onboard. The actual stipulations regarding the tax incentive were laid out in the budget as follows:
“Under the 2020 Budget, a fiscal incentive is being introduced to support employers who generate jobs for our young job seekers. Any additional job created will attract a percentage tax credit to the employer. This measure will reduce the employers cost of hiring young people through a cost-sharing mechanism with Government. To operationalize YETI, the Ministry of Finance and Economic Development will work closely with ZIMRA, Ministry of Justice, Ministry of Labour, EMCOZ and other relevant organisations to work out the respective legal and administrative framework.”
Earlier I did mention that the employment of young people is important for stimulating the startup culture. One, it exposes young people to real-life settings, dealing with real-life situations. This can be a breeding ground for them to notice areas that might need innovations, innovations that can morph into startups. Two, by being employed they will get monthly salaries and that can give them an opportunity to save some of their income to invest in coming up with their own startups. So, all in all, it is commendable that the government has realized the importance of prioritising youth employment and entrepreneurship.
Why Are These Funds Important And How Will They Be Used?
The highest constituent of the total Zimbabwean population is young people – approximately 70% of the population. It is reported that at least 300 000 graduates are produced locally from universities, polytechnic colleges, teachers colleges, nursing schools and apprenticeships. Yet unemployment stands at over 90% meaning the young people are the most affected. Ironically, they also happen to be the most endowed demographic when it comes to an informed understanding of how the fourth industrial revolution (4IR) works. By availing funds for them to use their expertise and skillsets to start businesses and by creating employment for them they become active participants in economic development. It is no wonder why in the 2020 budget they had this to say:
“Jobs are the foundation of any economy and high levels of unemployment depict the economy’s structural weakness which invariably promotes poverty, inequality and social problems. In recognition of this, the 2020 Budget prioritises jobs creation which relies on formal employment opportunities and entrepreneurship. In particular, the youth are targeted in as much they make an important contribution as productive workers, entrepreneurs, consumers, and agents of change. Taking advantage of this demographic dividend can also speed up the pace for economic development.”
How the funds will be used is best described in the budget where it says, “…financing start-up projects of our youth with preference being given to targeted areas in the context of the Local Content Strategy”. This means young people who come up with startups whose core is impacting the local context will most certainly be prioritised in terms of the funding. There are so many perennial problems in the country that can be solved by well thought out startups projects and young people have what it takes to do this. So it is important for young people to familiarise themselves with the tenets of what constitutes our Local Content Strategy. That way they will be able to start startup initiatives that will be eligible for funding.
Local young people have always lamented the lack of funding as one of the major impediments when endeavouring to start their own businesses. I believe this national venture capital fund could go a long way in addressing that challenge. What we wait to see is whether or not this initiative will be transparently and objectively implemented.