By Nomalanga Moyo
SW Radio Africa
11 July 2014
CABS Building Society has stopped disbursing loans under the $10 million Youth Development Fund, because most of the beneficiaries are not paying back.
The financial institution was distributing the funds on behalf of its foreign-owned parent company Old Mutual, which contributed the amount to comply with the Zim government’s controversial indigenisation and empowerment laws.
CABS managing director Kevin Terry told a parliamentary committee last week that 80% of the youths who received the funds were not paying back. The loan facility is meant to be a revolving fund to benefit youths across the country.
Terry suggested that the high default rate was caused by a lack of business management skills amongst the youths.
Among the defaulters is Tongai Kasukuwere, brother of ex-Indigenisation Minister Saviour Kasukuwere, who had the responsibility of choosing beneficiaries. Kasukuwere “borrowed” $5,000 for a horticultural project but produced nothing.
The fund was launched two years ago and 3,600 projects have so far shared $5 million, the Zim Independent newspaper said Friday.
Economist Godfrey Kanyenze said the involvement of politicians and the youths’ lack of business training were some of the factors that accounted for the collapse of the fund.
He said the government should fix the broader environment in which businesses have to operate before dishing out funds for empowerment projects.
“It is not just a matter of funding away the problems, it is a structural problem. You can’t have company closures and then help set up tuck-shops in the same environment,” Kanyenze told the Independent.
In March, former MDC-T Deputy Indigenisation Minister Tongai Matutu told SW Radio Africa that 95% of those who got the loans were ZANU PF supporters.
Matutu said the majority never meant to pay back the loans or use them for empowerment projects, because they viewed it as gifts from the party.
“So it was not based on the profitability or bankability of the project but on political allegiance and affiliation. Hence those people are failing to pay because those projects were never vetted or properly assessed by the bank itself.”
MDC-T legislator Thamsanqa Mahlangu, who sits on the indigenisation portfolio committee, said the youths felt that the money was theirs to keep for demonstrating support for ZANU PF.
“Most of the beneficiaries took the money as ‘thank-you’ payments for votes. Their reluctance to pay is based on the ZANU PF culture of looting and unaccountability when it comes to shared resources.
“Such funds should be handled transparently and in a non-political manner. All youths, regardless of political or regional background, should benefit if they qualify for the loans according to the criteria set out by the banks,” Mahlangu said.
Current Indigenisation Minister Francis Nhema is expected to appear before parliament next week to explain to legislators exactly how these funds were disbursed and the role of politicians in the process.